<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1998
REGISTRATION NO.
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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IMPSAT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4899 52-1910372
(STATE OR OTHER JURISDICTION OF (PRIMARY INDUSTRIAL (IRS EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
ALFEREZ PAREJA 256 (1107)
BUENOS AIRES, ARGENTINA
(541) 362-4240
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD HORNER
IMPSAT USA, INC.
ONE FINANCIAL PLAZA
FT. LAUDERDALE, FLORIDA 33394
(954) 779-7171
(NAME, ADDRESS, INCLUDING ZIP CODE, TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE FOR REGISTRANT)
------------------
Please send copies of communications to:
NEIL M. GOODMAN, ESQ.
ARNOLD & PORTER
555 TWELFTH STREET, N.W.
WASHINGTON, D.C. 20004
(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 MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED NOTE(1) PRICE(1) REGISTRATION FEE(1)
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<S> <C> <C> <C> <C>
12 3/8% Senior Notes due
2008....................... $225,000,000 $101.50 $227,250,000 $67,038.75
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Total........................ $225,000,000 $101.50 $227,250,000 $67,038.75
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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 July 14, 1998 of the 12 3/8% Senior Notes due 2008 of
the Company, for which the securities registered hereby will be exchanged.
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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.
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS
OFFER TO EXCHANGE
ALL OUTSTANDING
12 3/8% SENIOR NOTES DUE 2008
FOR
12 3/8% SENIOR NOTES DUE 2008
OF
IMPSAT CORPORATION
---------------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1996 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 3/8% Senior Notes due 2008 (the
"Old Notes"), of which an aggregate of $225,000,000 in principal amount is
outstanding as of the date hereof, for an equal principal amount of newly issued
12 3/8% Senior Notes due 2008 (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 June 17, 1998,
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 .
---------------------
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 , 1998
<PAGE> 3
The Notes will bear interest at the rate of 12 3/8% per annum and interest
will be payable semi-annually in cash on June 15 and December 15 of each year,
commencing December 15, 1998, to holders of record on the immediately preceding
June 1 and December 1. See "Description of the New Notes."
The Notes are unsecured, unsubordinated obligations of the Company, rank
pari passu in right of payment with all existing and future unsecured,
unsubordinated obligations and are senior in right of payment to all
subordinated indebtedness of the Company. The Company is a holding company and
the Notes will be effectively subordinated to all liabilities (including trade
payables) of the subsidiaries of the Company. The Indenture permits the Company
and its subsidiaries to incur substantial amounts of additional 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 Notes are redeemable, at the option of the Company, in whole or in
part, at any time on or after June 15, 2003, at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time on or prior to June 15, 2001, the Company may redeem up to
35% of the aggregate principal amount at maturity of the Notes from the net cash
proceeds of one or more public or private issuances of Capital Stock (other than
Disqualified Stock), at the redemption price set forth herein; provided that (i)
after any such redemption at least 65% of the aggregate principal amount of the
Notes initially issued remain outstanding and (ii) notice of such redemption is
mailed within 60 days of such issuance.
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."
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 , 1998 (if and as extended, the "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
2
<PAGE> 4
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 Company complies with the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports and other information with the Commission.
The Registration Statement (and the exhibits and schedules thereto), as well as
the periodic reports and other information filed by the Company with the
Commission, may be inspected without charge at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth St., N.W., Washington, D.C.
20549, and at the Regional Offices of the Commission at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material may be
accessed electronically by means of the Commission's World Wide Web home page on
the Internet at 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.
The Company has agreed that, whether or not it is required to do so by the
rules and regulations of the Commission, for so long as the Notes remain
outstanding, it will furnish to the holders of the Notes and file with the
Commission (unless the Commission will not accept such a filing) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Form 10-Q and 10-K (or any
successor forms) as if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants, and (ii) all reports that
would be required to be filed with the Commission on Form 8-K (or any successor
form) if the Company were required to file such reports in each case within the
time periods set forth in the Commission's rules and regulations. In addition,
for so long as any of the Notes remain outstanding, 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.
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.
------------------------
The terms VSAT(R), Dataplus(R), Teledatos(R), Regional Teleport(R),
Difusat(R), Interplus(R), Global Fax(R), Minidat(R), Conexia(R) and
Telecampus(R) are service marks or trademarks of the Company or its subsidiaries
that are registered or otherwise protected under the laws of various
jurisdictions.
4
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements, including the notes thereto, and other financial data appearing
elsewhere in this Prospectus. All consolidated historical financial statements,
other than pro forma financial information, contained in this Prospectus are
presented in accordance with United States generally accepted accounting
principles ("U.S. GAAP") and are presented in U.S. dollars. Certain information
contained herein is derived from external research sources 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 offers tailor-made, integrated
telecommunications solutions, with an emphasis on data transmission, for
national and multinational companies, financial institutions, governmental
agencies and other business customers. The Company currently has operations in
Argentina, Colombia, Venezuela, Ecuador, Mexico, Brazil 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 capacity and fiber optic links. The
Company believes that it operates the largest shared hub VSAT network in Latin
America, with 3,490 VSAT microstations installed as of March 31, 1998. In
addition, the Company operates 16 teleports located in six countries and twelve
microwave and fiber optic metropolitan area networks ("MANs") in twelve cities.
The Company has grown rapidly since the commencement of its operations in
1990. Its business customer base has expanded from 125 customers in two
countries as of December 31, 1992 to 1,251 customers in six countries as of
March 31, 1998. From 1992 to 1997, annual revenues on a consolidated basis have
grown from $20.5 million to $160.2 million, EBITDA (as defined) has grown from
$7.9 million to $51.8 million and net property, plant and equipment have grown
from $47.9 million to $255.4 million.
The Company has recently commenced operations in Brazil. The Company
believes that the breadth of opportunity for the expansion of the private
telecommunications network services market in Brazil is underscored by the
country's (i) growing economy (Brazil's gross domestic product grew from
approximately $387 billion in 1992 to approximately $803 billion in 1997); (ii)
strong, unsatisfied demand for reliable telecommunications solutions; (iii) low
teledensity; (iv) poor telephony infrastructure; and (v) recently commenced
liberalization and privatization of the telecommunications sector. The Company
plans to use its technological and commercial experience and knowledge of
providing private telecommunications network services in the region to expand
its market penetration in Brazil.
The Company expects continued growth in the demand for private
telecommunications network services in Latin America and anticipates that the
proportionate share of data transmission services will increase more rapidly
than the overall telecommunications sector, as has been the case in the United
States. Continued deregulation of the telecommunications markets in the region
should lead to substantial growth in the telecommunications sector, which
historically has grown slowly compared with that of more developed countries.
Continuing economic growth and integration in Latin America is expected to add
to the demand for telecommunications services in the region and support greater
opportunities for expansion of the Company's regional presence. The Company
believes that its pan-Latin American presence distinguishes it from its
competitors and is a key element in its ability to satisfy a need in Latin
America for "one-stop shopping" in private telecommunications network services.
In addition, upon further deregulation of the telecommunications markets in
Latin America, the Company may consider expansion into new services for its
business customers, including switched international, domestic long distance and
local services.
The Company provides a full range of private telecommunications network
services which are tailored to meet the specific system requirements of its
customers, including digital information (data, voice and video) transmission
via VSAT, SCPC, fiber optic and microwave technology and a wide range of
value-added
5
<PAGE> 7
services, including Internet access and electronic commerce; fax store and
forward; healthcare billing and insurance verification services; and
video-conferencing and long-distance learning. The Company utilizes its array of
service offerings combined in different ways to create customized packages that
best suit each customer's private telecommunications network system needs. The
Company distinguishes itself by providing telecommunications solutions which
permit its customers to enjoy the advantages of a private network while freeing
them from the burdens of purchasing, operating and maintaining the network. See
"Business -- Services and Related Infrastructure" for a further description of
the Company's private telecommunications network services.
The Company views its relationship with its customers as a long-term
partnership in which customer satisfaction is of paramount importance. For this
reason, the Company applies an integrated approach to its sales, marketing and
customer service functions. Each client service team is jointly responsible for
all aspects of a particular customer relationship. The Company provides customer
service 24 hours per day, 365 days per year. As a result of this consultative
approach, the Company achieves high levels of customer satisfaction while being
able to identify new revenue generating opportunities, customer
telecommunications possibilities and product or service improvements previously
overlooked or not adequately addressed by the client.
The Company intends to maintain and strengthen its position as a leading
provider of private telecommunications network services in Latin America. The
key elements of the Company's strategy include: (i) delivering premium,
tailor-made telecommunications solutions utilizing advanced technology; (ii)
focusing on business and governmental end users; (iii) establishing long-term
customer partnerships; and (iv) leveraging its established market presence to
expand operations.
The Company is a privately-held corporation. Nevasa Holdings Ltd.
("Nevasa"), which owns 100% of the common stock of the Company, is a holding
company controlled largely by the Pescarmona group (a prominent Argentine
industrial group); by Mr. Roberto Vivo, Deputy Chief Executive Officer of IMPSAT
Corporation; and by Mr. Ricardo Verdaguer, President and Chief Executive Officer
of IMPSAT Corporation. In addition, 100% of the issued and outstanding preferred
stock of the Company is owned by the Morgan Stanley Investors (as defined
below).
RECENT DEVELOPMENTS
On March 19, 1998, Princes Gate Investors II, L.P. ("Princes Gate") and
Morgan Stanley Global Emerging Markets Private Investment Fund, L.P. ("MSGEM"),
two private equity funds that are affiliates of Morgan Stanley Dean Witter &
Co., and certain other investors affiliated with Princes Gate and MSGEM (Princes
Gate, MSGEM and such other investors being hereinafter referred to as the
"Morgan Stanley Investors") purchased 25,000 shares of the Company's Series A
Preferred Stock. The Series A Preferred Stock was initially convertible into 25%
of the common stock of the Company. For a description of the Series A Preferred
Stock and the transaction, refer to "Certain Relationships and Related
Transactions -- STET Share Purchase and Series A Preferred Stock Issuance." The
holders of the Series A Preferred Stock have the right to vote as a separate
class to elect two of the Company's directors.
On April 20, 1998, the Company signed a definitive agreement to purchase a
majority interest in Mandic BBS Planejamento e Informatica S.A. ("Mandic S.A."),
a Brazilian Internet access provider, for approximately $9.8 million. Upon
consummation of the transaction, the Company will acquire 75.1% of the common
stock of Mandic S.A., and the remaining 24.9% will be owned by Mr. Aleksander
Mandic, the founder and current president of Mandic S.A. The initial stage of
the acquisition of Mandic S.A., pursuant to which the Company acquired a 58.5%
interest, was consummated on May 28, 1998, and the remaining 16.6% interest is
scheduled to be acquired by May 1, 1999.
On June 1, 1998, the Company acquired from Nevasa 99.93% of the outstanding
voting stock of IMPSAT Comunicacoes S.A. ("IMPSAT Brazil"), a Brazilian company,
for approximately $5.1 million in cash. IMPSAT Brazil was established by Nevasa
and operates under a value added telecommunications license (the "Brazil
License") permitting IMPSAT Brazil to lease satellite capacity directly from
satellite
6
<PAGE> 8
carriers and sell corporate private telecommunications network services (data,
voice and video), using terrestrial and satellite links, to third parties.
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 $225,000,000
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 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 , 1998,
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.
7
<PAGE> 9
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 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.
8
<PAGE> 10
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 December 17, 1997, the annual
interest rate borne by the Notes will be increased by 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 June 30, 1998. 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 June 30, 1998. 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............ $225,000,000 Senior Notes due 2008. See
"Description of the Notes."
MATURITY...................... June 15, 2008.
INTEREST...................... 12 3/8% per annum payable semi-annually. For a
description of the circumstances under which
the interest rate may be increased, see
"Registration Rights" below.
RANKING....................... The Notes will be unsecured, unsubordinated
indebtedness of the Company, 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. At March 31, 1998, on an pro
forma basis, after giving effect to the
Offering (as defined herein) and the
application of proceeds thereof, the Company
(on an unconsolidated basis) would have had
approximately $132.0 million of indebtedness
other than the Notes, all of which would have
been senior indebtedness. The Company is a
holding company and the Notes will be
effectively subordinated to all liabilities,
including trade payables, of the Company's
subsidiaries. On March 31, 1998, on the same
pro forma basis and excluding intercompany
payables and the guarantee of the Company's
$125 million 12 1/8% Senior Guaranteed Notes
due 2003 (the "Existing Senior Notes"), the
Company's subsidiaries would have had
approximately $134.4 million of liabilities,
including approximately $78.6 million of
indebtedness. 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 (as defined) and the
Indenture (the "1996 Indenture") relating to
the Existing Senior Notes. See "Risk
Factors -- Substantial Indebtedness," "Risk
Factors -- Significant Capital Requirements,"
and "Risk Factors -- Holding Company
Structure: Effective Subordination of Notes to
Obligations of Subsidiaries."
10
<PAGE> 12
CERTAIN COVENANTS............. The Indenture contains certain covenants
which, among other things, restrict the
ability of the Company and its restricted
subsidiaries 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.
These restrictions are subject to certain
exceptions. See "Description of the
Notes -- Covenants."
OPTIONAL REDEMPTION........... The Notes will be redeemable, at the option of
the Company, in whole or in part, at any time
on or after June 15, 2003, at the redemption
prices set forth under "Description of the
Notes -- Optional Redemption," plus accrued
and unpaid interest, if any, to the date of
redemption. In addition, at any time on or
prior to June 15, 2001, the Company may redeem
up to 35% of the aggregate principal amount of
the Notes originally issued from the net cash
proceeds of one or more public or private
issuances of Capital Stock (other than
Disqualified Stock) at a redemption price of
112.375% of the principal amount thereof on
the redemption date, together with accrued and
unpaid interest, if any, provided that (i)
after any such redemption at least 65% of the
aggregate principal amount of the Notes
initially issued remain outstanding and (ii)
notice of such redemption is mailed within 60
days of such issuance. See "Description of the
Notes -- Optional Redemption."
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. See "Description of the
Notes -- 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.
11
<PAGE> 13
USE OF PROCEEDS
On June 17, 1998 the Company issued $225 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 Company has distributed and/or will
distribute the net proceeds of the Offering, which totaled approximately $217.7
million, to its operating subsidiaries through inter-company loans. The net
proceeds of the Offering will be used for capital expenditures, including up to
approximately $41.0 million for planned expenditures through 1999 related to the
Company's expansion into Brazil; and to repay approximately $35.2 million of
indebtedness of its operating subsidiaries (with a weighted average interest
rate of 11.4% and scheduled maturities ranging from seven days to nine months as
of March 31, 1998). The Company expects to reborrow such short-term indebtedness
in the future to fund capital expenditures and for general corporate purposes,
although the lenders have not committed to make additional loans. In addition, a
portion of the net proceeds may also be used for strategic acquisitions of
businesses, products, or technologies complementary to the Company's business.
The Company does not currently have any signed contracts, letters of intent or
agreements in principle to make any such material acquisitions. Pending such
uses, the net proceeds of the Offering will be invested in short-term debt
instruments
12
<PAGE> 14
SUMMARY FINANCIAL DATA
The following summary financial and operating data are for the Company on a
consolidated basis in accordance with U.S. GAAP. The Company and its
subsidiaries use the U.S. dollar as their functional currency. The Company owns
a 95.2% equity interest in IMPSAT S.A. ("IMPSAT Argentina"), a 74.2% equity
interest in IMPSAT S.A. ("IMPSAT Colombia"), a 75.0% equity interest in
Telecomunicaciones IMPSAT S.A. ("IMPSAT Venezuela"), a 99.9% equity interest in
IMPSAT, S.A. de C.V. ("IMPSAT Mexico") and a 100% equity interest in each of
IMPSATEL del Ecuador S.A. ("IMPSAT Ecuador") and IMPSAT USA, Inc. ("IMPSAT
USA").
The summary statement of operations, other financial and balance sheet data
for the Company as of December 31, 1996 and 1997 and for each of the three years
in the period ended December 31, 1997 have been derived from the Company's
consolidated financial statements audited by Deloitte & Touche LLP, independent
auditors, whose reports thereon are included elsewhere in this Prospectus. The
summary financial data for the Company for the three month periods ended March
31, 1997 and 1998 have been derived from the unaudited financial statements of
the Company included elsewhere in this Prospectus and, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the information set forth therein. For
an explanation of the fiscal year reporting periods of the Company and its
subsidiaries, see Note 2 to the Company's consolidated financial statements.
The information set forth below should be read in conjunction with, and is
qualified in its entirety by reference to, the consolidated financial statements
of the Company and the notes thereto included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1995 1996 1997 1997 1998
-------- --------- --------- -------- --------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues from services............................ $105,641 $ 128,393 $ 160,236 $ 37,027 $ 45,153
Operating expenses(1)................................. (98,758) (110,328) (136,997) (30,089) (38,182)
Operating income...................................... 6,883 18,065 23,239 6,938 6,971
Interest expense, net................................. (15,677) (23,185) (24,743) (6,182) (7,785)
Income attributable to minority interest.............. (1,712) (1,766) (981) (627) (269)
Net loss.............................................. $ (7,417) $ (8,483) $ (7,966) $ (1,697) $ (2,363)
OTHER FINANCIAL DATA:
EBITDA(2)............................................. $ 27,536 $ 44,383 $ 51,753 $ 13,688 $ 15,032
Cash flow from (used by):
Operating activities.............................. 18,894 9,843 14,087 2,796 (2,245)
Investing activities.............................. (66,910) (53,681) (55,028) (14,906) (16,023)
Financing activities.............................. 22,097 66,517 22,485 1,760 18,740
Ratio of earnings to fixed charges(3)................. -- -- -- 1.09x --
Pro forma ratio of earnings to fixed charges(4)....... -- --
Ratio of EBITDA to gross interest expense............. 1.67x 1.76x 1.99x 2.15x 1.85x
Pro forma ratio of EBITDA to gross interest
expense(4).......................................... 1.04x 1.16x
Ratio of total debt to EBITDA(5)...................... 4.64x 4.49x 4.25x 3.59x 3.97x
Pro forma ratio of total debt to EBITDA(4)(5)......... 7.91x 8.07x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31, 1998
------------------------------ --------------------
1995 1996 1997 ACTUAL PRO FORMA
-------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 6,216 $ 28,895 $ 10,439 $ 10,911 $193,401
Net property, plant and equipment...................... 199,701 227,086 255,422 264,458 264,458
Total assets........................................... 249,095 315,230 339,916 365,914 548,404
Total long-term debt, net.............................. 30,200 156,230 159,677 159,532 384,532
Minority interest...................................... 28,476 30,242 10,398 10,313 10,313
Redeemable preferred stock............................. -- -- -- 125,000 125,000
Stockholders' equity (deficit)......................... 55,363 46,881 63,389 (63,974) (63,974)
</TABLE>
(footnotes appear on page 00)
13
<PAGE> 15
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
--------------------- ---------------
1995 1996 1997 1997 1998
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
VSAT microstations installed................................ 2,841 3,476 3,585 3,323 3,490
Dataplus earth stations installed........................... 443 704 908 701 959
Satellites linked........................................... 4 6 6 6 6
Leased satellite capacity (MHz)............................. 198.3 253.0 412.6 245.0 461.9
Teleports................................................... 4 5 5 5 5
Regional Teleports.......................................... 10 10 11 11 11
Teledatos networks (fiber optic/microwave).................. 12 12 12 12 12
Customers................................................... 656 907 1,189 1,021 1,251
</TABLE>
The following supplemental summary financial data are for (i) IMPSAT
Argentina for the fiscal years ended November 30, 1995, 1996 and 1997; and (ii)
each of IMPSAT Colombia, IMPSAT Venezuela and IMPSAT Ecuador for the years ended
December 31, 1995, 1996 and 1997. The category "Other", as it relates to
revenues, operating expenses, total assets and EBITDA, consists of (i) amounts
relating to IMPSAT Mexico; IMPSAT USA; International Satellite Capacity Holding,
NG ("ISCH"), a wholly-owned subsidiary that leases satellite capacity on behalf
of the Company's operating subsidiaries; and Resis Ingenieria, S.A. ("Resis"), a
wholly-owned subsidiary that provides management services for the Company; (ii)
unallocated parent company amounts, including overhead expenses; and (iii) the
elimination of intercompany balances and transactions. As it relates to net
income (loss) and stockholders' equity, the category "Other" also includes the
allocation to minority interest. Such financial data have been derived from the
consolidating schedules prepared by the Company for its consolidated financial
statements for the years ended December 31, 1995, 1996 and 1997. The following
supplemental financial data for the first quarter of 1997 and 1998 have been
derived from the Company's unaudited consolidated financial statements for the
three months ended March 31, 1997 and 1998, respectively. Selected financial
data for IMPSAT Argentina and IMPSAT Colombia are set forth in
"Business -- Description of Country Operations."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1995 1996 1997 1997 1998
-------- --------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues from services:
Argentina........................ $ 80,346 $ 85,145 $ 90,011 $ 22,838 $ 23,944
Colombia(7)...................... 22,417 35,116 49,514 10,908 13,828
Venezuela(8)..................... 2,204 4,496 8,625 1,841 2,992
Ecuador(9)....................... 588 2,802 5,513 1,063 1,846
Other............................ 86 834 6,573 377 2,543
-------- --------- --------- -------- --------
TOTAL....................... $105,641 $ 128,393 $ 160,236 $ 37,027 $ 45,153
======== ========= ========= ======== ========
Operating expenses(1):
Argentina........................ $(66,019) $ (66,275) $ (71,299) $(16,941) $(18,744)
Colombia......................... (17,627) (24,140) (32,791) (7,562) (9,333)
Venezuela........................ (4,257) (6,752) (10,767) (2,386) (3,076)
Ecuador.......................... (1,765) (3,474) (5,354) (1,063) (1,652)
Other............................ (9,090) (9,687) (16,786) (2,137) (5,377)
-------- --------- --------- -------- --------
TOTAL....................... $(98,758) $(110,328) $(136,997) $(30,089) $(38,182)
======== ========= ========= ======== ========
Net income (loss):
Argentina........................ $ 4,472 $ 3,021 $ 2,879 $ 1,243 $ 1,036
Colombia......................... (135) 2,239 8,392 1,271 1,800
Venezuela........................ (1,723) (1,167) (5,438) (1,092) (918)
Ecuador.......................... (1,290) (1,099) (961) (296) (199)
Other............................ (8,741) (11,477) (12,838) (2,823) (4,082)
-------- --------- --------- -------- --------
TOTAL....................... $ (7,417) $ (8,483) $ (7,966) $ (1,697) $ (2,363)
======== ========= ========= ======== ========
</TABLE>
(footnotes appear on page 00)
14
<PAGE> 16
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1995 1996 1997 1997 1998
-------- --------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA(2):
Argentina........................ $ 30,394 $ 37,656 $ 36,504 $ 10,533 $ 9,933
Colombia......................... 8,748 16,660 23,965 5,097 6,737
Venezuela........................ (1,675) (1,106) (132) (114) 492
Ecuador.......................... (1,037) (321) 812 104 386
Other............................ (8,894) (8,506) (9,396) (1,932) (2,516)
-------- --------- --------- -------- --------
TOTAL....................... $ 27,536 $ 44,383 $ 51,753 $ 13,688 $ 15,032
======== ========= ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31, 1998
------------------------------ -----------------------
1995 1996 1997 ACTUAL PRO FORMA(6)
-------- -------- -------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets:
Argentina......................... $165,945 $174,239 $191,029 $214,609 $214,609
Colombia.......................... 59,929 70,501 106,919 115,806 115,806
Venezuela......................... 11,192 23,718 28,596 28,914 28,914
Ecuador........................... 4,383 9,795 13,262 15,080 15,080
Other............................. 7,646 36,977 110 (8,495) 173,995
-------- -------- -------- -------- --------
TOTAL........................ $249,095 $315,230 $339,916 $365,914 $548,404
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Operating expenses consist of variable cost of services; satellite capacity;
salaries, wages and benefits; selling, general and administrative expenses;
and depreciation and amortization.
(2) EBITDA 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 U.S. GAAP. Because EBITDA is not calculated under U.S. GAAP
principles, it is not necessarily comparable to similarly titled measures of
other companies.
(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
deferred finance costs. Earnings of the Company were insufficient to cover
fixed charges by approximately $9.6 million, $7.1 million, $0.7 million and
$1.1 million for 1995, 1996 and 1997 and the three months ended March 31,
1998, respectively. On a pro forma basis as contemplated by footnote 4
below, earnings of the Company would have been insufficient to cover fixed
charges by approximately $26.6 million and $6.0 million for 1997 and the
three months ended March 31, 1998, respectively.
(4) Pro forma ratios are presented for the year ended December 31, 1997 and for
the three-month period ended March 31, 1998 as if the Offering and the
application of the proceeds thereof had occurred at the beginning of the
relevant period.
(5) Represents the ratio of debt at the end of the period to EBITDA over the
preceding four quarters.
(6) Pro forma balance sheet data is presented as if the Offering and the
application of the proceeds thereof to repay $35.2 million of indebtedness
had occurred on the balance sheet date.
(7) IMPSAT Colombia commenced operations in December 1992.
(8) IMPSAT Venezuela commenced operations in January 1993.
(9) IMPSAT Ecuador commenced operations in January 1995.
15
<PAGE> 17
RISK FACTORS
SUBSTANTIAL INDEBTEDNESS
As of March 31, 1998, on a pro forma basis after giving effect to the
Offering and the application of the proceeds thereof, IMPSAT Corporation on an
unconsolidated basis would have had approximately $132.0 million of indebtedness
other than the Notes, and the Company's subsidiaries would have had
approximately $78.6 million of indebtedness (excluding intercompany payables and
the guarantee of the Existing Senior Notes). Total stockholders' deficit of the
Company on a consolidated basis as of March 31, 1998 was approximately $64.0
million.
After giving effect to the Offering and the application of the proceeds
thereof as if they had occurred at the beginning of the period, the Company
would have had pro forma interest expense of approximately $49.9 million for
1997. As of March 31, 1998 on a pro forma basis, the Company's total debt was
$428.6 million and its stockholders' deficit was $64.0 million. In addition, at
March 31, 1998, on a pro forma basis, the Company's ratio of debt to EBITDA for
the prior four quarters would have been 8.07 times. Earnings of the Company were
insufficient to cover fixed charges by approximately $9.6 million, $7.1 million
and $0.7 million, for 1995, 1996 and 1997, respectively, and by $1.1 million for
the first quarter of 1998. In addition, on a pro forma basis earnings of the
Company were insufficient to cover fixed charges by approximately $26.6 million
and $6.0 million for 1997 and for the first quarter of 1998, respectively. The
Indenture permits the Company and its subsidiaries to incur substantial amounts
of indebtedness in the future.
The levels of the Company'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 to make payments on the Notes; (ii) the ability of the Company to obtain
any necessary financing in the future for working capital, capital expenditures,
debt service requirements or other purposes may be limited; (iii) all or a
substantial portion of the Company'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
level of indebtedness could limit its flexibility in planning for, or reacting
to changes in, its business; (v) the Company will be more highly leveraged than
some of its competitors, which may place it at a competitive disadvantage; and
(vi) the Company's high degrees of indebtedness will make it more vulnerable in
the event of a downturn in its business and make it less likely to be able to
make payments on the Notes.
SIGNIFICANT CAPITAL REQUIREMENTS
In the future, the Company will require significant amounts of additional
capital to fund (i) the expansion of its private telecommunications networks
(including the development of its operations in Brazil) and (ii) the acquisition
of businesses and investments in joint ventures and strategic alliances and
(iii) working capital. The Company will consider expansion into new services for
its business customers, including switched international, domestic long distance
and local services upon the deregulation of the telecommunications markets in
the countries in which it operates. If the Company were to seek to provide
switched telecommunications services, it would require considerable amounts of
additional outside capital. There can be no assurance that the Company will be
able to obtain sufficient capital on acceptable terms to fund any expansion
plans. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" for an estimate of the
Company's capital expenditure requirements through the year 1999. The exact
amount of the Company's future capital requirements will depend upon many
factors, including the cost, timing and extent of upgrading or expanding its
networks and services, the development of new services, the Company's ability to
penetrate new markets, regulatory changes, the status of competing services, the
magnitude of potential acquisitions, investments and strategic alliances, and
the Company's results of operations. Individually or collectively, variances in
these and other factors could cause the amount and timing of the Company's
actual capital requirements to differ from its expectations. During 1997, the
Company's cash flow from operations totaled $14.1 million and capital
expenditures totaled $55.0 million. In addition, as of March 31, 1998, on a pro
forma basis for the Offering after giving effect to the application of the
proceeds thereof, $44.0 million of the Company's debt is scheduled
16
<PAGE> 18
to mature in 1998, approximately $14.3 million in 1999 and approximately $370.3
million in the year 2000 and thereafter. The Company has historically incurred
substantial amounts of short-term debt. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." Although the Company does not have material commitments from
any lenders, it may borrow substantial amounts of short-term debt in the future.
New sources of capital may include subsequent public and private equity and
debt financings by the Company or its subsidiaries. The incurrence of additional
indebtedness could subject the Company to more restrictive financial covenants.
There can be no assurance that additional financing will be available on
acceptable terms or at all. To the extent unplanned expenditures arise or the
Company's estimates of its capital requirements prove to be inaccurate, the
Company may require such additional financing sooner than anticipated and in
amounts greater than currently expected. Failure to obtain such financing could
result in the delay or abandonment of some or all of the Company's development
and expansion plans, which could have a material adverse effect on the business,
results of operations and financial condition of the Company and its ability to
make payments on the Notes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Liquidity and Capital
Resources."
The terms of the Company's Series A Preferred Stock contain provisions
which under certain circumstances could require the Company to redeem that
Series, subject to the provisions of the Indenture and the 1996 Indenture. In
addition, because of the potentially dilutive effect of the conversion of the
Series A Preferred Stock into common stock, it may be desirable for the Company
to redeem the Series A Preferred Stock. The Company does not presently have the
funds with which to redeem the Series A Preferred Stock. If it is required to
redeem the Series A Preferred Stock, there can be no assurance that any such
redemption would not have a material adverse effect on the Company's ability to
make payments on the Notes.
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 and other related investments.
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 debt and to finance the expansion and development of their
telecommunications infrastructure. See "Use of Proceeds." 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 have no obligation,
contingent or otherwise, to pay amounts due pursuant to the Notes. IMPSAT
Corporation's subsidiaries will not guarantee the Notes, and some 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, Mexico and Brazil is currently 13.2%,
39.6%, 32.3%, 0%, 35.0% and 15.0%, respectively. The Company has been, and
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 is currently 0% in
Argentina, Venezuela, Ecuador, Mexico and Brazil and 39.6% in Colombia. 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 Venezuela, IMPSAT Ecuador and IMPSAT Mexico and expected to be incurred
by IMPSAT Brazil, the Company does not believe that any of its subsidiaries
other than IMPSAT Argentina and IMPSAT Colombia would be able to pay dividends
to the Company in the foreseeable future.
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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 indebtedness,
including the Notes. Accordingly, the Notes will be effectively subordinated to
the liabilities including trade payables, of the subsidiaries of IMPSAT
Corporation. At March 31, 1998, on a pro forma basis after giving effect to this
Offering and the application of the proceeds thereof, the subsidiaries of IMPSAT
Corporation would have had approximately $259.4 million of liabilities
(excluding intercompany payables), including $203.6 million of indebtedness
(including guarantees of the Existing Senior Notes).
SHORT OPERATING HISTORY; HISTORY OF LOSSES; RISKS OF EXPANSION STRATEGY
The Company commenced commercial operations in 1990 and has experienced
rapid growth, increasing annual revenues from $8.2 million in 1991 to
approximately $160.2 million in 1997. The Company has, however, 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 recently commenced
operations in Brazil with the acquisition of a 99.9% ownership interest in
IMPSAT Brazil on June 1, 1998. In addition, on May 28, 1998, the Company
acquired a majority interest in Mandic S.A. There can be no assurance that
IMPSAT Brazil, which is still primarily in the developmental stage, and Mandic
S.A. will be successfully integrated. Moreover, there can be no assurance that
the Company's historic rate of growth or expansion will continue. In particular,
the Company's rate of growth in Argentina, the market in which it first
commenced operations in 1990, has slowed considerably in recent periods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Description of Country Operations -- IMPSAT
Argentina."
The Company recorded net losses of $2.8 million, $7.4 million, $8.5 million
and $8.0 million in 1993, 1995, 1996 and 1997, respectively and net income of
$3.0 million in 1994. Achieving and sustaining profitable operations will depend
upon many circumstances, including market demand, pricing and competition in the
telecommunications industry in the countries where the Company operates. The
failure of the Company to achieve and sustain profitability could hinder its
ability to respond effectively to market conditions, to make capital
expenditures and to take advantage of business opportunities, the failure to
perform any of which could have a material adverse effect on the business,
results of operations and financial condition of the Company and its ability to
make payments on the Notes.
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 and develop integrated private
telecommunications networks, secure financing, install telecommunications
infrastructure, 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, including acquisitions in Brazil, that could divert the Company's
resources and management and require integration with the Company's existing
operations. The failure to manage its planned expansion effectively could have a
material adverse effect on the Company's business, growth, financial condition
and results of operations and its ability to make payments on the Notes. There
can be no assurance that the Company will be successful in developing and
marketing, on a timely basis or at all, service enhancements or new services
that respond to technological change, changes in customer requirements and
emerging industry standards. If the Company successfully identifies any such
opportunities, there can be no assurance that the Company's lack of significant
experience with respect to a new service or market will not hinder the Company's
ability to successfully capitalize on such opportunity. The Company may consider
expansion into new services for its business customers, including switched
international, and domestic long distance and local services upon the
deregulation of the telecommunications markets. If the Company pursues such an
expansion, it will be subject to numerous risks involved in entering a different
portion of the telecommunications industry in which it has no experience.
Switched telephony services will involve regulatory risks, interconnection
difficulties, large amounts of capital expenditures, accounts receivable risks,
competition from large, well-financed international telecommunications carriers
(such as AT&T
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Corporation ("AT&T"), MCI Communications Corporation ("MCI"), WorldCom, Inc.
("Worldcom"), Sprint Corporation ("Sprint"), STET SpA ("STET"), Spain's
Telefonica S.A. and others) and substantial start-up and marketing costs. If the
Company seeks to provide switched telephony services, it will have a negative
impact on its results of operations, at least over the short term, and could
have a material adverse effect on its ability to make payments on the Notes.
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 is likely to increase substantially in
the future. The Company competes on the basis of its experience, quality,
customer service, range of services offered and price.
Although the Company to date has not suffered substantial price erosion,
the Company has faced and expects to continue to face declining prices and may
experience declining margins in the future as the monopoly public telephony
operators (the "PTOs") in the countries in which the Company has operations
adapt to a competitive marketplace and place greater emphasis on data
communications and as new competitors enter its markets. The Company believes
that as the Latin American telecommunications markets become less regulated
there will be increasing demand for private telecommunications network services
and that such increased demand should help to mitigate 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. For example, the Company's principal competitor in Argentina is Startel
S.A. ("Startel"), which is the joint venture company for data transmission
services owned 50% each 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. Startel's total
revenues from all services, including data transmission, have increased to
approximately $114 million in 1997. In addition, Telecom Argentina and
Telefonica each recently obtained regulatory approval to establish their own
data transmission units. 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, which could have a material adverse effect on the Company's
business, results of operations and financial condition and its ability to make
payments on the Notes. 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 telecommunications carriers, such as AT&T, MCI, Worldcom and
Sprint, or from other industry participants. While international
telecommunications carriers 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,
if, as expected, Argentina authorizes competition in long distance telephony,
these large telecommunications 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. In addition, consolidation of telecommunications
companies and the formation of strategic alliances within the telecommunications
industry could give rise to significant new competitors to the Company. For
example, Spain's Telefonica S.A., Worldcom and MCI recently announced the
formation of an alliance to cooperate in Latin America and elsewhere. The three
companies reportedly announced an initial expectation to invest up to $200
million in Latin America. If any of such competitors or potential competitors
were to devote significant additional resources to the provision of private
telecommunications network services to the Company's core customer base, there
could be a material adverse effect on the
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business, financial condition and results of operations of the Company and its
ability to make payments on the Notes.
In addition, there can be no assurance that competing technologies will not
become available that will adversely affect the Company's business, although the
Company believes that it has the flexibility to act quickly to take advantage of
any significant technological development. For example, new technologies such as
asynchronous digital subscriber line (ADSL) can significantly enhance the speed
of traditional copper lines. This or other technologies could enable the
Company's PTO competitors to offer customers new high-speed services without
undergoing the expense of replacing their existing twisted-pair copper networks,
thereby negating the Company's "last mile" advantage. 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 space based systems dedicated to data distribution services, generally known
as "Little-LEOs" (low earth orbit satellites) and "Broadband" (Ka-band) systems.
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 over the longer term that could have a material adverse
effect on the business results of operations and financial condition of the
Company and its ability to make payments on the Notes. See "-- Technological
Considerations" and "Business -- Competition."
The Company has recently established operations in Brazil and expects to
face significant competition in that market. Brazil is by far the largest
telecommunications market in Latin America and is expected to attract numerous
providers, many of whom may be larger and better financed than the Company. It
was recently announced that Telecomunicacoes Brasileras S.A. ("Telebras"), the
Brazilian national telecommunications company, will be split into twelve holding
companies, some or all of which will be privatized. In addition, numerous
additional concessions to provide telephony and data transmissions services are
expected to be granted. It is likely that large international carriers will bid
on one or more of these holding companies and concessions. Winning bidders and
concessionaires are likely also to focus on parts of the Brazilian market beyond
those in which they initially obtain a concession. The presence of large
carriers in Brazil may negatively affect the Company's prospects in Brazil. As
the Brazilian telecommunications sector is liberalized and deregulated,
competition is likely to initially come from current telecommunications service
providers in that country, including Empresa Brasileira de Telecomunicacoes S.A.
("Embratel"), Brazil's state-owned, monopoly long-distance carrier; Promon
Eletronica Ltda., one of the largest Brazilian private telecommunications
companies and the local partner of Hughes Network Systems ("Hughes") for the
provision of satellite telecommunications networks; COMSAT do Brazil Ltda.; and
GSI Servicos de Informatica Ltda. ("GSI"), a wholly-owned data transmission
services subsidiary of IBM, as well as from other domestic and international
entrants. Global One, the joint venture of Deutsche Telekom AG, France Telecom
S.A. and Sprint, recently received a license to offer international and domestic
telecommunications services to corporations in Brazil. Moreover, large, well
financed international telecommunications carriers, such as AT&T, MCI, Worldcom
and Sprint, may be expected to enter the Brazilian telecommunications market.
Competition in Brazil could have a material adverse effect on the Company's
business, results of operations and financial condition and its ability to make
payments on the Notes.
RISKS ASSOCIATED WITH PROVIDING INTERNET SERVICES
One of the Company's newer services is Internet access, which has primarily
been provided to residential customers. For 1997, the Company had $7.6 million
in revenues from Internet services, and at March 31, 1998 had 25,385 dial-up
Internet access retail customers and 74 dedicated Internet access business
customers. As is typical for a new and rapidly evolving industry characterized
by rapidly changing technology, evolving industry standards and frequent new
product and service introductions, demand and market acceptance are subject to a
high level of uncertainty. In addition, critical issues concerning the
commercial use of the Internet remain unresolved and may impact the growth of
Internet use. Despite growing interest in the many commercial uses of the
Internet, many businesses have been deterred from purchasing Internet access
services for a number of reasons, including, among others, inconsistent quality
of service, lack of availability of cost-effective,
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high-speed options, a limited number of access points, inability to integrate
business applications on the Internet, the need to deal with multiple and
frequently incompatible vendors, inadequate protection of the confidentiality of
stored data and information moving across the Internet, and a lack of tools to
simplify Internet access and use. In particular, numerous published reports have
indicated that a perceived lack of security of commercial data, such as credit
card numbers, has significantly impeded commercial exploitation of the Internet
to date, and there can be no assurance that encryption or other technologies
will be developed that satisfactorily address these security concerns. Published
reports have also indicated that capacity constraints caused by growth in the
use of the Internet may, unless resolved, impede further development of the
Internet to the extent that users experience delays, transmission errors and
other difficulties. For example, inadequate transmission infrastructure in Latin
America (such as an insufficiency of telephone lines for Internet access) could
forestall the growth of Internet service in that region. Further, the adoption
of the Internet for commerce and communications, particularly by those
individuals and enterprises which have historically relied upon alternative
means of commerce and communication, generally requires the understanding and
acceptance of a new way of conducting business and exchanging information.
The Company could be exposed to liability with respect to the material that
may be accessible through the Company's Internet services. The nature and scope
of existing or future laws in various jurisdictions governing issues such as
property ownership, libel and personal privacy or other theories based on the
nature and content of material transmitted via Internet is uncertain, may take
years to resolve and could expose the Company to substantial liability for which
the Company might not be indemnified by the content providers or other third
parties. Any such new legislation or regulation or the application of such
existing laws and regulations to the Internet could have a material adverse
effect on the business, results of operations and financial condition of the
Company and its ability to make payments on the Notes.
The Company's customer base for Internet services currently consists
primarily of individuals. The Company can expect to encounter customer
"churn" -- the term used to denote customer turnover through
cancellations -- and difficulty collecting receivables from such a large base of
small customers as its Internet service grows. The Company's churn rate and
inability to collect receivables for Internet services could have a material
adverse effect on the Company's business, results of operations and financial
condition and its ability to make payments on the Notes.
RECEIVABLES RISKS
The Company's subsidiaries provide trade credit to their customers in the
normal course of business. Prior to extending credit, the customer's financial
history is analyzed. As of March 31, 1998, excluding two customers discussed
below, approximately 10.0% of the Company's gross current trade accounts
receivable were past due more than six months but less than one year and
approximately 10.0% of gross accounts receivable were past due more than one
year. Excluding these two customers, the Company's allowance for doubtful
accounts was approximately $5.3 million (or 10.4% of gross accounts receivable)
at March 31, 1998. See Note 3 to the Company's consolidated financial
statements. Pursuant to the Company's current internal guidelines, the Company
generally reserves an amount equal to 30% of accounts receivable in excess of
180 days but less than one year, and 100% of accounts receivable in excess of
360 days. These guidelines are not applied in cases where the Company determines
that applying the guidelines would not be appropriate. The Company reviews the
status of its accounts receivable and makes adjustments to its reserve for
uncollectible receivables.
A significant part of the Company's past due trade receivables relates to
Banco de la Nacion Argentina ("BNA"), a state-owned bank and the largest bank in
Argentina. The receivable was recorded for services provided under a subcontract
between IMPSAT Argentina and IBM de Argentina, S.A. In 1997, the Company began
reserving for receivables generated under the contract during 1996 and 1997. The
contract was terminated by BNA in the second quarter of 1997. The Company's
allowance for the BNA receivable was approximately $1.2 million (or 54.5% of the
total amount due to IMPSAT Argentina under such contract) at March 31, 1998. The
payment of the receivable by BNA is subject to the approval of the General
Auditor of Argentina, which office is conducting an audit of the procedures used
by BNA in awarding the contract. BNA is generally current on its payments under
BNA's existing contract with IMPSAT Argentina.
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In November 1996, IMPSAT Argentina filed suit against Empresa Nacional de
Correos y Telegrafos S.A. ("ENCOTESA"), the former Argentine national postal
service, for amounts due under IMPSAT Argentina's contracts with ENCOTESA, which
totaled $5.6 million, plus interest on such amounts. At the end of 1996, IMPSAT
Argentina began to reserve 100% of all subsequent invoices submitted to ENCOTESA
and to charge such amounts directly to selling, general and administrative
expenses. Subsequently, the Company reclassified all trade account receivables
due from ENCOTESA to noncurrent assets. Such noncurrent assets were recorded at
their estimated net realizable value of $5.1 million (as determined by the
Company's management based on the advice of the Company's Argentine counsel).
There can be no assurance that difficulties in collecting amounts due from
customers will not have a material adverse effect on the business, results of
operations and financial condition of the Company and its ability to make
payments on the Notes.
RISKS RELATING TO OPERATIONS IN LATIN AMERICA
Substantially all of the Company's consolidated net revenues from services
are derived from operations in Latin America. During 1997, approximately 56.1%
and 30.9% of the Company's consolidated net revenues from services were derived
from IMPSAT Argentina and IMPSAT Colombia, respectively. The Company also has
established operations in Venezuela, Mexico and Ecuador, and has recently
commenced operations in 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 Company is subject to certain risks common in the conduct
of business in Latin America. Other than the United States, each country where
the Company operates has experienced political and economic instability in
recent years. Moreover, as 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 have been characterized by extensive
government intervention in the economy; inflation and hyperinflation; currency
devaluations, fluctuations, exchange controls and shortages; troubled and
insolvent financial institutions; capital flight; political instability, turmoil
and violence; and economic contraction and unemployment. It is impossible to
predict whether such events, circumstances or conditions will occur, recur or
worsen, or what effect any such events, circumstances or conditions, which are
entirely outside the control of the Company, will have on the countries in which
the Company operates or upon the Company. Prospective purchasers should
recognize that these conditions and events may have adverse effects on the
business, results of operations and financial condition of the Company and its
ability to make payments on the Notes.
Argentina. While the Company anticipates that the concentration of its
business outside Argentina will increase in the coming years, Argentina is
expected to remain the Company's most significant market for the foreseeable
future, and 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 Argentine 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.
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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 a decline in Argentina's international currency reserves,
a significant tightening of bank liquidity and a surge in interest rates 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%.
The Argentine economy recovered in 1996, with GDP growing 4.4%, and
economic growth continued into 1997. During the first six months of 1997, GDP
rose 8.0% versus the same period in 1996. During the first six months of 1997,
industrial production grew 6.2% and investment increased by 28% over the
comparable 1996 period. The inflation rate during the first nine months of 1997
was approximately 0.1%, as measured by the wholesale price index, compared to
2.6% in the comparable 1996 period.
In the mid-term Congressional elections held on October 26, 1997, the
Justicialista Party, which had previously controlled both houses of the
Argentine Congress, lost by a narrow margin to a coalition (the "Alianza")
formed by its two main adversaries, the Union Civica Radical ("UCR") and the
Frente Pais Solidario ("Frepaso"). As a result, as of December 31, 1997, none of
these parties individually controlled a majority in the Chamber of Deputies.
Instead, of the total of 257 seats, the Justicialista Party held 118 seats, the
parties of the Alianza held an aggregate of 110 seats and other minority parties
held a total of 29 seats. No assurance can be given that a potential deadlock of
votes in the Chamber of Deputies will not delay the passing of certain laws,
which delay might negatively affect the economic situation of Argentina, nor
that the recent and future changes in the political composition of the Argentine
Government will not result in legislative or policy shifts adverse to the
Argentine economy or the telecommunications sector in Argentina and the business
of the Company.
The recent instability and volatility in the world financial markets, which
began with the crisis in the markets of Southeast Asia, has also negatively
affected the Argentine financial market, as well as the market of Argentina's
largest trading partner, Brazil, and could have a negative effect on the
Argentine economy. As of the date of this Prospectus, the Argentine economy has
not been severely affected by such events. However, the Company is unable to
predict the effect of such crisis on the Argentine economy or the business,
financial condition or results of operations of the Company or its ability to
make payments on the Notes.
In addition, there can be no assurance that the Convertibility Plan or the
recent government measures described above will be successful in improving the
performance of the Argentine economy or that future economic developments in
Argentina, over which the Company has no control, will not impair the Company's
business, financial condition or results of operations and adversely affect the
Company's ability to pay interest or repay the principal of the Notes. Nor can
there be any assurance that future uncertainties preceding and resulting from
the Presidential elections in October 1999 will not negatively impact the
Argentine economy or that the Convertibility Law will not be amended or repealed
or that the Argentine monetary authorities will not change their policy of
supporting the existing peso/dollar exchange rate.
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 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 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. Since 1990 the Colombian government has embarked on a series of
economic reforms, known as Apertura or "opening." The Apertura reforms included
deregulation of commercial activity, relaxation of foreign investment and
foreign exchange controls, greater independence for the Colombian Central Bank,
liberalization of labor laws,
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privatization of certain state-owned companies, reduction of trade barriers and
changes in the tax system. Although Apertura has had a generally positive effect
on the economy to date, there can be no assurance that Apertura will remain in
effect or that its positive effects will continue.
In December 1996, strong foreign investment inflows and increased external
borrowing by the public and private sector led to a $1.5 billion increase in
Colombia's net international reserves, 18.1% higher than their level on November
30, 1996, exerting upward pressure on the value of the Colombian peso and
complicating the achievement of macroeconomic and fiscal policy objectives for
1997. The combination of these two events led the Colombian government to
conclude in January 1997 that extraordinary economic measures would be required
in order to forestall a further appreciation of the peso and an increase in the
Colombian government deficit over that projected for 1997. Accordingly, in
January 1997, the Colombian government issued a series of decrees including (i)
a tax on the incurrence of external indebtedness (with certain exceptions, such
as export-related financings), (ii) an increase in the stamp tax rate, (iii) the
extension of the value added tax ("VAT") to certain previously exempt goods and
services and the elimination or limitation of certain income tax deductions and
exemptions, and (iv) an enhancement of the powers of tax and customs authorities
to investigate and sanction tax evaders.
Colombia has experienced political turmoil stemming in part from
allegations that former President Samper's 1994 election campaign fund received
contributions from the Cali drug cartel. The ongoing political turmoil caused by
such allegations has had and may continue to have a material adverse effect on
Colombia's economy. Real growth in gross domestic product during the first three
quarters of 1997 was negative 0.4%, positive 3.1% and positive 4.7%,
respectively, in contrast to real gross domestic product growth during the first
three quarters of 1996 of 4.4%, 2.3% and 2.0%, respectively, and for the years
1994, 1995 and 1996 of 5.8%, 5.4% and 2.1%, respectively. A slowdown in the
Colombian economy could have a material adverse effect on the Company's results
of operations and financial condition. This political crisis has been aggravated
by the United States "decertifying" Colombia for failing to take sufficient
action to stem the production and export of narcotics. The United States
decertified Colombia for a third year in a row on February 27, 1998. Under
United States law, the President is required to certify to the U.S. Congress
annually which nations that are major producers or major transit points for
drugs cooperate with efforts to stem the flow of narcotics into the United
States. The refusal to certify Colombia has had the following consequences: (i)
the U.S. representatives on the boards of certain multilateral development
banks, such as the World Bank and the Inter-American Development Bank, are
instructed to vote against loans granted by such institutions to Colombia, and
(ii) U.S. government credit institutions, such as the Export-Import Bank and the
Overseas Private Investment Corporation, will not lend funds or issue insurance
(including political risk insurance) for Colombian projects. Although its
antidrug performance was still found wanting, the United States ameliorated its
approach this year by granting Colombia a waiver, on national security grounds,
of the resultant financial-aid sanctions. Although the United States has not
imposed further sanctions at this time, it could also impose, for example, trade
sanctions on Colombian exports to the United States and may suspend or end
implementation of certain agreements providing preferential treatment to
Colombian exports to the United States primarily in connection with products
that benefit from low or no import duties. There can be no assurance that
sanctions of the nature described above or other sanctions will not be imposed
in the future. It is also uncertain what economic or political actions the U.S.
government may take in connection with the certification process and the effect
of such actions on the Colombian economy.
The foregoing political crisis has occurred against a backdrop of periodic
violence related to both drug activities and guerrilla movements in Colombia.
Colombia has experienced periods of criminal violence over the past four
decades, primarily from leftist guerrilla groups and drug-related activities.
Historically, guerrilla violence has increased in anticipation of and during
elections. Guerrilla and para-military attacks increased significantly in
September and October of 1997 in an effort to undermine the municipal elections
held on October 26, 1997. As part of this process of intimidation, more than 40
candidates were reported killed and 200 kidnapped and over 1,600 were threatened
into withdrawing as candidates from such elections. The Colombian government has
implemented various measures to address the violence associated with the
remaining active guerrilla groups and with narcotics trafficking and
strengthened its military and police forces by creating specialized units.
Nevertheless, drug-related crime and guerrilla activities are still present in
the
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country, and guerrilla groups exercise considerable influence in various parts
of the country. stability. On June 21, 1998, the conservative party candidate
Mr. Andres Pastrana was elected president of Colombia. The future impact, if
any, of the recent election of a new government in Colombia cannot be
ascertained. There can be no assurance that these matters, individually or
cumulatively (including by affecting Colombian governmental policy), will not
materially adversely affect the business, results of operations and financial
condition of the Company and its ability to make payments on the Notes.
Venezuela. The Company's operations in Venezuela, which is currently the
Company's third largest market in terms of revenues generated, are expected to
grow in the future. 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.
The Venezuelan economy has experienced difficulties in recent years,
especially since 1994 in part due to a widespread crisis among financial
institutions that began in that year when 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. The Venezuelan GDP contracted by 2.9% in 1994, increased in 1995 by
3.4% and contracted by 0.4% in 1996. Venezuela's GDP grew by approximately 5.1%
in 1997 (3.3% without regard to the oil sector).
The Venezuelan bolivar has, in the past, been subject to foreign exchange
controls. On June 27, 1994 in connection with the financial sector crisis
described above, the Venezuelan government established foreign currency exchange
controls and soon thereafter fixed the official bolivar/U.S. dollar exchange
rate. These controls were removed in April 1996. At that time, the Central Bank
of Venezuela announced a policy of maintaining the exchange rate within certain
limits, currently between 7.5% above and 7.5% below a reference rate set by the
Central Bank of Venezuela. Such reference rate was originally set at Bs. 470 per
U.S. dollar and is intended to be adjusted from time to time to account for
projected inflation. However, since April 1996 inflation in Venezuela has
exceeded the rate of devaluation of the bolivar against the U.S. dollar and, as
a result, in U.S. dollar terms goods and services priced in bolivars have
generally become increasingly expensive. On July 15, 1998, the exchange rate
equaled Bs. 556.0 -- $1.00.
Venezuela has experienced high levels of inflation during the past decade.
The general rate of inflation, as measured by the consumer price index, was
45.9%, 70.8%, 56.6%, 103.2% and 37.6% for the years 1993, 1994, 1995, 1996 and
1997, respectively.
The Venezuelan government recorded a fiscal surplus of 7.4% of GDP in 1996,
due to extraordinary petroleum revenues resulting from increased production and
higher international petroleum prices. With lower average oil prices in 1997,
($16.32 pb compared with $18.39 pb in 1996 for Venezuela's petroleum products
mix), the Venezuelan government posted a fiscal surplus equal to 2.3% of GDP in
1997. Prior to 1996, the Venezuelan government had recorded fiscal deficits of
13.9% and 5.9% of GDP during the years 1994 and 1995, respectively, and
concurrent reductions in international revenues. The Venezuelan government and
economy are highly dependent on petroleum extraction, with the petroleum
industry accounting in 1996 for 27% of Venezuela's GDP, 43% of central
government revenues and 80% of the total value of exports. During 1998,
international oil prices have continued to decline, largely due to excess global
supply and reduced demand from Asia. In connection with this decline, the
Venezuelan government has stated that it anticipates little or no growth in GDP
for 1998 and a fiscal deficit in excess of 2.0% of GDP and announced plans to
decrease government spending.
Mexico. The Company's operations in Mexico are currently limited but are
expected to grow in the future. At the end of 1994, Mexico 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
25
<PAGE> 27
in 1994), reduction of international investments and an increase in U.S.
interest rates. Mexico experienced rates of inflation of 27.7% in 1996 and 15.7%
in 1997 (as compared to 8.0% in 1993, 7.1% in 1994 and 52.0% in 1995), 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. Mexico's GDP for
1997 grew at a rate of 7.0%. Mexico's international reserves as of April 3, 1998
equaled $29.9 billion.
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 equaled Ps. 7.69 = $1.00 at December 31,
1995, fluctuating between Ps. 5.27 and Ps. 8.05 = $1.00. Between January 1, 1996
and December 31, 1996, the peso strengthened slightly, fluctuating between Ps.
7.33 and Ps. 8.05 = $1.00. In late October 1997, the peso declined by
approximately 8% over seven days, depreciating from Ps. 7.71 = $1.00 at October
21, 1997 to Ps. 8.20 = $1.00 at October 28, 1997, precipitated by a sharp
decline in the value of certain Asian currencies. As of June 11, 1998, the value
of the Mexican peso against the U.S. dollar equaled Ps. 9.04 = $1.00.
Brazil. Although its business in Brazil is currently limited, the Company
expects Brazil to constitute a larger share of its business in the future. The
Company plans to significantly expand its operations into Brazil which plans, if
implemented, could subject the Company and its financial condition and results
of operations to various additional economic and political risks. Throughout the
1980s and into the 1990s, the Brazilian economy has suffered from periods of
extremely high rates of inflation and recession. In December 1993, the Brazilian
government announced the Plano Real ("Real Plan"), an economic stabilization
plan designed to reduce inflation by, among other things, reducing certain
public expenditures, collecting debts owed to the Brazilian government,
increasing tax revenues and continuing the national program of privatizing
certain state-owned enterprises.
The Brazilian government's actions to implement macroeconomic policies have
often involved wage and price controls as well as certain measures that directly
impact the banking industry, such as freezing bank accounts and imposing
currency controls. Mr. Fernando Henrique Cardoso, the Finance Minister at the
time of the implementation of the Real Plan was elected President in October
1994. The Real Plan, which has succeeded in lowering inflation, has continued to
support the free market and privatization measures of recent years, Mr. Cardoso
has proposed measures for the liberalization of the state telecommunications and
petroleum monopolies and the privatization of a number of state-owned
enterprises. Some important political factions remain opposed to significant
elements of the reform program.
Brazil's trade deficit in 1997 totaled $8.5 billion, up from $5.6 billion
in 1996. As of December 31, 1997, Brazil's reserves were $52.2 billion. A
continuing increase in the trade deficit could substantially reduce reserves.
Furthermore, the Brazilian government's desire to control inflation and to
reduce budget deficits could cause it to take actions that could slow or halt
Brazil's economic growth.
The rapid changes in Brazilian political and economic conditions that have
occurred recently and that are expected to continue will require continued
emphasis on assessing the risks associated with the Company's operations in
Brazil and adjusting the Company's business and operating strategy.
Historically, Brazil's currency has frequently depreciated in relation to
the U.S. dollar. Although the real appreciated against the dollar for a period
of time after its introduction on July 1, 1994, since March 1995 the real has
depreciated against the dollar. Pursuant to an exchange rate band system
established by the Brazilian government in March 1995, the real is permitted to
float against the U.S. dollar within bands established by the Central Bank of
Brazil. The Central Bank of Brazil has periodically adjusted the exchange rate
band to permit the gradual devaluation of the real against the U.S. dollar.
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
26
<PAGE> 28
measured by the general price index domestic supply, was approximately 2,709% in
1993, 909.6% in 1994, 14.8% in 1995, 9.3% in 1996 and 4.8% for 1997. GDP grew in
constant real terms by 2.9% in 1996, 4.1% in 1995, 5.8% in 1994 and 4.2% in
1993, compared with a decrease of 0.8% in 1992. Brazil's GDP rose 3% in 1997,
reaching approximately $803 billion U.S. dollars. The average unemployment rate
in Brazil increased to 7.25% in January 1998 from an average of 4.8% in 1997.
While the Real Plan has been successful in controlling the level of
inflation, stabilizing the real and maintaining economic growth in Brazil, there
can be no assurance that the Real Plan will continue to be successful or that it
will not be repealed or discontinued.
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 payments of
interest and principal on the Company's indebtedness, is payable in U.S.
dollars. To date, the Company has not entered into hedging or swap contracts to
address its currency risks because 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 between the local currency and the U.S. dollar at
the time of invoicing. Such contractual provisions are structured to reduce the
Company's risk in the event of fluctuations in currency exchange rates. However,
given that the exchange rate is generally set at the date of invoicing and that
the Company in some cases experiences substantial delays in collecting
receivables, it is exposed to exchange rate risk.
Nonetheless, the revenues of the Company's customers 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 may therefore be
affected by currency fluctuations. The Company's competitors and potential
future competitors, including the PTOs and large, multinational
telecommunications 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 economies 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 and its ability to
make payments on the Notes.
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. The Company is prohibited by law from providing Interplus services
to or from Argentina during the term of the 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 November 2000. In
certain of the Company's principal existing and target markets, there are laws
and regulations that prohibit or limit the provision of certain
telecommunications 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
27
<PAGE> 29
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 business, results of operations and financial condition of the Company
and its ability to make payments on the Notes.
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 current 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. 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, 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 and
its ability to make payments on the Notes. For specific details of the Company's
licenses in the various countries in which it operates, including the expiration
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.
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. For example,
new technologies such as asynchronous digital subscriber line ("ADSL") can
significantly enhance the speed of traditional copper lines. Such technologies
could enable the Company's PTO competitors to offer customers new high-speed
services without undergoing the expense of replacing their existing twisted-pair
copper networks, thereby negating the Company's "last mile" advantage. In
addition, the Company generally owns the equipment, such as VSAT microstations
and Dataplus earth stations, 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 upgrade or
replace such equipment.
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, who generally are not
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 SHAREHOLDERS
The Company is a privately held corporation. All of the issued and
outstanding common stock of the Company is held by Nevasa, and all of the Series
A Preferred Stock is held by the Morgan Stanley Investors. Nevasa is a holding
company controlled 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.
28
<PAGE> 30
The Company's stockholders may have different interests from holders of the
Notes; in particular, the Company's stockholders may be less risk averse with
respect to the Company's business operations and financial planning.
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 June 17, 1998 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.
29
<PAGE> 31
CAPITALIZATION
The following table sets forth as of March 31, 1998: cash and cash
equivalents, short-term debt and capitalization of the Company (i) on an
historical basis, and (ii) pro forma to give effect to the Offering and the
application of the proceeds thereof. This table should be read in conjunction
with the financial statements of the Company and the notes related thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1998
----------------------
ACTUAL PRO FORMA
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
CASH AND CASH EQUIVALENTS................................... $ 10,911 $ 193,401
========= =========
SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT:
Short-term debt........................................ $ 68,095 $ 44,043
Current portion of long-term debt...................... 11,165 --
--------- ---------
Total short-term debt and current portion of
long-term debt.................................. 79,260 44,043
--------- ---------
LONG-TERM DEBT:
Existing Senior Notes.................................. 125,000 125,000
Senior Notes offered hereby............................ -- 225,000
Other long-term debt, net of current portion........... 34,532 34,532
--------- ---------
Total long-term debt, net......................... 159,532 384,532
--------- ---------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES.............. 10,313 10,313
--------- ---------
Redeemable, convertible preferred stock, Series A 25,000
shares authorized, issued and outstanding................. 125,000 125,000
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value
75,594,480 shares issued and outstanding............. 100,793 100,793
Treasury stock, 25,198,160 shares, at cost............. (125,000) (125,000)
Accumulated deficit.................................... (39,767) (39,767)
--------- ---------
Total stockholders' deficit....................... (63,974) (63,974)
--------- ---------
Total capitalization, including short-term debt... $ 310,131 $ 499,914
========= =========
</TABLE>
30
<PAGE> 32
SELECTED FINANCIAL AND OTHER DATA
The following selected financial and other data are for the Company on a
consolidated basis 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 95.2% equity
interest in IMPSAT Argentina, a 74.2% equity interest in IMPSAT Colombia and a
75.0% equity interest in IMPSAT Venezuela. For an explanation of the fiscal year
reporting periods of the Company and its subsidiaries, see Note 2 to the
Company's consolidated financial statements.
The selected statement of operations, other financial and balance sheet
data for the Company as of December 31, 1996 and 1997 and for each of the three
years in the period ended December 31, 1997 have been derived from the Company's
consolidated financial statements audited by Deloitte & Touche LLP, independent
auditors, whose reports thereon are included elsewhere in this Prospectus. The
balance sheet data as of December 31, 1993, 1994 and 1995 and the statement of
operations and other financial data for the years ended December 31, 1993 and
1994, have been derived from audited financial statements. The selected
financial data for the Company for the three month periods ended March 31, 1997
and 1998 have been derived from the unaudited financial statements of the
Company included elsewhere in this Prospectus and, in the opinion of management,
include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the information set forth therein.
31
<PAGE> 33
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- --------- --------- --------- -------- --------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues from services.................... $ 37,695 $ 77,679 $ 105,641 $ 128,393 $ 160,236 $ 37,027 $ 45,153
Operating expenses:
Variable cost of services................. (8,905) (12,770) (18,818) (21,494) (27,629) (4,963) (7,719)
Satellite capacity........................ (3,126) (7,734) (10,973) (13,925) (18,906) (4,435) (6,115)
Salaries, wages and benefits.............. (7,756) (13,528) (22,220) (25,561) (29,209) (6,386) (7,771)
Selling, general and administrative....... (9,244) (19,148) (26,094) (23,030) (32,739) (7,555) (8,516)
Depreciation and amortization............. (6,324) (12,874) (20,653) (26,318) (28,514) (6,750) (8,061)
-------- -------- --------- --------- --------- -------- --------
Total operating expenses...................... (35,355) (66,054) (98,758) (110,328) (136,997) (30,089) (38,182)
-------- -------- --------- --------- --------- -------- --------
Operating income.............................. 2,340 11,625 6,883 18,065 23,239 6,938 6,971
Other income (expenses):
Interest expense, net......................... (6,220) (8,231) (15,677) (23,185) (24,743) (6,182) (7,785)
Net gain (loss) on foreign exchange........... 1,518 1,352 1,838 910 (279) (162) 23
Other income (expenses), net.................. (684) 599 511 1,035 (155) 33 332
-------- -------- --------- --------- --------- -------- --------
(Loss) income before income taxes and minority
interest.................................... (3,046) 5,345 (6,445) (3,175) (1,938) 627 (459)
Benefit from (provision for) income taxes..... 1,428 3,155 740 (3,542) (5,047) (1,697) (1,635)
-------- -------- --------- --------- --------- -------- --------
(Loss) income before minority interest........ (1,618) 8,500 (5,705) (6,717) (6,985) (1,070) (2,094)
Income attributable to minority interest...... (1,218) (5,464) (1,712) (1,766) (981) (627) (269)
-------- -------- --------- --------- --------- -------- --------
Net (loss) income............................. $ (2,836) $ 3,036 $ (7,417) $ (8,483) $ (7,966) $ (1,697) $ (2,363)
======== ======== ========= ========= ========= ======== ========
OTHER FINANCIAL DATA:
EBITDA(1)..................................... $ 8,664 $ 24,499 $ 27,536 $ 44,383 $ 51,753 $ 13,688 $ 15,032
Cash flow from (used by):
Operating activities...................... 4,821 17,257 18,894 9,843 14,087 2,796 (2,245)
Investing activities...................... (35,261) (87,603) (66,910) (53,681) (55,028) (14,906) (16,023)
Financing activities...................... 33,394 93,351 22,097 66,517 22,485 1,760 18,740
Capital expenditures.......................... 36,172 87,541 67,060 53,998 56,440 17,097 16,997
Ratio of earnings to fixed charges(2)......... -- 1.38x -- -- -- 1.09x --
Pro forma ratio of earnings to fixed
charges(2)(3)............................... -- -- -- -- -- -- --
Ratio of EBITDA to gross interest expense..... 1.30x 2.90x 1.67x 1.76x 1.99x 2.15x 1.85x
Pro forma ratio of EBITDA to gross interest
expense(3).................................. -- -- -- -- 1.04x -- 1.16x
Ratio of total debt to EBITDA(4).............. 5.36x 4.39x 4.64x 4.49x 4.25x 3.59x 3.97x
Pro forma ratio of total debt to
EBITDA(3)(4)................................ -- -- -- -- 7.91x -- 8.07x
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
AS OF DECEMBER 31, ---------------------
---------------------------------------------------- PRO
1993 1994 1995 1996 1997 ACTUAL FORMA(5)
-------- -------- -------- -------- -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 7,130 $ 32,135 $ 6,216 $ 28,895 $ 10,439 $ 10,911 $193,401
Total current assets............................. 26,344 57,948 36,906 68,304 65,015 76,371 258,861
Net property, plant and equipment................ 77,970 152,909 199,701 227,086 255,422 264,458 264,458
Total assets..................................... 111,283 222,684 249,095 315,230 339,916 365,914 548,404
Total current liabilities........................ 24,796 68,984 128,813 78,125 103,438 131,752 96,535
Total short-term debt and current portion
of long-term debt.............................. 11,246 48,047 97,510 42,874 60,375 79,260 44,043
Total long-term debt, net........................ 35,152 59,437 30,200 156,230 159,677 159,532 384,532
Minority interest................................ 19,614 24,893 28,476 30,242 10,398 10,313 10,313
Redeemable preferred stock....................... -- -- -- -- -- 125,000 125,000
Stockholders' equity (deficit)................... 26,794 62,780 55,363 46,881 63,389 (63,974) (63,974)
OPERATING DATA:
VSAT microstations installed..................... 931 1,925 2,841 3,476 3,585 3,323 3,490
Dataplus earth stations installed................ 129 271 443 704 908 701 959
Satellites linked................................ 3 4 4 6 6 6 6
Leased satellite capacity (MHz).................. 51.5 128.4 198.3 253.0 412.6 245.0 461.9
Teleports........................................ 2 3 4 5 5 5 5
Regional Teleports............................... 6 9 10 10 11 11 11
Teledatos networks (fiber optic/microwave)....... 6 12 12 12 12 12 12
Customers........................................ 262 445 656 907 1,189 1,021 1,251
</TABLE>
(footnotes appear on page 00)
32
<PAGE> 34
The following supplemental summary financial data are for (i) IMPSAT
Argentina for the fiscal years ended November 30, 1995, 1996 and 1997; and (ii)
each of IMPSAT Colombia, IMPSAT Venezuela and IMPSAT Ecuador for the years ended
December 31, 1995, 1996 and 1997. The category "Other", as it relates to
revenues, operating expenses, total assets, and EBITDA, consists of (i) amounts
relating to IMPSAT Mexico; IMPSAT USA; ISCH; and Resis; (ii) unallocated parent
company amounts, including overhead expenses; and (iii) the elimination of
intercompany balances and transactions. As it relates to net income (loss) and
stockholders' equity, the category "Other" also includes the allocation to
minority interest. Such financial data have been derived from the consolidating
schedules prepared by the Company for the consolidated financial statements for
the years ended December 31, 1995, 1996 and 1997. The following supplemental
financial data for the first quarter of 1997 and 1998 have been derived from the
Company's unaudited consolidated financial statements for the three months ended
March 31, 1997 and 1998, respectively. Unaudited selected financial data for
IMPSAT Argentina and IMPSAT Colombia and are set forth in
"Business -- Description of Country Operations."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1995 1996 1997 1997 1998
-------- --------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues from services:
Argentina................................... $ 80,346 $ 85,145 $ 90,011 $ 22,838 $ 23,944
Colombia(6)................................. 22,417 35,116 49,514 10,908 13,828
Venezuela(7)................................ 2,204 4,496 8,625 1,841 2,992
Ecuador(8).................................. 588 2,802 5,513 1,063 1,846
Other....................................... 86 834 6,573 377 2,543
-------- --------- --------- -------- --------
TOTAL.................................. $105,641 $ 128,393 $ 160,236 $ 37,027 $ 45,153
======== ========= ========= ======== ========
Operating expenses(9):
Argentina................................... $(66,019) $ (66,275) $ (71,299) $(16,941) $(18,744)
Colombia.................................... (17,627) (24,140) (32,791) (7,562) (9,333)
Venezuela................................... (4,257) (6,752) (10,767) (2,386) (3,076)
Ecuador..................................... (1,765) (3,474) (5,354) (1,063) (1,652)
Other....................................... (9,090) (9,687) (16,786) (2,137) (5,377)
-------- --------- --------- -------- --------
TOTAL.................................. $(98,758) $(110,328) $(136,997) $(30,089) $(38,182)
======== ========= ========= ======== ========
Net income (loss):
Argentina................................... $ 4,472 $ 3,021 $ 2,879 $ 1,243 $ 1,036
Colombia.................................... (135) 2,239 8,392 1,271 1,800
Venezuela................................... (1,723) (1,167) (5,438) (1,092) (918)
Ecuador..................................... (1,290) (1,099) (961) (296) (199)
Other....................................... (8,741) (11,477) (12,838) (2,823) (4,082)
-------- --------- --------- -------- --------
TOTAL.................................. $ (7,417) $ (8,483) $ (7,966) $ (1,697) $ (2,363)
======== ========= ========= ======== ========
OTHER FINANCIAL DATA:
EBITDA(1):
Argentina................................... $ 30,394 $ 37,656 $ 36,504 $ 10,533 $ 9,933
Colombia.................................... 8,748 16,660 23,965 5,097 6,737
Venezuela................................... (1,675) (1,106) (132) (114) 492
Ecuador..................................... (1,037) (321) 812 104 386
Other....................................... (8,894) (8,506) (9,396) (1,932) (2,516)
-------- --------- --------- -------- --------
TOTAL.................................. $ 27,536 $ 44,383 $ 51,753 $ 13,688 $ 15,032
======== ========= ========= ======== ========
</TABLE>
(footnotes appear on page 00)
33
<PAGE> 35
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
AS OF DECEMBER 31, ---------------------
------------------------------ PRO
1995 1996 1997 ACTUAL FORMA(5)
-------- -------- -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets:
Argentina....................................... $165,945 $174,239 $191,029 $214,609 $214,609
Colombia........................................ 59,929 70,501 106,919 115,806 115,806
Venezuela....................................... 11,192 23,718 28,596 28,914 28,914
Ecuador......................................... 4,383 9,795 13,262 15,080 15,080
Other........................................... 7,646 36,977 110 (8,495) 173,995
-------- -------- -------- -------- --------
TOTAL.................................... $249,095 $315,230 $339,916 $365,914 $548,404
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) EBITDA 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 U.S. GAAP. Because EBITDA is not calculated under U.S. GAAP
principles, it is not necessarily comparable to similarly titled measures of
other companies.
(2) 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
deferred finance costs. Earnings of the Company were insufficient to cover
fixed charges by approximately $9.6 million, $7.1 million, $0.7 million and
$1.1 million for 1995, 1996 and 1997 and the three months ended March 31,
1998, respectively. On a pro forma basis as contemplated by footnote 3
below, earnings of the Company would have been insufficient to cover fixed
charges by approximately $26.6 million and $6.0 million for 1997 and the
three months ended March 31, 1998, respectively.
(3) Pro forma ratios are presented for the year ended December 31, 1997 and for
the three-month period ended March 31, 1998 as if the Offering and the
application of the proceeds thereof had occurred at the beginning of the
relevant period.
(4) This figure represents the ratio of debt at the end of the period to EBITDA
over the preceding four quarters.
(5) Pro forma balance sheet data is presented as if the Offering and the
application of the proceeds thereof to repay $35.2 million of indebtedness
had occurred on the balance sheet date.
(6) IMPSAT Colombia commenced operations in December 1992.
(7) IMPSAT Venezuela commenced operations in January 1993.
(8) IMPSAT Ecuador commenced operations in January 1995.
(9) Operating expenses consist of variable cost of services; satellite capacity;
salaries, wages and benefits; selling, general and administrative expenses;
and depreciation and amortization.
34
<PAGE> 36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Forward Looking Statements. This Management's Discussion and Analysis of
Financial Condition and Results of Operations contains forward-looking
statements that involve significant risks and uncertainties. Such forward
looking statements are based upon current expectations, and actual results may
differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, the effect of changing economic conditions in the countries in which
the Company operates, business conditions and growth in the telecommunications
industry in Latin America, the Company's ability to maintain its lending
arrangements, or if necessary, access additional sources of capital and
accurately forecast capital requirements, new technological developments,
changes in tax and other governmental rules and regulations applicable to the
Company, changes in the competitive environment in which the Company operates,
and dependence on key management. Assumptions relating to budgeting, marketing,
product development and other management decisions are subjective in many
respects and thus susceptible to interpretations and periodic revisions based on
actual experience and business developments, the impact of which may cause the
Company to alter its marketing, capital expenditure or other budgets, which may
in turn affect the Company's financial position and results of operations. The
Company does not undertake to publicly update or revise its forward looking
statements even if experience or changes make it clear that any projected
results (expressed or implied) will not be realized. See "Risk Factors" for a
description of important factors that could cause actual results to differ from
those referred to in the forward-looking statements.
Revenues. The Company provides services to its customers pursuant to
contracts which typically range from six months to five years but generally are
for three years. The customer generally pays an installation charge at the
beginning of the contract and a monthly fee based on the quantity and type of
equipment installed. The fees stipulated in the contracts are generally
denominated in U.S. dollar equivalents. See "Risk Factors -- Currency
Fluctuations, Devaluations and Restrictions." Services (other than installation
fees) are billed on a monthly, predetermined basis, which coincide with the
rendering of the services. The Company reports net revenues which are after
deductions for sales taxes.
As discussed in "Risk Factors -- Competition" and
"Business -- Competition," 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. In addition, as the Company's
business in a particular country matures, its rate of growth in that country
tends to slow. In particular, this has occurred in Argentina. To compensate for
slower growth in maturing markets, the Company seeks to expand into new
countries and to provide new services.
No single customer accounted for greater than 10% of revenue from services
for 1995, 1996 or 1997. The Company anticipates that its geographic
diversification provides some protection against economic downturns in any
particular country, although there can be no assurance in this regard. However,
a substantial majority of the Company's revenues are derived from Argentina and
Colombia. Many of the countries in which the Company operates have experienced
political and economic volatility in recent years. For example, the Colombian
economy performed poorly in 1997 relative to most expectations. Similarly,
presidential elections, which were recently held in Colombia and Ecuador and are
scheduled to be held later in 1998 for Venezuela and Brazil, and post-election
changes in economic or telecommunications policies could adversely affect the
Company's operations in such countries. It is impossible to predict whether such
events, circumstances or conditions will occur, recur or worsen, or what effect
any such events, circumstances or conditions, which are entirely outside the
control of the Company, will have on the countries in which the Company operates
or upon the Company. Such conditions and events may have adverse effects on the
business, results of operations and financial condition of the Company and its
ability to make payments on the Notes. See "Risk Factors -- Risks Relating to
Operations in Latin America."
35
<PAGE> 37
Costs and Expenses. The Company's costs and expenses include principally
(i) variable costs of services, (ii) lease payments for satellite transponder
capacity, (iii) salaries, wages and benefits, (iv) selling, general and
administrative expenses and (v) depreciation and amortization. The principal
items comprising variable cost of services are installation (and
de-installation) costs, sales commissions paid to third-party sales
representatives and maintenance costs. Selling, general and administrative
("SG&A") expenses for the Company consist principally of publicity and promotion
costs; provisions for doubtful accounts; fees and other remunerations; travel
and entertainment; rent; and plant services and telephone and energy expenses.
Currency Risks. 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 invoicing between the local currency and the
U.S. dollar. Accordingly, inflationary pressures experienced in the Company's
countries of operations did not have a direct effect on the Company's revenues
during 1997. 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. Moreover, given that the exchange rate is
generally set at the date of invoicing and that the Company in some cases
experiences substantial delays in collecting receivables, it is exposed to
exchange rate risk.
RESULTS OF OPERATIONS
The following table presents the Company's results of operations as a
percentage of revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------------------ ---------------------------------
1995 1996 1997 1997 1998
---------------- ---------------- ---------------- --------------- ---------------
(IN THOUSANDS AND AS A PERCENTAGE OF CONSOLIDATED REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues from
services........... $105,641 100.0% $128,393 100.0% $160,236 100.0% $37,027 100.0% $45,153 100.0%
Variable costs of
services........... 18,818 17.8 21,494 16.7 27,629 17.2 4,963 13.4 7,719 17.1
Satellite capacity
cost............... 10,973 10.4 13,925 10.8 18,906 11.8 4,435 12.0 6,115 13.5
Salaries, wages and
benefits........... 22,220 21.0 25,561 19.9 29,209 18.2 6,386 17.2 7,771 17.2
Selling, general and
administrative
expenses........... 26,094 24.7 23,030 17.9 32,739 20.4 7,555 20.4 8,516 18.9
Depreciation and
amortization....... 20,653 19.6 26,318 20.5 28,514 17.8 6,750 18.2 8,061 17.8
Interest expense,
net................ 15,677 14.8 23,185 18.1 24,743 15.4 6,182 16.7 7,785 17.2
Net gain (loss) on
foreign exchange... 1,838 1.7 910 0.7 (279) (0.2) (162) (0.4) 23 0.1
Benefit from
(provision for)
foreign income
taxes.............. 740 0.7 (3,542) (2.8) (5,047) (3.2) (1,697) (4.6) (1,635) (3.6)
Net loss............. (7,417) (7.0) (8,483) (6.6) (7,966) (5.0) (1,697) (4.6) (2,363) (5.2)
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31,
1997
Revenues. Revenues of the Company for the first quarter of 1998 totaled
$45.2 million, an increase of $8.1 million, or 21.9%, from revenues for the
first quarter of 1997. Revenues at IMPSAT Argentina for the first quarter of
1998 totaled $23.9 million (an increase of $1.1 million, or 4.8%, from the first
quarter of 1997). This increase was attributable to an increase in revenues
received from Internet services. Revenues at IMPSAT Colombia totaled $13.8
million in the first quarter of 1998, an increase of $2.9 million, or 26.8%,
from the first quarter of 1997; revenues at IMPSAT Venezuela totaled $3.0
million for the first quarter of 1998 (an increase of $1.2 million from the
first quarter of 1997), and revenues at IMPSAT Ecuador totaled $1.8 million for
the first quarter of 1998 (an increase of $0.8 million from the first quarter of
1997). IMPSAT
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<PAGE> 38
USA recorded revenues of $1.8 million and $0.3 million during the three months
ended March 31, 1998 and 1997, respectively, and IMPSAT Mexico recorded revenues
of $0.7 million and $0.2 million for the same periods, respectively.
The increase in the Company's revenues for the first quarter of 1998 is
derived principally from growth in the Company's services other than its VSAT
based service offerings. The Company anticipates that the percentage, and
absolute amount, of total revenues represented by non-VSAT based service
offerings will continue to grow at a faster rate than its revenues from VSAT
based service offerings. Revenues from Dataplus service offerings for the first
quarter of 1998 increased by $1.8 million, or 20.9%, from Dataplus revenues for
the first quarter of 1997. Many of the Company's customers have supplemented or
replaced their VSAT services with Dataplus services over time as they have
increased the amount of private telecommunications network capacity they
purchase from the Company, and the Company expects this trend to continue. In
addition, the Company's revenues from newer service offerings, such as Internet
services, recorded significant increases in the first quarter of 1998, totaling
$2.2 million, as compared to $0.9 million for the first quarter of 1997. The
Company anticipates additional growth in Internet-related revenues, including
revenues derived from its acquisition of Mandic S.A. As part of total revenues,
the Company recorded revenues of $0.4 million from certain nonrecurring
equipment sales during the first quarter of 1998, as compared to no revenues
from such sales during the first quarter of 1997.
Variable Cost of Services. The Company's variable cost of services for the
first quarter of 1998 totaled $7.7 million, an increase of $2.8 million, or
55.5%, from the Company's variable cost of services for the first quarter of
1997. Of total variable cost of services for the first quarter of 1998, $4.6
million related to the operations of IMPSAT Argentina and $1.5 million related
to the operations of IMPSAT Colombia, compared to variable cost of services of
$3.2 million and $1.5 million at IMPSAT Argentina and IMPSAT Colombia,
respectively, for the first quarter of 1997.
The principal items comprising total variable cost of services are
maintenance and installation (including de-installation) costs, and sales
commissions paid to third-party sales representatives.
Maintenance costs totaled $3.8 million for the first quarter of 1998,
compared to $1.7 million for the corresponding period in 1997.
Installation costs totaled $1.5 million for the first quarter of 1998 and
$1.3 million for the first quarter of 1997. The Company contracts equipment
installation services from outside providers.
Sales commissions paid to third-party sales representatives totaled $1.3
million for the first quarter of 1998, compared to $1.3 million for the first
quarter of 1997. The overwhelming amount of such sales commissions paid to
third-party sales representatives related to customers of IMPSAT Argentina.
Sales commissions paid to third-party sales representatives in Argentina totaled
$1.1 million and $1.2 million in the first quarters of 1998 and 1997,
respectively.
In addition, the Company incurred costs of equipment sold during the first
quarter of 1998 of $0.7 million, as compared with costs of equipment sold during
the first quarter of 1997 of $61,000.
Satellite Capacity Cost. The Company's satellite lease payments for the
first quarter of 1998 totaled $6.2 million, an increase of $1.7 million, or
37.9%, over satellite lease payments for the corresponding period in 1997. The
Company had approximately 461.9 MHz and 245.0 MHz of leased satellite capacity
at March 31, 1998 and 1997, respectively. The expansion of the Company's
satellite capacity during the first quarter of 1998 compared to the first
quarter of 1997 is attributable primarily to contractually scheduled increases
in satellite capacity to match anticipated growth in the total number of
Dataplus earth stations. Dataplus earth stations have greater transmission
capacity and bandwidth requirements than VSAT and therefore utilize larger
amounts of satellite capacity. The increase in satellite capacity leased by the
Company is also attributable to growth of IMPSAT USA's satellite capacity
requirements. Increases in the Company's utilization of satellite capacity have
not been matched by proportionate increases in revenues from its services.
Salaries, Wages and Benefits. Salaries, wages and benefits paid by the
Company for the first quarter of 1998 totaled $7.8 million, an increase of $1.4
million, or 21.7%, over the Company's expenses for salaries,
37
<PAGE> 39
wages and benefits during the first quarter of 1997. The Company has added
employees and has increased salaries, wages and benefits of its personnel to
match market rates and increases in cost of living. Salaries, wages and benefits
increased principally in the Company's more recently developed operations in
Ecuador, Mexico, Venezuela and the United States and remained relatively stable
in Argentina and Colombia. The Company maintained a total of 700 employees at
March 31, 1998, compared to 656 employees at March 31, 1997.
Selling, General and Administrative Expenses. SG&A expenses for the
Company consist principally of publicity and promotion costs; provisions for
doubtful accounts; fees and other remuneration; travel and entertainment; rent;
and plant services, telephone and energy expenses.
The Company incurred SG&A expenses of $8.5 million for the first quarter of
1998, an increase of $1.0 million, or 12.7%, from SG&A expenses incurred by the
Company during the first quarter of 1997. The increase relates in part to
increased advertising and promotion expenses related to the introduction and
roll-out of certain of the Company's newer service offerings, including Internet
services, Conexia and Telecampus (described under "Business -- Services and
Related Infrastructure"); higher occupancy costs at IMPSAT Colombia due to the
expansion of its operations; and fees paid for feasibility studies regarding the
Company's expansion into Brazil.
SG&A expenses at IMPSAT Argentina for the first quarter of 1998 totaled
$3.6 million, a decrease of $0.7 million from SG&A expenses incurred by IMPSAT
Argentina for the first quarter of 1997. The decrease in SG&A expenses at IMPSAT
Argentina is due in part to a lower provision for doubtful accounts during the
first quarter of 1998 ($0.7 million) compared to the provision recorded by
IMPSAT Argentina on the first quarter of 1997 ($1.2 million). On a Company-wide
basis, the Company recorded a provision for doubtful accounts in the first
quarter of 1998 of $1.2 million as a result of payment arrears experienced by
certain customers in Argentina, Ecuador and the United States. Pursuant to the
Company's current internal guidelines, the Company generally reserves an amount
equal to 30% of accounts receivable in excess of 180 days but less than one year
and 100% of accounts receivable in excess of 360 days. These guidelines are not
applied in cases where the Company determines that applying the guidelines would
not be appropriate. The Company reviews the status of its accounts receivable
and makes adjustments to its reserve for uncollectible receivables as
appropriate.
Depreciation and Amortization. The Company's depreciation and amortization
for the first quarter of 1998 totaled $8.1 million, an increase of $1.3 million,
or 19.4%, compared to the first quarter of 1997.
Interest Expense, Net. The Company's net interest expense for the first
quarter of 1998 totaled $7.8 million, comprising interest expense of $8.1
million and interest income of $0.3 million. Net interest expense for the first
quarter of 1998 increased $1.6 million from net interest expense for the first
quarter of 1997. IMPSAT Argentina's net interest expense for the first quarter
of 1998 totaled $3.1 million ($1.5 million after eliminating intercompany
items), compared to net interest expense of $3.4 million ($1.1 million after
eliminating intercompany items) for the first quarter of 1997. Net interest
expense at IMPSAT Colombia for the first quarter of 1998 totaled $2.1 million
($1.7 million after eliminating intercompany items), as compared to $1.5 million
($1.1 million after eliminating intercompany items) for the first quarter of
1997. Interest expense with respect to intercompany loans are eliminated in the
Company's Consolidated Statement of Operations.
The increase in net interest expense reflects increased indebtedness of the
Company, which grew from $195.7 million as of March 31, 1997 to $238.8 million
as of March 31, 1998. As of March 31, 1998, total outstanding indebtedness at
IMPSAT Argentina equaled $121.5 million ($61.5 million after eliminating
intercompany items), compared to $103.3 million as of March 31, 1997 ($26.5
million after eliminating intercompany items). Total outstanding indebtedness at
IMPSAT Colombia as of March 31, 1998 equaled $55.1 million ($42.1 million after
eliminating intercompany items), compared to $48.8 million as of March 31, 1997
($35.8 million after eliminating intercompany items). The weighted average
interest rate on the Company's indebtedness for the first quarter of 1998 was
approximately 14.1%, compared to a weighted average interest rate of
approximately 12.1% for the first quarter of 1997.
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<PAGE> 40
Provision for Income Taxes. The Company recorded a provision for income
taxes, all of which are for foreign taxes, for the three months ended March 31,
1998 and 1997 of $1.6 and $1.7 million, respectively. IMPSAT Argentina recorded
a provision for income taxes for the first quarter of 1998 of $1.1 million,
compared to $1.3 million in the first quarter of 1997. IMPSAT Colombia recorded
a provision for income taxes for the first quarter of 1998 of $0.7 million,
compared to $0.3 million for the first quarter of 1997.
Net Loss. For the three months ended March 31, 1998, the Company incurred
a net loss of $2.4 million, an increase of $0.7 million, compared to the
Company's net loss of $1.7 million for the three months ended March 31, 1997.
The principal reasons for the Company's net loss for the three months ended
March 31, 1998 related to losses at IMPSAT Venezuela of $0.9 million and
unallocated overhead expenses, including management services incurred, by IMPSAT
Corporation of $2.0 million. For the three month period ended March 31, 1998,
IMPSAT Argentina recorded net income of $1.0 million, compared to net income of
$1.1 million for the three months ended March 31, 1997. IMPSAT Colombia recorded
net income of $1.8 million for the three months ended March 31, 1998 compared to
a net income of $1.3 million for the three months ended March 31, 1997.
1997 COMPARED TO 1996
Revenues. Revenues for 1997 totaled $160.2 million, an increase of $31.8
million, or 24.8%, from 1996. Revenues at IMPSAT Argentina for 1997 totaled
$90.0 million, an increase of $4.9 million, or 5.4%, from 1996. IMPSAT
Argentina's revenues for 1997 included approximately $4.2 million generated from
Internet access services (approximately 55.0% of the Company's total revenues
from Internet access services). Although IMPSAT Argentina experienced a decrease
in the average price of its services in 1997 as a result of increased
competition, IMPSAT Argentina has been able to maintain revenues by increasing
its customer base and by selling a greater volume of services at such lower
prices. IMPSAT Colombia's revenues for 1997 totaled $49.5 million, an increase
of $14.4 million, or 41.0%, from 1996. IMPSAT Venezuela's revenues for 1997
totaled $8.6 million, representing an increase of $4.1 million, or 91.1%, from
1996. In addition, the revenues at IMPSAT Ecuador ($5.5 million and $2.8 million
for 1997 and 1996, respectively) and IMPSAT USA ($5.0 million and $0.5 million
for 1997 and 1996, respectively) increased as the Company's operations in those
countries continued to grow. The significant growth in IMPSAT USA's revenues
during 1997 was principally generated by certain short-term, non-recurring
contracts. Approximately 41% of IMPSAT USA's revenues for 1997 were derived from
such short-term contracts. As part of their revenues, IMPSAT Argentina and
IMPSAT USA recorded revenues of $2.2 million and $0.9 million, respectively,
during 1997 from certain nonrecurring equipment sales. The Company is unable to
predict whether IMPSAT USA will obtain any such contracts, maintain its revenues
at 1997 levels or achieve similar revenue growth in the future.
As of December 31, 1997 the Company had 1,189 customers (excluding
Internet, Global Fax and Conexia customers), compared to 907 at December 31,
1996.
Variable Cost of Services. The Company's variable cost of services for
1997 totaled $27.6 million, an increase of $6.1 million, or 28.5%, compared to
1996. Of the Company's total variable cost of services for 1997, $14.6 million
related to the operations of IMPSAT Argentina and $7.3 million related to the
operations of IMPSAT Colombia. This compares to variable cost of services of
$14.7 million at IMPSAT Argentina and $5.6 million at IMPSAT Colombia for 1996.
Maintenance costs for the Company totaled $12.5 million during 1997, an
increase of $4.0 million, or 47.1%, compared to 1996. Maintenance costs for
IMPSAT Argentina for 1997 amounted to $5.8 million. This represents an increase
of $1.3 million over IMPSAT Argentina's maintenance costs during 1996. In
Colombia, maintenance costs totaled $4.5 million during 1997, an increase of
$1.2 million compared to 1996. The increase in maintenance costs of the Company
during 1997 compared to 1996 is primarily attributable to (i) the increased
level and amount of the Company's telecommunications infrastructure in service
as the Company's operations have grown and expanded; and (ii) de-installation
costs incurred by the Company in connection with replacing VSAT microstations
with higher capacity Dataplus earth stations at customer locations. In addition,
maintenance costs for IMPSAT USA totaled $1.4 million in 1997 compared to
maintenance costs of $0.5 million in 1996. IMPSAT USA's maintenance costs for
1997 included fees of
39
<PAGE> 41
$0.2 million paid to third-party carriers to terminate the "last mile" of
certain private telecommunications network links provided by IMPSAT USA to some
of its customers.
Installation costs for the Company totaled $4.7 million during 1997 in
comparison to installation costs of $2.2 million during 1996. The Company
installed a net total of 109 VSAT microstations and 204 Dataplus earth stations
during 1997. In comparison, the Company installed a net total of 635 VSAT
microstations and 261 Dataplus earth stations during 1996. The Company contracts
equipment installation services from outside providers.
Sales commissions paid to third-party sales representatives totaled $5.9
million for 1997, compared to $8.9 million during 1996. The overwhelming amount
of such sales commissions were paid to third-party sales representatives with
respect to customers of IMPSAT Argentina. Sales commissions paid to third-party
sales representatives in Argentina totaled $5.2 million for 1997, compared to
$8.3 million for 1996. The Company incurred lower sales commissions during 1997
primarily because of the renegotiation of certain of the agreements with
third-party sales representatives for lower commissions. In addition,
commissions were also reduced as a result of the renegotiation of underlying
contracts with customers, which resulted in reduced sales bases underlying
contractually due commissions. For example, the renegotiation and reduction of
services provided by IMPSAT Argentina under its agreements to provide private
telecommunications network services to BNA in the second quarter of 1997
resulted in a reduction in the revenues from such services and a corresponding
reduction in related sales commissions.
In addition, the Company incurred costs of equipment sold of $2.8 million
1997. The Company did not incur any costs of equipment sold during 1996.
Satellite Capacity Costs. The Company's satellite capacity costs for 1997
totaled $18.9 million, an increase of $5.0 million, or 36.0%, from 1996. The
Company had approximately 253.0 MHz and 412.6 MHz of leased satellite capacity
as of December 31, 1996 and 1997, respectively. The Company's satellite capacity
costs are primarily related to the increase in the Company's customer and
revenue bases. The increase in satellite capacity during 1997 is attributable
primarily to contractually scheduled increases in satellite capacity to match
anticipated growth in the total number of Dataplus earth stations. Dataplus
earth stations have greater transmission capacity and bandwidth requirements
than VSATs and therefore utilize larger amounts of satellite capacity.
Salaries, Wages and Benefits. Salaries, wages and benefits for 1997
totaled $29.2 million, an increase of $3.7 million, or 14.5%, compared to 1996.
The Company increased salaries, wages and benefits of its personnel to match
market rates and increases in cost of living. IMPSAT Argentina incurred $12.5
million in salaries, wages and benefits costs during 1997, a decrease of $0.1
million over IMPSAT Argentina's salaries, wages and benefits costs during 1996.
IMPSAT Colombia's salaries, wages and benefits costs totaled $6.3 million during
1997, an increase of $1.3 million compared to IMPSAT Colombia's salaries, wages
and benefits costs during 1996. The appreciation of the Colombian peso against
the U.S. dollar since the beginning of 1997 resulted in an increase in U.S.
dollar terms in salaries, wages and benefits paid to employees of IMPSAT
Colombia during 1997. Salaries, wages and benefits for 1997 for the Company's
other subsidiaries increased by varying amounts totaling $2.4 million, compared
to 1996. The Company maintained a total of 683 employees as of December 31,
1997, compared to 650 employees as of December 31, 1996.
Selling, General and Administrative Expenses. The Company incurred SG&A
expenses of $32.7 million for 1997, an increase of $9.7 million, or 42.2%, from
SG&A expenses incurred by the Company during 1996. The increase in SG&A expenses
is primarily attributable to an increase in SG&A expenses incurred by IMPSAT
Argentina and IMPSAT Colombia.
SG&A expenses at IMPSAT Argentina for 1997 totaled $16.8 million, an
increase of $6.1 million from SG&A expenses incurred by IMPSAT Argentina for
1996. The increase in SG&A expenses at IMPSAT Argentina in 1997 compared to 1996
includes the creation of a specific provision of $2.5 million relating to
services invoiced to ENCOTESA. At the end of 1996 IMPSAT Argentina began to
reserve 100% for all subsequent invoices submitted to ENCOTESA and to charge
such amounts directly to SG&A expenses. Subsequently the Company reclassified
its trade account receivables due from ENCOTESA as noncurrent
40
<PAGE> 42
assets. Such receivables were recorded at their estimated net realizable value
of $5.1 million. In addition to the specific provision relating to ENCOTESA, the
Company increased its provision for doubtful accounts from $2.5 million for 1996
to $5.8 million for 1997. See "Risk Factors -- Receivables Risks" and
"Business -- Legal Matters." The Company has increased its allowance for
doubtful accounts as a result of certain payment arrears experienced by a number
of customers in Argentina. Such adjustments in 1997 included a provision of $1.2
million with respect to a receivable totaling $2.2 million from BNA that was
generated during 1996 and 1997 under a subcontract between IMPSAT Argentina and
IBM de Argentina, S.A. that was terminated by BNA in the second quarter of 1997.
The payment of the receivable by BNA is subject to the approval of the General
Auditor of Argentina, which office is conducting an audit of the procedures used
by BNA in awarding contracts to its service providers. BNA is generally current
on its payments under BNA's existing contract with IMPSAT Argentina.
As a percentage of revenues, the Company's provision for doubtful accounts
increased from 1.9% of revenues for 1996 to 3.5% of revenues for 1997. The
Company believes that its reserve for doubtful accounts is adequate.
SG&A expenses at IMPSAT Colombia for 1997 totaled $6.5 million, an increase
of $1.9 million from SG&A expenses incurred by IMPSAT Colombia for 1996. The
increase in SG&A expenses at IMPSAT Colombia for 1997 is primarily attributable
to the cost of additional telephone lines for Internet access and expenses
associated with the promotion of IMPSAT Colombia's services at commercial
expositions and trade shows.
SG&A expenses at IMPSAT Venezuela for 1997 totaled $2.3 million, an
increase of $0.8 million from SG&A expenses incurred by IMPSAT Venezuela for
1996. The increase in SG&A expenses at IMPSAT Venezuela for 1997 is attributable
to approximately $0.3 million of severance payments incurred due to termination
of certain of IMPSAT Venezuela's management personnel and $0.5 million in
increased office rental and operational facilities expenses. Consequently,
IMPSAT Venezuela took steps in 1997 to reduce and rationalize its SG&A expenses,
including the termination of leases covering excess office and operational
facilities. In April 1997, certain changes were made in the senior management
levels at IMPSAT Venezuela, including the designation of Mr. Mariano Torre
Gomez, previously President at IMPSAT Ecuador, as President of IMPSAT Venezuela.
Finally, the increase in SG&A expenses incurred by the Company during 1997
compared to 1996 is also attributable to legal and tax advice and other fees and
expenses of $4.7 million incurred by the Company during 1997. This represents an
increase of $1.1 million over such expenses incurred during 1996. Such expenses
were incurred during 1997 primarily in connection with legal fees incurred with
respect to its legal proceeding commenced against ENCOTESA, described in
"Business -- Legal Matters" and Note 9 to the Company's financial statements,
the Company's ongoing financing activities and the conduct of preliminary
feasibility assessments of the expansion of the Company's operations into
Brazil.
Depreciation and Amortization. The Company's depreciation and amortization
for 1997 totaled $28.5 million, representing an increase of $2.2 million, or
8.3%, compared to depreciation and amortization for 1996. Depreciation and
amortization for IMPSAT Argentina for 1997 totaled $17.8 million. In 1997, the
Company adopted an improved inventory control system, which has enhanced the
Company's ability to more accurately track and depreciate its equipment in
service.
Interest Expense, Net. The Company's net interest expense for 1997 totaled
$24.7 million, comprising interest expense of $25.9 million and interest income
of $1.2 million for 1997. Net interest expense increased $1.5 million, or 6.7%,
from net interest expense for 1996. IMPSAT Argentina's net interest expense for
1997 totaled $12.6 million ($3.0 million after eliminating intercompany items).
Net interest expense at IMPSAT Colombia for totaled $6.2 million ($4.5 million
after eliminating intercompany items). Interest expense with respect to
intercompany loans are eliminated in the Company's Consolidated Statement of
Operations.
The increase in net interest expense for 1997 reflects primarily increased
indebtedness of the Company, which increased from $199.1 million as of December
31, 1996 to $220.1 million as of December 31, 1997. As of November 30, 1997,
total outstanding indebtedness at IMPSAT Argentina equaled $108.4 million,
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compared to $101.6 million as of November 30, 1996. Total outstanding
indebtedness at IMPSAT Colombia as of December 31, 1997 equaled $38.9 million,
compared to $35.9 million as of December 31, 1996. The weighted average interest
rate on the Company's indebtedness for 1997 was 12.3%, compared to a weighted
average interest rate of 14.5% for 1996.
Provision for Income Taxes. The Company recorded a provision for income
taxes for 1997 of $5.0 million, compared to $3.5 million for 1996. The Company
has paid income tax, although it has recorded net losses on a consolidated
basis, because its operations in certain countries have generated taxable net
income. IMPSAT Argentina recorded a provision for income taxes for 1997 of $3.2
million, compared to $4.0 million in 1996. IMPSAT Colombia paid income taxes of
$1.8 million for 1997, compared to $1.5 million for 1996. IMPSAT Venezuela
recorded a provision for income taxes of $0.8 million, compared to a credit of
$1.7 million in 1996.
Net Loss. The Company incurred a net loss of $8.0 million for 1997, a
decrease of $0.5 million, or 6.1%, compared to the Company's net loss of $8.5
million for 1996. The Company's net loss for 1997 is primarily related to losses
incurred by the Company's operations in Venezuela (a net loss of $5.4 million)
and Mexico (a net loss of $1.4 million), as well as $2.2 million in management
services provided and overhead expenses incurred by IMPSAT Corporation for 1997.
IMPSAT Argentina recorded net income of $2.9 million for 1997, a decrease of
$0.1 million compared to 1996. IMPSAT Colombia recorded net income of $8.4
million for 1997, an increase of $6.2 million compared to 1996.
1996 COMPARED TO 1995
Revenues. Revenues for 1996 totaled $128.4 million, an increase of $22.8
million, or 21.6%, from 1995. The increase in revenues reflected principally a
growth in revenues of IMPSAT Colombia, which totaled $35.1 million, representing
an increase of $12.7 million, or 56.7%, from 1995. Revenues at IMPSAT Argentina
for 1996 totaled $85.1 million (an increase of $4.7 million, or 5.9%, from
1995), revenues at IMPSAT Venezuela totaled $4.5 million for 1996 (an increase
of $2.3 million from 1995), and revenues at IMPSAT Ecuador totaled $2.8 million
for 1996 (an increase of $2.2 million from 1995).
IMPSAT Colombia's customer base increased from 271 at December 31, 1995 to
410 at December 31, 1996. During 1996 IMPSAT Colombia installed a net total of
287 VSAT microstations and 148 Dataplus earth stations for new and existing
customers. IMPSAT Venezuela also experienced growth in the number of customers
and services provided. In Venezuela, the number of customers increased from 39
at December 31, 1995 to 76 at December 31, 1996, and IMPSAT Venezuela installed
a net total of 96 VSAT microstations and 48 Dataplus earth stations for new and
existing customers during 1996. In Ecuador, the number of customers increased
from 26 as of December 31, 1995 to 44 as of December 31, 1996, and IMPSAT
Ecuador installed a net total of 55 VSAT microstations and 5 Dataplus earth
stations during 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 November 30, 1996 totaled 358,
compared with 319 customers as of November 30, 1995. During 1996, IMPSAT
Argentina installed a net total of 160 VSAT microstations and 43 Dataplus earth
stations for new and existing customers, as compared to a net total of 489 VSAT
microstations and 119 Dataplus earth stations installed during 1995. The
significant diminution in the level of growth of IMPSAT Argentina's revenues and
customer base was related to the recession experienced in Argentina that
commenced in 1995 and continued through the first six months of 1996.
Variable Cost of Services. The Company's variable cost of services for
1996 totaled $21.5 million, an increase of $2.7 million, or 14.4%, from the
Company's variable cost of services for 1995. Of total variable cost of
services, $14.3 million related to the operations of IMPSAT Argentina and $5.6
million related to the operations of IMPSAT Colombia, compared to variable cost
of services of $14.7 million at IMPSAT Argentina for 1995 and variable cost of
services of $3.7 million at IMPSAT Colombia for 1995.
Installation costs totaled $2.2 million for 1996, or 10.2% of total
variable cost of services, compared to installation costs of $1.8 million, or
9.5% of total variable cost of services for 1995. Variable costs of services
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declined at IMPSAT Argentina, primarily as a result of fewer installations in
1996 due to a lower growth rate for new services and customers, and increased at
IMPSAT Colombia, primarily due to the rapid growth in new installations and
customers.
Maintenance costs for the Company totaled $8.5 million during 1996, or
39.5% of total variable cost of services. In comparison, maintenance costs for
the Company totaled $4.4 million in 1995, or 23.4% of total variable cost of
services. The increase in maintenance costs of the Company during 1996 compared
to 1995 was primarily attributable to the increased level and amount of the
Company's telecommunications infrastructure in service as the Company's
operations grew and expanded over time.
Sales commissions paid to third-party sales representatives totaled $8.9
million for 1996, or 41.4% of the Company's total variable cost of services
during such period. The overwhelming amount of such sales commissions ($8.3
million, or 93.4% of such total sales commissions) were paid to third-party
sales representatives with respect to customers of IMPSAT Argentina.
Satellite Capacity Cost. The Company's satellite lease payments for 1996
totaled $13.9 million, an increase of $2.9 million, or 26.4%, over satellite
lease payments for 1995. The Company's satellite capacity costs are 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
198.3 MHz as of December 31, 1995 to 253.0 MHz as of December 31, 1996.
Salaries, Wages and Benefits. Salaries, wages and benefits paid by the
Company for 1996 totaled $25.6 million, an increase of $3.3 million, or 15.0%
over the Company's expenses for salaries, wages and benefits during 1995. The
Company increased personnel headcount during 1996 in Colombia, Mexico,
Venezuela, Ecuador and the United States and decreased personnel in Argentina.
In the second quarter of 1996, IMPSAT Argentina reduced its technical support
staff by 17 persons, its sales workforce by 16 persons and its personnel
workforce by 11 persons, resulting in the payment of legally required severance
payments for such personnel of $713,000 in the second quarter of 1996. This
reduction in workforce was made possible by increases in productivity realized
as a result of IMPSAT Argentina's organizational restructuring in 1995. The
Company also effectuated a small decrease in the number of employees at Resis, a
wholly-owned subsidiary that provides management services for the Company.
Selling, General and Administrative Expenses. The Company incurred SG&A
expenses of $23.0 million for 1996, a decrease of $3.1 million, or 11.8%, from
1995. SG&A expenses at IMPSAT Argentina for 1996 totaled $10.7 million, a
decrease of $3.5 million, or 24.6%, from 1995. SG&A expenses at IMPSAT Colombia
for 1996 totaled $4.6 million, an increase of $0.6 million, or 16.2%, from 1995.
Principal items of note with respect to SG&A expenses incurred by the
Company in 1996 included the following matters:
The Company's provisions for doubtful accounts, principally relating to
IMPSAT Argentina, increased from $0.4 million for 1995, or 487.3%, to $2.5
million for 1996. The Company increased its allowance for doubtful accounts as a
result of certain payment arrears experienced by a number of customers in
Argentina. As a percentage of revenues, the Company's allowance for doubtful
accounts increased from 1.1% of revenues for 1995 to 1.9% of revenues for 1996.
In 1996, the Company commenced efforts to decrease and rationalize its SG&A
expenses. Those steps included a decrease in expenses such as corporate travel
expenses and a more efficient use of space requirements. IMPSAT Corporation
moved its executive offices from leased office space in downtown Buenos Aires
and centralized its personnel at IMPSAT Argentina's new facility at its Buenos
Aires Teleport. The move of IMPSAT Corporation's headquarters and personnel to
the Buenos Aires Teleport resulted in a savings of $300,000 annually in reduced
rental expense in 1996 as compared to 1995.
Depreciation and Amortization. The Company's depreciation and amortization
for 1996 totaled $26.3 million, an increase of $5.7 million, or 27.5%, compared
to 1995. Depreciation and amortization for IMPSAT Argentina totaled $18.8
million for 1996, an increase of $2.7 million, or 16.8%, compared to 1995.
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The increase in depreciation and amortization was related principally to the
growth in the Company's private telecommunications network systems and the
expansion of its facilities.
Interest Expense, Net. The Company's net interest expense for 1996 totaled
$23.2 million, comprising interest expense of $25.2 million and interest income
of $2.0 million. Net interest expense increased $7.5 million, or 47.8%, from net
interest expense for 1995. IMPSAT Argentina's net interest expense for 1996
totaled $13.4 million ($9.6 million after eliminating intercompany items). Net
interest expense at IMPSAT Colombia for 1996 totaled $7.3 million ($7.0 million
after eliminating intercompany items). Interest expense with respect to
intercompany loans are eliminated in the Company's consolidated statement of
operations.
The increase in net interest expense reflected increased indebtedness of
the Company, which grew from $127.7 million as of December 31, 1995 to $199.1
million as of December 31, 1996. In addition, during the period between the
consummation of the offering of the Existing Senior Notes and the maturity dates
for the indebtedness refinanced with the proceeds of the Existing Senior Notes,
the Company was required to incur the interest expense on the existing
indebtedness as well as on the Existing Senior Notes, which additional interest
expense was offset only partially by the receipt of interest income on the
Company's cash balances being held pending repayment. As of November 30, 1996,
total outstanding indebtedness at IMPSAT Argentina equaled $101.6 million
(including parent company advances of $71.5 million from the proceeds of the
Existing Senior Notes), compared to $79.7 million as of November 30, 1995. Total
outstanding indebtedness at IMPSAT Colombia as of December 31, 1996 equaled
$35.9 million (including parent company advances of $13.0 million from the
proceeds of the Existing Senior Notes), compared to $43.6 million as of December
31, 1995. The weighted average interest rate on the Company's indebtedness for
1996 was 15.4%, compared to a weighted average interest rate of 14.1% for 1995.
Net Gain (Loss) on Foreign Exchange. The Company recorded a net gain on
foreign exchange for 1996 of $0.9 million due to a decrease in the Company's
indebtedness denominated in Venezuelan bolivars as a result of the devaluation
of the Venezuelan bolivar against the U.S. dollar.
Benefit From (Provision for) Foreign Income Taxes. The Company recorded a
provision for foreign income taxes for 1996 of $3.5 million, a decrease of $4.3
million from the benefit for foreign income taxes recorded for 1995. The
provision for foreign income taxes reflects the income taxes owed by the
Company's operating subsidiaries in their countries of operation. For 1996,
IMPSAT Argentina recorded a provision of $4.0 million, and IMPSAT Colombia
recorded a provision of $1.5 million. During 1996, IMPSAT Argentina had
available net operating loss carryforwards of $3.2 million which were applied
towards its income tax liability for 1996. See Note 8 to the Company's
consolidated financial statements.
Net Loss. For 1996, the Company incurred a net loss of $8.5 million, an
increase of $1.1 million, or 14.9%, compared to the Company's net loss of $7.4
million for 1995. The Company's net loss as a percentage of revenues for 1996
declined to 6.6% of revenues from a loss of 7.0% of revenues for 1995. The
Company's net loss for 1996 was primarily related to the costs of the Company's
operations in Venezuela (a net loss of $1.2 million after deduction for minority
interests), Ecuador (a net loss of $1.1 million), Mexico (a net loss of $2.0
million), as well as management services provided, and overhead expenses
incurred by IMPSAT Corporation of $5.4 million. Such losses were offset by
IMPSAT Argentina's net income for 1996 of $3.0 million, of which the Company's
interest after deduction for minority interests totaled $1.5 million and IMPSAT
Colombia's net income of $2.2 million for 1996, of which the Company's interest
after deduction for minority interests totaled $1.8 million. The increase in the
Company's net loss for 1996 was primarily attributable to increased interest
expense associated with the Company's higher levels of indebtedness and the use
of IMPSAT Argentina's net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
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 commercial operations (Argentina, Colombia, Venezuela, Ecuador and
Mexico), and the development of its operations in Brazil. The Company's budget
contemplates that the Company will need up to $41.0 million through 1999 for the
adequate development of a private telecommunications network system in Brazil.
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The ability of the Company to continue the expansion of its private
telecommunications network systems at their current rates 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. The Company's ability to maintain its
planned program of capital expenditures will be dependent on its ability to
obtain additional sources of financing. If the Company is unable to obtain such
additional sources of financing, it will not be able to maintain its levels of
growth and market position in any of the countries in which it operates, which
could have an adverse effect on the business and prospects of the Company and
its ability to make payments on the Notes.
As set forth in its consolidated statements of cash flow, the Company
generated $14.1 million in net cash flow from operating activities for 1997,
compared to $9.8 million for 1996. The increase in net cash flow for 1997 from
operating activities was primarily attributable to the increase in trade
payables ($4.6 million in 1997, versus a decrease in trade payables of $0.1
million in 1996) and an increase in other long-term liabilities ($0.1 million
compared to a decrease of $2.5 million in 1996). Financing activities provided
$22.5 million in cash flow in 1997, representing a decrease of $44.0 million
from 1996. The difference in cash provided from financing activities in 1997
compared to 1996 reflects cash received generated in 1996 from the issuance of
the Existing Senior Notes. During 1997, the Company used $55.0 million in net
cash flow in investing activities, compared to $53.7 million for 1996.
At March 31, 1998, the Company had a cash balance of $10.9 million. At that
date, the Company's consolidated total debt was $238.8 million, approximately
$68.1 million of which was short-term debt. Such short-term debt included $25
million of IMPSAT Argentina's short-term indebtedness, which has been refinanced
during April 1998 with the proceeds of notes issued by IMPSAT Argentina under
its $50 million Global Euro-Commercial Paper Program (the "Global Commercial
Paper Program"). As of March 31, 1998, approximately $79.3 million of the
Company's debt was scheduled to mature in 1998, approximately $16.3 million in
1999, and approximately $143.2 million in the year 2000 and thereafter.
After the consummation of the Offering on a pro forma basis as of March 31,
1998, the Company will have $44.0 million of short-term debt outstanding.
In the three months ended March 31, 1998, the Company utilized $2.2 million
in net cash flow from operating activities, compared with $2.8 million generated
for the three months ended March 31, 1997. The negative cash flow from operating
activities in the first quarter of 1998 was primarily attributable to increases
in net trade receivables of $8.0 million (compared to an increase of $4.0
million in net trade receivables in the first quarter of 1997) and in other
receivables and other non-current assets of $6.9 million (compared to a decrease
of $1.8 million in the first quarter of 1997). Financing activities provided
$18.7 million in net cash flow for the three months ended March 31, 1998,
compared with $1.8 million from cash flow generated by financing activities for
the three months ended March 31, 1997. Such increase is primarily attributable
to the issuance by IMPSAT Argentina in February 1998 of $25.0 million in notes
under the Global Commercial Paper Program. The Company's net outstanding
indebtedness increased by $19.0 million during the three months ended March 31,
1998. During the three months ended March 31, 1998, the Company used $16.0
million in net cash flow for investing activities, compared to $14.9 million for
the three months ended March 31, 1997.
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 debt and equity securities of IMPSAT Corporation and/or any
of its subsidiaries. The Company currently anticipates that it will use
approximately $225 million during the period 1998 and 1999 for capital
expenditures (including amounts already expended in 1998). Of such capital
expenditures, the Company anticipates that approximately $35 million will be
spent on infrastructure and approximately $190 million will be used for
customer-driven capital expenditure. These projected capital expenditure
requirements include the further establishment of operations and development of
private telecommunications network systems in Brazil and continued additions to
its private telecommunications network infrastructure in order to maintain the
Company's ability to provide high quality, competitive services. The Company's
budget contemplates that the Company will need approximately $41 million
(included in the estimate above) for the period 1998 and 1999 for capital
expenditures related to the build-out
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of a private telecommunications network system in Brazil. Furthermore, with
continued deregulation of the telecommunications market in the region, the
Company may in the future expand its business to include other
telecommunications services, such as general voice telephony, which would
require significant amounts of additional financing for capital expenditures and
operating losses.
The Company leases satellite capacity with annual rental commitments of
approximately $26.0 million through the year 2001. In addition, the Company has
commitments to purchase communications equipment amounting to approximately
$10.5 million at March 31, 1998.
As of April 15, 1998, IMPSAT Argentina had outstanding $50 million of
commercial paper issued under the Global Commercial Paper Program, $25 million
of which will mature on August 10, 1998 and $25 million of which will mature on
December 17, 1998.
YEAR 2000
The Company's equipment and operational systems are being reviewed and,
where required, detailed plans have been, or are being, developed and
implemented on a schedule intended to permit the Company's computer systems and
services to continue to function properly in the year 2000. Such plans are
likely to involve a combination of software modification, upgrades and
replacement. Ensuring that the Company's equipment and operational systems are
year 2000 compliant is expected to increase costs in 1998 and 1999. While final
cost estimates are not complete, Management does not expect these costs to have
a material adverse impact on the Company's financial position, results of
operations or cash flows. In addition, the Company faces risks to the extent
that suppliers, customers and others with whom the Company transacts business do
not have business systems or products that comply with the year 2000
requirements. In providing its services, the Company's systems may sometimes be
required to communicate electronically with customer-owned systems with respect
to a variety of functions. Failure of the systems of the Company's customers to
address the year 2000 issue could impair the Company's ability to perform such
functions. Furthermore, in the event any of the Company's suppliers cannot
timely provide the Company with products, services or systems that meet the year
2000 requirements, the Company's operating results could be materially adversely
affected. The Company is not yet able to estimate the cost for year 2000
compliance with respect to customers and suppliers; however, based on a
preliminary review, Management does not expect that such costs will have a
material adverse effect on the future consolidated results of operations of the
Company. However, the Company could be adversely impacted by the year 2000 date
issue if suppliers, customers and other businesses do not address this issue
successfully.
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BUSINESS
OVERVIEW
The Company is a leading provider of private telecommunications network
services in Latin America. The Company offers tailor-made, integrated
telecommunications solutions, with an emphasis on data transmission, for
national and multinational companies, financial institutions, governmental
agencies and other business customers. The Company currently has operations in
Argentina, Colombia, Venezuela, Ecuador, Mexico, Brazil 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 capacity and fiber optic links. The
Company believes that it operates the largest shared hub VSAT network in Latin
America, with 3,490 VSAT microstations installed as of March 31, 1998. In
addition, the Company operates 16 teleports located in six countries and twelve
microwave and fiber optic metropolitan area networks in twelve cities.
The Company has grown rapidly since the commencement of its operations in
Argentina in 1990. Its business customer base has expanded from 125 customers in
two countries as of December 31, 1992 to 1,251 customers in six countries as of
March 31, 1998. From 1992 to 1997, annual revenues on a consolidated basis have
grown from $20.5 million to $160.2 million, EBITDA (as defined) has grown from
$7.9 million to $51.8 million and net property, plant and equipment have grown
from $47.9 million to $255.4 million.
The Company has recently commenced operations in Brazil. The Company
believes that the breadth of opportunity for the expansion of the private
telecommunications network services market in Brazil is underscored by the
country's (i) growing economy (Brazil's gross domestic product grew from
approximately $387 billion in 1992 to approximately $803 billion in 1997); (ii)
strong, unsatisfied demand for reliable telecommunications solutions; (iii) low
teledensity; (iv) poor telephony infrastructure; and (v) recently commenced
liberalization and privatization of the telecommunications sector. The Company
plans to use its technological and commercial experience and knowledge of
providing private telecommunications network services in the region to expand
its market penetration in Brazil.
The Company expects continued growth in the demand for private
telecommunications network services in Latin America and anticipates that the
proportionate share of data transmission services will increase more rapidly
than the overall telecommunications sector as has been the case in the United
States. Continued deregulation of the telecommunications markets in the region
should lead to substantial growth in the telecommunications sector, which
historically has grown slowly compared with that of more developed countries.
Continuing economic growth and integration in Latin America is expected to add
to the demand for telecommunications services in the region and support greater
opportunities for expansion of the Company's regional presence. The Company
believes that its pan-Latin American presence distinguishes it from its
competitors and is a key element in its ability to satisfy a need in Latin
America for "one-stop shopping" in private telecommunications network services.
In addition, upon further deregulation of the telecommunications markets in
Latin America, the Company may consider expansion into new services for its
business customers, including switched international, domestic long distance and
local services.
The Company provides a full range of private telecommunications network
services which are tailored to meet the specific system requirements of its
customers, including digital information (data, voice and video) transmission
via VSAT, SCPC, fiber optic and microwave technology and a wide range of value
added services, including Internet access and electronic commerce; fax store and
forward; healthcare billing and insurance verification services; and
video-conferencing and long-distance learning. The Company utilizes its array of
service offerings in different ways to create customized packages that best suit
each customer's private telecommunications network system needs. The Company
distinguishes itself by providing telecommunications solutions which permit its
customers to enjoy the advantages of a private network while freeing them from
the burdens of purchasing, operating and maintaining the network. See
"Business -- Services and Related Infrastructure" for a further description of
the Company's private telecommunications network services.
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The Company views its relationship with its customers as a long-term
partnership in which customer satisfaction is of paramount importance. For this
reason, the Company applies an integrated approach to its sales, marketing and
customer service functions. Each client service team is jointly responsible for
all aspects of a particular customer relationship. The Company provides customer
service on a 24 hour per day, 365-day per year basis. As a result of this
consultative approach, the Company achieves high levels of customer satisfaction
while being able to identify new revenue generating opportunities, customer
telecommunications possibilities and product or service improvements previously
overlooked or not adequately addressed by the client.
The Company believes its key competitive advantages over its competitors
include: (i) early market entry and operating experience in providing private
telecommunications network services in Latin America; (ii) the ability to
provide diverse, cost-efficient networking solutions; (iii) superior marketing
skill and knowledge of the customer's needs and responsiveness; and (iv)
position as a market leader and its significant existing network infrastructure
in numerous Latin American markets.
RECENT DEVELOPMENTS
On March 19, 1998, IMPSAT Corporation redeemed 25% of its outstanding
common stock (the "STET Shares") previously held by STET International
Netherlands NV ("STET International") with the proceeds of a substantially
concurrent issuance and sale of the Series A Preferred Stock. The Series A
Preferred Stock were offered and sold to the Morgan Stanley Investors pursuant
to an exemption from the registration requirements of the Securities Act. See
"Principal Stockholders." The Series A Preferred Stock was convertible on the
date of issuance into 25% of the common stock of the Company. For a description
of the sale of the Series A Preferred Stock by the Company to the Morgan Stanley
Investors (the "Series A Preferred Stock Issuance"), refer to "Certain
Relationships and Related Transactions -- STET Share Purchase and Series A
Preferred Stock Issuance." The holders of the Series A Preferred Stock have,
pursuant to a right to vote thereon as a separate class, elected two of the
Company's directors.
On April 20, 1998, the Company signed a definitive agreement to purchase a
majority interest in Mandic S.A, a Brazilian Internet access provider, for
approximately $9.8 million. Upon consummation of the transaction, the Company
will acquire 75.1% of the common stock of Mandic S.A., and the remaining 24.9%
will be owned by Mr. Aleksander Mandic, the founder and current president of
Mandic, S.A. The initial stage of the acquisition of Mandic S.A., pursuant to
which the Company acquired a 58.5% interest, was consummated on May 28, 1998,
and the remaining 16.6% interest is scheduled to be acquired by May 1, 1999.
On June 1, 1998, the Company acquired from Nevasa 99.9% of the capital
stock of IMPSAT Brazil for approximately $5.1 million in cash. The purchase
price for IMPSAT Brazil represented the total amount of pre-operating and
development costs and expenses incurred for IMPSAT Brazil by Nevasa. IMPSAT
Brazil was established by Nevasa and operates under a value added
telecommunications license (the "Brazil License") permitting IMPSAT Brazil to
lease satellite capacity directly from satellite carriers and sell corporate
private telecommunications network services (data, voice and video), using
terrestrial and satellite links, to third parties.
As of March 31, 1998, IMPSAT Brazil was providing private network
telecommunications services in Brazil to Shell do Brasil S.A., Fundacao Cultural
e Educacional, TCA Ltda., Ultrafertil, Sony Music Entertainment, and HSBC
Bamerindus, through a total of 23 Dataplus and three Interplus earth stations
and the outsourcing of a 200 VSAT microstation network for HSBC Bamerindus.
STRATEGY
The Company intends to maintain and strengthen its position as a leading
provider of private telecommunications network services in Latin America. The
key elements of the Company's strategy include the following:
Deliver Premium Tailor-Made Telecommunications Solutions Utilizing Advanced
Technology. The Company distinguishes itself by providing tailor-made,
integrated data, voice and video solutions using the
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various components of its terrestrial and satellite networks to achieve a
technologically advanced, efficient and cost-effective solution for each
customer. 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. In addition, the Company strives to differentiate
itself from its competitors by designing value added features and integrating
these features into the customized private telecommunications services it
provides to its customers. The Company's mix of technologies, transmission media
and equipment suppliers provides it with the flexibility to react quickly and
take full advantage of technological developments and advancements. The Company
believes that the technical sophistication of its equipment and the reliability
and efficiency of its services are critical to maintaining customer
satisfaction.
Focus on Business and Governmental End Users. The Company focuses on large
financial, national and multinational corporate and government end users, for
whom reliable data transmission is particularly important. The Company's
experience indicates that these customers generally tend to outsource their
private telecommunications requirements and prefer a single private network
service provider that offers high quality, innovative telecommunications
solutions. The Company believes that its services are of a higher quality and
greater reliability than those of many of its competitors, including the PTOs.
The Company is able to offer its target customer base a "one-stop" source in
Latin America for integrated private telecommunications network solutions,
matched with advanced technology and premium customer service. The Company
believes that these service features, which are often unavailable from the PTOs
and other competitors of the Company, are especially attractive to large Latin
American business and governmental customers.
Establish Long-Term Customer Partnerships. The Company views its
relationships with its customers as long-term partnerships in which customer
satisfaction is of paramount importance. The Company seeks to maintain its
position as a strategic partner with its clients and to foster long-term
customer relationships. To implement this strategy, the Company applies an
integrated approach to sales, marketing and customer services. Each client
service team is jointly responsible for all aspects of a particular customer's
or a group of customers' relationship with the Company, and each customer is
able to call upon any of its service team representatives to respond to the
customer's service requirements. As a result of this consultative approach, the
Company believes that it has high levels of customer satisfaction while being
able to identify new revenue generating opportunities, customer
telecommunications possibilities and product or service improvements previously
overlooked or not adequately addressed by the customer. The Company's
combination of pan-Latin American scale with superior customer service provides
distinct and significant value to its customers, which the Company expects will
result in long-term customer loyalty and an expanding customer base.
Leverage Established Market Presence to Expand Operations. The Company
seeks to leverage its existing customer base, established regional presence,
advanced infrastructure and its knowledge of the market to expand its operations
and service offerings in Latin America. The Company seeks 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 business customers, and
expanding its business in Latin America.
The first prong of this strategy is to continue to develop and sell new and
additional services to existing clients. The principal new services and products
developed and commercialized by the Company during 1997 include Minidat, Conexia
and Telecampus. Features currently under development include Intranet/Extranet
service, electronic commerce, information technology integration, and
"Broadband" (38 GHz, Ka-band frequency spectrum) telecommunications services.
The Company's customers often begin by purchasing limited VSAT services and
expand the services purchased by adding significant numbers of additional VSAT
microstations and/or adding additional services such as Dataplus and Interplus
services and Internet access. For examples of certain customer histories, see
"-- Customers." In addition, the Company plans to capitalize on its early market
entry and operating experience in providing private telecommunications network
services in Latin America to take advantage of revenue opportunities expected
from the deregulation of Latin American telecommunications markets, including
switched voice telecommunications and growing demand in Latin America for data
transmission services.
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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
additional large national and multinational corporations, financial institutions
and governmental agencies, as well as by targeting medium-sized businesses in
Latin America, as they begin to require data transmission services. Many of the
larger national and multinational corporations doing business in Latin America
increasingly expect comprehensive telecommunications solutions in order to
integrate and coordinate geographically expansive business operations.
The third prong of this strategy includes identifying and exploiting
growing regional demand for private network telecommunications services where
incumbent providers offer inadequate service and where liberalization of
telecommunications regulations may be pending. To this end, the Company recently
established operations in Brazil. In addition, the Company intends to explore
opportunities, for example, through joint ventures or other cooperative efforts
with local partners, to be able to provide its customers with private
telecommunications network services throughout Latin America, including
countries in which the Company has no plan to establish a fixed base of
operations. The Company believes that its pan-Latin American presence will
contribute to its ability to satisfy a growing need in Latin America for a
source of "one-stop shopping" for private telecommunications network services.
The Company provides services in multiple countries to several of its
multinational customers. For example, affiliates of the Royal Dutch Shell group
of petroleum companies are customers of the Company in Argentina, Colombia and
Brazil, and Reuters is a client of the Company in Argentina, Colombia, Ecuador
and Venezuela. The Company believes that its early penetration in several Latin
American telecommunications markets provides it with key competitive advantages
that include (i) industry knowledge and experience; (ii) name recognition and
credibility with customers, suppliers, potential joint venture partners, and
sources of financing; and (iii) a developed customer base and network
infrastructure. The Company believes that its knowledge and experience in the
Latin American telecommunications market will enable it to assess and react
quickly to attractive business opportunities expected to arise from ongoing
telecommunications deregulation in the region.
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 in Argentina in 1990 under the name IMPSAT S.A.
(IMPSAT Argentina). The Company currently owns a 95.2% equity interest in IMPSAT
Argentina. The Company began operations outside of Argentina with the
establishment of IMPSAT Colombia in 1991 and the establishment of IMPSAT
Venezuela in 1992. New operating subsidiaries were created in Ecuador (IMPSAT
Ecuador) and Mexico (IMPSAT Mexico) in 1994; and in the United States (IMPSAT
USA) in 1995. In Brazil, the Company recently acquired a 99.9% ownership
interest in IMPSAT Brazil and has also signed a definitive agreement to purchase
a 75.1% interest in Mandic S.A., a Brazilian Internet service provider.
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SERVICES AND RELATED INFRASTRUCTURE
General. The Company utilizes satellite, fiber optic cable and microwave
links and employs advanced technology in its network systems. The following
diagram illustrates a typical network configuration:
CHART INSERTED
The Company provides a full range of private telecommunications network
services which are tailored to meet the specific 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
telecommunications network system 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. 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 Company provides a wide range of private telecommunications network
services, including digital information (data, voice and video) transmission via
VSAT, SCPC, fiber optic and microwave technology and a wide range of value added
services, including Internet access and electronic commerce; fax, store and
forward; healthcare billing and insurance verification services;
video-conferencing; and long-distance learning.
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The following table shows the Company's revenue breakdown by service for
the years ended December 31, 1995, 1996 and 1997 and the three month periods
ended March 31, 1997 and 1998:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------------- --------------------------------
SERVICE 1995 1996 1997 1997 1998
------- --------------- --------------- --------------- -------------- --------------
(IN THOUSANDS AND PERCENTAGE OF CONSOLIDATED REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VSAT.................. $ 52,756 49.9% $ 55,680 43.4% $ 57,420 35.8% $16,089 43.5% $13,731 30.4%
Dataplus.............. 23,953 22.7 29,962 23.3 37,603 23.5 8,573 23.1 10,362 23.0
Interplus............. 2,806 2.7 4,457 3.5 11,400 7.1 2,248 6.1 4,366 9.7
Internet.............. 0 0 1,267 1.0 7,597 4.7 937 2.6 2,576 5.7
Other(1).............. 26,126 24.7 37,027 28.8 46,216 28.9 9,180 24.7 14,118 31.2
-------- ---- -------- ---- -------- ---- ------- ---- ------- ----
Total........ $105,641 100% $128,393 100% $160,236 100% $37,027 100% $45,153 100%
======== ==== ======== ==== ======== ==== ======= ==== ======= ====
</TABLE>
- ---------------
(1) The figure for "Other" includes revenues from Teledatos networks, Regional
Teleports, Difusat, Global Fax, Minidat, Conexia and Telecampus.
VSAT. VSAT (Very Small Aperture Terminal) was the first private
telecommunications network service provided by the Company. VSAT technology
permits the transmission of digital information between and among many remote
locations and a central location via satellite and a high-capacity hub earth
station known as a Teleport. 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. A typical VSAT customer would have several VSAT microstations linked to
each other by a Teleport and then linked to terrestrially connected sites by one
or more local Teledatos networks. Each remote VSAT location has a relatively
small antenna (typically ranging from 1.2 to 2.4 meters in diameter) and
utilizes Time Division Multiple Access ("TDMA") technology which enhances the
use of satellite capacity by enabling multiple VSATs to share a single satellite
channel. 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.
The Company is a pioneer in Latin America in the use of a shared hub and
believes that it currently operates one of the largest shared hub VSAT networks
in Latin America (measured by the number of microstations installed). The use of
a shared hub earth station, whereby many different customers share a
Company-operated central teleport, 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. 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 diverse locations because the service is
reliable and customers pay a fixed monthly fee rather than one based on usage
and distance. VSAT customers are billed according to the number of VSAT
microstations installed and the number of ports on each VSAT.
VSAT generates the largest share of the Company's revenues from services,
accounting for approximately 35.8% of such revenues during 1997. The Company
expects that VSAT services will decline both as a percentage of total Company
revenues and in absolute amount as many of the Company's customers utilize other
service offerings, such as Dataplus, as their telecommunications needs grow. As
of March 31, 1998, the Company had 3,490 VSAT microstations installed in Latin
America.
Dataplus. Dataplus is the brand name for the Company's Single Carrier Per
Channel ("SCPC") service, which is designed for customers that require speedy
point-to-point transmission of large quantities of information. SCPC provides
the customer with a dedicated, permanent channel, whereas VSAT services provide
communication channels that are shared among customers. SCPC uses a multiplexer
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). In addition, a Dataplus earth
station (having a satellite dish larger and more powerful than that of the VSAT)
can communicate via
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satellite to another SCPC earth station or to a Teleport where the transmission
can be integrated with the Teledatos and VSAT networks. SCPC also offers greater
transmission capacity than do VSATs because SCPC utilizes dedicated satellite
links. The Dataplus service is therefore a particularly attractive private
telecommunications network option for customers who tend to communicate
relatively heavy flows of information. The Company's customers often supplement
or replace VSAT with Dataplus as their private telecommunications network needs
expand to require the transmission of larger quantities of data at faster
speeds. For examples of certain customer histories, see "-- Customers." The
Company charges its customers for the use of each Dataplus earth station and for
the multiplexer which makes possible the multiple use of an SCPC earth station.
Dataplus is the second most significant of the Company's private
telecommunications network service offerings in terms of revenue generation.
Dataplus accounted for approximately 23.5% of the Company's revenues from
services in 1997. At March 31, 1998, the Company had a total of 959 Dataplus
earth stations installed.
Teledatos Networks. Teledatos is the brand name of the Company's fiber
optic and/or microwave MANs. Teledatos provides "last mile" terrestrial
microwave and fiber optic links among and between points in a metropolitan area
and also with other points outside the MAN by means of satellite connections.
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 transmit 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. 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.
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The following diagram illustrates the configuration of a typical Teledatos
network:
INSERT GRAPH 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; Medellin, Barranquilla
and Cali, Colombia; and Caracas, Venezuela. Additionally, the Company manages
and operates a fiber optic network covering 2,016 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 region. 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 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 March 31, 1998, Teledatos networks were
operating in twelve cities, with a total of 5,892 connections to the Teledatos
networks in service.
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.
The customer generally pays a monthly fee for the Difusat service which is based
on the number of Difusat microstations installed, the number of ports on each
microstation and the rate of the satellite transmission. At March 31, 1998, the
Company had installed 454 Difusat microstations.
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 fifteen countries -- Brazil, Bolivia, Colombia, Chile, Costa Rica,
Ecuador, El Salvador, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay,
Venezuela and the United States -- 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
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<PAGE> 56
international telecommunications services, unless the Company obtains Telintar's
consent or unless specifically authorized by the Argentine Comision Nacional de
Comunicaciones ("CNC"). Telintar's monopoly is due to expire in November 2000.
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 using VSAT, Dataplus or Teledatos networks. This end-to-end
control provides the Company with the ability to maintain customer service and
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 Bolivia, Chile, Costa Rica,
El Salvador, Nicaragua, Panama, Paraguay, Peru and Uruguay. In addition, the
Company is currently negotiating correspondent agreements with carriers in
Jamaica and Trinidad. The Company charges customers a monthly fee for Interplus
which is based on the capacity of the circuit provided.
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. Americas-1, which commenced
commercial operation in December 1994, is a 4,960 mile fiber optic cable system
connecting Vero Beach, Florida 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, the United States, the U.S.
Virgin Islands, Spain, Portugal and Italy with about 7,440 miles of fiber optic
cable.
Teleports. A 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. Teleports serve as the command center for VSAT
networks in the host country and 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. The Company owns Teleports in Buenos Aires, Argentina; Bogota,
Colombia; Caracas, Venezuela; Quito, Ecuador; and Mexico City, Mexico. In the
United States, the Company utilizes two leased teleport facilities located in
Florida and New Jersey. The Company is currently constructing teleports in south
Florida and Curitiba, Brazil, each of which is expected to be in operation by
the end of 1998. In addition, the Company anticipates that it will commence the
construction of a teleport in Sao Paulo, Brazil by the end of 1998.
Regional Teleports. Regional Teleport is the Company's brand name for
smaller SCPC-based earth stations which have antennas ranging from 3.8 to 4.5
meters in diameter. Regional Teleports enable the Company to extend its network
to smaller metropolitan area networks outside a country's capital via satellite
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 first Regional Teleport was established in Mendoza,
Argentina in 1991, and the Company also has Regional Teleports in Cordoba,
Rosario, Tucuman, La Plata, Mar del Plata and Neuquen in Argentina; Medellin,
Cali and Barranquilla in Colombia; and Guayaquil, Ecuador. Customers generally
pay a fixed monthly fee for access to the Regional
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<PAGE> 57
Teleport. The monthly fee is based on the number of services and connections
provided and varies with the particular specifications of the private
telecommunications network system designed and developed for the customer.
Internet Access. Since the Company commenced offering its Internet access
service in March 1996, the Company has experienced significant growth in this
service. The Company recorded approximately $7.6 million in revenues from
Internet access services during 1997, compared to $1.3 million in 1996. The
Company has taken a number of actions regarding its expansion as 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 and establishing relationships with Internet
service providers in the United States. The Company has entered into agreements
with several retail entities which will market the Company's Internet access
service under the IMPSAT brand name, to their customers, including agreements
with VideoCable Comunicaciones S.A. ("VCC"), a leading Argentine cable company,
and also directly markets Internet access to retail customers in Argentina,
Colombia, Venezuela and Ecuador. The Company intends to offer Internet access
services to new and existing customers, including universities, institutions,
governmental agencies and corporations. Services offered include high-speed ISDN
(integrated services digital network) communications capability and frame relay
connectivity, access software, worldwide web browser, electronic mail,
electronic commerce network and worldwide web site implementation and
maintenance. In providing Internet access services, the Company utilizes
Interplus links between its Teleports in Latin America and IMPSAT USA's leased
teleport facilities in Florida and New Jersey, which then provide connections to
the United States Internet backbone through MCI, Sprint, Intermedia
Communications and UUNET.
At March 31, 1998, the Company had 25,385 dial-up Internet access retail
customers and 74 dedicated Internet access corporate customers. Mandic S.A., the
Brazilian Internet service provider in which the Company has recently acquired a
majority interest, currently has over 40,000 dial-up Internet access retail
customers. In the future, the Company plans to expand its Internet access
service to include Intranet (private telecommunications within a company via
Internet) and Extranet (private telecommunications between a company's Intranet
and selected persons outside such company via Internet).
Pursuant to an agreement executed in December 1997 between the Company and
Harbinger Corporation, a leading supplier of electronic commerce software, the
Company has a license to provide electronic data interchange services
(electronic transactions via Internet) utilizing Harbinger's software products
in Argentina and Colombia on an exclusive basis, subject to certain exceptions
and conditions. The Agreement with Harbinger also grants the Company an option
to provide such services in Venezuela and Ecuador.
Global Fax. Global Fax is a fax store and forward service which receives
facsimile transmissions from customers, temporarily stores the data and then
retransmits it to designated addressees. In Argentina, as of March 31, 1998, the
Company had 239 customers for this service and was handling approximately
161,400 pages per month.
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 Latin American
businesses. The principal new services and products developed and commercialized
during 1997 include Minidat, Conexia and Telecampus.
In the first quarter of 1997, the Company initiated a new service called
Minidat. Minidat represents a lower cost alternative for satellite digital
information transmission for a category of customers that maintain a large
quantity of transmission points but require a lower volume usage of satellite
capacity than is provided by VSAT. Minidat was established to meet the data
transmission requirements of customers operating point of sales systems,
automated teller machines, lottery ticket sales, reservation systems, wholesaler
and inventory control and management systems and entertainment facilities
(sports arenas, theaters, etc.). Minidat utilizes USATs (ultra small aperture
terminals), which tend to be about half the size of VSATs, at customer
locations. The Company's Minidat service is provided for a lower monthly fee
than its VSAT services. The
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Company provides its Minidat customers with two pricing options, one in which
the customer purchases the remote terminals required to deliver the service and
is charged a basic monthly fee and one in which the Company provides the
equipment (as is the case for the Company's VSAT and Dataplus services) with the
customer paying a higher monthly fee. As of March 31, 1998, the Company had
installed 347 Minidat microstations.
In the second quarter of 1997, IMPSAT Argentina introduced a new service
called Conexia for the private electronic transaction requirements of customers
such as health management organizations ("HMOs"). Through the Conexia service,
HMO customers are able to communicate patient billing, identification, insurance
eligibility and certain medical history information among their different
operating locations (laboratories, supply facilities, clinics and hospitals) in
real time, thereby increasing the efficiency of the operations. In order to
provide the Conexia service, IMPSAT Argentina has created a dedicated computer
center and customer service unit at its Buenos Aires Teleport facility.
Authorized access to centralized information via Conexia is accomplished by a
magnetic card carried by patients covered by affiliated health plans. In each
operating location (e.g., clinics or hospitals), point of sale ("POS") terminals
designed by the Company are installed. The Company currently has one Conexia
customer in Argentina, the Organization of National Civil Personnel ("OSPCN").
OSPCN provides HMO coverage to Argentina's workforce of public servants. The
Conexia service provided to OSPCN by the Company consists of 1,400 installed POS
terminals throughout the Buenos Aires metropolitan area and its suburbs.
Telecampus, a new service that was introduced by the Company in October
1997, involves the use of video teleconferencing, including interactive
teleconferencing for long-distance educational and training purposes. The
Company contemplates that such services would be provided to governmental,
educational, national and international businesses that desire to utilize
interactive teleconferencing for educational, training and conferencing
purposes. Telecampus may be accessed via VSAT or Dataplus. The Company currently
has one Telecampus customer, the Argentine Institute of Computers, a nationwide
computer training center.
Relative to the Company's other services, the potential customer base for
Conexia and Telecampus is narrower and more specialized -- i.e., larger entities
in the fields of health management and education, respectively. Traditionally,
such entities have been relatively slow to integrate new technologies in their
operations and to incur major corporate expenditures for the contracting of
technology-based services. As a result, the Company expects the pattern of
growth in demand for Conexia and Telecampus to be gradual.
SATELLITE TECHNOLOGY AND SUPPLIERS
General. 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 reliable
access to the existing public switched networks often is not readily available.
Satellite 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.
Satellite Capacity. As of March 31, 1998, the Company had a total leased
capacity of 461.9 MHz on six satellites. The Company has satellite leases on the
Intelsat 601, 706 and 709 satellites for 0.6 MHz, 62.6 MHz and 201.4 MHz of
capacity, respectively. Various amounts of leased capacity on Intelsat 601, 706
and 709 satellites are scheduled to expire from April 1998 through April 2008,
respectively. The Company's satellite capacity on the Intelsat satellites is
leased both directly by the Company's operating subsidiaries and through
subleases with Intelsat participants, such as Argentina's CNC. The Company also
has leased 40.3 MHz of capacity on Nahuelsat's Nahuel-1 satellite which will
expire in January 2002. The Company has leased 65.6 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 has 72 MHz of capacity on
PanAmSat's PAS-5 satellite expiring at the end of 2003. The Company also has
19.4 MHz of capacity on Mexico's Solidaridad-II satellite
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which expires in January 2002. The Company's total lease payments for satellite
capacity totaled $13.9 million in 1996, and increased to approximately $18.9
million in 1997. The Company will contract for additional leased satellite
capacity to the extent that the Company's business so requires. A portion of the
Company's satellite capacity is leased by ISCH, a wholly-owned subsidiary of the
Company. 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.
Equipment Suppliers. 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. From 1994 through 1997, the Company has purchased a total of $29.5
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 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.
CUSTOMERS
The Company has grown rapidly since the commencement of its operations in
1990. Its customer base has grown from 125 corporate customers in two countries
as of December 31, 1992 to 1,251 corporate customers in six countries as of
March 31, 1998.
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 has
been 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.
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, principally additional large national
and multinational corporations, financial institutions and governmental
agencies, and also to 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 customers consist of major governmental agencies, financial
institutions and leading national and multinational corporations and private
sector companies, including YPF, Royal Dutch Shell, Banco de Galicia y Buenos
Aires, Siemens and Reuters. During 1997, the Company's ten largest customers
accounted for approximately 18.1% of the Company's revenues. The percentage of
revenues represented by the Company's ten largest customers for 1996 was
approximately 26.6%.
The Company's ten largest customers as of December 31, 1997 were: BNA, a
state-owned bank and the largest bank in Argentina, with 525 branches in
Argentina; Administracion Nacional de la Seguridad Social ("ANSeS"), the
Argentine social security administration; Banco de Galicia y Buenos Aires S.A.,
a private
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<PAGE> 60
bank with more than 180 branches in Argentina; YPF S.A., which is engaged in
hydrocarbon exploitation and is one of the largest companies in Argentina;
Bancolombia S.A., a private bank headquartered in Bogota, Colombia and the
largest commercial bank in Colombia; Gendarmeria Nacional Argentina ("GNA"), the
Argentine governmental agency charged with policing Argentina's borders;
Administracion Federal de Ingresos Publicos ("AFIP"), the Argentine governmental
agency charged with the collection of taxes; Perez Companc S.A., an Argentine
energy conglomerate; BANELCO S.A., a private company engaged in electronic
banking activities with approximately 510 electronic banking posts in Argentina;
and Bansud S.A., a private bank with approximately 120 branches in Argentina.
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, MARCH 31,
-------------- ----------
COUNTRY 1996 1997 1998
------- ----- ------ ----------
<S> <C> <C> <C>
Argentina(2)........................................ 358 436 460
Colombia............................................ 410 524 547
Venezuela........................................... 75 102 105
Ecuador............................................. 44 96 104
Mexico.............................................. 7 16 20
USA................................................. 10 15 15
--- ----- -----
Total.......................................... 904 1,189 1,251
=== ===== =====
</TABLE>
- ---------------
(1) Totals presented do not include customers from some of the Company's newer
services such as Global Fax, Internet and Conexia.
(2) The number of customers for IMPSAT Argentina is presented as of November 30,
1996 and 1997.
The Company's contracts with its customers typically range in duration from
six months to five years and are generally for 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 telecommunications
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 equipment on the
customers' premises.
Because of the relatively short period of time that the Company has been in
operation, 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. Similarly, Banco
de Galicia y Buenos Aires S.A. initially purchased services for 31 VSAT
microstations, and currently purchases services for a private telecommunications
network consisting of over 240 VSAT microstations, 54 with voice channels, over
28 Teledatos connections, 123 Minidats and four Regional Teleports.
By providing private telecommunications 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
telecommunications network services offered by the Company and the difficulty of
obtaining alternative services on short notice. The Company lost
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<PAGE> 61
approximately 30 business customers in 1997 representing $4.9 million, or 3.1%,
of the Company's revenues for 1997.
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
invoicing between the local currency and the U.S. dollar. Notwithstanding such
arrangements, the revenues of the customers of the Company are generally
denominated 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, 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, and the exchange rate
for, U.S. dollars. See "Risk Factors -- Currency Fluctuations, Devaluations and
Restrictions."
SALES, MARKETING AND CUSTOMER SERVICE
The Company views its relationships with its customers as long-term
partnerships 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. The Company's sales, marketing and customer service
professionals are organized into a number of service teams, each comprising up
to 12 persons and includes individuals with backgrounds in and responsibilities
for marketing, operations, engineering, maintenance, customer service and
administration. Each team is jointly responsible for all aspects of a particular
customer's or a group of customers' relationship with the Company and each
customer is able to call upon any of its service team representatives to respond
to the customer's service requirements. Each individual within each service team
is trained in a variety of skills so that no service team 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 service teams, each focusing on a particular
type of client. For example, in Argentina, the Company has service teams devoted
to industrial customers, financial institutions, governmental agencies and
companies with headquarters in the interior of the country, as well as a special
service team that was established to service the particular needs of key
customers. Within each segment of the Company's market, the respective service
team is responsible both for new sales to potential customers within such
segment as well as for the servicing and customer satisfaction monitoring 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 existing customers.
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
telecommunications 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 telecommunications 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
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<PAGE> 62
are operating and generating revenue is typically between 45 days and four
months. 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.
In addition to its salaried sales and marketing 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 Argentina. With respect to the other countries in which the
Company currently operates, 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 utilize such third-party sales
representatives in connection with its operations in Argentina and that it
primarily will use its own sales force in other countries in which it does
business. As of March 31, 1998, IMPSAT Argentina had entered into contracts with
third-party sales representatives for approximately 9% of its customer
contracts, including a number of its largest contracts. 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. Commissions paid by IMPSAT Argentina to third-party sales
representatives totaled approximately 5.8% of IMPSAT Argentina's revenues for
1997.
COMPETITION
The Company competes on the basis of its experience, quality, customer
service, range of services offered and price. 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. Such companies operate competing VSAT and other satellite data
transmission businesses, along with other terrestrial telecommunications links.
The third category is comprised of companies that sell the equipment for
privately owned networks that are operated and maintained by the customer but do
not sell data transmission services. In addition, potential future competitors
include certain of the large international telecommunications 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 telecommunications network systems market, along
with continued deregulation of the telecommunications industry in Latin America,
will bring the Company into greater competition with the PTOs. A number of PTOs
in the countries in which the Company operates have recently established and
marketed "large customer" or "grand user" business teams in an attempt to
provide dedicated services to the type of customer that represents the Company's
most significant targeted market. The Company believes that by establishing
itself as a reliable, high-quality provider of private telecommunications
network systems it will be able to maintain its current customers and
successfully attract new customers. The Company might 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, the Company's competitors, many of
whom operate VSAT systems, include international satellite providers such as
COMSAT Corp. and local data transmission providers. Regarding these competitors,
the Company believes that it is able to compete successfully in data
transmission services 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.
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 telecommunications network.
The Company believes that it possesses significant competitive advantages over
such competitors, including its ability to provide comprehensive
telecommunications services that offer the
61
<PAGE> 63
benefits of a private network while freeing the customers from the burdens of
operating and maintaining the network.
While the PTOs and international telecommunications carriers have in the
past focused on local and long distance telephony services, in the future they
may focus on the private telecommunications network systems segment of the
telecommunications market. 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 telecommunications network businesses
with revenues from public telephony. More recently, global alliances have been
formed by major telecommunications carriers as deregulation in Latin America and
elsewhere opens new market opportunities. For example, Telefonica S.A. of Spain,
Worldcom and MCI recently announced the formation of an alliance to cooperate in
Latin America and elsewhere, through joint ventures and equity holdings in each
other's subsidiaries. The three companies reportedly announced an initial
expectation to invest up to $200 million in Latin America. 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".
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. For example, new technologies such as
asynchronous digital subscriber line ("ADSL") can significantly enhance the
speed of traditional copper lines. Such technologies could enable the Company's
PTO competitors to offer customers new high-speed services without undergoing
the expense of replacing their existing twisted-pair copper networks, thereby
negating the Company's "last mile" advantage. 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 space based systems dedicated to data distribution services, generally known
as "Little-LEOs" and "Broadband" systems.
The Company has recently established operations in Brazil and expects to
face significant competition in that market. Brazil is by far the largest
telecommunications market in Latin America and is expected to attract numerous
providers, many of whom may be larger and better financed than the Company. It
was recently announced that Telebras, the Brazilian national telecommunications
company, will be split into twelve holding companies, some or all of which will
be privatized. In addition, numerous additional concessions to provide telephony
and data transmission services are expected to be granted. It is likely that
large international carriers will bid on one or more of these holding companies.
Winning bidders and concessionaires are likely also to focus on parts of the
Brazilian market beyond those in which they initially obtain a concession. The
presence of large carriers in Brazil may negatively affect the Company's
prospects in Brazil. As the Brazilian telecommunications sector is liberalized
and deregulated, competition is likely to initially come from current
telecommunications service providers in that country, including Embratel,
Brazil's state-owned, monopoly long-distance carrier; Promon Eletronica Ltda.,
one of the largest Brazilian private telecommunications companies and the local
partner of Hughes for the provision of satellite telecommunications networks;
COMSAT do Brazil Ltda.; and GSI, a wholly-owned data transmission services
subsidiary of IBM, as well as from other domestic and international entrants.
Global One, the joint venture of Deutsche Telekom AG, France Telecom S.A. and
Sprint, recently received a license to offer international and domestic
telecommunications services to corporations in Brazil. Moreover, large, well
financed international telecommunications carriers, such as AT&T, MCI, Worldcom
and Sprint, may be expected to enter the Brazilian telecommunications market.
Rates are not regulated in the Company's countries of operation, and the
prices for the Company's services are strongly influenced by market forces. The
Company believes that increased competition in the coming years will result in
increased pricing pressures. Although the Company to date has not suffered
substantial price erosion, the Company has faced and expects to continue to face
declining prices and may experience margin pressure in the future as the PTOs in
the countries in which the Company has operations modernize their facilities,
adapt to a competitive marketplace and place greater emphasis on data
communications and as other companies enter the Latin American
telecommunications market. These price and margin declines may be accelerated if
new competitors enter its markets. The principal barriers to entry for
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<PAGE> 64
prospective providers of private telecommunications 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
and infrastructure to provide quality services to meet those needs. The Company
believes that its operating experience as a pioneer in providing shared hub VSAT
services, position as market leader, significant existing network infrastructure
in its markets, and ability to offer a diversity of cost-efficient networking
solutions, create significant competitive advantages.
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.
Various countries in Latin America have taken initial steps towards
deregulation in the telecommunications market during the last few years. Several
Latin American countries have completely or partially privatized their national
carriers, including Argentina, Mexico and Venezuela. Furthermore, some countries
have scheduled the demonopolization of their state telecommunications providers.
For example, Argentina recently announced a telecommunications deregulation
decree which contemplates the demonopolization of telephony services of Telecom
Argentina and Telefonica. Brazil is in the process of opening its
telecommunications market to competition and privatizing its PTO pursuant to a
new law adopted in July 1997. Brazil established an independent regulator in
October 1997, and value added and private network services are already open to
competition. The Company believes that this trend toward deregulation, while
likely to increase competition, will also present significant opportunities for
the Company to expand its private telecommunications network services to, from
and within the region, as well as to present opportunities for the Company in
areas of telecommunications currently permitted to be conducted only by the
PTOs. 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 March 31, 1998, the Company employed a total of 700 persons, of whom
280 were employed by IMPSAT Argentina and 181 were employed by IMPSAT Colombia.
The number of employees of the 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. None of the Company's employees is
a member of any union. The Company believes that its relations with its
employees are good.
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.
In November 1996, IMPSAT Argentina filed suit against ENCOTESA for amounts
due under IMPSAT Argentina's contracts with ENCOTESA, which totaled $5.6
million, plus interest on such amounts. ENCOTESA was the Company's single
largest delinquent account as of December 31, 1997. In December 1996, ENCOTESA
filed its reply to IMPSAT Argentina's claim. The court has not yet ruled upon
IMPSAT Argentina's claim against ENCOTESA. At the end of 1996, IMPSAT Argentina
began to reserve 100% of all of its subsequent invoices submitted to ENCOTESA
and to charge such amounts directly to selling, general and administrative
expenses. Subsequently, IMPSAT Argentina reclassified its trade account
receivables due from ENCOTESA to noncurrent assets at their estimated net
realizable value. In September 1997, ENCOTESA, which was the Company's fourth
largest customer as of December 31, 1996, was privatized and replaced by Correo
Argentino S.A., ("Correo Argentino"), the entity formed by a private
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consortium to acquire and operate the Argentine postal system. Trade receivables
of IMPSAT Argentina allocable to ENCOTESA were not transferred to or assumed by
Correo Argentino and remain an obligation of the Argentine government. In
addition, IMPSAT Argentina's contracts with ENCOTESA were not assumed by Correo
Argentino. The Company will continue to monitor the ENCOTESA receivables
situation. There can be no assurance that the ENCOTESA receivables situation
will not have a material adverse effect on the Company's results of operations,
liquidity or capital resources. For further information regarding IMPSAT
Argentina's relationship with ENCOTESA, see "Risk Factors -- Receivables Risk,"
and "Management's Discussion and Analysis of Financial Condition and 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, the United States and Brazil.
IMPSAT ARGENTINA
IMPSAT Argentina, the Company's first subsidiary, was established in 1988
and began commercial operations in 1990. The Company currently owns a 95.2%
equity interest in IMPSAT Argentina. Argentina has been the site of the initial
introduction of each of the services provided by the Company, except Interplus.
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 its
Teleport in Buenos Aires, Regional Teleports located in Cordoba, Mendoza,
Rosario, Mar del Plata, Tucuman, La Plata and Neuquen, and Teledatos networks in
Buenos Aires, Cordoba, Mendoza, Rosario, Mar del Plata, Tucuman and La Plata,
with an aggregate of approximately 41 route 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
March 31, 1998, the Company had installed approximately 2,361 VSAT microstations
and 470 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, PAS-1,
PAS-5 and Nahuel-1 satellites. In addition, the CNC has allocated to IMPSAT
Argentina 200 MHz of the 38 GHz band specified for point-to-point and
point-to-multipoint microwave telecommunications services.
IMPSAT Argentina had 460 customers at March 31, 1998. Financial institution
customers provided approximately 37.8% of IMPSAT Argentina's revenues during
1997. The second largest sector of IMPSAT Argentina's customer base consists of
governmental agencies, which represented approximately 23.1% of its revenues
during 1997. IMPSAT Argentina's largest customers during 1997 included BNA (8.1%
of IMPSAT Argentina's 1997 revenues); ANSeS, the Argentine social security
administration, which has 136 branch offices (4.4% of IMPSAT Argentina's 1997
revenues); Banco de Galicia y Buenos Aires, the largest private bank in
Argentina with more than 180 branches throughout the country (3.7% of IMPSAT
Argentina's 1997 revenues); and YPF S.A., one of the largest companies in
Argentina, which is engaged in hydrocarbon exploitation (3.0% of IMPSAT
Argentina's 1997 revenues). Revenues from IMPSAT Argentina's top ten customers
accounted for approximately 30.9% of IMPSAT Argentina's revenues during 1997.
IMPSAT Argentina is a leader in data transmission and VSAT services in
Argentina and estimates that it had over 40% of the market share in private
telecommunications network services during 1997. The Company's principal
competitors in Argentina for the provision of private telecommunications network
services include Startel and Comsat Argentina S.A., a wholly-owned subsidiary of
COMSAT, which provides corporate data transmission services, primarily through
VSAT and SCPC technology.
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IMPSAT ARGENTINA SELECTED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
MONTH
ENDED THREE MONTHS ENDED
FISCAL YEAR ENDED NOVEMBER 30, DECEMBER 31, MARCH 31,
------------------------------ ------------ -------------------
1995 1996 1997 1997 1997 1998
-------- -------- -------- ------------ -------- --------
(IN THOUSANDS, EXCEPT FOR OPERATING AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA:
Net revenues from services........ $80,346 $85,145 $90,011 $8,130 $22,838 $23,944
Operating income.................. 14,327 18,870 18,712 1,903 5,897 5,200
Net income........................ 4,472 3,021 2,879 620 1,243 1,036
EBITDA............................ 30,394 37,656 36,504 3,465 10,533 9,933
Capital expenditures.............. 38,248 22,361 16,677 207 10,985 8,598
OPERATING DATA:
VSAT microstations installed...... 1,951 2,111 2,446 2,452 2,187 2,361
Dataplus earth stations
installed....................... 355 398 465 467 419 470
Teleports......................... 1 1 1 1 1 1
Regional Teleports................ 6 6 7 7 6 7
Teledatos networks (fiber
optic/microwave)................ 7 7 7 7 7 7
Customers......................... 319 358 436 439 407 460
OTHER DATA:
Per capita GDP.................... $ 8,117 $ 8,351 --
relative to U.S.............. 29.5% 29.3% --
Telephony revenue (U.S.$
millions)....................... $ 6,183 -- --
Per capita telephony revenues..... 180 -- --
relative to U.S.............. 26.6% -- --
Teledensity (lines in
service/population 100)......... 16.0 -- --
relative to U.S.............. 25.6% -- --
Population (in millions).......... 34.3 34.8 --
</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 CNC 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 November 2000. On March 10,
1998, the Argentine Government announced a telecommunications deregulation
decree which contemplates the demonopolization of telephony services of Telecom
Argentina and Telefonica and the commencement of deregulation of local and
long-distance telephony markets in the year 2000. International voice and
transmission services are supplied by Telintar, a joint venture between Telecom
Argentina and Telefonica, which has an exclusive license until no later than
2000. Other services, such as those rendered by IMPSAT Argentina, are provided
on a non-exclusive basis upon authorization by the CNC.
IMPSAT Argentina obtained a permit in 1989 from the Argentine 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
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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 CNC.
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. 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 also 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 domestic and international videoconferencing services.
Although certain services are provided on a competitive basis, the CNC is
in charge of the authorization, supervision and control of the
telecommunications services. IMPSAT Argentina is required to pay the CNC a
monthly fee of 0.5% of its net revenues.
IMPSAT COLOMBIA
IMPSAT Colombia began operations in December 1992. The Company holds a
74.2% equity interest in IMPSAT Colombia. Other principal shareholders of IMPSAT
Colombia 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 24.6% equity interest in IMPSAT Colombia. 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 cross-ownerships and interlocking directorates. Member
companies of the Sindicato Antioqueno include Bancolombia, the largest
commercial bank in Colombia; Cementos Argos, Colombia's largest cement
manufacturer; and Nacional de Chocolates, one of Colombia's largest food
processing firms.
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 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 provides multiplexing
equipment and terminal equipment on customer premises, controls and monitors the
network, provides technical support and sells network services to customers.
IMPSAT Colombia had approximately 957 VSAT microstations and 358 Dataplus earth
stations installed at March 31, 1998. IMPSAT Colombia operates on the C-band
with access to PAS-1 and the Intelsat 603 and 709 satellites.
IMPSAT Colombia had 547 customers at March 31, 1998. Financial institutions
provided approximately 37% of IMPSAT Colombia's revenues for 1997. The second
largest sector of IMPSAT Colombia's customer base is comprised of industrial
companies (including oil companies) which provided approximately 21% of IMPSAT
Colombia's revenues for 1997. IMPSAT Colombia's largest customers during 1997
included Bancolombia S.A., the country's largest bank; Banco de la Republica,
Colombia's central bank; Interred, an Internet access provider; and Concasa, a
savings and loan corporation. Revenues from IMPSAT Colombia's top ten customers
accounted for approximately 17% of IMPSAT Colombia's revenues for 1997. IMPSAT
Colombia has recently entered into a five-year contract with Corporacion
Nacional de Ahorro y Vivienda ("Conavi"), one of Colombia's largest financial
institutions and a member of the Suramericana Group, to
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provide private telecommunications network services. The contract with Conavi
contemplates monthly revenues to IMPSAT Colombia of $565,000 per month, but is
terminable by Conavi after notice. Upon the commencement of service under this
contract, Conavi will become the single largest customer of the Company.
The Company estimates that it is a leader in terms of market share in VSAT
and data transmission services at December 31, 1997. 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 SELECTED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ ---------------------
1995 1996 1997 1997 1998
-------- -------- -------- --------- ---------
(IN THOUSANDS, EXCEPT FOR OPERATING AND OTHER DATA)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA:
Net revenues from services................... $22,417 $35,116 $49,514 $10,908 $13,828
Operating income............................. 4,858 10,976 16,724 3,346 4,495
Net (loss) income............................ (135) 2,239 8,392 1,271 1,800
EBITDA....................................... 8,748 16,660 23,965 5,097 6,737
Capital expenditures......................... 19,684 15,447 20,256 3,042 5,287
OPERATING DATA:
VSAT microstations installed................. 812 1,066 886 790 957
Dataplus earth stations installed............ 65 174 324 197 358
Teleport..................................... 1 1 1 1 1
Regional Teleports........................... 3 3 3 3 3
Teledatos networks (fiber optic/microwave)... 4 4 4 4 4
Customers.................................... 271 410 524 448 547
OTHER DATA:
Per capita GDP............................... $ 2,256 $ 2,401 --
relative to U.S......................... 8.2% 8.4% --
Telephony revenues (U.S. $ millions)......... $ 1,213 -- --
Per capita telephony revenues................ 35 -- --
relative to U.S......................... 5.1% -- --
Teledensity (lines in service/population
100)....................................... 10.0 -- --
relative to U.S......................... 16.0% -- --
Population (in millions)..................... 35.2 35.9 --
</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 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
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<PAGE> 69
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.
IMPSAT Colombia is required to pay taxes equal to 5% of its gross revenues
to the Ministry of Communications.
IMPSAT VENEZUELA
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 members of the Suramericana Group. In 1997, IMPSAT
Venezuela recorded revenue from services of $8.6 million and a net loss of $5.4
million.
The Company's private telecommunications network services are provided in
Venezuela by 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 196 VSAT
microstations and 88 Dataplus earth stations in Venezuela as of March 31, 1998.
The Company operates on the C-band in Venezuela utilizing the PAS-1 and the
Intelsat 709 satellites.
IMPSAT Venezuela estimates that it had approximately 20% of the market
share in data transmission services during 1997. The Company's principal
competitors in Venezuela include 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; T-Data, the data transmission and Internet services
division of Telcel, one of Venezuela's two cellular telephone providers; and
Bantel, which provides data and voice transmission services.
IMPSAT Venezuela had 105 customers at March 31, 1998. IMPSAT Venezuela's
largest customers are generally large national and multinational corporations.
IMPSAT Venezuela's largest customers during 1997 included Banco Mercantil SAICA,
one of Venezuela's largest commercial banks; Reacciun, a national academic
telecommunications network; Cadenas de Tiendas Venezolanas, S.A. ("Cativen"),
one of Venezuela's largest retail department stores and supermarket chains.
Corporacion Andina de Fomento, a multilateral development bank; Nabisco de
Venezuela C.A., a subsidiary of multinational food and tobacco conglomerate RJR
Nabisco Holdings Corp.; and Compania Occidental de Hidrocarburos, Inc., a
subsidiary of Occidental Petroleum Corp. Revenues from IMPSAT Venezuela's top
ten customers accounted for approximately 51.8% of IMPSAT Venezuela's revenues
for 1997. In addition, IMPSAT Venezuela recently signed a five-year contract to
provide private telecommunications network services to Instituto Nacional de
Hipodromos ("INH"), a horse racing track. The contract with INH contemplates
monthly revenues to IMPSAT Venezuela of $240,000 per month. Upon commencement of
service under this contract, INH will become the single largest customer of
IMPSAT Venezuela.
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
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<PAGE> 70
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 in February 1996 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.
Under each of the licenses described above, IMPSAT Venezuela is or will be
required to pay taxes and fees equal to 5.5% of a stipulated portion of its
gross revenues from the services that are provided pursuant to such license.
Such stipulated portion of its gross revenues currently represent approximately
70% of IMPSAT Venezuela's revenues.
IMPSAT ECUADOR
The Company began operations in January 1995 and holds a 100% equity
interest in IMPSAT Ecuador. For 1997, IMPSAT Ecuador recorded revenues from
services of $5.5 million and a net loss of $1.0 million.
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 access to the PAS-1 and PAS-5 satellites. A
Teleport located in Quito, Ecuador was constructed in September 1995 and a
Regional Teleport was constructed in Guayaquil in July 1995.
IMPSAT Ecuador had approximately 104 customers as of March 31, 1998.
Governmental entities and banks and financial institutions provided
approximately 34%, and industrial and commercial companies provided
approximately 21% of IMPSAT Ecuador's revenues for 1997.
IMPSAT Ecuador's largest customers at December 31, 1997 included Banco del
Pichincha, one of the largest Ecuadoran banks; Aduanas, the Ecuadoran customs
agency; and Diners Club del Ecuador, a leading credit card company. Revenues
from IMPSAT Ecuador's top ten customers accounted for approximately 52% of its
revenues for 1997. In addition, the Company provides international
communications services for the regional PTO located in the city of Cuenca.
The telecommunications industry in Ecuador is regulated by the Consejo
Nacional de Telecomunicaciones, the Secretaria Nacional de Telecomunicaciones
and is under the control and supervision of the Superintendencia de
Telecomunicaciones.
IMPSAT Ecuador believes that it is the leading provider of private
telecommunications network services in Ecuador. The Company's principal
competitors in Ecuador include: Empresa Estatal de Telecomunicaciones del
Ecuador ("EMETEL"), the Ecuadoran state-owned PTO; Suratel, S.A., which provides
national and international SCPC and voice services; Consorcio Ecuatoriano de
Telecomunicaciones S.A., which provides national and international SCPC services
and cellular telephony; and Ram Telecom Telecomunicaciones S.A., which provides
national SCPC services.
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 certain
of its revenues which have historically represented approximately half of IMPSAT
Ecuador's revenues.
IMPSAT MEXICO
IMPSAT Mexico was incorporated in 1995. The Company has a 99.9% equity
interest in IMPSAT Mexico. For 1997, IMPSAT Mexico recorded net revenues from
services of $1.4 million and a net loss of $1.4 million.
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<PAGE> 71
The Company's private telecommunications network services are provided in
Mexico through a Teleport located in Mexico City. 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. The Company operates on the
C-band in Mexico with access to Intelsat 709, which has been approved by the
Secretaria de Comunicaciones y Transportes ("SCT"), and to Solidaridad-II, a
Mexican satellite.
As of March 31, 1998, IMPSAT Mexico had 20 customers including: Wang de
Mexico S.A. de C.V, a developer of computer equipment software; Carvajal S.A. de
C.V., a publisher of textbooks and books of general interest and manufacturer of
school products such as notebooks; Becton & Dickinson and SmithKline Beecham,
two international pharmaceutical companies; and ATSI de Mexico S.A. de C.V., a
private pay phone provider and a subsidiary of American TeleSource
International, Inc.
IMPSAT Mexico's current market share is insignificant. However, the Company
believes that its technical experience, know-how and commitment to customer
service should enable it to increase its revenues and market share over time.
The Company's principal competitors in Mexico include: Telecomunicaciones de
Mexico ("Telecomm"), the PTO charged with the provision of national satellite
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.
The telecommunications industry is regulated primarily by the SCT. An
agency of the SCT, Telecomm, is charged with the regulation of non-national
satellite and telegraph services. Telecomm supervises carriers and allocates
electronic frequencies for satellite communications. Satelites Mexicanos, S.A.
de C.V. ("SatMex"), formerly a Mexican government agency before its
privatization in December 1997, owns and operates Solidaridad II along with
other Mexican satellites.
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. Interconnection of
IMPSAT Mexico's network to networks in other countries requires the approval of
the SCT. 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 15 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 services
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.
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.
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IMPSAT USA
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 revenues of $5.0 million and operating expenses of
$3.9 million during 1997.
IMPSAT USA has leased teleport facilities in south Florida and New Jersey
and has purchased switching hardware and software from General Datacom, ACT
Networks, Ascend Communications, Inc., Cisco Systems Inc., Adtran Inc., and
others. IMPSAT USA is currently constructing its own Teleport in south Florida,
which is expected to be completed by the end of 1998.
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 targets
U.S.-based Competitive Access Providers ("CAPs"), Latin American Internet
service providers and international long-distance carriers for specific niche
products. IMPSAT USA currently provides Interplus service to 15 customers
(excluding intercompany accounts). IMPSAT USA's customer accounts include
Intermedia Communications of Florida Inc., one of the largest CAPs in the United
States, which 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, both of which have Interplus links between
Florida and their locations in Ecuador. In addition, in February 1997, IMPSAT
USA signed an agreement with MCI Global Resources, Inc. pursuant to which
circuits are being provided from Florida to MCI's customer locations in Honduras
and Colombia.
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.
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 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 June 5, 1997,
IMPSAT USA's application for authorization to resell telecommunications services
of other international carriers between the United States and various
international points was granted by the FCC. On July 25, 1997, IMPSAT USA's
application to the FCC for authority to operate as an international
facilities-based and international global resale carrier was granted.
IMPSAT BRAZIL
IMPSAT Brazil was established by Nevasa to apply for a value added
telecommunications license in Brazil and to develop such business in Brazil with
the understanding between Nevasa and its then minority partner in the Company,
STET International, that IMPSAT Brazil would be combined with the Company at a
later date to be agreed upon. The Company presently holds an 99.9% ownership
interest in IMPSAT Brazil.
IMPSAT Brazil is currently providing Dataplus, Interplus and network
outsourcing services utilizing satellite capacity subleased from Embratel. Last
mile solutions in metropolitan areas are anticipated initially to be delivered
through microwave and fiber optic links leased from local PTOs. IMPSAT Brazil
plans to operate its network through two teleports to be located in Sao Paulo
and Curitiba. Depending on the Company's success, the Company anticipates that
it may construct additional teleports in the main Brazilian
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cities in the future. After construction of a teleport, the Company expects its
operations in Brazil to utilize the C-bands and Ku-bands on Brazilsat, PanAmSat,
Intelsat and Nahuel satellites.
As of March 31, 1998, IMPSAT Brazil was providing private network
telecommunications services in Brazil to Shell do Brasil S.A., Fundacao Cultural
e Educacional, TCA Ltda., Ultrafertil, Sony Music Entertainment, and HSBC
Bamerindus, through a total of 23 Dataplus and three Interplus earth stations
and the outsourcing of a 200 VSAT microstation network for HSBC Bamerindus.
IMPSAT Brazil recorded revenues of $0.3 million and operating expenses of $1.4
million for 1997, which were not consolidated with the Company's operating
results.
The Company expects to use its well-developed technological and commercial
experience and knowledge of private telecommunications network services in Latin
America for further market penetration and expansion of its customer base in
Brazil. Brazil, with an estimated population of 156 million people, potentially
represents one of the largest telecommunications markets in Latin America.
Brazil is four times the size of any other South American country and has more
people than all the other South American countries combined. It is the fifth
largest country in the world both in terms of area and population. Brazil's
economy is also the largest in Latin America with reported GDP of $803 billion
in 1997, a 3% gain over the previous year. The Brazilian population has been
urbanized over the past 40 years -- as a percentage of total population, urban
population in Brazil has grown from approximately 49% in 1970 to 74% in
1993 -- due to a rapid change from an agriculture based economy to an industrial
and service based economy. As a result, Brazil has numerous large urban areas
separated by great distances, a characteristic that is correlated with a high
demand for telecommunications services.
Commercial and governmental activity in Brazil are often dispersed among
multiple sites located great distances apart. The Company believes its
satellite-based private telecommunications network services are well-suited to
such an environment. The Company's services are designed to reach many locations
over vast distances simultaneously (i.e., point-to-multi-point transmission) and
for connecting a number of locations that cannot be connected efficiently or
cost-effectively by terrestrial telecommunications networks. Despite its large
land mass, population and economy, existing telecommunications infrastructure is
unreliable, inadequate and expensive. Telephony infrastructure and service
quality has not kept pace with rapidly increasing demand. Consistent with its
experience in its other Latin American markets, where the local
telecommunications infrastructure is often unreliable and not readily
accessible, the Company believes that significant opportunities exist in Brazil
for providers of private telecommunications network services.
The Company's experience in other Latin American markets indicates that the
rate of growth for private telecommunications network services is generally
greater than that of the telecommunications sector as a whole. The Company
believes that Brazil's low teledensity; poor telephony infrastructure, both
switched and non-switched; growing economy with strong, unsatisfied demand for
reliable, cost-effective telecommunications solutions in a variety of commercial
and industrial settings; and its recently commenced liberalization and
deregulation of the telecommunications sector all underscore the breadth of
opportunity in the private telecommunications network services market in that
country.
The Company expects intense competition in the market for private
telecommunications network services in Brazil. Such competition is expected to
come primarily from Embratel, Promon Eletronica Ltda., COMSAT do Brasil Ltda.,
Victori Comunicacoes (a joint venture between Globo Participacoes Ltda., STET
Victori Internacional Engenharia de Telecomunicacoes S.A. and Laboratorio
Digital Ltda.) and GSI, as well as from other domestic and international market
entrants as the Brazilian telecommunications industry is liberalized and
deregulated. These factors are expected to be particularly attractive to large,
multinational customers which prefer to be serviced by one company within the
region. The Company intends to use its well-developed technological and
commercial experience and knowledge in South America as a launching point for
expansion and market penetration in Brazil and as an integral part of its
pan-Latin American network of private telecommunications services. The Company
expects to compete effectively in Brazil by delivering tailor-made solutions to
meet the particular telecommunications needs of its customers; offering a broad
range of services; and providing personalized attention and uncompromising
customer service and support. The Company will initially focus on large
corporations, financial institutions and governmental entities, providing
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VSAT, Dataplus and Interplus services, and adding Internet access and other
value added services as the network and customer base expands. The Company's
sales efforts in Brazil will focus primarily on the 500 largest companies and
international corporations based in the main economic centers of Brazil: Sao
Paulo, Rio de Janeiro, Minas Gerais, Parana, Rio Grande do Sul, Brasilia and
Bahia. The Company's sales strategy will aim to provide the customer with highly
personalized pre-sale, sale and post-sale attention. The Company believes that
such comprehensive customer service at all stages of the relationship should
promote customer loyalty and generate demand for additional services by existing
customers. See "Risk Factors -- Competition."
The telecommunications and postal services in Brazil are regulated by the
Ministry of Communications (the "Ministry") pursuant to the Telecommunications
Law of 1962, as amended in 1995 (the "Cable TV Law") and in 1996 (the "Minimum
Law"). Brazil's telecommunications laws recently underwent significant revision
with the enactment by the Brazilian legislature in September 1997 of a new
statute (the "General Telecommunications Law") authorizing the creation of the
Agencia Nacional de Telecomunicacoes ("Anatel"), an independent agency that
regulates all aspects of telecommunications services, except radio and TV
broadcasting, including the granting of licenses under the General
Telecommunications Law. In addition, competition both at the local and long
distance levels is expected to be introduced, with the privatization of Telebras
and the dismantling of its telecommunications monopoly.
Under the General Telecommunications Law, value added services may not be
provided in Brazil without prior governmental authorization. The Brazil License,
which was granted to IMPSAT Brazil by Anatel permits IMPSAT Brazil to lease
satellite capacity directly from satellite carriers and sell corporate
telecommunications services (data, voice and video) using terrestrial and
satellite links to third parties.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
In accordance with its Bylaws, IMPSAT Corporation currently has eight
members on its Board of Directors. The directors of the Company will hold office
until the next annual meeting of stockholders and until successors of such
directors have been elected and qualified, or until their earlier death,
resignation or removal. The holders of the Series A Preferred Stock have, since
the issuance thereof, had the right to vote as a separate class to elect two
directors. Ms. Marianne Hay and Mr. Stephen Munger currently serve in such
capacities.
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.
Set forth below are the names, ages and positions of directors and
executive officers of the Company as of March 31, 1998. The officers designated
as executive officers of IMPSAT Corporation 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
Ricardo A. Verdaguer.................... 47 Director, President and Chief Executive Officer
Roberto A. Vivo......................... 44 Director, Deputy Chief Executive Officer
Alexander Rivelis....................... 57 Director and Vice President, Institutional
Relations
Lucas Pescarmona........................ 27 Director
Sofia Pescarmona........................ 24 Director
Marianne Hay*........................... 46 Director
Stephen R. Munger*...................... 40 Director
EXECUTIVE OFFICERS
- ------------------
Hector Alonso........................... 40 Chief Operating Officer
Guillermo Jofre......................... 42 Chief Financial Officer
Guillermo V. Pardo...................... 47 Vice President, Planning
Jose R. Torres.......................... 39 Vice President, Administration, Chief Accounting
Officer
Alejandro Suarez del Cerro.............. 44 Vice President, Technology
Rafael Carchak Canes.................... 48 President of IMPSAT Argentina
Horacio Sajoux.......................... 45 President of IMPSAT Colombia
Mariano Torre Gomez..................... 47 President of IMPSAT Venezuela
Mauricio G. Klau........................ 35 President of IMPSAT Mexico
Rodolfo Arroyo.......................... 38 President of IMPSAT Ecuador
Richard Horner.......................... 46 President of IMPSAT USA
Daniel V. Hourquescos................... 46 President of IMPSAT Brazil
</TABLE>
- ---------------
* Pursuant to the terms of the Certificate of Designations, on March 19, 1998,
Ms. Marianne Hay and Mr. Stephen Munger were elected to the Company's Board of
Directors by the Morgan Stanley Investors. See "Certain Relationships and
Related Transactions -- STET Share Purchase and Series A Preferred Stock
Issuance."
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BIOGRAPHIES OF DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to the business experience and the affiliations of
the current 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
Corporacion IMPSA S.A. ("CORIM"), the holding company for the Pescarmona family,
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), Mercantil Andina S.A. ("Mercantil
Andina") (an insurance company), TCA S.A. ("TCA") (a manufacturer of automobile
parts), Buenos Aires al Pacifico San Martin S.A. ("BAPSA") and Ferrocarriles
Mesopotamico General Urquiza S.A. (Argentine railway companies). 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 has also served as President of IMPSAT Argentina from 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 A. Vivo has been Deputy Chief Executive Officer 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 from 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 Institutional Relations and a
member of the Board of Directors of IMPSAT Corporation since December 1994. Mr.
Rivelis served as President of IMPSAT Colombia from 1991 to March 1993,
President of IMPSAT USA from 1995 to 1993, and has held a variety of managerial
positions with companies in the Pescarmona group from 1978 through 1996. Mr.
Rivelis holds a degree in electrical and mechanical engineering from the
University of Rosario, Argentina.
Lucas Enrique Pescarmona, a 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 Automotivos
S.A. ("TCA Brazil"), a Brazilian manufacturer of automotive parts that is part
of the Pescarmona group, as senior investment analyst in Brazil. Mr. Pescarmona
is also a member of the Board of Directors of TCA, another company within the
Pescarmona group. Mr. Pescarmona holds degrees in economics and political
science from the University of Pittsburgh and holds a master of business
administration degree at SDA Bocconi in Milan.
Sofia Pescarmona, a daughter of Enrique M. Pescarmona, has been a member of
the Board of Directors of IMPSAT Corporation since February 1996. From August
1994 to December 1997, Ms. Pescarmona has held several positions in the Company,
including in the Internet unit and marketing department of IMPSAT Corporation
and the sales department of IMPSAT Argentina. Ms. Pescarmona holds a degree in
international relations from Tufts University. Ms. Pescarmona is currently
pursuing an MBA degree at IAE, Universidad Austral in Argentina.
Marianne Hay has been a member of the Board of Directors of IMPSAT
Corporation since March 1998. Ms. Hay is a Managing Director of Morgan Stanley
Dean Witter & Co. and is President of the Morgan Stanley Global Emerging Markets
Private Investment Fund, L.P. Ms. Hay joined Morgan Stanley in 1993.
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Ms. Hay graduated from Edinburgh University with a degree in genetics and holds
a Diploma in education and the qualification of Association of the Institute of
Bankers in Scotland.
Stephen R. Munger has been a member of the Board of Directors of IMPSAT
Corporation since March 1998. Mr. Munger is a Managing Director in the Mergers,
Acquisitions and Restructuring Department of Morgan Stanley & Co. Incorporated
with a focus on the energy industry and is Head of Princes Gate. He joined the
Firm in 1988 as a Vice President in the Corporate Finance Department. He became
a principal in 1990 and a Managing Director in 1993. Since February 1998, Mr.
Munger has been a member of the Board of Directors of Wright Medical
Technologies, Inc. Mr. Munger graduated from Dartmouth College and received an
MBA from the Wharton School of the University of Pennsylvania.
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 holds a degree in industrial engineering from
Universidad Argentina de la Empresa.
Guillermo Jofre has been Chief Financial Officer 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 over
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.
Alejandro Suarez del Cerro has been Vice President, Technology of IMPSAT
Corporation since November 1997. Previously, Mr. Suarez del Cerro 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,
Development Manager from 1991 to 1994 and Vice President, Technology from 1995
to 1997. 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 de Buenos Aires.
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 de Buenos Aires.
Mariano Torre Gomez has been President of IMPSAT Venezuela since April
1997. Mr. Torre has served in a variety of positions involving engineering,
production, planning, business development and new markets
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<PAGE> 78
for companies in the Pescarmona group over a period of 17 years. Mr. Torre
served two years as President of IMPSAT Ecuador from 1997. Before that, 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.
Mauricio Gabriel Klau has been President of IMPSAT Mexico since June 1997.
Previously, Mr. Klau held several positions within IMPSAT Argentina and IMPSAT
Mexico. Mr. Klau holds a degree in electronic engineering from Universidad de
Buenos Aires.
Rodolfo Arroyo became President of IMPSAT Ecuador in March 1997, after
joining IMPSAT Ecuador as a General Manager in April 1996. From the end of 1991
until April 1996, Mr. Arroyo was employed in several different capacities at
IMPSAT Colombia, including Vice President, Planning and Control and Vice
President, Operations. Prior to joining the Company, Mr. Arroyo was employed by
IMPSA as Projects Manager from July 1988 until December 1991. Mr. Arroyo holds a
degree in civil engineering from Universidad Nacional de San Juan in Mendoza,
Argentina.
Richard Horner has been President of IMPSAT USA since July 1995. Prior to
joining IMPSAT USA, Mr. Horner was South American Sales Manager 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 Bachelor of Arts
degree from Amherst College, a degree in electrical engineering from the
University of Kansas and a Master of Arts degree in Latin American studies from
the University of Texas -- Austin.
Daniel V. Houquescos became President of IMPSAT Brazil on March 17, 1997.
Since 1990, Mr. Horquescos has held several positions in the Company, including
General Manager of IMPSAT Argentina from March 1993 to April 1995. Prior to
joining IMPSAT Argentina, Mr. Horquescos served as director of information
services of Direccion General Impositiva, the former Argentine governmental
agency charged with the collection of taxes, and associate Director of CMA
International Company. Mr. Horquescos holds a degree in industrial engineering
from the Instituto Tecnologico de Buenos Aires.
EXECUTIVE COMPENSATION
The following tables set forth the compensation paid or accrued to the
chief executive officer and the three most highly compensated other executive
officers receiving over $100,000 per year of IMPSAT Corporation during 1997. No
bonuses were paid by IMPSAT Corporation to such executive officers during 1997.
The Company does not maintain any long term incentive plans and does 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>
Enrique M. Pescarmona............................... 1997 $291,045 $ -- $ --
Chairman of the Board
Ricardo A. Verdaguer................................ 1997 240,500 -- --
President and Chief Executive Officer
Roberto A. Vivo..................................... 1997 198,250 -- --
Director, Deputy Chief Executive Officer and Vice
President, Marketing
Rafael Carchak Canes................................ 1997 203,372 -- --
Director and President of IMPSAT Argentina
</TABLE>
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<PAGE> 79
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a compensation committee. Decisions with respect
to compensation matters that otherwise would be decided by a compensation
committee are made by the Board of Directors as a whole. Pursuant to the terms
of the Securityholders Agreement (as defined below), for so long as any Morgan
Stanley Investors beneficially own a majority of the shares of Series A
Preferred Stock outstanding on their date of issuance, any material amendment or
change of the compensation arrangements of IMPSAT Corporation's Chief Executive
Officer, Chief Financial Officer, Deputy Chief Executive Officer or Chief
Operating Officer must be approved by the designees of the Morgan Stanley
Investors to the Board of Directors of the Company.
The Morgan Stanley Investors, which are affiliates of Morgan Stanley Dean
Witter & Co., own 25,000 shares of Series A Preferred Stock. Effective March 19,
1998, the holders of the Series A Preferred Stock designated Ms. Marianne Hay
and Mr. Stephen Munger as Directors of the Company. In addition, Morgan Stanley
& Co. Incorporated was the placement agent in connection with the offering of
the Existing Senior Notes, and was one of the Placement Agents in connection
with the Offering. See "Certain Relationships and Related Transactions -- STET
Share Purchase and Series A Preferred Stock Issuance" and "Principal
Stockholders."
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<PAGE> 80
PRINCIPAL STOCKHOLDERS
The following table and the accompanying notes set forth certain
information concerning the beneficial ownership of IMPSAT Corporation's capital
stock as of March 19, 1998 by (i) each person who owned of record, or was known
to own beneficially, more than five percent of any class of IMPSAT Corporation's
capital 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 capital
stock and (ii) record and beneficial ownership with respect to such person's
shares of capital stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT
------------------------------------ ---------- -------
<S> <C> <C>
IMPSAT Corporation Common Stock(1)
Beneficial Owners of more than 5%
Nevasa Holdings Limited(2).................................. 75,594,480 75%
17 Dame Street
Dublin 2, Ireland
Princes Gate Investors II, L.P.(3).......................... 20,158,528 20%
Morgan Stanley Global Emerging Markets Private Investment
Fund, L.P.(4)............................................. 5,039,632 5%
Directors and Executive Officers(2)......................... 0 0%
All Directors and Officers as a Group (19 persons)(2)....... 0 0%
IMPSAT Corporation Preferred Stock
Beneficial Owners of more than 5%
Princes Gate Investors II, L.P.(5).......................... 20,000 80%
Morgan Stanley Global Emerging Markets Private Investment
Fund, L.P.(6)............................................. 5,000 20%
Directors and Executive Officers(2)......................... 0 0%
All Directors and Officers as a Group (19 persons)(2)....... 0 0%
</TABLE>
- ---------------
(1) Determined on an as-converted basis, assuming the conversion of all issued
and outstanding shares of Series A Preferred Stock into Common Stock. As of
March 19, 1998, each share of Series A Preferred Stock was convertible into
1,007.9 shares of Common Stock, or a total of 25,198,160 shares of Common
Stock.
(2) Nevasa Holdings Limited 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.
(3) Determined on an as-converted basis, assuming the conversion of 20,000
shares of Series A Preferred Stock, which were convertible into 20,158,528
shares of Common Stock on March 19, 1998, owned by Princes Gate and
affiliates of Princes Gate over which Princes Gate has sole voting power.
See Note 4 to this "Principal Stockholders" section.
(4) Determined on an as-converted basis, assuming the conversion of 5,000 shares
of Series A Preferred Stock, which were convertible into 5,039,632 shares of
Common Stock on March 19, 1998, owned by MSGEM and Morgan Stanley Global
Emerging Markets Private Investors, L.P. (collectively, the "MSGEM Fund")
over which MSGEM has sole voting power.
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<PAGE> 81
(5) The shares of Series A Preferred Stock set forth on this line include 2,857
shares owned by certain affiliates of Princes Gate over which Princes Gate
has sole voting and dispositive power. The business address of Princes Gate
is Princes Gate Investors II, L.P., 1585 Broadway, 36th Floor, New York, NY
10036. Mr. Stephen Munger, who is the President of PG Investors II, Inc.,
the general partner of Princes Gate and Princes Gate's designee to IMPSAT
Corporation's Board of Directors, disclaims voting or dispositive power over
the shares of Series A Preferred Stock owned by Princes Gate and its
affiliates.
(6) The shares of Series A Preferred Stock set forth on this line include 4,712
shares owned by MSGEM and 288 shares owned by Morgan Stanley Global Emerging
Markets Private Investors, L.P. MSGEM, which is a subsidiary of Morgan
Stanley, manages the investment in, and has sole voting power over, the
shares of Series A Preferred Stock owned by each person comprising the MSGEM
Fund. The business address of each of such persons is c/o Morgan Stanley
Global Emerging Markets Private Investment Fund, L.P., 1221 Avenue of the
Americas, 33rd Floor, New York, NY 10020. Ms. Marianne Hay, who is President
of Morgan Stanley Global Emerging Markets, Inc., the general partner of the
MSGEM Fund, and the MSGEM Fund's designee to the IMPSAT Corporation's Board
of Directors, disclaims voting or dispositive power over the shares of
Series A Preferred Stock owned by the MSGEM Fund.
As described under "Certain Relationships and Related Transactions -- STET
Share Purchase and Series A Preferred Stock Issuance," on March 19, 1998, the
STET Shares were redeemed with the proceeds of a substantially concurrent
issuance and sale by the Company of $125 million of the Series A Preferred Stock
to the Morgan Stanley Investors. As a result, Nevasa currently owns 100% of the
Company's outstanding common stock of the Company and the Morgan Stanley
Investors own 100% of the Series A Preferred Stock. In connection with these
transactions, Nevasa and the Morgan Stanley Investors have entered into a
Securityholders Agreement (the "Securityholders Agreement"), effective as of
March 19, 1998, relating to the joint management of IMPSAT Corporation. The
Securityholders Agreement provides the Morgan Stanley Investors with veto rights
with respect to certain significant corporate actions and provides the Morgan
Stanley Investors with a minimum of two seats on the Company's Board of
Directors for so long as a majority of the Series A Preferred Stock initially
issued on March 19, 1998 are held by the Morgan Stanley Investors.
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 members of the Pescarmona family have an interest during 1997 and for the
first three months of 1998 totaled approximately $2.3 million. Total
telecommunications services provided to companies affiliated with the
Suramericana Group from January 1, 1997 to March 31, 1998 totaled approximately
$5.1 million.
The Company holds a 74.2% equity interest in IMPSAT Colombia and the
Suramericana Group holds a 24.6% equity interest in IMPSAT Colombia. The
Suramericana Group also holds a 25% equity interest in IMPSAT Venezuela.
The following is a description of the most significant of transactions
between the Company and its subsidiaries and entities affiliated with CORIM and
the Suramericana Group. 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 provides telecommunications services to IMPSA, a company
controlled by CORIM that produces heavy steel capital goods, including
hydromechanical equipment and cranes, and through subsidiaries, engages in other
business including but not limited to cargo transportation, auto parts
manufacturing and general environmental services. Total telecommunications
services provided to IMPSA for the period from January 1, 1997 to March 31, 1998
totaled approximately $463,000.
IMPSAT Argentina provides telecommunications services to TCA, a company
controlled by CORIM and IMPSA that produces wire harnesses for automobile
electrical systems and coil springs for automobile
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<PAGE> 82
suspension systems in Argentina and Brazil. Total telecommunications services
provided to TCA for the period from January 1, 1997 to March 31, 1998 totaled
approximately $95,000.
IMPSAT Argentina provides telecommunications services to BAPSA, a company
controlled by CORIM and IMPSA that operates the San Martin Railway between
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, 1997 to March 31, 1998
totaled approximately $1.3 million.
IMPSAT Argentina provides telecommunications services to Mercantil Andina,
an insurance company owned by CORIM and members of the Pescarmona family. Total
telecommunications services provided to Mercantil Andina for the period from
January 1, 1997 to March 31, 1998 totaled approximately $316,000.
IMPSAT Argentina provides telecommunications services to Lagarde, a company
owned by members of the Pescarmona family that owns and operates a winery in the
Mendoza province of Argentina. Total telecommunications services provided to
Lagarde S.A. for the period from January 1, 1997 to March 31, 1998 totaled
approximately $75,000.
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 Sufinanciamiento, a finance
company. During 1997 and the first three months of 1998, the total amount of
telecommunications services rendered to the Suramericana Group totaled
approximately $5.1 million, the most significant of which are detailed in the
following breakdown:
<TABLE>
<S> <C>
Bancolombia................................................. $3,597,000
Conavi...................................................... 1,085,000
Suramericana de Seguros..................................... 830,000
Industrias Noel............................................. 479,000
Almacenes Exito............................................. 223,000
Corfinsura.................................................. 203,000
Proteccion.................................................. 195,000
Suvalor..................................................... 175,000
Acerias Paz del Rio......................................... 144,000
Sufinanciamiento............................................ 126,000
Susalud..................................................... 109,000
Suleasing................................................... 102,000
Cementos Rio Claro.......................................... 85,000
Sodexho Pass................................................ 73,000
</TABLE>
During 1997 and the first three months of 1998, IMPSAT Venezuela provided
telecommunications services to several companies within the Suramericana Group,
including Industrias Alimenticias Noel de Venezuela S.A., which totaled
approximately $108,000 and Cadena de Tiendas Venezolanas S.A., which totaled
approximately $774,000.
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 have an interest. The following is a description of the most significant
of such transactions.
Corfinsura and Bancolombia are creditors of IMPSAT Colombia. As of March
31, 1998, IMPSAT Colombia was indebted to Corfinsura in the amount of $7.0
million and to Bancolombia in the amount of approximately $8.6 million. The
total interest paid for the period from January 1, 1997 to March 31, 1998 was
approximately $2.0 million.
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<PAGE> 83
Suramericana de Seguros acts from time to time as an insurance broker and
an insurer for IMPSAT Colombia. IMPSAT Colombia paid premiums to Suramericana de
Seguros totaling approximately $74,000 for the period from January 1, 1997 to
March 31, 1998.
Certain other companies within the Suramericana Group, including Suleasing
S.A. and Suleasing Panama, provide financial leasing services to IMPSAT
Colombia. The total indebtedness as of March 31, 1998 was approximately $2.0
million and the total interest paid for the period from January 1, 1997 to March
31, 1998 was approximately $156,000.
Other payments by IMPSAT Colombia to companies of Suramericana Group in
1997 and the first three months of 1998 included: payments of approximately
$71,000 to Proteccion, S.A. for pension fund services; Susalud, had total
payments of approximately $79,000 to Susalud, S.A. for health benefit services;
and payments of approximately $74,000 to Sodexho Pass for employee luncheon
services.
As of March 31, 1998, IMPSAT Brazil had an outstanding loan with TCA
Brazil, a subsidiary of IMPSA, for an aggregate amount of $500,000.
STET Share Purchase and Series A Preferred Stock Issuance. The acquisition
by IMPSAT Corporation of the STET Shares and the 0.64% interest in IMPSAT
Argentina (the "Argentina Shares") then held by STET International, was
consummated on March 19, 1998, pursuant to the terms of the Stock Purchase and
Termination Agreement dated as of February 27, 1998 among Nevasa, STET
International and certain other parties (the "Stock Purchase and Termination
Agreement"). In accordance with the terms of the Stock Purchase and Termination
Agreement, the Shareholders Agreement dated as of December 16, 1994, among
Nevasa, STET International and certain other parties relating to the ownership
of capital stock of, and certain management rights in respect of, the Company,
was terminated. Pursuant to a series of transactions, on March 19, 1998, the
STET Shares were redeemed and the Argentina Shares were acquired by IMPSAT
Corporation with the proceeds of a substantially concurrent issuance and sale by
IMPSAT Corporation of $125 million of the Series A Preferred Stock to the Morgan
Stanley Investors.
The Series A Preferred Stock was convertible into 25% of the common stock
of IMPSAT Corporation on the date of issuance. The Certificate of Voting Powers,
Designations, Preferences and Relative Participating, Optional or Other Special
Rights and Qualifications, Limitations and Restrictions Thereof of the Series A
Convertible Preferred Stock of IMPSAT Corporation (the "Certificate of
Designations") was filed by IMPSAT Corporation with the Secretary of State of
Delaware on March 19, 1998. The following are some of the principal features of
the Series A Preferred Stock, as more particularly specified in the Certificate
of Designations: (a) cumulative dividends at the rate of 10% per annum,
compounded quarterly and, with certain exceptions, payable in kind; (b)
mandatorily redeemable in cash by IMPSAT Corporation at maturity (ten years
after issuance) plus accrued and unpaid dividends; (c) callable under certain
circumstances by IMPSAT Corporation, in whole, at 100% of the principal amount,
plus accrued and unpaid dividends; (d) convertible into common stock of IMPSAT
Corporation at any time at the option of the holders (including upon a call by
IMPSAT Corporation), at a specified conversion rate subject to certain
antidilution rights; (e) the right by Morgan Stanley Investors holding a
majority of the shares of Series A Preferred Stock initially issued to appoint
two directors to the IMPSAT Corporation's Board of Directors as well as to
immediately appoint half of the members of IMPSAT Corporation's Board of
Directors upon the occurrence of certain specified events; and (f) the right by
Directors appointed by the Morgan Stanley Investors to a veto over certain major
corporate actions.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of the material provisions of certain agreements
governing certain indebtedness of IMPSAT Corporation and IMPSAT Argentina. 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 from IMPSAT Corporation upon request.
Existing Senior Notes. In July 1996 the Company completed the offering of
the Existing Senior Notes, of which an aggregate of $125,000,000 in principal
amount is outstanding as of the date hereof. The Existing Senior Notes bear
interest at the rate of 12 1/8% per annum payable semi-annually in cash on
January 15 and July 15 of each year. The Existing Senior Notes have the benefit
of a guarantee issued on a senior unsecured basis by IMPSAT Argentina. The 1996
Indenture contains certain covenants which, among other things, restrict the
ability of IMPSAT Corporation and its restricted subsidiaries 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 IMPSAT Corporation, consolidate, merge or sell all or substantially
all of its assets.
Global Commercial Paper Program. As of April 15, 1998, IMPSAT Argentina
had outstanding $50 million of commercial paper issued under the Global
Commercial Paper Program. On February 10, 1998, IMPSAT Argentina completed the
placement of a first series (the "First Series") of $25 million of short-term
promissory notes under the Global Commercial Paper Program. The first series
under the Global Commercial Paper Program will mature on August 10, 1998. On
April 3, 1998, IMPSAT Argentina completed the issuance of a second series (the
"Second Series") of $25 million of short-term promissory notes under the Global
Commercial Paper Program, which will mature on December 17, 1998. The interest
rate on each of the First Series and Second Series is 11.0%.
THE EXCHANGE OFFER
The Old Notes were sold by the Company on June 17, 1998 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 June 17, 1998 (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, 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
holders thereof 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 [ ], 1998; 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.
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As of the date of this Prospectus, $225,000,000 aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about [ ], 1998, 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.
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 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.
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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
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.
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.
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
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<PAGE> 87
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.
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 June 17, 1998. 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 December 17,
1998, the annual interest rate borne by the Notes will be increased by 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
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<PAGE> 88
"-- 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
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
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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.
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.
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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.
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
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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 to be issued under an Indenture, to be dated as of June
17, 1998 (the "Indenture"), between the Company, as issuer, and The Bank of New
York, as Trustee (the "Trustee"). The Old Notes and the New Notes will be
treated as a single class 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 particular
defined terms of the Indenture not otherwise defined herein are referred to,
such defined terms are incorporated herein by reference. For definitions of
certain capitalized terms used in the following summary, see "-- Certain
Definitions." 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 unsubordinated obligations of the Company,
initially limited to $225 million aggregate principal amount, and will mature on
June 15, 2008. Each Note will bear interest at the rate per annum shown on the
front cover of this Prospectus 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 June 1 or
December 1 immediately preceding the Interest Payment Date) on June 15 and
December 15 of each year, commencing December 15, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
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 Holders at their
addresses as they appear 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.
See "-- Book-Entry; Delivery and Form." 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.
Subject to the covenants described below under "Covenants" and applicable
law, the Company may issue additional Notes under the Indenture. The Notes
offered hereby and any additional Notes subsequently issued would be treated as
a single class for all purposes under the Indenture.
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
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time or from time to time, on or after June 15, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the Security
Register. The Notes will be redeemable at the redemption prices (expressed in
percentages of principal amount) set forth below, plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is on or prior to the Redemption
Date to receive interest due on an Interest
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Payment Date), if redeemed during the 12-month period commencing June 15 of the
years set forth below. The redemption prices with respect to the Notes are as
follows:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2003........................................................ 106.188%
2004........................................................ 104.125
2005........................................................ 102.063
2006 and thereafter......................................... 100.000
</TABLE>
In addition, at any time prior to June 15, 2001, the Company may redeem up
to 35% of the principal amount of the Notes originally issued with the Net Cash
Proceeds of one or more public or private issuances of Capital Stock (other than
Disqualified Stock) at any time or from time to time in part, at a redemption
price of 112.375% of the principal amount thereof on the redemption date,
together with accrued and unpaid interest, if any, thereon; provided that (i) at
least 65% of the principal amount of the Notes remain outstanding after each
such redemption and (ii) notice of such redemption is mailed within 60 days of
such issuance.
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, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided that no Note of $1,000 in principal amount at
maturity 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 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.
SINKING FUND
There will be no sinking fund payments for the Notes.
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 December 17, 1998, 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 the expiration of the period referred to in Rule
144(k) under the Securities Act with respect to the Registrable Securities 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 December
17, 1998, annual interest rate borne by the Notes will be increased by 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.
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RANKING
The Indebtedness evidenced by the Notes will rank pari passu in right of
payment with all existing and future unsubordinated indebtedness of the Company
and senior in right of payment to all existing and future subordinated
indebtedness of the Company. At March 31, 1998, on a pro forma basis after
giving effect to the Offering and the application of the proceeds thereof, the
Company (on an unconsolidated basis) would have had approximately $132.0 million
of indebtedness (other than the Notes). The Company is a holding company, and
the Notes will be effectively subordinated to all existing and future
liabilities (including trade payables) of the Company's subsidiaries. On March
31, 1998, on the same pro forma basis, the Company's subsidiaries would have had
approximately $134.4 million of liabilities (excluding intercompany payables and
the guarantee of the Existing Senior Notes), including approximately $78.6
million of indebtedness. The Indenture permits the Company and its subsidiaries
to incur substantial amounts of additional indebtedness.
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 definition of any other capitalized term used herein for which
no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary and not Incurred in connection
with, or in anticipation of, such Person becoming a Restricted Subsidiary or
such Asset Acquisition.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company 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 (or loss) of any Person that is not a Restricted Subsidiary,
except (x) with respect to net income, to the extent of the amount of dividends
or other distributions actually paid to the Company or any of its Restricted
Subsidiaries by such Person during such period and (y) with respect to net
losses, to the extent of the amount of Investments made by the Company or any
Restricted Subsidiary in such Person 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 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; (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; (vi) all extraordinary gains
and extraordinary losses; and (vii) any compensation expense paid or payable
solely with Capital Stock (other than Disqualified Stock) of the Company or any
options, warrants or other rights to acquire Capital Stock (other than
Disqualified Stock) of the Company.
"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 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 most
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recent quarterly or annual consolidated balance sheet of the Company and its
Restricted Subsidiaries, prepared in conformity with GAAP and filed with the
Commission or provided to the Trustee 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 Disposition" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) 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 (other than the Capital Stock of, or
other Investment in, an Unrestricted Subsidiary) 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
all or substantially all of the 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)
sales, transfers or other dispositions of assets constituting a Restricted
Payment permitted to be made under the "Limitation on Restricted Payments"
covenant, (c) sales, transfers or other dispositions of assets with a fair
market value (as certified in an Officers' Certificate) not in excess of $1
million in any transaction or series of related transactions, (d) sales or other
dispositions of assets for consideration at least equal to the fair market value
of the assets sold or disposed of, to the extent that the consideration received
would constitute property or assets of the kind described in clause (B) of the
"Limitation on Asset Sales" covenant or (e) issuances and sales of Common Stock
of Restricted Subsidiaries in accordance with clauses (i), (iii) or (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.
"Bank" means Banco Rio de la Plata S.A. and any other party that the Board
of Directors has determined does not present any material credit risk.
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"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 outstanding on the
Closing Date or issued thereafter, 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.
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized 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 Sections 13(d) and
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of Voting Stock representing a
greater percentage of the total voting power of the Voting Stock of the Company,
on a fully diluted basis, than is beneficially owned by the Existing
Stockholders on such date 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 ultimate "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of Voting Stock representing more than 30% of the total
voting power of the Voting Stock of the Company on a fully diluted basis and
such ownership represents a greater percentage of the total voting power of the
Voting Stock of the Company, on a fully diluted basis, than is held by the
Existing Stockholders on such date; or (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.
"Closing Date" means the date on which the Notes are originally issued
under the Indenture.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) income taxes (other than income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
sales of assets) and the portion of any other tax payable as a result of
generating income before taxes, (iii) depreciation expense, (iv) amortization
expense and (v) 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 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 percentage ownership interest in the income of
such Restricted Subsidiary not owned on the last day of such period by the
Company or any of its Restricted Subsidiaries.
"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
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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, the placement of the Series A Preferred Stock and the offering of the
12 1/8% Senior Guaranteed Notes due 2003 all as determined on a consolidated
basis (without taking into account 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 filed with the Commission
or provided to the Trustee pursuant to the "Commission Reports and Reports to
Holders" covenant described below, 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).
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"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 described below and such Capital Stock, or the agreements or
instruments governing the redemption rights thereof, 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 described below.
"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 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) or clauses (viii) or (ix), (viii) Nevasa
Holdings Ltd., (ix) Corporacion IMPSA, S.A., (x) Princes Gate Investors II,
L.P., (xi) Morgan Stanley Global Emerging Markets Private Investment Fund, L.P.,
and (xii) any Affiliate of either of the Persons named in clauses (x) or (xi).
"fair market value" means the price that would be paid in an arm'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 if
evidenced by a Board Resolution.
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"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 or referred
to 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, the placement of
the Series A Preferred Stock and the offering of the 12 1/8% Senior Guaranteed
Notes due 2003, (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 nonrecurring 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 (unless such purchase arrangements are on
arm's-length terms and are entered into in the ordinary course of business), 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.
"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 Acquired Indebtedness; 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, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following such drawing), (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 Capitalized Lease Obligations of such Person, (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 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
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Restricted Subsidiaries), provided (A) that the amount outstanding at any time
of any Indebtedness issued with original issue discount is the original issue
price of such Indebtedness, (B) that money borrowed and set aside at the time of
the Incurrence of any Indebtedness in order to prefund the payment of the
interest on such Indebtedness shall not be deemed to be "Indebtedness" and (C)
that Indebtedness shall not include any liability for federal, state, local or
other taxes.
"Indebtedness to EBITDA Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated EBITDA for the then most recent four
fiscal quarters for which financial statements of the Company have been filed
with the Commission or provided to the Trustee pursuant to the "Commission
Reports and Reports to Holders" covenant described below (such four fiscal
quarter period being the "Four Quarter Period"); provided that, in making the
foregoing calculation, (A) pro forma effect shall be given to any Indebtedness
to be Incurred or repaid on the Transaction Date; (B) pro forma effect shall be
given to Asset Dispositions and Asset Acquisitions (including giving pro forma
effect to the application of proceeds of any Asset Disposition) that occur from
the beginning of the Four Quarter Period through the Transaction Date (the
"Reference Period"), as if they had occurred and such proceeds had been applied
on the first day of such Reference Period; and (C) pro forma effect shall be
given to asset dispositions and asset acquisitions (including giving pro forma
effect to the application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary or has been merged
with or into the Company or any Restricted Subsidiary during such Reference
Period and that would have constituted Asset Dispositions or Asset Acquisitions
had such transactions occurred when such Person was a Restricted Subsidiary as
if such asset dispositions or asset acquisitions were Asset Dispositions or
Asset Acquisitions that occurred on the first day of such Reference Period;
provided that to the extent that clause (B) or (C) of this sentence requires
that pro forma effect be given to an Asset Acquisition or Asset Disposition,
such pro forma calculation shall be based upon the four full fiscal quarters
immediately preceding the Transaction Date of the Person, or division or line of
business of the Person, that is acquired or disposed of for which financial
information is available.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Intermediary Documents" means documents relating to the issuance of one or
more Certificates of Deposit (the "Certificates of Deposit") by the Issuer to
the Company, the issuance of one or more promissory notes (having a principal
amount equal to the principal amount of the Certificate of Deposit (the
"Promissory Notes")) by IMPSAT Argentina to the Bank and the Guarantees of the
Promissory Notes by the Company.
"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; but excluding 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, on the balance
sheet of the Company or its Restricted Subsidiaries and Trade Payables) 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 or any of 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 and Sale 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 of its Restricted Subsidiaries) 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
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Company or any of its Restricted Subsidiaries) 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.
"Issuer" means the Cayman Islands branch of the Bank or any other party
that the Board of Directors has determined does not present any material credit
risk.
"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.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"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 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
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 agent 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.
"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
such 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 such 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 such 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
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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 an integral multiple 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
an integral multiple 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 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 an aggregate amount at any one time outstanding not to exceed $15 million
during the first three years following July 30, 1996 and $20 million thereafter
in Common Stock of the International Telecommunications Satellite Organization
("Intelsat"); (vii) participations in Indebtedness of any Restricted Subsidiary
permitted to be Incurred by clause (xii) of the second paragraph of the
"Limitation on Indebtedness" covenant; and (viii) Investments consisting of one
or more Certificates of Deposit, having an aggregate principal amount not to
exceed the aggregate principal amount of the Promissory Notes then outstanding;
provided that (1) upon making any such Investment after May 13, 1997, the
Company shall deliver an Officers' Certificate to the Trustee, to the effect
that applicable law regarding rights of set off has not changed since May 13,
1997, (2) the Stated Maturity of each such Certificate of Deposit shall be the
same as a Promissory Note of equal principal amount and (3) at the time that any
Investment in any Certificate of Deposit is made the Company shall deliver an
Officer's Certificate to the Trustee to the effect that (A) the Bank and the
Issuer are not under intervention, receivership or any similar arrangement or
proceeding and (B) the Company does not have any reason to believe there is a
material possibility that the Bank or the Issuer may be subject to intervention,
receivership or any similar arrangement or proceeding.
"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
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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 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 described
below, (1) to finance the cost (including the cost of design, development,
acquisition, construction, installation, improvement, transportation 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 Capital 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 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 solely to protect
the Company or any of its Restricted Subsidiaries from fluctuations in interest
rates, currencies or 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 receivables; and (xix) Liens that secure Indebtedness with an
aggregate principal amount not in excess of $5 million at any time outstanding.
"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.
A "Public Market" shall be deemed to exist if (i) a Public Equity Offering
has been consummated and (ii) at least 15% of the total issued and outstanding
Common Stock of the Company immediately prior to the consummation of such Public
Equity Offering has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Series A Preferred Stock" means the Company's Series A Convertible
Preferred Stock.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all
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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.
"S&P" means Standard & Poor's Ratings Services and its successors.
"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.
"Strategic Subordinated Indebtedness" means Indebtedness of the Company
Incurred to finance the acquisition of a Person engaged in a business that is
related, ancillary or complementary to the business conducted by the Company or
any of its Restricted Subsidiaries, which Indebtedness by its terms, or by the
terms of any agreement or instrument pursuant to which such Indebtedness is
Incurred, (i) is expressly made subordinate in right of payment to the Notes and
(ii) provides that no payment in cash or assets of the Company or any Restricted
Subsidiaries of principal, premium or interest on, or any other payment with
respect to, such Indebtedness may be made prior to the payment in full of all of
the Company's obligations under the Notes; provided that such Indebtedness may
provide for and be repaid at any time from the proceeds of a capital
contribution or the sale of Capital Stock (other than Disqualified Stock) of the
Company after the Incurrence of such Indebtedness.
"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.
"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 one year 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 of America, 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 moneymarket 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 one year 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 or "A-1" (or higher) according
to S&P, (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 S&P or
Moody's and (vi) certificates of deposit maturing not more than one year 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.
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"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 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) 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 (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness by the Company or such
Restricted Subsidiary (or both, if applicable) at the time of such designation;
(B) either (I) the Subsidiary to be so designated has total assets of $1,000 or
less or (II) if such Subsidiary has assets greater than $1,000, such designation
would be permitted under the "Limitation on Restricted Payments" covenant
described below; and (C) if applicable, the Incurrence of Indebtedness would 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.
"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, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly-Owned Subsidiaries of such
Person.
COVENANTS
Limitation on Indebtedness
(a) 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 outstanding at any time in an aggregate principal amount not to
exceed the greater of (A) $200 million or (B) the Consolidated EBITDA for the
four preceding quarters for which financial statements of the Company have been
filed with the Commission or provided to the Trustee 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
owed (A) to the Company evidenced by a promissory note or (B) to any Restricted
Subsidiary; 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 an 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), (vi), (viii)
or
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(x) 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 or Indebtedness that is pari passu with, or
subordinated in right of payment to, the Notes shall only be permitted under
this clause (iii) if (A) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Notes, 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, (B) in
case the Indebtedness to be refinanced is subordinated in right of payment to
the Notes, such new Indebtedness, by its terms or by the terms of any agreement
or instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made subordinate in right of payment to the Notes at
least to the extent that the Indebtedness to be refinanced is subordinated to
the Notes 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 be refinanced by means of any Indebtedness of any
Restricted Subsidiary 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 (a) are designed solely to protect the Company or
its Restricted Subsidiaries against fluctuations in foreign currency exchange
rates or interest rates and (b) 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 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, to the extent the net proceeds thereof are promptly
(A) used to purchase Notes tendered in an Offer to Purchase made as a result of
a Change in Control or (B) deposited to defease the Notes as described below
under "Defeasance"; (vi) Guarantees of the Notes and Guarantees of Indebtedness
of the Company by any Restricted Subsidiary provided the Guarantee of such
Indebtedness is permitted by and made in accordance with the "Limitation on
Issuance of Guarantees by Restricted Subsidiaries" covenant described below;
(vii) Indebtedness (including Guarantees) Incurred to finance the cost
(including the cost of design, development, acquisition, construction,
installation, improvement, transportation or integration) to acquire equipment,
inventory or network assets (including acquisitions by way of Capitalized Lease
and acquisitions of the Capital Stock of a Person that becomes a Restricted
Subsidiary to the extent of the fair market value of the equipment, inventory or
network assets so acquired) by the Company or a Restricted Subsidiary after the
Closing Date; (viii) Indebtedness of the Company not to exceed, at any one time
outstanding, two times the sum of (A) the Net Cash Proceeds received by the
Company after the Closing Date as a capital contribution or from the issuance
and sale of its Capital Stock (other than Disqualified Stock) to a Person that
is not a Subsidiary of the Company, to the extent (I) such capital contribution
or Net Cash Proceeds are not, at the Company's option, added to the amount
calculated pursuant to clause (C)(2) of the first paragraph of the "Limitation
on Restricted Payments" covenant or used to make a Restricted Payment pursuant
to clause (iii), (iv) or (viii) of the second paragraph of the "Limitation on
Restricted Payments" covenant and (II) if such capital contribution or Net Cash
Proceeds are used to consummate a transaction pursuant to which the Company
Incurs Acquired Indebtedness, the amount of such Net Cash Proceeds exceeds
one-half of the amount of Acquired Indebtedness so Incurred and (B) 80% of the
fair market value of property (other than cash and cash equivalents) received by
the Company after the Closing Date from the sale of its Capital Stock (other
than Disqualified Stock) to a Person that is not a Subsidiary of the Company, to
the extent (I) such capital contribution or sale of Capital Stock has not been
used to make a Restricted Payment pursuant to clause (iii), (iv) or (viii) of
the second paragraph of the "Limitation on Restricted Payments" covenant and
(II) if such capital contribution or Capital Stock is used
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to consummate a transaction pursuant to which the Company Incurs Acquired
Indebtedness, 80% of the fair market value of the property received exceeds
one-half of the amount of Acquired Indebtedness so Incurred; provided that such
Indebtedness does not mature prior to the Stated Maturity of the Notes and has
an Average Life longer than the Notes; (ix) Acquired Indebtedness; (x) Strategic
Subordinated Indebtedness; (xi) Indebtedness consisting of one or more loans to
IMPSAT Argentina, evidenced by one or more Promissory Notes and Guaranteed by
the Company, in each case under the Intermediary Documents; provided that the
Promissory Notes shall, at all times, have an aggregate principal amount equal
to the aggregate principal amount of the Certificates of Deposit and shall not
be outstanding at any time that the Certificates of Deposit are not validly
outstanding and beneficially owned by the Company; (xii) Indebtedness of any
Restricted Subsidiary, to the extent that the Company is the beneficial owner of
such Indebtedness and such Indebtedness is evidenced by an unsubordinated
promissory note or participation certificate issued to the Company by the record
holder of such Indebtedness; (xiii) Indebtedness of the Company, 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
July 30, 1996 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 and (xiv) subordinated Indebtedness of the
Company (in addition to Indebtedness permitted under clauses (i) through (xiii)
above) in an aggregate principal amount outstanding at any time not to exceed
$100 million, less any amount of such Indebtedness permanently repaid as
provided under the "Limitation on Asset Sales" covenant described below.
(b) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, the maximum amount of Indebtedness that the Company or a
Restricted Subsidiary may Incur pursuant to this "Limitation on Indebtedness"
covenant shall not be deemed to be exceeded, with respect to any outstanding
Indebtedness due solely to the result of fluctuations in the exchange rates of
currencies.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (1) 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 and (2) 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, and from time to
time may reclassify, 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
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 Restricted Subsidiary (other than (x) 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 (y) pro rata dividends or distributions on
Common Stock of Restricted Subsidiaries), (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Capital Stock of the Company
(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 (iv) make any Investment, other
than a Permitted Investment, in any Person (such payments or any other actions
described in clauses (i) through (iv) above 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 be
continuing, (B) 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 (the amount, if other than in cash,
to be determined in good
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faith by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) made 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 the amount
of such loss) (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 with the Commission or
provided to the Trustee pursuant to the "Commission Reports and Reports to
Holders" covenant plus (2) the aggregate Net Cash Proceeds received by the
Company after the Closing Date as a capital contribution or from the issuance
and sale of its Capital Stock (other than Disqualified Stock) to a Person who is
not a Subsidiary of the Company, including an issuance or sale permitted by the
Indenture of Indebtedness of the Company for cash subsequent to the Closing Date
upon the conversion of such Indebtedness into Capital Stock (other than
Disqualified Stock) of the Company, or from the issuance to a Person who is not
a Subsidiary of the Company 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), in each case except to the extent
such Net Cash Proceeds are used to Incur Indebtedness pursuant to clause (viii)
of the second paragraph under the "Limitation on Indebtedness" covenant, plus
(3) an amount equal to the net reduction in 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 or from the Net Cash Proceeds from the
sale of any such Investment (except, in each case, to the extent any such
payment or proceeds are 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, in each case, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary.
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 part (a) of the "Limitation on Indebtedness" covenant; (iii) 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 capital contribution or 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); (iv) 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 capital contribution or a substantially concurrent
offering of, shares of the Capital Stock (other than Disqualified Stock) of the
Company (or options, warrants or other rights to acquire such Capital Stock);
(v) payments or distributions, to dissenting stockholders pursuant to applicable
law, 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; (vi) 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 proceeding four quarters for which reports have been
filed pursuant to the "Commission Reports and Reports to Holders" covenant,
(vii) Investments in any Person the primary business of which is related,
ancillary or complementary to the business of the Company and its Restricted
Subsidiaries on the date of such Investments; provided that the aggregate amount
of Investments made pursuant to this clause (vii) does not exceed $20 million;
(viii) Investments acquired in exchange for Capital Stock (other than
Disqualified Stock) of the Company or with the proceeds of such Capital Stock;
provided that such proceeds are so applied within 90 days of receipt thereof;
(ix) the
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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; (x) prior
to the occurrence of a Public Market, the purchase, redemption, retirement or
other acquisition for value of shares of Capital Stock of the Company or options
to purchase such shares, held by directors, employees or officers, or former
directors, employees or officers, of the Company or a Restricted Subsidiary (or
their estates or beneficiaries under their estates), upon the death, disability,
retirement, termination of employment or pursuant to the terms of any agreement
under which such shares of Capital Stock or options were issued; provided that
the aggregate consideration paid for such purchase, redemption, retirement or
other acquisition for value of such shares or options after the Closing Date
does not exceed $5 million in the aggregate (unless such repurchases are made
with the proceeds of insurance policies and the shares are purchased from the
executors, administrators, testamentary trustees, heirs, legatees or
beneficiaries); and (xi) other Restricted Payments in an aggregate amount not to
exceed $25 million; provided that, except in the case of clauses (i) and (iii),
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 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, an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof and an Investment referred to in clause (vi)
thereof), and the Net Cash Proceeds from any capital contribution or any
issuance of Capital Stock referred to in clauses (iii), (iv) and (viii), 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. If 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 (xii) 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
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 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
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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 all or substantially 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; (vii) 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; or (viii) contained in
the terms of any Indebtedness or any agreement pursuant to which such
Indebtedness was issued if (A) the encumbrance or restriction applies only in
the event of a payment default or a default with respect to a financial covenant
contained in such Indebtedness or agreement, (B) the encumbrance or restriction
is not materially more disadvantageous to the Holders of the Notes than is
customary in comparable financings (as determined by the Company) and (C) the
Company determines that any such encumbrance or restriction will not materially
affect the Company's ability to make principal or interest payments on the
Notes. 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
The Company will not sell, and will not permit any Restricted Subsidiary,
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 of director's qualifying shares 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; or (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
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a
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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 existed at the time such Person
became a Restricted Subsidiary and 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, then the Guarantee of
such Guaranteed Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guarantee or (B) subordinated to the Notes, 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.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may 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.
Limitation on Transactions with Shareholders and Affiliates
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, if such transaction
is pursuant to a written agreement, 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 or "Permitted Investment").
Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this "Limitation on Transactions with
Shareholders and Affiliates" covenant and not covered by clauses (ii) through
(v) 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
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 (including, without limitation, licenses), 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
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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 the Capital Stock of, or any
property or assets of, a Restricted Subsidiary securing Indebtedness of such
Restricted Subsidiary permitted under the "Limitation on Indebtedness" covenant;
(vi) Liens on the Capital Stock of Restricted Subsidiaries securing up to $100.0
million of Indebtedness Incurred under clause (vii) of the second paragraph of
the "Limitation on Indebtedness" covenant; (vii) 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 (viii) Permitted Liens.
Limitation on Sale-Leaseback Transactions
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 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 lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company and
any Wholly-Owned Restricted Subsidiary or solely between Wholly-Owned Restricted
Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within 12
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
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) at least 75% of the consideration received
consists of cash or Temporary Cash Investments; provided, however, that this
clause (ii) shall not apply to long-term assignments in capacity in a
telecommunications network. 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 with the Commission pursuant to the "Commission Reports and Reports
to Holders" covenant), then the Company shall or shall cause the relevant
Restricted Subsidiary to (i) within 12 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 described above 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
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agreement committing to so invest within 12 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 12-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 12-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
accrued interest (if any) to the Payment Date.
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 of the Notes on the
relevant Payment Date, plus, accrued interest (if any) to the Payment Date.
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 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.
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 the
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 assurance 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
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 consents 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 then 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 or shall
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supply to the Trustee for forwarding to each 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 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 (not
covered by insurance) 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 or any Significant Subsidiary and shall not be
paid or discharged, and either (A) an enforcement proceeding shall have been
commenced by a creditor upon such judgment or order or (B) there shall be any
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 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 or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company 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; or (g) the Company 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 or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any general
assignment for the benefit of creditors.
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 on the Notes 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
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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 either 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 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 requires 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
The Company will 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 or the Company)
shall be issued or distributed to the stockholders of the Company) or permit any
Person to merge with or into the Company unless: (i) the Company shall be the
continuing Person, or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or that acquired or leased
such property and assets of the Company shall be a corporation organized and
validly existing under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustees, all of the obligations of the Company on
all of 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 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 immediately prior to such transaction;
(iv) immediately after giving effect to such transaction on a pro forma basis
the
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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; provided that this clause (iv) shall
not apply to (x) a consolidation, merger or sale of all (but not less than all)
of the assets of the Company if all Liens and Indebtedness of the Company or any
Person becoming the successor obligor on the Notes, as the case may be, and its
Restricted Subsidiaries outstanding immediately after such transaction would, if
Incurred at such time, have been permitted to be Incurred (and all such Liens
and Indebtedness, other than Liens and Indebtedness of the Company and its
Restricted Subsidiaries outstanding immediately prior to the transaction, shall
be deemed to have been Incurred) for all purposes of the Indenture or (y) a
consolidation, merger or sale of all or substantially all of the assets of the
Company if immediately after giving effect to such transaction on a pro forma
basis, the Company or any Person becoming the successor obligor of the Notes
shall have an Indebtedness to EBITDA Ratio equal to or less than the
Indebtedness to EBITDA Ratio of the Company immediately prior to such
transaction; and (v) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate compliance
with clauses (iii) and (iv) above) 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 provides 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 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.
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Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further provides 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,"
and clause (c) under "Events of Default" with respect to such 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. If 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.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
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, or adversely affect any right of repayment at the
option of any Holder of 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, supplement or amend the
Indenture, (vi) waive a default in the payment of principal of, premium, if any,
or interest on the Notes or (vii) 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, STOCKHOLDERS, 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, stockholder, 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 of the
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rights and powers vested in it under the Indenture 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 and the Indenture are governed by the laws of the State of New
York. The Company has submitted 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 and the
Indenture.
CURRENCY INDEMNITY
U.S. dollars are the sole currency of account and payment for all sums
payable by the Company under or in connection with the Notes, 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 otherwise) by
any Holder of a Note in respect of any sum expressed to be due to it from the
Company shall only constitute a discharge to the Company to the extent of the
dollar amount which the recipient is able to purchase with the amount so
received or recovered in that 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,
the Company shall indemnify the recipient against any loss sustained by it as a
result. In any event, the Company 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 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.
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 Notes represented by such Global Note for all
purposes under the Indenture and the Notes. 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.
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Payments of the principal of, and interest on, a Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, either Trustee nor any Paying Agent 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 of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such 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 Notes (including the presentation of Notes 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 principal amount of Notes 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 certificates
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 either
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.
If DTC is at any time 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, the Company will issue Certificated Notes, which may bear the
legend referred to under "Transfer Restrictions," in exchange for the Global
Notes. Holders of an interest in a Global Note may receive Certificated Notes,
which may bear the legend referred to under "Transfer Restrictions," in
accordance with the DTC's rules and procedures in addition to those provided for
under the Indenture.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes certain of the principal
material United States federal income tax consequences of the exchange of Old
Notes for New Notes, and the ownership, and disposition of the New Notes. This
discussion is a summary for general information only and does not consider all
aspects of United States federal income taxation that may be relevant to a
prospective investor in light of that investor's particular circumstances. This
discussion also deals only with Notes purchased at their "issue price" (as
defined below) and held as capital assets within the meaning of Section 1221 of
the United States Internal Revenue Code of 1986, as amended to the date hereof
(the "Code"). This summary does not address all of the tax consequences that may
be relevant to a holder of Notes nor does it address the federal income tax
consequences to holders subject to special treatment under the United States
federal income tax laws, such as brokers or dealers in securities or currencies,
certain securities traders, tax-exempt entities, banks, thrifts, insurance
companies, other financial institutions, persons that hold the Notes as a
position in a "straddle" or as part of a "synthetic security," "hedging,"
"conversion" or other integrated instrument, persons that have a "functional
currency" other than the United States dollar, investors in pass-through
entities and certain United States expatriates. Further, this summary does not
address (i) the income tax consequences to shareholders in or partners or
beneficiaries of, a holder of the Notes, (ii) the United States federal
alternative minimum tax consequences of the purchase, ownership or disposition
of the Notes, or (iii) any state, local or foreign tax consequences of the
purchase, ownership, or disposition of the Notes.
This discussion is based upon the Code, existing and proposed Treasury
regulations thereunder, and current administrative rulings and court decisions.
All of the foregoing are subject to change, possibly on a retroactive basis, and
any such change could affect the continuing validity of this discussion.
HOLDERS CONSIDERING EXCHANGING NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX LAWS, AS WELL AS
THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION TO THE EXCHANGE AND
TO THE OWNERSHIP AND DISPOSITION OF NOTES.
UNITED STATES HOLDERS
For purposes of this discussion, the term "United States Holder" means a
beneficial owner of Notes that for United States federal income tax purposes is
(i) a citizen or resident (as defined in 7701(b)(1) of the Code) of the United
States, (ii) a corporation or partnership created or organized under the laws of
the United States or any political subdivision thereof, (iii) an estate the
income of which is includible in its gross income for United States federal
income tax purposes without regard to its source, or (iv) a trust if a court
within the United States is able to exercise primary supervision over its
administration and one or more United States persons have the authority to
control all substantial decisions of the trust. Certain United States federal
income tax consequences relevant to a holder other than a United States Holder
(a "Non-U.S. Holder") are discussed separately below.
Exchange of Notes. The exchange of Old Notes for the New Notes pursuant to
the Exchange Offer should not be a taxable event to the holder and thus the
holder should not recognize any taxable gain or loss as a result of the
exchange. A holder's adjusted tax basis in the New Notes will be the same as his
adjusted tax basis in the Old Notes exchange therefor, his holding period for
the Old Notes will be included in his holding period for the New Notes and the
issue price and adjusted issue price of the old Notes will be the issue price
and adjusted price of the New Notes. Old Notes and New Notes are discussed
collectively below as "Notes."
Payments of Interest. Stated interest paid or accrued on the Notes
generally will be taxable to a United States Holder as ordinary income in
accordance with the holder's method of accounting for United States federal
income tax purposes.
Foreign Source. At present, the Company believes that it is an "80/20
company" for United States federal income tax purposes (as defined below), and
therefore that interest income on the Notes generally will be treated as foreign
source income for United States federal income tax purposes. A U.S. corporation
is an 80/20 company if at least 80 percent of its gross income during an
applicable testing period is, directly or
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through its subsidiaries, "active foreign business income." However, the 80%
test for active foreign business income is applied on a periodic basis, and the
Company's operations and business plans may change in future years. Therefore,
while at present it appears that interest income on the Notes will be treated as
foreign source income, no assurance can be made regarding future treatment. In
addition, special source rules will apply to interest paid to certain holders
related to the Company.
Premium. The excess of the United States Holder's basis in a Note over its
principal amount generally is treated as amortizable bond premium. A United
States Holder may elect to deduct such amortizable bond premium (with a
corresponding reduction in the holder's tax basis) over the remaining term of
the Note (or a shorter period to the first call date, if a smaller deduction
would result) on an economic accrual basis. The election would apply to all
taxable debt instruments held by the United States Holder at any time during the
first taxable year to which the election applies and to any such debt
instruments that are later acquired by the United States Holder. The election
may not be revoked without the consent of the IRS.
Market Discount. If a United States Holder purchases a Note for an amount
that is less than its principal amount, the amount of the difference will be
treated as market discount for U.S. federal income tax purposes, unless such
difference is less than a specified de minimis amount. Under the market discount
rules, a United States Holder must accrue market discount on a straight-line
basis, or may elect to accrue it on an economic accrual basis. Absent the
election described in the next paragraph, a United States Holder will not
include market discount in income as it accrues. A United States Holder will be
required to treat any principal payment on, or any amount received on the sale,
exchange, retirement or other disposition of, a Note as ordinary income to the
extent of accrued market discount which has not previously been included in
income.
In addition, the United States Holder may be required to defer, until the
maturity of the Note or its earlier disposition in a taxable transaction, the
deduction of a portion of the interest expense of any indebtedness incurred or
continued to purchase or carry such a Note. A United States Holder of a Note
acquired at a market discount may elect to include market discount in income as
interest as it accrues, in which case the interest deferral rule described in
the prior sentence would not apply. This election would apply to all bonds with
market discount acquired by the electing United States Holder on or after the
first day of the taxable year to which the election applies and is separate from
the election concerning the rate of accrual described above. The election may be
revoked only with the consent of the IRS.
Repurchase Premium. The Company has concluded that the possibility that it
will be required to offer to repurchase Notes at a premium as described under
"Description of Notes -- Covenants -- Limitation on Asset Sales" and
"Description of Notes -- Repurchase of Notes upon a Change of Control" is
"remote" or "incidental" within the meaning of the applicable Treasury
regulations. If an event occurs that triggers the Company's obligation to make
such an offer, there may be additional consequences under the rules governing
the taxation of original issue discount.
Sale or Redemption of the Notes. Upon the disposition of a Note by sale,
exchange or redemption, a United States Holder generally will recognize gain or
loss equal to the difference, if any, between (i) the amount realized on the
disposition (other than amounts attributable to accrued and unpaid interest) and
(ii) the United States Holder's tax basis in the Note. A United States Holder's
tax basis in a Note generally will equal the cost of the Note to the United
States Holder. When a Note is sold, disposed of or redeemed between interest
payment dates, the portion of the amount realized on the disposition that is
attributable to interest accrued to the date of sale must be reported as
interest income by a cash method investor and an accrual method investor that
has not included the interest in income as it accrued.
Assuming the Note is held as a capital asset, such gain or loss generally
will constitute capital gain or loss and will be long-term capital gain or loss
if the United States Holder has held such Note for longer than one year. Federal
income tax rates on capital gain received by individuals vary based on the
individual's income and the holding period for the asset. Holders should contact
their tax advisors for more information or for the capital gains tax rate
applicable to particular sale of Notes. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income.
119
<PAGE> 121
NON-U.S. HOLDERS
The following discussion summarizes certain United States federal income
tax consequences relevant to a Non-U.S. Holder of a Note. This discussion does
not deal with all aspects of United States federal income taxation that may be
relevant to any particular Non-U.S. Holder in light of that holder's personal
circumstances with respect to such holder's purchase, ownership or disposition
of the Notes, including such holder holding the Notes through a partnership. For
example, persons who are partners in foreign partnerships and beneficiaries of
foreign trusts or estates who are subject to United States federal income tax
because of their own status, such as United States residents or foreign persons
engaged in a trade or business in the United States, may be subject to United
States federal income tax even though the entity is not subject to such tax.
Stated Interest on the Notes. If the Company is an 80/20 company as
described above, subject to the discussion of backup withholding below, payments
of stated interest on a Note by the Company or any paying agent to a Non-U.S.
Holder will not be subject to United States federal income tax, including
withholding tax, unless the holder has an office or other fixed place of
business in the United States to which the interest is attributable and the
interest either (i) is derived in the active conduct of a banking, financing or
similar business within the United States or (ii) is received by a corporation
the principal business of which is in trading stocks or securities for its own
account, and certain other conditions exist. Special rules will apply to
payments of interest to Non-U.S. Holders related to the Company.
If the Company is not an 80/20 company, then under current United States
federal income tax law, and subject to the discussion of backup withholding
below, payments of stated interest on a Note by the Company or any paying agent
to a Non-U.S. Holder will not be subject to withholding of United States federal
income tax if (i) such payment is effectively connected with a trade or business
within the United States by such Non-U.S. Holder, or (ii) both (a) the holder
does not actually or constructively own 10 percent or more of the combined
voting power of all classes of stock of the Company and is not a controlled
foreign corporation related to the Company through stock ownership and (b) the
beneficial owner provides a statement signed under penalties of perjury that
includes its name and address and certifies (on an IRS Form W-8 or a
substantially similar substitute form) that it is a Non-U.S. Holder in
compliance with applicable requirements. Interest on a Note that is effectively
connected with the conduct of a trade or business in the United States by a
Non-U.S. Holder, although exempt from the withholding tax (assuming appropriate
certification is provided), generally will be subject to graduated United States
federal income tax on a net income basis as if such amounts were earned by a
United States Holder. Corporate Non-U.S. holders receiving effectively connected
interest may also be subject to an additional branch profits tax.
Sale or Redemption of Notes. Except as described below and subject to the
discussion concerning backup withholding, a Non-U.S. Holder generally will not
be subject to withholding of United States federal income tax with respect to
any gain realized upon the sale or redemption of Notes. Further, a Non-U.S.
Holder generally will not be subject to United States federal income tax with
respect to any such gain unless (i) the gain is effectively connected with a
United States trade or business of such Non-U.S. Person, (ii) subject to certain
exceptions, the Non-U.S. Holder is an individual who holds such Notes as a
capital asset and is present in the United States for 183 days or more in the
taxable year of the disposition, or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of United States tax law applicable to certain United
States expatriates.
New Regulations Relating to Withholding and Information Reporting for
Non-U.S. Holders. The IRS recently issued final regulations relating to
withholding and information reporting (described below) with respect to payments
made to Non-U.S. Holders. The regulations generally apply to payments made after
December 31, 1999. However, withholding certificates that are valid under the
present rules on December 31, 1999 remain valid until the earlier of December
31, 2000 or the expiration date of the certificate under the present rules
(unless otherwise invalidated due to changes in the circumstances of the person
whose name is on the certificate).
When effective, the new regulations will streamline and, in some cases,
alter the types of statements and information that must be furnished to claim a
reduced rate of withholding. While various IRS forms (such as
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<PAGE> 122
IRS Forms 1001 and 4224) currently are used to claim exemption from withholding
or a reduced withholding rate, the preamble to the regulations states that the
IRS intends most certifications to be made on revised Form W-8. The regulations
also clarify the duties of United States payors making payments to foreign
persons and modify the rules concerning withholding on payments made to Non-U.S.
Holders through foreign intermediaries. With some exceptions, the new
regulations treat a payment to a foreign partnership as a payment directly to
the partners.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments made
on, and proceeds from the sale of, Notes held by a noncorporate United States
Holder within the United States. In addition, payments made on, and payments of
proceeds from the sale of such Notes to a Non-U.S. Holder made to or through the
United States office of a broker or the non-U.S. office of a broker that is (i)
a United States person, (ii) a controlled foreign corporation for United States
federal income tax purposes, (iii) a foreign person 50% or more of whose gross
income is effectively connected with a United States trade or business for a
specified three-year period, or (iv) (in the case of payments made after
December 31, 1999) a foreign partnership with certain connections to the United
States, are subject to information reporting unless the holder thereof certifies
as to its non-U.S. status or otherwise establishes an exemption from information
reporting and backup withholding.
Payments made on, and proceeds from the sale of, Notes held by a United
States Holder may be subject to a "backup" withholding tax of 31% unless the
holder complies with certain identification or exemption requirements. Backup
withholding at a rate of 31% will apply to payments by the Company or its agent
on Notes held by Non-U.S. Holders and proceeds from the sale or other
disposition of such Notes through certain brokers unless the Non-U.S. Holder
certifies to its Non-U.S. status or otherwise establishes entitlement to
exemption. A Non-U.S. Holder may certify to its non-U.S. status and obtain
exemption from backup withholding by providing an IRS Form W-8 or a
substantially similar substitute form. Backup withholding may apply to any
payment if the broker has actual knowledge that a payee claiming non-U.S. status
is a United States Holder. Any amounts so withheld will be allowed as a credit
against the holder's income tax liability, or refunded, provided the required
information is provided to the IRS.
Non-U.S. Holders of Notes should consult their tax advisers regarding the
application of information reporting and backup withholding in their particular
situations, the availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if available.
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
121
<PAGE> 123
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.
EXPERTS
The financial statements of the Company as of December 31, 1996 and 1997
and for each of the three years in the period ended December 31, 1997 included
in this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and is included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
122
<PAGE> 124
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. Similar to a water main, the backbone is the high volume conduit for
transmissions input by multiple smaller connections ("last mile" connections)
from ultimate end-users.
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.
123
<PAGE> 125
Ka Band: That portion of the electromagnetic spectrum that is the
frequency band range 20-30 Ghz. Experimental satellites have recently been
deployed to develop this new band.
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.
Last Mile: A shorthand reference to the last section of a
telecommunications connection to the ultimate end-user which may be less than or
greater than one mile.
Low Earth Orbit (LEO): Satellites deployed in close proximity to the
earth's surface (450-1200 miles) so as to reduce or eliminate transmission
delays. Because of their low altitude, multiple LEOs are required to cover the
same footprint of a high orbit geostationary satellite. While large LEOs are
capable of broadband transmissions of voice, video, data and fax, the less
expensive and increasingly common "Little LEOs" are small, "data only"
satellites, which typically operate on spectrum bands below 1 Ghz.
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.
USAT (Ultra Small Aperture Terminal): A satellite ground antenna for point
to multi-point or multi-point to point satellite communications, which tends to
be about half the size of VSATs.
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.
124
<PAGE> 126
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF IMPSAT CORPORATION AND
ITS SUBSIDIARIES
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997 and as of March 31, 1998.......................... F-3
Consolidated Statements of Operations for Each of the
Three Years in the Period Ended December 31, 1997 and
the Three Months Ended March 31, 1997 and 1998......... F-4
Consolidated Statements of Stockholders' Equity for Each
of the Three Years in the Period Ended December 31,
1997 and the Three Months Ended March 31, 1998......... F-5
Consolidated Statements of Cash Flows for Each of the
Three Years in the Period Ended December 31, 1997 and
the Three Months Ended March 31, 1997 and 1998......... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 127
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF IMPSAT CORPORATION:
We have audited the accompanying consolidated balance sheets of IMPSAT
Corporation and its subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of operations, stockholders' equity and of cash
flows for each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company'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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the 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 Corporation and its
subsidiaries at December 31, 1996 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Miami, Florida
April 13, 1998
F-2
<PAGE> 128
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------- -----------
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 28,895 $ 10,439 $ 10,911
Trade accounts receivable, net......................... 22,969 36,596 44,606
Other receivables...................................... 12,372 15,583 16,859
Prepaid expenses....................................... 4,068 2,397 3,995
-------- -------- --------
Total current assets.............................. 68,304 65,015 76,371
-------- -------- --------
PROPERTY, PLANT & EQUIPMENT, Net............................ 227,086 255,422 264,458
-------- -------- --------
NON-CURRENT ASSETS:
Trade accounts receivable, net......................... 5,143 5,143 5,143
License and permit costs, net.......................... 2,413 2,003 1,903
Deferred income taxes, net............................. 4,812 -- 99
Deferred financing costs, net.......................... 4,761 4,044 3,115
Other non-current assets............................... 2,711 8,289 14,825
-------- -------- --------
Total non-current assets.......................... 19,840 19,479 25,085
-------- -------- --------
TOTAL....................................................... $315,230 $339,916 $365,914
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable -- trade.............................. $ 19,250 $ 25,289 $ 32,168
Short-term debt........................................ 31,852 50,189 68,095
Current portion of long-term debt...................... 11,022 10,186 11,165
Accrued liabilities.................................... 11,708 8,878 6,718
Deferred income taxes, net............................. 247
Other liabilities...................................... 4,293 8,649 13,606
-------- -------- --------
Total current liabilities......................... 78,125 103,438 131,752
-------- -------- --------
LONG-TERM DEBT, NET......................................... 156,230 159,677 159,532
-------- -------- --------
OTHER LONG-TERM LIABILITIES................................. 3,752 3,014 3,291
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 10)
MINORITY INTEREST........................................... 30,242 10,398 10,313
-------- -------- --------
REDEEMABLE PREFERRED STOCK, Convertible, Series A, 10%
cumulative dividend, 25,000 shares authorized, issued and
outstanding, liquidation preference $5,000 per share...... -- -- 125,000
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $1 par value; 77,750,640 and 100,792,640
shares issued and outstanding at December 31, 1996
and 1997, respectively and 75,594,480 shares issued
and outstanding at March 31, 1998.................... 77,751 100,793 100,793
Treasury Stock, 25,198,160 shares, at cost............. (125,000)
Accumulated deficit.................................... (30,870) (37,404) (39,767)
-------- -------- --------
Total stockholders' equity (deficit).............. 46,881 63,389 (63,974)
-------- -------- --------
TOTAL....................................................... $315,230 $339,916 $365,914
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 129
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ -----------------
1995 1996 1997 1997 1998
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET REVENUES FROM SERVICES................ $105,641 $128,393 $160,236 $37,027 $45,153
-------- -------- -------- ------- -------
COST AND EXPENSES:
Variable cost of services............ 18,818 21,494 27,629 4,963 7,719
Satellite capacity cost.............. 10,973 13,925 18,906 4,435 6,115
Salaries, wages and benefits......... 22,220 26,631 29,209 6,386 7,771
Selling, general and
administrative..................... 26,094 21,960 32,739 7,555 8,516
Depreciation and amortization........ 20,653 26,318 28,514 6,750 8,061
-------- -------- -------- ------- -------
Total cost and expenses.............. 98,758 110,328 136,997 30,089 38,182
-------- -------- -------- ------- -------
Operating income................ 6,883 18,065 23,239 6,938 6,971
-------- -------- -------- ------- -------
OTHER INCOME (EXPENSES):
Interest expense, net................ (15,677) (23,185) (24,743) (6,182) (7,785)
Net gain (loss) on foreign
exchange........................... 1,838 910 (279) (162) 23
Other income (expense), net.......... 511 1,035 (155) 33 332
-------- -------- -------- ------- -------
(LOSS) INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST....................... (6,445) (3,175) (1,938) 627 (459)
BENEFIT FROM (PROVISION FOR) INCOME
TAXES................................... 740 (3,542) (5,047) (1,697) (1,635)
-------- -------- -------- ------- -------
LOSS BEFORE MINORITY INTEREST............. (5,705) (6,717) (6,985) (1,070) (2,094)
INCOME ATTRIBUTABLE TO MINORITY
INTEREST................................ (1,712) (1,766) (981) (627) (269)
-------- -------- -------- ------- -------
NET LOSS.................................. $ (7,417) $ (8,483) $ (7,966) $(1,697) $(2,363)
======== ======== ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 130
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARES AMOUNT)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- IMPSAT TREASURY ACCUMULATED MINORITY
SHARES AMOUNT ARGENTINA STOCK DEFICIT TOTAL INTEREST
----------- -------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994...... 51,300,000 $ 51,300 $13,360 $ (1,879) $ 62,781 $24,892
Additional capitalization
IMPSAT Venezuela............ 1,872
Net loss for the year......... (7,417) (7,417) 1,712
----------- -------- ------- --------- ----------- --------- -------
BALANCE AT DECEMBER 31, 1995...... 51,300,000 51,300 13,360 (9,296)(*) 55,364 28,476
IMPSAT Argentina exchange
(51%)....................... 26,450,640 26,451 (13,360) (13,091)
Net loss for the year......... (8,483) (8,483) 1,766
----------- -------- ------- --------- ----------- --------- -------
BALANCE AT DECEMBER 31, 1996...... 77,750,640 77,751 -- (30,870)(*) 46,881 30,242
IMPSAT Argentina exchange
(43.5%)..................... 23,042,000 23,042 23,042 (22,393)
Additional capitalization
IMPSAT Colombia and IMPSAT
Venezuela................... 1,537
Adjustment for change in
IMPSAT Argentina's fiscal
year end (Note 2)........... 1,432 1,432 31
Net loss for the year......... (7,966) (7,966) 981
----------- -------- ------- --------- ----------- --------- -------
BALANCE AT DECEMBER 31, 1997...... 100,792,640 100,793 -- (37,404)(*) 63,389 10,398
Change in minority interest
IMPSAT Argentina............ (354)
Acquisition of Treasury
stock....................... (25,198,160) $(125,000) (125,000)
Net loss for the three months
ended....................... (2,363) (2,363) 269
----------- -------- ------- --------- ----------- --------- -------
BALANCE AT MARCH 31, 1998
(unaudited)..................... 75,594,480 $100,793 -- $(125,000) $ (39,767)(*) $ (63,974) $10,313
=========== ======== ======= ========= =========== ========= =======
</TABLE>
- ---------------
(*) Includes an appropriation of retained earnings amounting to $449, $1,254,
$1,410 and $1,622 at December 31, 1995, 1996 and 1997 and March 31, 1998,
respectively, to comply with legal reserve requirements in Argentina.
See notes to consolidated financial statements.
F-5
<PAGE> 131
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ --------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................... $ (7,417) $ (8,483) $ (7,966) $ (1,697) $ (2,363)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization and depreciation............... 20,653 26,318 28,514 6,750 8,061
Deferred income tax (benefit) provision..... (936) 3,012 4,748 103 (346)
Adjustment for change in IMPSAT
Argentina's fiscal year end............... 1,432
Net change in minority interest............. 1,712 1,766 981 627 (85)
Changes in assets and liabilities:
Increase in trade accounts receivable,
net................................... (5,940) (6,525) (13,627) (4,001) (8,010)
Decrease (increase) in prepaid
expenses.............................. 1,513 (1,406) 1,671 2,332 (1,598)
(Increase) decrease in other receivables
and other non-current assets.......... (446) (6,647) (7,730) 1,839 (6,883)
Increase (decrease) in accounts payable
-- trade.............................. 8,444 (41) 4,627 7,081 5,905
Increase (decrease) in accrued and other
liabilities........................... 1,658 4,340 1,526 (2,644) 2,797
(Decrease) Increase in other long-term
liabilities........................... (347) (2,491) (89) (7,594) 277
-------- -------- -------- -------- ---------
Net cash provided by (used in)
operating activities............. 18,894 9,843 14,087 2,796 (2,245)
-------- -------- -------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment....... (66,796) (53,648) (55,028) (14,906) (16,023)
Capitalized preoperating costs................... (114) (33)
-------- -------- -------- -------- ---------
Net cash used by investing activities....... (66,910) (53,681) (55,028) (14,906) (16,023)
-------- -------- -------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from (payments on) short-term
debt........................................... 15,533 (28,483) 18,337 1,751 17,906
Capital contribution from minority interest...... 1,872 1,537
Proceeds from long-term debt..................... 8,545 132,888 10,483 3,753 3,753
Repayments of long-term debt..................... (3,853) (37,888) (7,872) (3,744) (2,919)
Acquisition of treasury stock.................... (125,000)
Proceeds from issuance of redeemable preferred
stock.......................................... 125,000
-------- -------- -------- -------- ---------
Net cash provided by financing activities... 22,097 66,517 22,485 1,760 18,740
-------- -------- -------- -------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS........................................ (25,919) 22,679 (18,456) (10,350) 472
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..... 32,135 6,216 28,895 29,583 10,439
-------- -------- -------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........... $ 6,216 $ 28,895 $ 10,439 $ 19,233 $ 10,911
======== ======== ======== ======== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.................................... $ 16,498 $ 19,413 $ 23,442 $ 2,335 $ 4,626
======== ======== ======== ======== =========
Foreign income taxes paid........................ $ 244 $ 1,015 $ 1,375 -- --
======== ======== ======== ======== =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
ACTIVITIES
Equipment in transit............................. $ 264 $ 350 $ 1,412 $ 2,191 $ 974
======== ======== ======== ======== =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 132
IMPSAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS)
1. BACKGROUND AND EVOLUTION
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, and governmental agencies and other business customers
in Latin America. The Company provides its services through its advanced
telecommunications networks comprised of owned teleports, earth stations, fiber
optic and microwave links, and leased satellite and fiber optic links.
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 were established in Colombia in 1992 ("IMPSAT
Colombia") and in Venezuela in 1993 ("IMPSAT Venezuela"). Other operating
subsidiaries have been created in Mexico, Ecuador, Peru (inactive), and the
United States. 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
26,450,640 shares of common stock of the Company. During June and July 1997,
effective as of January 1, 1997, an additional 43.5% ownership interest was
exchanged for 23,042,000 shares of common stock of the Company.
The Company's operating subsidiaries at December 31, 1997 and March 31,
1998 are as follows:
<TABLE>
<CAPTION>
NET
REVENUES OPERATING
OWNERSHIP TOTAL FROM INCOME
COUNTRY OPERATING SUBSIDIARIES PERCENTAGE ASSETS SERVICES (LOSS)
------- ---------------------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1997
Argentina Impsat S.A.................. 94.5% $191,029 $ 89,960 $19,813
Colombia Impsat S.A.................. 74.2 87,546 49,514 20,213
Telecomunicaciones Impsat
Venezuela S.A....................... 75.0 29,751 8,625 (811)
Mexico Impsat S.A. de C.V.......... 99.9 7,417 1,427 (1,809)
Ecuador Impsatel del Ecuador S.A.... 100.0 13,262 5,513 1,651
USA Impsat USA, Inc............. 100.0 5,931 5,019 297
-------- -------- -------
Subtotal for operating
subsidiaries.............. 334,936 160,058 39,354
Parent company, others and
eliminations.............. 4,980 178 (16,115)
-------- -------- -------
Consolidated total.......... $339,916 $160,236 $23,239
======== ======== =======
</TABLE>
F-7
<PAGE> 133
IMPSAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. BACKGROUND AND EVOLUTION -- (CONTINUED)
<TABLE>
<CAPTION>
NET
REVENUES OPERATING
OWNERSHIP TOTAL FROM INCOME
COUNTRY OPERATING SUBSIDIARIES PERCENTAGE ASSETS SERVICES (LOSS)
------- ---------------------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
MARCH 31, 1998
Argentina Impsat S.A.................. 95.2% $214,309 $ 23,944 $ 4,900
Colombia Impsat S.A.................. 74.2 115,806 13,828 4,495
Telecomunicaciones Impsat
Venezuela S.A....................... 75.0 29,003 2,992 (84)
Mexico Impsat S.A. de C.V.......... 99.9 8,242 736 (576)
Ecuador Impsatel del Ecuador S.A.... 100.0 15,080 1,846 194
USA Impsat USA, Inc............. 100.0 7,669 1,815 211
-------- -------- -------
Subtotal for operating
subsidiaries.............. 390,109 45,161 9,140
Parent company, others and
eliminations.............. (24,195) (8) (2,169)
-------- -------- -------
Consolidated total.......... $365,914 $ 45,153 $ 6,971
======== ======== =======
</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 International
Satellite Capacity Holding, NG (Liechtenstein).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The 1996 and 1997 financial statements are
presented on a consolidated basis and include the accounts of the Company and
its subsidiaries. The 1995 financial statements are presented on a combined
basis by virtue of common ownership, as described in Note 1. For 1995 and 1996,
IMPSAT Argentina has been consolidated on the basis of its fiscal year-end,
November 30. Effective December 31, 1997, IMPSAT Argentina changed its fiscal
year to December 31. All significant intercompany transactions and balances have
been eliminated.
INTERIM FINANCIAL INFORMATION -- The unaudited consolidated statements as
of March 31, 1998 and for the three months ended March 31, 1997 and 1998 have
been prepared on the same basis as the audited consolidated financial
statements. In the opinion of management, such unaudited consolidated 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 three months period ended March 31, 1997 and 1998 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.
REVENUE RECOGNITION -- The Company provides services to its customers
pursuant to contracts which typically range from six months to five years but
generally are for three years. The customer generally pays an installation
charge at the beginning of the contract and a monthly fee based on the number of
microsystem installations. The fees stipulated in the contracts are denominated
in U.S. dollars equivalents. Services are
F-8
<PAGE> 134
IMPSAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
billed on a monthly, predetermined basis, which coincides with when the services
are rendered. No single customer accounted for greater than 10% of total net
revenue from services for the years ended December 31, 1995, 1996 and 1997 and
for the three months ended March 31, 1997 and 1998.
PROPERTY, PLANT AND EQUIPMENT COSTS -- 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 may not be recoverable, the
Company's carrying value will be reduced to its estimated fair value. The
amounts capitalized, by operating subsidiaries are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
------- ------- -----------
(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............................................. 147 147 147
------- ------- -------
Total costs capitalized........................... 3,747 3,747 3,747
Less: accumulated amortization......................... (1,334) (1,744) (1,844)
------- ------- -------
Unamortized balance.................................... $ 2,413 $ 2,003 $ 1,903
======= ======= =======
</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 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 Company's 12 1/8% Senior Guaranteed
Notes due 2003 (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.
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 (loss) 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 using available market information
and interest rates as of December 31, 1997.
At December 31, 1996 and 1997, the fair value of the Senior Guaranteed
Notes was approximately $132,000 and $129,000, respectively, compared to the
carrying value of $125,000. The fair value of all other financial instruments
were not materially different from their carrying value.
F-9
<PAGE> 135
IMPSAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
LONG LIVED ASSETS -- Long-lived assets are reviewed on an ongoing basis for
impairment based on comparison of carrying value against undiscounted future
cash flows. If an impairment is identified, the assets carrying amount is
adjusted to fair value. No such adjustments were recorded during the years ended
December 31, 1995, 1996 and 1997 and during the three months ended March 31,
1997 and 1998.
RECLASSIFICATIONS -- Certain amounts in the 1995 and 1996 consolidated
financial statements have been reclassified to conform with the 1997
presentation.
NEW ACCOUNTING PRONOUNCEMENTS -- In June 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 requires that all components of comprehensive income be reported on
one of the following: (1) the statement of income; (2) the statement of changes
in stockholders' equity, or (3) a separate statement of comprehensive income.
Comprehensive income is comprised of net income and all changes to stockholders'
equity, except those due to investments by owners (changes in paid-in capital)
and distributions to owners (dividends). SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. The adoption of SFAS No. 130 during the
first quarter of 1998 did not have a material impact on the Company's
consolidated financial statements presentation.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information. SFAS No. 131 changes the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports issued to shareholders. SFAS No. 131 also requires
entity-wide disclosures about the products and services an entity provides, the
foreign countries in which it holds assets and reports revenues, and its major
customers. SFAS No. 131 is effective for fiscal years beginning after December
15, 1997. The adoption of SFAS No. 131 during the first quarter of 1998 did not
to have a material impact on the Company's consolidated financial statement
presentation.
3. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable, by operating subsidiaries are summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
IMPSAT Argentina...................................... $17,958 $27,531 $30,631
IMPSAT Colombia....................................... 5,846 10,102 14,486
IMPSAT Venezuela...................................... 1,331 2,202 2,777
IMPSAT USA............................................ 24 1,359 1,996
All Others............................................ 613 1,335 1,229
------- ------- -------
Total............................................ 25,772 42,529 51,119
Less: allowance for doubtful accounts................. (2,803) (5,933) (6,513)
------- ------- -------
Trade accounts receivable, net........................ $22,969 $36,596 $44,606
======= ======= =======
</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.
F-10
<PAGE> 136
IMPSAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. TRADE ACCOUNTS RECEIVABLE -- (CONTINUED)
The activity for the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1995 1996 1997 1998
------ ------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Beginning balance.............................. $ 712 $1,130 $2,803 $5,933
Provision for doubtful accounts................ 418 1,673 3,269 1,194
Write-offs..................................... (139) (614)
------ ------ ------ ------
Ending balance................................. $1,130 $2,803 $5,933 $6,513
====== ====== ====== ======
</TABLE>
In addition, see Note 10.
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:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
IMPSAT Argentina...................................... $ 4,290 $ 4,753 $ 5,845
IMPSAT Colombia....................................... 3,696 4,460 4,178
IMPSAT Venezuela...................................... 2,224 2,133 2,455
IMPSAT Ecuador........................................ 494 548 529
All Others............................................ 1,668 3,689 3,852
------- ------- -------
Total............................................ $12,372 $15,583 $16,859
======= ======= =======
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1996 1997 1998
-------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land............................................... $ 1,478 $ 1,478 $ 1,478
Building and improvements.......................... 22,604 23,312 23,412
Operating communications equipment................. 258,593 310,321 327,449
Furniture, fixtures and other equipment............ 11,311 14,503 15,010
-------- --------- ---------
Total......................................... 293,986 349,614 367,349
Less: accumulated depreciation..................... (73,046) (101,051) (108,776)
-------- --------- ---------
Total......................................... 220,940 248,563 258,573
Deposit on purchase of equipment and in transit.... 6,146 6,859 5,885
-------- --------- ---------
Property, plant and equipment, net................. $227,086 $ 255,422 $ 264,458
======== ========= =========
</TABLE>
F-11
<PAGE> 137
IMPSAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT -- (CONTINUED)
The recap of accumulated depreciation is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1995 1996 1997 1998
------- ------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Beginning balance.......................... $27,188 $47,155 $ 73,046 $101,051
Depreciation expense....................... 20,268 25,913 29,665 7,961
Retirements and disposals.................. (301) (22) (1,660) (236)
------- ------- -------- --------
Ending balance............................. $47,155 $73,046 $101,051 $108,776
======= ======= ======== ========
</TABLE>
6. SHORT-TERM DEBT
The Company's short-term debt is detailed as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Commercial paper (7.55% to 11%)....................... $20,000 $25,000 $31,000
Short-term credit facilities, denominated in US
dollars; interest rates ranging from 6.26% to 15%;
IMPSAT Argentina................................. 327 15,850 22,000
IMPSAT Colombia.................................. 3,345 5,414 7,194
IMPSAT Venezuela................................. 1,400 1,714 848
IMPSAT Ecuador................................... 53 992 2,744
IMPSAT USA....................................... 65
Short-term credit facilities, denominated in local
currencies; local interest rates;
IMPSAT Argentina (8.75% to 9%)................... 3,068
IMPSAT Colombia (27%)............................ 5,700
IMPSAT Venezuela (32%)........................... 1,027 1,219 1,176
------- ------- -------
Total short-term debt................................. $31,852 $50,189 $68,095
======= ======= =======
</TABLE>
The Company has historically refinanced these short-term credit facilities
on an annual basis.
F-12
<PAGE> 138
IMPSAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
The Company's long-term debt is detailed as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
12 1/8% Senior Guaranteed Notes due 2003............ $125,000 $125,000 $125,000
Term notes payable:
IMPSAT Colombia; with maturities through 2002
collateralized by equipment with a carrying
value of approximately $14,000 and the
assignment of customer contracts totaling
approximately $12,000 denominated in:
U.S. dollars (Interest rates
8.5% -- 13%)............................ 25,324 27,111 21,220
Local currency (24.93% -- 34%)............ 1,551 6,380 13,763
IMPSAT Argentina (6.69% -- 7%), maturing semi-
annually through 2001, collateralized by
certain assets............................... 4,374 2,435 2,083
IMPSAT Venezuela (9% -- 10.75%), maturing through
2001.............................................. 5,922 5,550 4,671
IMPSAT USA (8.75%), maturing through 2003........... 573
Eximbank notes payable (6.56%), maturing
semi-annually through 1999........................ 5,081 3,387 3,387
-------- -------- --------
Total long-term debt...................... 167,252 169,863 170,697
Less: current portion............................... (11,022) (10,186) (11,165)
-------- -------- --------
Long-term debt, net................................. $156,230 $159,677 $159,532
======== ======== ========
</TABLE>
The scheduled maturities of long-term debt at December 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998........................................................ $ 10,186
1999........................................................ 16,280
2000........................................................ 14,234
2001........................................................ 3,058
2002 and thereafter......................................... 126,105
--------
$169,863
========
</TABLE>
The Senior Guaranteed Notes, guaranteed by IMPSAT Argentina, and 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.
8. INCOME TAXES
For the years ended December 31, 1995, 1996 and 1997, the provision for
(benefits from) income taxes, all of which are for foreign taxes, consist of a
current provision of $196, $530 and $299, respectively, and a deferred benefit
of $936 and deferred provision of $3,012 and $4,748, respectively. The foreign
statutory tax rates range from 20% to 35% depending on the particular country.
There is no provision or benefit for U.S. income taxes for the Company, as it
has net operating loss carryforwards in the amount of $7,223 which begin
F-13
<PAGE> 139
IMPSAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES -- (CONTINUED)
to expire in the year 2010. Deferred taxes result primarily from temporary
differences in the capitalization policies of preoperating costs and net
operating loss carryforwards. The composition of net deferred tax assets at
December 31 is as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
DEFERRED TAX ASSETS:
Pre-operating costs:
IMPSAT Colombia........................................ $ 2,038 $ 1,698
IMPSAT Venezuela....................................... 1,695 1,380
IMPSAT Ecuador......................................... 85 58
Net operating loss carryforwards:
IMPSAT Colombia........................................ 900
IMPSAT Venezuela....................................... 4,625 4,048
IMPSAT Mexico.......................................... 1,741 2,487
IMPSAT Ecuador......................................... 684 876
Company and IMPSAT USA................................. 255 2,745
Other:
IMPSAT Colombia........................................ 273 139
IMPSAT Mexico.......................................... 54
------- -------
Gross deferred tax assets................................... 12,296 13,485
------- -------
DEFERRED TAX LIABILITIES:
IMPSAT Argentina....................................... (743) (4,301)
IMPSAT Colombia........................................ (389)
IMPSAT Mexico.......................................... (336) (293)
------- -------
Gross deferred tax liabilities.............................. (1,079) (4,983)
------- -------
Less: valuation allowance................................... (6,405) (8,749)
------- -------
Net deferred tax (liabilities) assets....................... $ 4,812 $ (247)
======= =======
</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.
For the three months ended March 31, 1997 and 1998, the provision for
income taxes, all of which are for foreign taxes, consist of a current provision
of $653 and $1,981, respectively, and a deferred provision (benefit) of $1,044
and $(346), respectively. There is no provision or benefit for U.S. income
taxes, as the Company has net operating loss carryforwards. The foreign
statutory tax rates range from 20% to 35%, depending on the particular country.
Deferred taxes result from temporary differences in the capitalization policies
of preoperating costs and net operating loss carryforwards.
9. SHARE PURCHASE AND SERIES A REDEEMABLE PREFERRED STOCK ISSUANCE
On March 19, 1998, the Company redeemed 25% of its outstanding common stock
previously held by STET International Netherlands NV (the "STET Shares") with
the proceeds of a substantially concurrent issuance and sale of $125,000 of the
Company's Series A Redeemable Preferred Stock (the "Series A Preferred Stock").
The Series A Preferred Stock was offered and sold to Princes Gate Investors II,
L.P. ("Princes Gate") and Morgan Stanley Global Emerging Markets Private
Investment Fund, L.P. ("MSGEM"), two private equity funds that are affiliates of
Morgan Stanley Dean Witter & Co., and to certain other investors affiliated with
Princes Gate and MSGEM (such investors along with Princes Gate and
F-14
<PAGE> 140
IMPSAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SHARE PURCHASE AND SERIES A REDEEMABLE PREFERRED STOCK
ISSUANCE -- (CONTINUED)
MSGEM, the "Purchasers"). The Series A Preferred Stock was convertible at the
date of issuance into 25% of the common stock of the Company.
The following are some of the principal features of the Series A Preferred
Stock: (a) cumulative dividends at the rate of 10% per annum, compounded
quarterly and, with certain exceptions, payable in kind; (b) mandatorily
redeemable in cash by the Company at maturity (ten years after issuance) plus
accrued and unpaid dividends; (c) callable under certain circumstances by the
Company, in whole, at 100% of the principal amount, plus accrued and unpaid
dividends; (d) convertible into common stock of the Company at any time at the
option of the Purchasers (including upon a call by the Company), at a specified
conversion rate subject to certain antidilution rights; (e) the right by
Purchasers holding a certain minimum number of outstanding Series A Preferred
Stock to appoint two directors to the Company's Board of Directors as well as to
immediately appoint half of the members of the Company's Board of Directors upon
the occurrence of certain specified events; and (f) the right of Directors
appointed by the Purchasers holding a certain minimum number of outstanding
Series A Preferred Stock to a veto over certain major corporate actions.
10. COMMITMENTS AND CONTINGENCIES
The Company leases satellite capacity with annual rental commitments of
approximately $26,000. In addition, the Company has commitments to purchase
communications equipment amounting to approximately $8,500 and $10,500 and was
obligated under letters of credit amounting to approximately $400 and $1,600 at
December 31, 1997 and March 31, 1998, respectively.
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
December 31, 1997 and March 31, 1998, the balance outstanding on this credit
facility amounted to approximately $5,600 and $4,600, respectively.
During May, 1997, the Company and one of its subsidiaries entered into a
three party arrangement with a financial institution whereby $60,000 was
borrowed by the subsidiary and concurrently a like amount Certificate of Deposit
was placed at the financial institution by the Company. The arrangements
establish a right of setoff and, accordingly, the amounts have been netted for
purposes of the consolidated financial statements presentation. The arrangements
expire in May 1999.
The Company is involved in or subject to various litigation and legal
proceedings incidental to the normal conduct of its business. Whenever
justified, the Company expects to vigorously prosecute or defend such claims,
although there can be no assurance that the Company will ultimately prevail with
respect to any such matters.
In November 1996, IMPSAT Argentina filed suit against one of its customers,
ENCOTESA, for amounts due and arising under IMPSAT Argentina's contract with
ENCOTESA, the Argentine national postal service. In December 1996, ENCOTESA
filed its reply to IMPSAT Argentina's claim. The court has not yet ruled upon
IMPSAT Argentina's claim against ENCOTESA. In September 1997, ENCOTESA was
privatized and emerged as Correo Argentino S.A. In connection therewith, the
claim by IMPSAT Argentina remained with ENCOTESA. Based on these developments,
the Company has reclassified the trade account receivables from ENCOTESA to
non-current assets at the estimated net realizable value of $5,143 as determined
by the Company's management based on the advice of local legal counsel. The
Company will continue to assess the effect that the ENCOTESA receivables will
have on its results of operations, liquidity or capital resources.
F-15
<PAGE> 141
IMPSAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. SUBSEQUENT EVENTS
On June 1, 1998, the Company acquired from Nevasa Holdings Ltd. ("Nevasa"),
the Company's parent, 99.9% of the capital stock of IMPSAT Comunicacoes S.A.
("IMPSAT Brazil"), a Brazilian company, for approximately $5.1 million. The
purchase price for IMPSAT Brazil represented the total amount of pre-operating
and development costs and expenses incurred for IMPSAT Brazil by Nevasa. IMPSAT
Brazil was established by Nevasa and operates under a value added
telecommunications license (the "Brazil License") permitting IMPSAT Brazil to
lease satellite capacity directly from satellite carriers and sell corporate
private telecommunications network services (data, voice and video) using
terrestrial and satellite links to third parties.
On April 20, 1998, the Company signed a definitive agreement to purchase a
75.1% interest in Mandic BBS Planejamento e Informatica S.A. ("Mandic S.A."), a
Brazilian Internet access provider, for approximately $9.8 million. Upon
consummation of the transaction, the Company will acquire 75.1% of the common
stock of Mandic S.A., and the remaining 24.9% will be owned by Mr. Aleksander
Mandic, the founder and current president of Mandic S.A. The initial stage of
the acquisition of Mandic S.A., pursuant to which the Company acquired a 58.5%
interest, was consummated on May 28, 1998, and the remaining 16.6% interest is
scheduled to be acquired by May 1, 1999.
F-16
<PAGE> 142
- ------------------------------------------------------
- ------------------------------------------------------
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.................
Prospectus Summary....................
Risk Factors..........................
Capitalization........................
Selected Financial and Other Data.....
Management's Discussion and Analysis
of Financial Condition and Results
of Operations.......................
Business..............................
Management............................
Principal Stockholders................
Certain Relationships and Related
Transactions........................
Description of Certain Indebtedness...
The Exchange Offer....................
Description of the Notes..............
Certain United States Federal Income
Tax Considerations..................
Plan of Distribution..................
Legal Matters.........................
Experts...............................
Glossary..............................
Index to Financial Statements.........
</TABLE>
---------------------
UNTIL , 1998 (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.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$225,000,000
IMPSAT CORPORATION
12 3/8% SENIOR NOTES DUE 2008
--------------------
PROSPECTUS
--------------------
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 143
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 VII Section 1 of the Company's By-laws provides that the Company
shall indemnify its officers and directors to the fullest extent permitted by
the Delaware General Corporation Law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The exhibits listed on the Exhibit Index of this Registration
Statement (numbered in accordance with Item 601 of Regulation S-K) are filed
herewith, or, as noted, have been previously filed, will be filed by amendment,
or are incorporated herein by reference to other filings.
(b) Financial Statement Schedules. 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. 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.
II-1
<PAGE> 144
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-2
<PAGE> 145
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS 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, , 1998.
IMPSAT CORPORATION
BY: /s/ RICARDO A. VERDAGUER
------------------------------------
RICARDO A. VERDAGUER
PRESIDENT AND CHIEF EXECUTIVE
OFFICER OF
IMPSAT CORPORATION
Date: July 16, 1998
II-3
<PAGE> 146
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
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 Directors July 20, 1998
- ------------------------------------------------ of IMPSAT Corporation
ENRIQUE M. PESCARMONA
/s/ RICARDO A. VESDAQUES Director, President and Chief July 16, 1998
- ------------------------------------------------ Executive Officer of IMPSAT
RICARDO A. VESDAQUES Corporation
/s/ GUILLERMO JOFRE Chief Financial Officer of IMPSAT July 16, 1998
- ------------------------------------------------ Corporation
GUILLERMO JOFRE
/s/ JOSE R. TORRES Vice President, Administration and July 16, 1998
- ------------------------------------------------ Chief Accounting Officer of IMPSAT
JOSE R. TORRES Corporation
/s/ ROBERTO VIVO Director, Deputy Chief Executive July 16, 1998
- ------------------------------------------------ Officer and Vice President,
ROBERTO VIVO Marketing of IMPSAT Corporation
/s/ ALEXANDER RIVELIS Director and Vice President, July 16, 1998
- ------------------------------------------------ International Development of IMPSAT
ALEXANDER RIVELIS Corporation
/s/ LUCAS PESCARMONA Director of IMPSAT Corporation July 16, 1998
- ------------------------------------------------
LUCAS PESCARMONA
Director of IMPSAT Corporation , 1998
- ------------------------------------------------
SOFIA PESCARMONA
Director of IMPSAT Corporation , 1998
- ------------------------------------------------
MARIANNE HAY
/s/ STEPHEN R. MUNGER Director of IMPSAT Corporation July 20, 1998
- ------------------------------------------------
STEPHEN R. MUNGER
</TABLE>
II-4
<PAGE> 147
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<C> <S> <C>
3.1.* Restated Certificate of Incorporation of the Company........
3.2 * Restated Bylaws of the Company..............................
4.1. Indenture for the Notes, dated as of June 17, 1998, between
the Company and The Bank of New York, as Trustee (including
form of Note)...............................................
4.2 Placement Agreement dated as of June 17, 1998 among the
Company and the Initial Purchasers..........................
4.3 Registration Rights Agreement, dated June 17, 1998, among
the Company and the Initial Purchasers......................
4.4 Form of Note (included in Exhibit 4.1)......................
4.5 * Certificate of Designations dated as of March 19, 1998......
5.1 ** Form of Opinion of Arnold & Porter as to the legality of the
securities being registered (including consent).............
9.1 * Securityholders Agreement dated as of March 19, 1998, among
Nevasa and the Purchasers and certain other parties.........
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 between PanAmSat and ISCH,
dated December 19, 1997.....................................
10.3 ** Domestic Data Service Agreement among PanAmSat and IMPSAT
Argentina and ISCH, dated May 1, 1998.......................
10.4 Agreement for Lease of Satellite Capacity, dated September
8, 1997, between Nahuelsat S.A. and IMPSAT Argentina........
10.5 Agreement for Lease of Satellite Capacity, dated August 13,
1997, between Organizacion Internacional de
Telecomunicaciones por Satelite and IMPSAT Colombia, as
amended by Agreement dated March 16, 1998...................
12.1 ** Computation of ratio of earnings to fixed charges...........
21.1 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 Arnold & Porter (contained in its opinion to be
filed as Exhibit 5 hereto)..................................
24.1 Power of Attorney (included on the signature page hereto)...
25.1 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.................................
99.1 Form of Letter of Transmittal...............................
99.2 Form of Notice of Guaranteed Delivery.......................
</TABLE>
- ---------------
* Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for 1997, filed with the Commission on April 15, 1998, and incorporated
herein by reference.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 4.1
================================================================================
IMPSAT CORPORATION,
as Issuer
and
THE BANK OF NEW YORK,
as Trustee
--------------------------------------
Senior Notes Indenture
Dated as of June 17, 1998
--------------------------------------
12_% Senior Notes due 2008
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- ------------ ------------------
<S> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08
Section 313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 10.02
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.19; 10.02
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.18; 10.02
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.04
Section 315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 10.02
Section 316(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
</TABLE>
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONEDEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 1.03. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE TWOTHE SECURITIES
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.02. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.03. Execution, Authentication and Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.04. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.05. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.07. Book-Entry Provisions for Global Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.08. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.09. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.10. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.11. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.12. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.13. CUSIP, CINS and ISIN Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.14. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.15. Issuance of Additional Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE THREEREDEMPTION
SECTION 3.01. Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.02. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.03. Selection of Securities to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.04. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.05. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.06. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.07. Payment of Securities Called for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.08. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE FOURCOVENANTS
SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
- --------------
Note: The Table of Contents shall not for any purposes be deemed to be a part
of the Indenture.
<PAGE> 4
<TABLE>
<S> <C>
SECTION 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.03. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries . . . . . . . . 43
SECTION 4.06. Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries . . . . . . . . . . . . 44
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.08. Limitation on Transactions with Shareholders and Affiliates . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.09. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.10. Limitation on Sale-Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.11. Limitation on Asset Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.12. Repurchase of Securities upon a Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.13. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.14. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.15. Maintenance of Properties and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.16. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.17. Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.18. Commission Reports and Reports to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.19. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE FIVESUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.02. Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE SIXDEFAULT AND REMEDIES
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.12. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.13. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.14. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
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ARTICLE SEVENTRUSTEE
SECTION 7.01. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.02. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.05. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.09. Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.10. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.11. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.12. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE EIGHTDISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.02. Defeasance and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.03. Defeasance of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.04. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.05. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.07. Insiders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE NINEAMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.03. Revocation and Effect of Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.04. Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.05. Trustee to Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.06. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE TENMISCELLANEOUS
SECTION 10.01. Trust Indenture Act of 1939 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.03. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.04. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.05. Rules by Trustee, Paying Agent or Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.06. Payment Date Other Than a Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.07. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
</TABLE>
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SECTION 10.08. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.09. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.10. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.11. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.12. Currency Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.13. Currency Translations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.14. Table of Contents, Headings, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
</TABLE>
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EXHIBIT A Form of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B Form of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D Form of Certificate to be Delivered in Connection with
Transfers to Non-QIB Accredited Investors . . . . . . . . . . . . . . . . . . . . . . D-1
</TABLE>
<PAGE> 10
INDENTURE, dated as of June 17, 1998, among IMPSAT
CORPORATION, a Delaware corporation, as issuer (the "Company"), and THE BANK OF
NEW YORK, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance initially of up to $225,000,000
aggregate principal amount of the Company's 12_% Senior Notes due 2008 (the
"Securities") issuable as provided herein. All things necessary to make this
Indenture a valid agreement of the Company, in accordance with its terms, have
been done, and the Company has done all things necessary to make the
Securities, when executed by the Company and authenticated and delivered by the
Trustee hereunder and duly issued by the Company, the valid obligations of the
Company as hereinafter provided.
This Indenture is subject to, and shall be governed by, the
provisions of the Trust Indenture Act of 1939, as amended, that are required to
be a part of and to govern indentures qualified under the Trust Indenture Act
of 1939, as amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary or assumed in
connection with an Asset Acquisition by a Restricted Subsidiary and not
Incurred in connection with, or in anticipation of, such Person becoming a
Restricted Subsidiary or such Asset Acquisition.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company 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 (or loss) of any Person that is not a
Restricted Subsidiary, except (x) with respect to net income, to the extent of
the amount of dividends or other distributions actually paid to the Company or
any of its Restricted Subsidiaries by such Person during such period and (y)
with respect to net losses, to the extent of the amount of Investments made by
the Company or any Restricted Subsidiary in such Person 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 Section 4.04
(and in such case, except to the
<PAGE> 11
2
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 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; (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 Section 4.04, 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; (vi) all extraordinary gains and extraordinary losses;
and (vii) any compensation expense paid or payable solely with Capital Stock
(other than Disqualified Stock) of the Company or any options, warrants or
other rights to acquire Capital Stock (other than Disqualified Stock) of the
Company.
"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 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 most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission or provided to
the Trustee pursuant to Section 4.18.
"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.
"Agent" means any Registrar, Paying Agent, authenticating
agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.07(a).
"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
<PAGE> 12
3
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 Disposition" means the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary) of (i) all or substantially all of the Capital
Stock of any Restricted Subsidiary or (ii) all or substantially all of the
assets that constitute a division or line of business of the Company or any of
its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transaction) 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 (other than the Capital
Stock of, or other Investment in, an Unrestricted Subsidiary) 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 Article Five; 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) sales,
transfers or other dispositions of assets constituting a Restricted Payment
permitted to be made under Section 4.04, (c) sales, transfers or other
dispositions of assets with a fair market value (as certified in an Officers'
Certificate) not in excess of $1 million in any transaction or series of
related transactions, (d) sales or other dispositions of assets for
consideration at least equal to the fair market value of the assets sold or
disposed of, to the extent that the consideration received would constitute
property or assets of the kind described in clause (B) of Section 4.11 or (e)
issuances and sales of Common Stock of Restricted Subsidiaries in accordance
with clauses (i), (iii) or (v) of the second paragraph of Section 4.06.
"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.
"Bank" means Banco Rio de la Plata S.A. and any other party
that the Board of Directors has determined does not present any material credit
risk.
<PAGE> 13
4
"Board of Directors" means, with respect to any Person, the
Board of Directors of such Person or any committee of such Board of Directors
duly authorized to act with respect to this Indenture.
"Board Resolution" means, with respect to any Person, a copy
of a resolution, certified by the Secretary or Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and
to be in full force and effect on the date of such certification, and delivered
to the Trustee.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in The City of New York, or in the city of
the Corporate Trust Office of the Trustee, are authorized by law to close.
"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 outstanding on
the Closing Date or issued thereafter, 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.
"Capitalized Lease Obligations" means the discounted present
value of the rental obligations under a Capitalized Lease.
"Certificates of Deposit" has the meaning provided in the
definition of Intermediary Documents.
"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
Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the ultimate
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of Voting
Stock representing a greater percentage of the total voting power of the Voting
Stock of the Company, on a fully diluted basis, than is beneficially owned by
the Existing Stockholders on such date 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 ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of Voting Stock representing more
than 30% of the total voting power of the Voting Stock of the Company on a
fully diluted basis and such ownership represents a greater percentage of the
total voting power of the Voting Stock of the Company, on a fully diluted
basis, than is held by the Existing Stockholders on such date; or (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
<PAGE> 14
5
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.
"Closing Date" means the date on which the Securities are
originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body
performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all series and classes of such common stock.
"Company" means the party named as such in the first paragraph
of this Indenture until a successor replaces it pursuant to Article Five of
this Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in the
name of the Company (i) by its Chairman, a Vice Chairman, its President or a
Vice President and (ii) by its Chief Financial Officer, Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary and delivered to the
Trustee; provided, however, that such written request or order may be signed by
any two of the officers or directors listed in clause (i) above in lieu of
being signed by one of such officers or directors listed in such clause (i) and
one of the officers listed in clause (ii) above.
"Consolidated EBITDA" means, for any period, Adjusted
Consolidated Net Income for such period plus, to the extent such amount was
deducted in calculating such Adjusted Consolidated Net Income, (i) Consolidated
Interest Expense, (ii) income taxes (other than income taxes (either positive
or negative) attributable to extraordinary and non-recurring gains or losses or
sales of assets) and the portion of any other tax payable as a result of
generating income before taxes, (iii) depreciation expense, (iv) amortization
expense and (v) 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 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 percentage ownership interest in
the income of such Restricted Subsidiary not owned on the last day of such
period by the Company or any of its Restricted Subsidiaries.
<PAGE> 15
6
"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
Securities, the placement of the Series A Preferred Stock and the offering of
the 12 _% Senior Guaranteed Notes due 2003 all as determined on a consolidated
basis (without taking into account 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
filed with the Commission or provided to the Trustee pursuant to Section 4.18,
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).
"Corporate Trust Office" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any particular
time, be principally administered, which office is, at the date hereof, located
at 101 Barclay Street, Floor 21 West, New York, New York 10286.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees,
and their respective successors.
<PAGE> 16
7
"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 Securities, (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 Securities 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
Securities; 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 Securities 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 Section 4.11 and Section
4.12 and such Capital Stock, or the agreements or instruments governing the
redemption rights thereof, 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 Securities as are required to be repurchased
pursuant to Section 4.11 and Section 4.12.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.11.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Securities" means any securities of the Company
containing terms identical to the Securities (except that such Exchange
Securities (i) shall be registered under the Securities Act, (ii) will not
provide for an increase in the rate of interest (other than with respect to
overdue amounts) and (iii) will not contain terms with respect to transfer
restrictions) that are issued and exchanged for the Securities pursuant to the
Registration Rights Agreement and this Indenture.
"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 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) or clauses (viii) or (ix), (viii)
Nevasa Holdings Ltd., (ix) Corporacion IMPSA, S.A., (x) Princes Gate Investors
II, L.P., (xi) Morgan Stanley Global Emerging Markets Private Investment Fund,
L.P., and (xii) any Affiliate of either of the Persons named in clauses (x) or
(xi).
<PAGE> 17
8
"fair market value" means the price that would be paid in an
arm'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 if 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 or referred to herein 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 this Indenture shall be made without giving effect to (i)
the amortization of any expenses incurred in connection with the offering of
the Securities, the placement of the Series A Preferred Stock and the offering
of the 12 _% Senior Guaranteed Notes due 2003, (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 nonrecurring charges
associated with the adoption, after the Closing Date, of Financial Accounting
Standard Nos. 106 and 109.
"Global Securities" has the meaning provided in Section 2.01.
"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 (unless such purchase
arrangements are on arm's-length terms and are entered into in the ordinary
course of business), 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.
"Guaranteed Indebtedness" has the meaning provided in Section
4.07.
"Holder" or "Securityholder" means the then registered holder
of any Security.
"IMPSAT Argentina" 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
<PAGE> 18
9
payment of, contingently or otherwise, such Indebtedness, including, with
respect to the Company and its Restricted Subsidiaries, an "Incurrence" of
Acquired Indebtedness; 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, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following such drawing), (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 Capitalized Lease Obligations of such
Person, (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
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 (A) that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the original issue price of
such Indebtedness, (B) that money borrowed and set aside at the time of the
Incurrence of any Indebtedness in order to prefund the payment of the interest
on such Indebtedness shall not be deemed to be "Indebtedness" and (C) that
Indebtedness shall not include any liability for federal, state, local or other
taxes.
"Indebtedness to EBITDA Ratio" means, on any Transaction Date,
the ratio of (i) the aggregate amount of Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis outstanding on such Transaction
Date to (ii) the aggregate amount of Consolidated EBITDA for the then most
recent four fiscal quarters for which financial statements of the Company have
been filed with the Commission or provided to the Trustee pursuant to the
Section 4.18 (such four fiscal quarter period being the "Four Quarter Period");
provided that, in making the foregoing calculation, (A) pro forma effect shall
be given to any Indebtedness to be Incurred or repaid on the Transaction Date;
(B) pro forma effect shall be given to Asset Dispositions and Asset
Acquisitions (including giving pro forma effect to the application of
<PAGE> 19
10
proceeds of any Asset Disposition) that occur from the beginning of the Four
Quarter Period through the Transaction Date (the "Reference Period"), as if
they had occurred and such proceeds had been applied on the first day of such
Reference Period; and (C) pro forma effect shall be given to asset dispositions
and asset acquisitions (including giving pro forma effect to the application of
proceeds of any asset disposition) that have been made by any Person that has
become a Restricted Subsidiary or has been merged with or into the Company or
any Restricted Subsidiary during such Reference Period and that would have
constituted Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (B) or (C) of this sentence requires that pro
forma effect be given to an Asset Acquisition or Asset Disposition, such pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business
of the Person, that is acquired or disposed of for which financial information
is available.
"Indenture" means this Indenture as originally executed or as
it may be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D under the Securities Act.
"Intelsat" has the meaning provided in the definition of
Permitted Investment.
"Interest Payment Date" means each semiannual interest payment
date on June 15 and December 15 of each year, commencing December 15, 1998.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement, option or future contract or other
similar agreement or arrangement.
"Intermediary Documents" means documents relating to the
issuance of one or more Certificates of Deposit (the "Certificates of Deposit")
by the Issuer to the Company, the issuance of one or more promissory notes
(having a principal amount equal to the principal amount of the Certificate of
Deposit (the "Promissory Notes")) by IMPSAT Argentina to the Bank and the
Guarantees of the Promissory Notes by the Company.
"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; but excluding 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, on the
balance
<PAGE> 20
11
sheet of the Company or its Restricted Subsidiaries and Trade Payables) 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 or any of 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 Section
4.06. For purposes of the definition of "Unrestricted Subsidiary" and Section
4.04, (i) "Investment" shall include the fair market value of the assets (net
of liabilities, other than liabilities to the Company or any of its Restricted
Subsidiaries) 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
of its Restricted Subsidiaries) 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.
"Issuer" means the Cayman Islands branch of the Bank or any
other party that the Board of Directors has determined does not present any
material credit risk.
"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.
"Moody's" means Moody's Investor Service, Inc. and its
successors.
"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 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 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
<PAGE> 21
12
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 agent 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.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Offer to Purchase" means an offer to purchase Securities 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 such Securities 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 such Security
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 Security
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 such
Security purchased pursuant to the Offer to Purchase will be required to
surrender the Security, together with the form entitled "Option of the Holder
to Elect Purchase" on the reverse side of the Security 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 Securities delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Securities purchased; and (vii) that Holders whose Securities are being
purchased only in part will be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered; provided that each
Security purchased and each new Security issued shall be in a principal amount
of $1,000 or an integral multiple thereof. On the Payment Date, the Company
shall (i) accept for payment on a pro rata basis Securities 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 Securities or portions
thereof so accepted; and (iii) deliver, or cause to be delivered, to the
Trustee all Securities or portions thereof so accepted together with an
Officers' Certificate specifying the Securities or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the
Holders of Securities so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail to such Holders a
new Security equal in principal amount to any unpurchased portion of the
Security surrendered; provided that each Security purchased and each new
Security issued shall be in a principal amount of $1,000 or an integral
multiple thereof. The Company will publicly announce the results of an Offer to
Purchase
<PAGE> 22
13
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 and regulations thereunder
to the extent such laws and regulations are applicable, in the event that the
Company is required to repurchase Securities pursuant to an Offer to Purchase.
"Officer" means with respect to any Person, (i) the Chairman
of the Board, the Vice Chairman of the Board, the President, any Vice
President, the Chief Financial Officer, and (ii) the Treasurer or any Assistant
Treasurer, or the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by one
Officer listed in clause (i) of the definition thereof and one Officer listed
in clause (ii) of the definition thereof; provided, however, that any such
certificate may be signed by any two of the Officers listed in clause (i) of
the definition thereof in lieu of being signed by one Officer listed in clause
(i) of the definition thereof and one Officer listed in clause (ii) of the
definition thereof. Each Officers' Certificate (other than certificates
provided pursuant to TIA Section 314(a)(4)) shall include the statements
provided for in TIA Section 314(e).
"Offshore Global Security" has the meaning provided in Section
2.01.
"Offshore Physical Securities" has the meaning provided in
Section 2.01.
"Opinion of Counsel" means a written opinion signed by legal
counsel who may be an employee of or counsel to the Company. Each such Opinion
of Counsel shall include the statements provided for in TIA Section 314(e).
"Paying Agent" has the meaning provided in Section 2.04,
except that, for the purposes of Article Eight, the Paying Agent shall not be
the Company or a Subsidiary of the Company or an Affiliate of any of them. The
term "Paying Agent" includes any additional Paying Agent.
"Payment Date" has the meaning provided in the definition of
"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;
<PAGE> 23
14
(vi) Investments, in an aggregate amount at any one time outstanding not to
exceed $15 million during the first three years following July 30, 1996 and $20
million thereafter in Common Stock of the International Telecommunications
Satellite Organization ("Intelsat"); (vii) participations in Indebtedness of
any Restricted Subsidiary permitted to be Incurred by clause (xii) of the
second paragraph of Section 4.03; and (viii) Investments consisting of one or
more Certificates of Deposit, having an aggregate principal amount not to
exceed the aggregate principal amount of the Promissory Notes then outstanding;
provided that (1) upon making any such Investment after May 13, 1997, the
Company shall deliver an Officers' Certificate to the Trustee, to the effect
that applicable law regarding rights of set off has not changed since May 13,
1997, (2) the Stated Maturity of each such Certificate of Deposit shall be the
same as a Promissory Note of equal principal amount and (3) at the time that
any Investment in any Certificate of Deposit is made the Company shall deliver
an Officer's Certificate to the Trustee to the effect that (A) the Bank and the
Issuer are not under intervention, receivership or any similar arrangement or
proceeding and (B) the Company does not have any reason to believe there is a
material possibility that the Bank or the Issuer may be subject to
intervention, receivership or any similar arrangement or proceeding.
"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 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 Section
4.03, (1) to finance the cost (including the cost of design, development,
acquisition, construction, installation, improvement, transportation 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
<PAGE> 24
15
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 Capital 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 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, Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed
solely to protect the Company or any of its Restricted Subsidiaries from
fluctuations in interest rates, currencies or 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 receivables; and (xix) Liens that
secure Indebtedness with an aggregate principal amount not in excess of $5
million at any time outstanding.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Physical Securities" has the meaning provided in Section
2.01.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
whether now outstanding or issued after the date of this Indenture, including,
without limitation, all series and classes of such preferred or preference
stock.
"principal" of a debt security, including the Securities,
means the principal amount due on the Stated Maturity as shown on such debt
security.
<PAGE> 25
16
"Private Placement Legend" means the legend initially set
forth on the Securities in the form set forth in Section 2.02(a).
"Promissory Notes" has the meaning provided for in the
definition of Intermediary Documents.
"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.
"Public Market" means, and shall be deemed to exist if (i) a
Public Equity Offering has been consummated and (ii) at least 15% of the total
issued and outstanding Common Stock of the Company immediately prior to the
consummation of such Public Equity Offering has been distributed by means of an
effective registration statement under the Securities Act or sales pursuant to
Rule 144 under the Securities Act.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Redemption Date" means, when used with respect to any
Security to be redeemed, the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price" means, when used with respect to any
Security to be redeemed, the price at which such Security is to be redeemed
pursuant to this Indenture.
"Registrar" has the meaning provided in Section 2.04.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of June 17, 1998, among the Company, Morgan Stanley & Co.
Incorporated and Credit Suisse First Boston Corporation.
"Registration Statement" means the Registration Statement as
defined and described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the June 1 or December 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee,
means any vice president, any assistant vice president, any assistant
secretary, any assistant treasurer, and any trust officer or assistant trust
officer employed in the conduct of the Trustee's corporate trust business, or
any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular
<PAGE> 26
17
corporate trust matter, any other officer to whom such matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Restricted Payments" has the meaning provided in Section
4.04.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" means any of the securities, as defined in the
first paragraph of the recitals hereof, that are authenticated and delivered
under this Indenture. For all purposes of this Indenture, the term
"Securities" shall include any Exchange Securities to be issued and exchanged
for any Securities pursuant to the Registration Rights Agreement and this
Indenture and, for purposes of this Indenture, all Securities and Exchange
Securities shall vote together as one series of Securities under this
Indenture.
"Securities Act" means the Securities Act of 1933.
"Security Register" has the meaning provided in Section 2.04.
"Series A Preferred Stock" means the Company's Series A
Convertible Preferred Stock.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined and described in the Registration Rights Agreement.
"Significant Subsidiary" means, at any date of determination,
any Restricted Subsidiary that, together with its Subsidiaries, (i) for the
most recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, 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 Section 4.18.
"S&P" means Standard & Poor's Ratings Services and its
successors.
"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.
<PAGE> 27
18
"Strategic Subordinated Indebtedness" means Indebtedness of
the Company Incurred to finance the acquisition of a Person engaged in a
business that is related, ancillary or complementary to the business conducted
by the Company or any of its Restricted Subsidiaries, which Indebtedness by its
terms, or by the terms of any agreement or instrument pursuant to which such
Indebtedness is Incurred, (i) is expressly made subordinate in right of payment
to the Securities and (ii) provides that no payment in cash or assets of the
Company or any Restricted Subsidiaries of principal, premium or interest on, or
any other payment with respect to, such Indebtedness may be made prior to the
payment in full of all of the Company's obligations under the Securities;
provided that such Indebtedness may provide for and be repaid at any time from
the proceeds of a capital contribution or the sale of Capital Stock (other than
Disqualified Stock) of the Company after the Incurrence of such Indebtedness.
"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.
"Subsidiary Guarantee" has the meaning provided in Section
4.07.
"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 one year 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 of America, 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 moneymarket 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
one year 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 or "A-1"
(or higher) according to S&P, (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 S&P or Moody's and (vi) certificates of deposit maturing not
more than one year 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
<PAGE> 28
19
under intervention, receivership or any similar arrangement at the time of the
acquisition of such certificates of deposit.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act
of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb), as in effect on the
date this Indenture was executed, except as provided in Section 9.06.
"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.
"Trustee" means the party named as such in the first paragraph
of this Indenture until a successor replaces it in accordance with the
provisions of Article Seven of this Indenture and thereafter means such
successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company 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) 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 (A) any Guarantee
by the Company or any Restricted Subsidiary of any Indebtedness of the
Subsidiary being so designated shall be deemed an "Incurrence" of such
Indebtedness by the Company or such Restricted Subsidiary (or both, if
applicable) at the time of such designation; (B) either (I) the Subsidiary to
be so designated has total assets of $1,000 or less or (II) if such Subsidiary
has assets greater than $1,000, such designation would be permitted under
Section 4.04; and (C) if applicable, the Incurrence of Indebtedness would be
permitted under this 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 Section 4.03 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.
"United States Bankruptcy Code" means the Bankruptcy Reform
Act of 1978, as amended and as codified in Title 11 of the United States Code,
as amended from time to time hereafter, or any successor federal bankruptcy
law.
<PAGE> 29
20
"U.S. Global Security" has the meaning provided in Section
2.01.
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof at any time
prior to the Stated Maturity of the Securities, and shall also include a
depository receipt issued by a bank or trust company as custodian with respect
to any such U.S. Government Obligation or a specific payment of interest on or
principal of any such U.S. Government Obligation held by such custodian for the
account of the holder of a depository receipt; provided that (except as
required by law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or the
specific payment of interest on or principal of the U.S. Government Obligation
evidenced by such depository receipt.
"U.S. Person" has the meaning ascribed thereto in Rule 902
under the Securities Act.
"U.S. Physical Securities" has the meaning provided in Section
2.01.
"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, the ownership of all of the outstanding Capital Stock of such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) by such Person or one or more
Wholly-Owned Subsidiaries of such Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The
following TIA terms used herein have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a
Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
<PAGE> 30
21
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used herein that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words
in the plural include the singular;
(v) provisions apply to successive events and
transactions;
(vi) "herein", "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(vii) all references to Sections or Articles refer to
Sections or Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating The Securities and the
Trustee's certificate of authentication shall be substantially in the form
annexed hereto as Exhibit A. The Securities may have notations, legends or
endorsements required by law, stock exchange agreements to which the Company is
subject or usage. The Company shall approve the form of the Securities and any
notation, legend or endorsement on the Securities. Each Security shall be
dated the date of its authentication.
The terms and provisions contained in the form of the
Securities annexed hereto as Exhibit A shall constitute, and are hereby
expressly made, a part of this Indenture. Each of the Company and the Trustee,
by its execution and delivery of this Indenture, expressly agrees to the terms
and provisions of the Securities applicable to it and to be bound thereby.
<PAGE> 31
22
Securities offered and sold in reliance on Rule 144A shall be
issued in the form of one or more permanent global Securities in registered
form, substantially in the form set forth in Exhibit A (collectively, the "U.S.
Global Security"), deposited with the Trustee, as custodian for the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the U.S. Global Security may from
time to time be increased or decreased by adjustments made on the records of
the Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Securities offered and sold in offshore transactions in
reliance on Regulation S shall be issued in the form of one or more global
Securities in registered form substantially in the form set forth in Exhibit A
(collectively, the "Offshore Global Security") deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
Offshore Global Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary
or its nominee, as hereinafter provided.
Securities which are offered and sold to Institutional
Accredited Investors which are not QIBs (excluding Non-U.S. Persons) shall be
issued in the form of permanent certificated Securities in registered form in
substantially the form set forth in Exhibit A (the "U.S. Physical Securities").
Securities issued pursuant to Section 2.07 in exchange for interests in the
Offshore Global Security shall be in the form of permanent certificated
Securities in registered form substantially in the form set forth in Exhibit A
(the "Offshore Physical Securities").
The Offshore Physical Securities and U.S. Physical Securities
are sometimes collectively herein referred to as the "Physical Securities".
The U.S. Global Security and the Offshore Global Security are sometimes
referred to as the "Global Securities".
The definitive Securities shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
Officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 2.02. Restrictive Legends. (a) Unless and until a
Security is exchanged for an Exchange Security or sold in connection with an
effective Registration Statement pursuant to the Registration Rights Agreement,
(i) the U.S. Global Security and each U.S. Physical Security shall bear the
legend set forth below on the face thereof and (ii) the Offshore Physical
Securities and the Offshore Global Security shall bear the legend set forth
below on the face thereof until at least 41 days after the Closing Date and
receipt by the Company and the Trustee of a certificate substantially in the
form of Exhibit B hereto:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED
<PAGE> 32
23
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL
NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE
SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE,
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF NOTES AT THE TIME OF TRANSFER OF LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE.
IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND
THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING
<PAGE> 33
24
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE
TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
(b) Each Global Security, whether or not an Exchange
Security, shall also bear the following legend on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO THE DEPOSITORY TRUST COMPANY OR NOMINEES OF
THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.08 OF THE INDENTURE.
SECTION 2.03. Execution, Authentication and Denominations.
Subject to Article Four and applicable law, the aggregate principal amount of
Securities which may be authenticated and delivered under this Indenture is
unlimited. The Securities shall be executed by two Officers of the Company.
The signature of these Officers on the Notes may be by facsimile or manual
signature in the name and on behalf of the Company.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee or authenticating agent authenticates the
Security, the Security shall be valid nevertheless.
<PAGE> 34
25
A Security shall not be valid until an authorized signatory of
the Trustee or authenticating agent manually signs the certificate of
authentication on the Security. The signature shall be conclusive evidence
that the Security has been authenticated under this Indenture.
At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Securities in the aggregate
principal amount specified in such Company Order; provided that the Trustee
shall receive an Officers' Certificate and an Opinion of Counsel of the Company
in connection with such authentication of Securities. The Opinion of counsel
shall be to the effect that:
(a) the form and terms of such Securities have been
established by or pursuant to a Board Resolution or, if applicable, an
indenture supplemental hereto in conformity with the provisions of
this Indenture;
(b) such supplemental indenture, if any, when executed
and delivered by the Company and the Trustee, will constitute a valid
and binding obligation of the Company;
(c) such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and binding obligations of the Company in accordance with their terms
and will be entitled to the benefits of this Indenture, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equitable principles; and
(d) that the Company has been duly incorporated in, and
is a validly existing corporation in good standing under the laws of,
the State of Delaware.
Such Company Order shall specify the amount of Securities to be authenticated
and the date on which the original issue of Securities is to be authenticated
and, in the case of an issuance of Securities pursuant to Section 2.15, shall
certify that such issuance is in compliance with Article Four.
The Trustee may appoint an authenticating agent to
authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such authenticating
agent. An authenticating agent has the same rights as an Agent to deal with
the Company or an Affiliate of the Company.
The Securities shall be issuable only in registered form
without coupons and only in denominations of $1,000 in principal amount and any
integral multiple of $1,000 in excess thereof.
<PAGE> 35
26
SECTION 2.04. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar"), an office or agency where
Securities may be presented for payment (the "Paying Agent") and an office or
agency where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served, which shall be in the Borough of
Manhattan, The City of New York. The Company shall cause the Registrar to keep
a register of the Securities and of their transfer and exchange (the "Security
Register"). The Company may have one or more co-Registrars and one or more
additional Paying Agents.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
give prompt written notice to the Trustee of the name and address of any such
Agent and any change in the address of such Agent. If the Company fails to
maintain a Registrar, Paying Agent and/or agent for service of notices and
demands, the Trustee shall act as such Registrar, Paying Agent and/or agent for
service of notices and demands for so long as such failure shall continue and
shall be entitled to compensation therefor pursuant to Section 7.07. The
Company may remove any Agent upon written notice to such Agent and the Trustee;
provided that no such removal shall become effective until (i) the acceptance
of an appointment by a successor Agent to such Agent as evidenced by an
appropriate agency agreement entered into by the Company and such successor
Agent and delivered to the Trustee or (ii) notification to the Trustee that the
Trustee shall serve as such Agent until the appointment of a successor Agent in
accordance with clause (i) of this proviso. The Company, any Subsidiary of the
Company, or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar, and/or agent for service of notice and demands; provided,
however, that neither the Company, a Subsidiary of the Company nor an Affiliate
of any of them shall act as Paying Agent in connection with the defeasance of
the Securities or the discharge of this Indenture under Article Eight.
The Company initially appoints the Trustee as Registrar,
Paying Agent, authenticating agent and agent for service of notice and demands.
If, at any time, the Trustee is not the Registrar, the Registrar shall make
available to the Trustee before each Interest Payment Date and at such other
times as the Trustee may reasonably request, the names and addresses of the
Holders as they appear in the Security Register.
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later
than 11:00 a.m. New York City time on each due date of the principal, premium,
if any, and interest on any Securities, the Company shall deposit with the
Paying Agent money in immediately available funds sufficient to pay such
principal, premium, if any, and interest so becoming due. The Company shall
require each Paying Agent, if any, other than the Trustee to agree in writing
that such Paying Agent shall hold in trust for the benefit of the Holders or
the Trustee all money held by the Paying Agent for the payment of principal of,
premium, if any, and interest on the Securities (whether such money has been
paid to it by the Company or any other obligor on the Securities), and that
such Paying Agent shall promptly notify the Trustee in writing of any default
by the Company (or any other obligor on the Securities) in making any such
payment. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and account for any funds
<PAGE> 36
27
disbursed, and the Trustee may at any time during the continuance of any
payment default, upon written request to a Paying Agent, require such Paying
Agent to pay all money held by it to the Trustee and to account for any funds
disbursed. Upon doing so, the Paying Agent shall have no further liability for
the money so paid over to the Trustee. If the Company or any Subsidiary of the
Company or any Affiliate of any of them acts as Paying Agent, it will, on or
before each due date of any principal of, premium, if any, or interest on the
Securities, segregate and hold in a separate trust fund for the benefit of the
Holders a sum of money sufficient to pay such principal, premium, if any, or
interest so becoming due until such sum of money shall be paid to such Holders
or otherwise disposed of as provided in this Indenture, and will promptly
notify the Trustee in writing of its action or failure to act as required by
this Section 2.05.
SECTION 2.06. Transfer and Exchange. The Securities are
issuable only in registered form. A Holder may transfer a Security by written
application to the Registrar stating the name of the proposed transferee and
otherwise complying with the terms of this Indenture. No such transfer shall
be effected until, and such transferee shall succeed to the rights of a Holder
only upon, registration of the transfer by the Registrar in the Security
Register. Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Trustee, and any agent of the Company or the Trustee
shall treat the person in whose name the Security is registered as the owner
thereof for all purposes whether or not the Security shall be overdue, and
neither the Company, the Trustee, nor any such agent shall be affected by
notice to the contrary. Furthermore, any Holder of or beneficial owner of an
interest in a Global Security shall, by acceptance of such Global Security, be
deemed to have agreed that transfers of beneficial interests in such Global
Security may be effected only through a book-entry system maintained by the
Depositary (or its agent), and that ownership of a beneficial interest in the
Security shall be required to be reflected in a book entry. When Securities
are presented to the Registrar or a co-Registrar with a request to register the
transfer or to exchange them for an equal principal amount of Securities of
other authorized denominations (including on exchange of Securities for
Exchange Securities), the Registrar shall register the transfer or make the
exchange as requested if its requirements for such transactions are met;
provided that no exchanges of Securities for Exchange Securities shall occur
until a Registration Statement shall have been declared effective by the
Commission and that any Securities that are exchanged for Exchange Securities
shall be canceled by the Trustee. To permit registrations of transfers and
exchanges in accordance with the terms, conditions and restrictions hereof, the
Company shall execute and the Trustee shall authenticate Securities at the
Registrar's request. No service charge shall be made to any Holder for any
registration of transfer or exchange or redemption of the Securities, but the
Company may require payment by the Holder of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental charge
payable upon transfers, exchanges or redemptions pursuant to Section 2.11, 3.08
or 9.04).
The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 3.03 or Section 3.08 and
ending at the close of business on the day of such mailing, or (ii) to register
the
<PAGE> 37
28
transfer of or exchange any Security so selected for redemption in whole or in
part, except the unredeemed portion of any Security being redeemed in part.
SECTION 2.07. Book-Entry Provisions for Global Securities.
(a) The U.S. Global Security and Offshore Global Security initially shall (i)
be registered in the name of the Depositary for such Global Securities or the
nominee of such Depositary, (ii) be delivered to the Trustee as custodian for
such Depositary and (iii) bear legends as set forth in Section 2.02.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under any Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a beneficial owner
of any Security.
(b) Transfers of a Global Security shall be limited to
transfers of such Global Security in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of
beneficial owners in a Global Security may be transferred in accordance with
the applicable rules and procedures of the Depositary and the provisions of
Section 2.08. In addition, Physical Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in the U.S.
Global Security or the Offshore Global Security, respectively, if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for the U.S. Global Security or the Offshore Global Security, as the
case may be, 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 the Depositary.
(c) Any beneficial interest in one of the Global
Securities that is transferred to a person who takes delivery in the form of an
interest in the other Global Security will, upon transfer, cease to be an
interest in such Global Security and become an interest in the other Global
Security and, accordingly, will thereafter be subject to all transfer
restrictions, if any, and other procedures applicable to beneficial interests
in such other Global Security for as long as it remains such an interest.
(d) In connection with any transfer pursuant to paragraph
(b) of this Section 2.07 of a portion of the beneficial interests in a Global
Security to beneficial owners who are required to hold Physical Securities, the
Registrar shall reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Company shall
<PAGE> 38
29
execute, and the Trustee shall authenticate and deliver, one or more Physical
Securities of like tenor and amount.
(e) In connection with the transfer of an entire Global
Security to beneficial owners pursuant to paragraph (b) of this Section 2.07,
the Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the Global Security an equal aggregate principal
amount of Physical Securities of authorized denominations.
(f) Any Physical Security delivered in exchange for an
interest in the U.S. Global Security pursuant to paragraph (b) or (d) of this
Section 2.07 shall, except as otherwise provided by paragraph (f)(i)(A) or
paragraph (d) of Section 2.08, bear the legend regarding transfer restrictions
applicable to the U.S. Physical Security set forth in Section 2.02.
(g) The registered holder of a Global Security may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a
Holder is entitled to take under this Indenture or the Securities.
(h) QIBs that are beneficial owners of interests in a
Global Security may receive Physical Securities (which shall bear the Private
Placement Legend if required by Section 2.02) in accordance with the procedures
of the Depositary. In connection with the execution, authentication and
delivery of such Physical Securities, the Registrar shall reflect on its books
and records a decrease in the principal amount of the relevant Global Security
equal to the principal amount of such Physical Securities and the Company shall
execute and the Trustee shall authenticate and deliver one or more Physical
Securities having an equal aggregate principal amount.
SECTION 2.08. Special Transfer Provisions. Unless and until
a Security is exchanged for an Exchange Security or sold in connection with an
effective Registration Statement pursuant to the Registration Rights Agreement,
transfers of a Security or of Securities shall only be permitted as specified
below:
(a) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer of a U.S.
Physical Security or an interest in the U.S. Global Security to a QIB
(excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of (A)
U.S. Physical Securities, the Registrar shall register the transfer if
such transfer is being made by a proposed transferor who has checked
the box provided for on the form of Security stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has
been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form
of Security stating, or has otherwise advised the
<PAGE> 39
30
Company and the Registrar in writing, that it is purchasing the
Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account
is a QIB within the meaning of Rule 144A, and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A or (B) an interest in the U.S.
Global Security, the transfer of such interest may be effected only
through the book entry system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and
the Security to be transferred consists of U.S. Physical Securities,
upon receipt by the Registrar of the documents referred to in clause
(i) and instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the U.S.
Global Security in an amount equal to the principal amount of the U.S.
Physical Securities to be transferred, and the Trustee shall cancel
the U.S. Physical Securities so transferred.
(b) Transfers of Interests in the Offshore Global
Security or Offshore Physical Securities to U.S. Persons. The following
provisions shall apply with respect to any transfer of interests in the
Offshore Global Security or Offshore Physical Securities to U.S. Persons:
(i) prior to the removal of the Private Placement Legend
from the Offshore Global Security or Offshore Physical Securities
pursuant to Section 2.02, the Registrar shall refuse to register such
transfer unless the Registrar receives with respect to such transfer
the documents and instruments required by Section 2.08(a) or Section
2.08(c), as the case may be; and
(ii) after such removal, the Registrar shall register the
transfer of any such Security without requiring any additional
certification.
(c) Transfers to Non-U.S. Persons at Any Time. The
following provisions shall apply with respect to any transfer of a Security to
a Non-U.S. Person:
(i) The Registrar shall register any proposed transfer to
any Non-U.S. Person if the Security to be transferred is a U.S.
Physical Security or an interest in the U.S. Global Security only upon
receipt of a certificate substantially in the form of Exhibit C from
the proposed transferor.
(ii) (A) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Security, upon
receipt by the Registrar of (1) the documents required by paragraph
(i) and (2) instructions in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the U.S.
Global Security in an amount equal to the
<PAGE> 40
31
principal amount of the beneficial interest in the U.S. Global
Security to be transferred, and (B) if the proposed transferee is an
Agent Member, upon receipt by the Registrar of instructions given in
accordance with the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Offshore Global Security in an
amount equal to the principal amount of the U.S. Physical Securities
or the U.S. Global Security, as the case may be, to be transferred,
and the Trustee shall cancel the Physical Security, if any, so
transferred or decrease the amount of the U.S. Global Security.
(d) Private Placement Legend. Upon the transfer,
exchange or replacement of Securities not bearing the Private Placement Legend,
the Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless (i) the Private Placement Legend is no
longer required by Section 2.02, (ii) the circumstances contemplated by
paragraph (f)(i)(A) of this Section 2.08 exist or (iii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company to
the effect that neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provisions of the
Securities Act.
(e) General. By its acceptance of any Security bearing
the Private Placement Legend, each Holder of, or beneficial owner of an
interest in, such Security acknowledges the restrictions on transfer of such
Security set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Security only as provided in this Indenture.
The Registrar shall not register a transfer of any Security unless such
transfer complies with the restrictions on transfer of such Security set forth
in this Indenture. In connection with any transfer of Securities to an
Institutional Accredited Investor, each such Holder or beneficial owner agrees
by its acceptance of Securities to furnish to the Registrar and the Company
such certifications, legal opinions or other information as the Company may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act; provided that the Registrar shall not be required to
determine (but may rely on a determination made by the Company with respect to)
the sufficiency of any such certifications, legal opinions or other
information.
(f) Transfers to Non-QIB Institutional Accredited
Investors. The following provisions shall apply with respect to the
registration of any proposed transfer of a Security to any Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any
Security, whether or not such Security bears the Private Placement
Legend, if (A) the requested transfer is after the time period
referred to in Rule 144(k) under the Securities Act or any successor
provision at the time of such transfer or (B) the proposed transferee
has delivered to the Registrar (1) a certificate substantially in the
form of Exhibit D hereto and (2) if such transfer is in respect of an
aggregate principal amount of Securities at the time of transfer of
less than $250,000,
<PAGE> 41
32
an Opinion of Counsel acceptable to the Company that such transfer is
in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding
a beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (A) the documents, if any, required by paragraph (i) and
(B) instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the U.S.
Global Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and
deliver, one or more U.S. Physical Securities of like tenor and
amount.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.07 or this Section
2.08. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
SECTION 2.09. Replacement Securities. If a mutilated
Security is surrendered to the Trustee or if the Holder claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding;
provided that the requirements of the second paragraph of Section 2.10 are met.
If required by the Trustee or the Company, an indemnity bond must be furnished
that is sufficient in the judgment of both the Trustee and the Company to
protect the Company, the Trustee or any Agent from any loss that any of them
may suffer if a Security is replaced. The Company may charge such Holder for
its expenses and the expenses of the Trustee in replacing a Security. In case
any such mutilated, lost, destroyed or wrongfully taken Security has become or
is about to become due and payable, the Company in its discretion may pay the
principal of, premium, if any, and interest accrued on such Security instead of
issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
SECTION 2.10. Outstanding Securities. Securities outstanding
at any time are all Securities that have been authenticated by the Trustee
except for those canceled by it, those delivered to it for cancellation and
those described in this Section 2.10 as not outstanding.
If a Security is replaced pursuant to Section 2.09, it ceases
to be outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Security is held by a bona fide
purchaser.
If the Paying Agent (other than the Company or an Affiliate of
the Company) holds on the maturity date money sufficient to pay the principal
of, premium, if any, and interest accrued
<PAGE> 42
33
on Securities payable on that date, then on and after that date such Securities
cease to be outstanding and interest on them shall cease to accrue.
A Security does not cease to be outstanding because the
Company or one of its Affiliates holds such Security, provided, however, that,
in determining whether the Holders of the requisite principal amount of the
outstanding Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Securities owned by the Company
or any other obligor upon the Securities or any Affiliate of the Company or of
such other obligor shall be disregarded and deemed not to be outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
SECTION 2.11. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have insertions,
substitutions, omissions and other variations determined to be appropriate by
the Officers executing the temporary Securities, as evidenced by their
execution of such temporary Securities. If temporary Securities are issued,
the Company will cause definitive Securities to be prepared without
unreasonable delay. After the preparation of definitive Securities, the
temporary Securities shall be exchangeable for definitive Securities upon
surrender of the temporary Securities at the office or agency of the Company
designated for such purpose pursuant to Section 4.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities
of authorized denominations. Until so exchanged, the temporary Securities
shall be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 2.12. Cancellation. The Company at any time may
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold.
The Registrar and the Paying Agent shall forward to the Trustee any Securities
surrendered to them for transfer, exchange or payment. The Trustee shall
cancel all Securities surrendered for transfer, exchange, payment or
cancellation and shall dispose of them in accordance with its normal procedure.
The Company shall not issue new Securities to replace Securities it has paid in
full or delivered to the Trustee for cancellation.
SECTION 2.13. CUSIP, CINS and ISIN Numbers. The Company in
issuing the Securities may use "CUSIP", "CINS", "ISIN" or other identification
numbers (if then generally in use), and, if so, the Trustee shall use CUSIP
numbers, CINS numbers, ISIN numbers or other
<PAGE> 43
34
identification numbers, as the case may be, in notices of redemption or
exchange as a convenience to Holders; provided that any such notice shall state
that no representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of redemption or
exchange and that reliance may be placed only on the other identification
numbers printed on the Securities; provided further, that failure to use
"CUSIP", "CINS", "ISIN" or other identification numbers in any notice of
redemption or exchange shall not effect the validity or sufficiency of such
notice.
SECTION 2.14. Defaulted Interest. If the Company defaults in
a payment of interest on the Securities, it shall pay, or shall deposit with
the Paying Agent money in immediately available funds sufficient to pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest, to the Persons who are Holders on a subsequent special
record date. A special record date, as used in this Section 2.14 with respect
to the payment of any defaulted interest, shall mean the 15th day next
preceding the date fixed by the Company for the payment of defaulted interest,
whether or not such day is a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder and to
the Trustee a notice that states the subsequent special record date, the
payment date and the amount of defaulted interest to be paid.
SECTION 2.15. Issuance of Additional Securities. The Company
may, subject to Article Four of this Indenture and applicable law, issue
additional Securities under this Indenture. The Securities issued on the
Closing Date and any additional Securities subsequently issued shall be treated
as a single class for all purposes under this Indenture.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption. The Securities are
redeemable, at the Company's option, in whole or in part, at any time or from
time to time, on or after June 15, 2003 and prior to maturity, upon not less
than 30 nor more than 60 days' prior notice mailed by first class mail to each
Holder's last address as it appears in the Security Register. The Securities
are redeemable at the Redemption Price (expressed in percentages of principal
amount) set forth below, plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is on or prior to the Redemption Date to receive
interest due on an Interest Payment Date), if redeemed during the 12-month
period commencing June 15, of the years set forth below. The Redemption Prices
with respect to the Securities are as follows:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
-------------------------------------- -----------------------------------
<S> <C>
2003 . . . . . . . . . . . . . . . . 106.188%
2004 . . . . . . . . . . . . . . . . 104.125
2005 . . . . . . . . . . . . . . . . 102.063
</TABLE>
<PAGE> 44
35
<TABLE>
<S> <C>
2006 and thereafter . . . . . . . . . 100.000
</TABLE>
In addition, at any time prior to June 15, 2001, the Company
may redeem up to 35% of the principal amount of the Securities originally
issued with the Net Cash Proceeds of one or more public or private issuances of
Capital Stock (other than Disqualified Stock) at any time or from time to time
in part, at a Redemption Price of 112.375% of the principal amount thereof on
the Redemption Date, together with accrued and unpaid interest, if any,
thereon; provided that (i) at least 65% of the principal amount of the
Securities remain outstanding after each such redemption and (ii) notice of
such redemption is mailed within 60 days of such issuance.
SECTION 3.02. Notices to Trustee. If the Company elects to
redeem Securities pursuant to Section 3.01, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed.
The Company shall give each notice provided for in this
Section 3.02 in an Officers' Certificate at least ten days before mailing the
notice to Holders required pursuant to Section 3.04 (unless a shorter period
shall be satisfactory to the Trustee).
SECTION 3.03. Selection of Securities to Be Redeemed. In the
case of any partial redemption, selection of the Securities for redemption will
be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Securities are listed or, if
the Securities are not listed on a national securities exchange, by lot or by
such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate; provided that no Security of $1,000 in principal amount or
less shall be redeemed in part.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption. Securities in
denominations of $1,000 in principal amount may only be redeemed in whole.
The Trustee may select for redemption portions (equal to $1,000 in principal
amount or any integral multiple thereof) of Securities that have denominations
larger than $1,000 in principal amount. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption. The Trustee shall notify the Company and the Registrar
promptly in writing of the Securities or portions of Securities to be called
for redemption.
SECTION 3.04. Notice of Redemption. With respect to any
redemption of Securities pursuant to Section 3.01, at least 30 days but not
more than 60 days before a Redemption Date, the Company shall mail a notice of
redemption by first class mail to each Holder whose Securities are to be
redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
(a) the Redemption Date;
<PAGE> 45
36
(b) the Redemption Price;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be
surrendered to the Paying Agent in order to collect the Redemption
Price;
(e) that, unless the Company defaults in making the
redemption payment, interest on Securities called for redemption
ceases to accrue on and after the Redemption Date and the only
remaining right of the Holders is to receive payment of the Redemption
Price plus accrued interest to the Redemption Date upon surrender of
the Securities to the Paying Agent;
(f) that, if any Security is being redeemed in part, the
portion of the principal amount (equal to $1,000 in principal amount
or any integral multiple thereof) of such Security to be redeemed and
that, on and after the Redemption Date, upon surrender of such
Security, a new Security or Securities in principal amount equal to
the unredeemed portion thereof will be reissued; and
(g) that, if any Security contains a CUSIP, CINS, ISIN or
other identification number as provided in Section 2.13, no
representation is being made as to the correctness of the CUSIP, CINS,
ISIN or other identification number either as printed on the
Securities or as contained in the notice of redemption and that
reliance may be placed only on the other identification numbers
printed on the Securities.
At the Company's request (which request may be revoked by the
Company at any time prior to the time at which the Trustee shall have given
such notice to the Holders), made in writing to the Trustee at least ten days
before it is required to mail the notice to Holders required by this Section
3.04, the Trustee shall give such notice of redemption in the name and at the
expense of the Company. If, however, the Company gives such notice to the
Holders, the Company shall concurrently deliver to the Trustee an Officers'
Certificate stating that such notice has been given.
SECTION 3.05. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable
on the Redemption Date and at the Redemption Price. Upon surrender of any
Securities to the Paying Agent, such Securities shall be paid at the Redemption
Price, plus accrued interest, if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed,
whether or not the Holder receives the notice. In any event, failure to give
such notice, or any defect therein, shall not affect the validity of the
proceedings for the redemption of Securities held by Holders to whom such
notice was properly given.
<PAGE> 46
37
SECTION 3.06. Deposit of Redemption Price. On or prior to
10:00 A.M. on any Redemption Date, the Company shall deposit with the Paying
Agent (or, if the Company is acting as its own Paying Agent, shall segregate
and hold in trust as provided in Section 2.05) money sufficient to pay the
Redemption Price of and accrued interest on all Securities to be redeemed on
that date other than Securities or portions thereof called for redemption on
that date that have been delivered by the Company to the Trustee for
cancellation.
SECTION 3.07. Payment of Securities Called for Redemption.
If notice of redemption has been given in the manner provided above, the
Securities or portion of Securities specified in such notice to be redeemed
shall become due and payable on the Redemption Date at the Redemption Price
stated therein, together with accrued interest to such Redemption Date, and on
and after such date (unless the Company shall default in the payment of such
Securities at the Redemption Price and accrued interest to the Redemption Date,
in which case the principal, until paid, shall bear interest from the
Redemption Date at the rate prescribed in the Securities), such Securities
shall cease to accrue interest. Upon surrender of any Security for redemption
in accordance with a notice of redemption, such Security shall be paid and
redeemed by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided that installments of
interest shall be payable to the Holders registered as such at the close of
business on the relevant Regular Record Date that is on or prior to the
Redemption Date.
SECTION 3.08. Securities Redeemed in Part. Upon surrender of
any Security that is redeemed in part, the Company shall execute and the
Trustee shall authenticate and deliver to the Holder a new Security equal in
principal amount to the unredeemed portion of such surrendered Security.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities. The Company shall pay
the principal of, premium, if any, and interest on the Securities on the dates
and in the manner provided in the Securities and this Indenture. An
installment of principal, premium, if any, or interest shall be considered paid
on the date due if the Trustee or Paying Agent (other than the Company, a
Subsidiary of the Company, or any Affiliate of any of them) holds on that date
money designated for and sufficient to pay the installment. If the Company or
any Subsidiary of the Company or any Affiliate of any of them, acts as Paying
Agent, an installment of principal, premium, if any, or interest shall be
considered paid on the due date if the entity acting as Paying Agent complies
with the last sentence of Section 2.05. As provided in Section 6.09, upon any
bankruptcy or reorganization procedure relative to the Company, the Trustee
shall serve as the Paying Agent for the Securities.
The Company shall pay interest on overdue principal, premium,
if any, and interest on overdue installments of interest, to the extent lawful,
at the rate per annum specified in the Securities.
<PAGE> 47
38
SECTION 4.02. Maintenance of Office or Agency. The Company
will maintain in the Borough of Manhattan, The City of New York, an office or
agency (which may be an office of the Trustee, Registrar or co-Registrar or any
Affiliate of any of them) where Securities may be surrendered for registration
of transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 10.02.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations. The Company will give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of any
such other office or agency.
The Company hereby initially designates the Corporate Trust
Office of the Trustee, located in the Borough of Manhattan, The City of New
York, as such office of the Company in accordance with Section 2.04.
SECTION 4.03. Limitation on Indebtedness.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, Incur any Indebtedness (other than the Securities
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 outstanding at any time in an aggregate principal amount not
to exceed the greater of (A) $200 million or (B) the Consolidated EBITDA for
the four preceding quarters for which financial statements of the Company have
been filed with the Commission or provided to the Trustee pursuant to Section
4.18, in each case less any amount of Indebtedness permanently repaid as
provided under Section 4.11 (other than any Securities 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
owed (A) to the Company evidenced by a promissory note or (B) to any Restricted
Subsidiary; 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 an Incurrence of such Indebtedness
not permitted by this clause (ii); (iii) Indebtedness
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39
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), (vi), (viii) or (x) 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 Securities or
Indebtedness that is pari passu with, or subordinated in right of payment to,
the Securities shall only be permitted under this clause (iii) if (A) in case
the Securities are refinanced in part or the Indebtedness to be refinanced is
pari passu with the Securities, 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 Securities, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Securities, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding, is
expressly made subordinate in right of payment to the Securities at least to
the extent that the Indebtedness to be refinanced is subordinated to the
Securities 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 be refinanced by means of any
Indebtedness of any Restricted Subsidiary 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 (a) are designed solely to
protect the Company or its Restricted Subsidiaries against fluctuations in
foreign currency exchange rates or interest rates and (b) 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 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, to the extent the net proceeds thereof are promptly (A) used to
purchase Securities tendered in an Offer to Purchase made as a result of a
Change in Control or (B) deposited to defease the Securities as described below
under Article Eight; (vi) Guarantees of the Securities and Guarantees of
Indebtedness of the Company by any Restricted Subsidiary provided the Guarantee
of such Indebtedness is permitted by and made in accordance with Section 4.07;
(vii) Indebtedness (including Guarantees) Incurred to finance the cost
(including the cost of design, development, acquisition, construction,
installation, improvement, transportation or integration) to acquire equipment,
inventory or network assets (including acquisitions by way of Capitalized Lease
and acquisitions of the Capital Stock of a Person that becomes a Restricted
Subsidiary to the extent of the fair market value of the equipment, inventory
or network assets so acquired) by the Company
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40
or a Restricted Subsidiary after the Closing Date; (viii) Indebtedness of the
Company not to exceed, at any one time outstanding, two times the sum of (A)
the Net Cash Proceeds received by the Company after the Closing Date as a
capital contribution or from the issuance and sale of its Capital Stock (other
than Disqualified Stock) to a Person that is not a Subsidiary of the Company,
to the extent (I) such capital contribution or Net Cash Proceeds are not, at
the Company's option, added to the amount calculated pursuant to clause (C)(2)
of the first paragraph of Section 4.04 or used to make a Restricted Payment
pursuant to clause (iii), (iv) or (viii) of the second paragraph of Section
4.04 and (II) if such capital contribution or Net Cash Proceeds are used to
consummate a transaction pursuant to which the Company Incurs Acquired
Indebtedness, the amount of such Net Cash Proceeds exceeds one-half of the
amount of Acquired Indebtedness so Incurred and (B) 80% of the fair market
value of property (other than cash and cash equivalents) received by the
Company after the Closing Date from the sale of its Capital Stock (other than
Disqualified Stock) to a Person that is not a Subsidiary of the Company, to the
extent (I) such capital contribution or sale of Capital Stock has not been used
to make a Restricted Payment pursuant to clause (iii), (iv) or (viii) of the
second paragraph of Section 4.04 and (II) if such capital contribution or
Capital Stock is used to consummate a transaction pursuant to which the Company
Incurs Acquired Indebtedness, 80% of the fair market value of the property
received exceeds one-half of the amount of Acquired Indebtedness so Incurred;
provided that such Indebtedness does not mature prior to the Stated Maturity of
the Securities and has an Average Life longer than the Securities; (ix)
Acquired Indebtedness; (x) Strategic Subordinated Indebtedness; (xi)
Indebtedness consisting of one or more loans to IMPSAT Argentina, evidenced by
one or more Promissory Notes and Guaranteed by the Company, in each case under
the Intermediary Documents; provided that the Promissory Notes shall, at all
times, have an aggregate principal amount equal to the aggregate principal
amount of the Certificates of Deposit and shall not be outstanding at any time
that the Certificates of Deposit are not validly outstanding and beneficially
owned by the Company; (xii) Indebtedness of any Restricted Subsidiary, to the
extent that the Company is the beneficial owner of such Indebtedness and such
Indebtedness is evidenced by an unsubordinated promissory note or participation
certificate issued to the Company by the record holder of such Indebtedness;
(xiii) Indebtedness of the Company, 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 July 30, 1996 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 and (xiv) subordinated Indebtedness of the Company (in addition to
Indebtedness permitted under clauses (i) through (xiii) above) in an aggregate
principal amount outstanding at any time not to exceed $100 million, less any
amount of such Indebtedness permanently repaid as provided under Section 4.11.
(b) Notwithstanding any other provision of this Section
4.03, the maximum amount of Indebtedness that the Company or a Restricted
Subsidiary may Incur pursuant to this Section 4.03 shall not be deemed to be
exceeded, with respect to any outstanding Indebtedness due solely to the result
of fluctuations in the exchange rates of currencies.
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41
(c) For purposes of determining any particular amount of
Indebtedness under this Section 4.03, (1) 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 and (2) any Liens
granted pursuant to the equal and ratable provisions referred to in Section
4.09 shall not be treated as Indebtedness. For purposes of determining
compliance with this Section 4.03, 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, and
from time to time may reclassify, such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of such
clauses.
SECTION 4.04. Limitation on Restricted Payments. 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
Restricted Subsidiary (other than (x) 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 (y) pro rata dividends or distributions on Common
Stock of Restricted Subsidiaries), (ii) purchase, redeem, retire or otherwise
acquire for value any shares of Capital Stock of the Company (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 Securities 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) above 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
be continuing, (B) the Company could not Incur at least $1.00 of Indebtedness
under the first paragraph of Section 4.03 or (C) the aggregate amount of all
Restricted Payments (the amount, if other than in cash, to be determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution) made 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
the amount of such loss) (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
with the Commission or provided to the Trustee pursuant to Section 4.18 plus
(2) the aggregate Net Cash Proceeds received by the Company after the Closing
Date as a capital contribution or from the issuance and sale of its Capital
Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of
the Company, including an issuance or sale permitted by this Indenture of
Indebtedness of the Company for cash subsequent to the Closing Date upon the
conversion of such Indebtedness into Capital Stock (other than Disqualified
Stock) of the Company, or from the issuance to a Person who is not a Subsidiary
of the Company of any options, warrants or other rights to acquire Capital
Stock of the Company (in each case,
<PAGE> 51
42
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 Securities),
in each case except to the extent such Net Cash Proceeds are used to Incur
Indebtedness pursuant to clause (viii) of the second paragraph under Section
4.03, plus (3) an amount equal to the net reduction in Investments made
pursuant to this first paragraph of this Section 4.04 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 or from the Net Cash Proceeds from the sale of any such
Investment (except, in each case, to the extent any such payment or proceeds
are 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, in
each case, the amount of Investments previously made by the Company or any
Restricted Subsidiary in such Person or Unrestricted Subsidiary.
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 Securities 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 part (a) of Section
4.03; (iii) 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 capital contribution or 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); (iv) 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
Securities in exchange for, or out of the proceeds of a capital contribution or
a substantially concurrent offering of, shares of the Capital Stock (other than
Disqualified Stock) of the Company (or options, warrants or other rights to
acquire such Capital Stock); (v) payments or distributions, to dissenting
stockholders pursuant to applicable law, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with Article Five;
(vi) 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 proceeding four quarters for which reports have been filed pursuant to
Section 4.18, (vii) Investments in any Person the primary business of which is
related, ancillary or complementary to the business of the Company and its
Restricted Subsidiaries on the date of such Investments; provided that the
aggregate amount of Investments made pursuant to this clause (vii) does not
exceed $20 million; (viii) Investments acquired in exchange for Capital Stock
(other than Disqualified Stock) of the Company or with the proceeds of such
Capital Stock; provided that such proceeds are so applied within 90 days of
receipt thereof; (ix) 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; (x) prior to the occurrence of a Public Market, the
purchase, redemption, retirement or other acquisition for value of shares of
Capital Stock of the Company or options to purchase such
<PAGE> 52
43
shares, held by directors, employees or officers, or former directors,
employees or officers, of the Company or a Restricted Subsidiary (or their
estates or beneficiaries under their estates), upon the death, disability,
retirement, termination of employment or pursuant to the terms of any agreement
under which such shares of Capital Stock or options were issued; provided that
the aggregate consideration paid for such purchase, redemption, retirement or
other acquisition for value of such shares or options after the Closing Date
does not exceed $5 million in the aggregate (unless such repurchases are made
with the proceeds of insurance policies and the shares are purchased from the
executors, administrators, testamentary trustees, heirs, legatees or
beneficiaries); and (xi) other Restricted Payments in an aggregate amount not
to exceed $25 million; provided that, except in the case of clauses (i) and
(iii), 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 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, an exchange of Capital Stock for Capital Stock or Indebtedness
referred to in clause (iii) or (iv) thereof and an Investment referred to in
clause (vi) thereof), and the Net Cash Proceeds from any capital contribution
or any issuance of Capital Stock referred to in clauses (iii), (iv) and (viii),
shall be included in calculating whether the conditions of clause (C) of the
first paragraph of this Section 4.04 have been met with respect to any
subsequent Restricted Payments. If the proceeds of an issuance of Capital Stock
of the Company are used for the redemption, repurchase or other acquisition of
the Securities, or Indebtedness that is pari passu with the Securities, then
the Net Cash Proceeds of such issuance shall be included in clause (C) of the
first paragraph of this Section 4.04 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 Section 4.04, 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 (xii) 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.
SECTION 4.05. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. 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 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.
<PAGE> 53
44
The foregoing provisions shall not restrict any encumbrances
or restrictions: (i) existing on the Closing Date 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 Section 4.05, (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 this 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 all or substantially 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 Securities; provided that such
encumbrances and restrictions expressly allow the payment of interest and
principal on such promissory notes; (vii) encumbrances or 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; or (viii) contained in the terms of any Indebtedness or any
agreement pursuant to which such Indebtedness was issued if (A) the encumbrance
or restriction applies only in the event of a payment default or a default with
respect to a financial covenant contained in such Indebtedness or agreement, (B)
the encumbrance or restriction is not materially more disadvantageous to the
Holders of the Securities than is customary in comparable financings (as
determined by the Company) and (C) the Company determines that any such
encumbrance or restriction will not materially affect the Company's ability to
make principal or interest payments on the Securities. Nothing contained in this
Section 4.05 shall prevent the Company or any Restricted Subsidiary from (1)
creating, incurring, assuming or suffering to exist any Liens otherwise
permitted in Section 4.09 or (2) restricting the
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45
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.
SECTION 4.06. Limitation on the Issuance and Sale of Capital
Stock of Restricted Subsidiaries. The Company will not sell, and will not
permit any Restricted Subsidiary, 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 of director's
qualifying shares 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 Section 4.04 if made on the
date of such issuance or sale; or (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 Section 4.11 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.
SECTION 4.07. Limitation on Issuances of Guarantees by
Restricted Subsidiaries. The Company will not permit any Restricted
Subsidiary, directly or indirectly, to Guarantee any Indebtedness of the
Company which is pari passu with or subordinate in right of payment to the
Securities ("Guaranteed Indebtedness"), unless (i) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to this Indenture
providing for a Guarantee (a "Subsidiary Guarantee") of payment of the
Securities 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 existed at the time such Person became a Restricted
Subsidiary and 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 Securities, then the Guarantee of such Guaranteed
Indebtedness shall be pari passu with, or subordinated to, the Subsidiary
Guarantee or (B) subordinated to the Securities, 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
Securities.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary may 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 this 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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46
SECTION 4.08. Limitation on Transactions with Shareholders
and Affiliates. 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, if such transaction is pursuant to a written agreement, 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 Section 4.04 (other than pursuant to clause (iv) of the
definition or "Permitted Investment"). Notwithstanding the foregoing, any
transaction or series of related transactions covered by the first paragraph of
this Section 4.08 and not covered by clauses (ii) through (v) 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.
SECTION 4.09. Limitation on Liens. 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
(including, without limitation, licenses), or any shares of Capital Stock or
Indebtedness of any Restricted Subsidiary, without making effective provision
for all of the Securities and all other amounts due under this 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
Securities, 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 Section 4.03;
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47
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 the Capital Stock of,
or any property or assets of, a Restricted Subsidiary securing Indebtedness of
such Restricted Subsidiary permitted under Section 4.03; (vi) Liens on the
Capital Stock of Restricted Subsidiaries securing up to $100.0 million of
Indebtedness Incurred under clause (vii) of the second paragraph of Section
4.03(a); (vii) 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 (viii) Permitted Liens.
SECTION 4.10. Limitation on Sale-Leaseback Transactions. 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 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 lease secures or relates to industrial
revenue or pollution control bonds; (iii) the transaction is solely between the
Company and any Wholly-Owned Restricted Subsidiary or solely between
Wholly-Owned Restricted Subsidiaries; or (iv) the Company or such Restricted
Subsidiary, within 12 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 Section 4.11.
SECTION 4.11. Limitation on Asset Sales. 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) at least 75% of the consideration received consists of
cash or Temporary Cash Investments; provided, however, that this clause (ii)
shall not apply to long-term assignments in capacity in a telecommunications
network. 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
with the Commission pursuant to Section 4.18), then the Company shall or shall
cause the relevant Restricted Subsidiary to (i) within 12 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 Section 4.07 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
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committing to so invest within 12 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
12-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 Section 4.11. The amount of such excess Net Cash Proceeds
required to be applied (or to be committed to be applied) during such 12-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 Section 4.11 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 Securities equal to the Excess Proceeds on such
date, at a purchase price equal to 101% of the principal amount of the
Securities, plus accrued interest (if any) to the Payment Date.
SECTION 4.12. Repurchase of Securities 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 Securities then
outstanding, at a purchase price equal to 101% of the principal amount of the
Securities on the relevant Payment Date, plus accrued interest (if any) to the
Payment Date. 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 Securities pursuant to such
Offer to Purchase or (ii) obtain any requisite consents under instruments
governing any such indebtedness of the Company to permit the repurchase of the
Securities. The Company shall first comply with the covenant in the preceding
sentence before it shall be required to repurchase Securities pursuant to this
Section 4.12.
SECTION 4.13. Existence. Subject to Articles Four and Five
of this Indenture, the Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its existence and the existence
of each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each such Subsidiary and the rights
(whether pursuant to charter, partnership certificate, agreement, statute or
otherwise), material licenses and franchises of the Company and each such
Subsidiary; provided that the Company shall not be required to preserve any
such right, license or franchise, or the existence of any Restricted Subsidiary
(other than itself), if the maintenance or preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiaries taken as a whole.
SECTION 4.14. Payment of Taxes and Other Claims. The Company
shall pay or discharge and shall cause each of its Subsidiaries to pay or
discharge, or cause to be paid or
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discharged, before the same shall become delinquent (i) all material taxes,
assessments and governmental charges levied or imposed upon (a) the Company or
any such Subsidiary, (b) the income or profits of any such Subsidiary which is
a corporation or (c) the property of the Company or any such Subsidiary and
(ii) all material lawful claims for labor, materials and supplies that, if
unpaid, might by law become a lien upon the property of the Company or any such
Subsidiary; provided that the Company shall not be required to pay or
discharge, or cause to be paid or discharged, any such tax, assessment, charge
or claim the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established.
SECTION 4.15. Maintenance of Properties and Insurance. The
Company shall cause all properties used or useful in the conduct of its
business or the business of any of its Restricted Subsidiaries, to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided that nothing in this Section 4.15 shall prevent the Company or any
such Restricted Subsidiary from discontinuing the use, operation or maintenance
of any of such properties or disposing on any of them, if such discontinuance
or disposal is, in the judgment of the Company, desirable in the conduct of the
business of the Company or such Restricted Subsidiary.
The Company shall provide or cause to be provided, for itself
and its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, including, but
not limited to, products liability insurance and public liability insurance,
with reputable insurers or with the government of the United States of America,
or an agency or instrumentality thereof, in such amounts, with such deductibles
and by such methods as shall be customary for corporations similarly situated
in the industry in which the Company or such Restricted Subsidiary, as the case
may be, is then conducting business.
SECTION 4.16. Notice of Defaults. In the event that the
Company becomes aware of any Default or Event of Default, the Company promptly
after it becomes aware thereof, shall give written notice thereof to the
Trustee.
SECTION 4.17. Compliance Certificates. (a) The Company
shall deliver to the Trustee, within 90 days after the end of the Company's
fiscal year, an Officers' Certificate stating whether or not the signers know
of any Default or Event of Default that occurred during such fiscal year. Such
certificates shall contain a certification from the principal executive
officer, principal financial officer or principal accounting officer of the
Company that a review has been conducted of the activities of the Company and
the Restricted Subsidiaries and the Company's and the Restricted Subsidiaries'
performance under this Indenture and that, to the best knowledge of such
officer, the Company has complied with all conditions and covenants under this
Indenture. For purposes of this Section 4.17, such compliance shall be
determined without regard to any
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period of grace or requirement of notice provided under this Indenture. If any
such officer knows of such a Default or Event of Default, the certificate shall
describe any such Default or Event of Default and its status.
(b) The Company shall deliver to the Trustee, within 90
days after the end of its fiscal year, a certificate signed by the Company's
independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the
Securities as they relate to accounting matters, (ii) that they have read the
most recent Officers' Certificate delivered to the Trustee pursuant to
paragraph (a) of this Section 4.17 and (iii) whether, in connection with their
audit examination, anything came to their attention that caused them to believe
that the Company was not in compliance with any of the terms, covenants,
provisions or conditions of Article Four and Section 5.01 of this Indenture as
they pertain to accounting matters and, if any Default or Event of Default has
come to their attention, specifying the nature and period of existence thereof;
provided that such independent certified public accountants shall not be liable
in respect of such statement by reason of any failure to obtain knowledge of
any such Default or Event of Default that would not be disclosed in the course
of an audit examination conducted in accordance with generally accepted
auditing standards in effect at the date of such examination.
(c) Within 90 days of the end of each of the Company's
fiscal years, the Company shall deliver to the Trustee a list of all
Significant Subsidiaries. The Trustee shall have no duty with respect to any
such list except to keep it on file and available for inspection by the
Holders.
SECTION 4.18. Commission Reports and Reports to Holders.
Whether or not the Company is required to file reports with the Commission, if
any Securities 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 Exchange Act 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 Securities 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.
SECTION 4.19. Waiver of Stay, Extension or Usury Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not
at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of, premium, if any, or interest on the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or that may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. The Company will
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 or the Company shall be issued or
distributed to the stockholders of the Company) or permit any Person to merge
with or into the Company unless: (i) the Company shall be the continuing
Person, or the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or that acquired or leased such property
and assets of the Company shall be a corporation organized and validly existing
under the laws of the United States of America or any jurisdiction thereof and
shall expressly assume, by a supplemental indenture, executed and delivered to
the Trustee, all of the obligations of the Company on all of the Securities and
hereunder; (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
any Person becoming the successor obligor of the Securities shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
the Company 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 Securities, as the case may be,
could Incur at least $1.00 of Indebtedness under the first paragraph of Section
4.03; provided that this clause (iv) shall not apply to (x) a consolidation,
merger or sale of all (but not less than all) of the assets of the Company if
all Liens and Indebtedness of the Company or any Person becoming the successor
obligor of the Securities, as the case may be, and its Restricted Subsidiaries
outstanding immediately after such transaction would, if Incurred at such time,
have been permitted to be Incurred (and all such Liens and Indebtedness, other
than Liens and Indebtedness of the Company and its Restricted Subsidiaries
outstanding immediately prior to the transaction, shall be deemed to have been
Incurred) for all purposes of this Indenture or (y) a consolidation, merger or
sale of all or substantially all of the assets of the Company if immediately
after giving effect to such transaction on a pro forma basis, the Company or
any Person becoming the successor obligor of the Securities shall have an
Indebtedness to EBITDA Ratio equal to or less than the Indebtedness to EBITDA
Ratio of the Company immediately prior to such transaction; and (v) the Company
delivers to the Trustee an Officers' Certificate (attaching the arithmetic
computations to demonstrate compliance with clauses (iii) and (iv) above) 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
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Company; and provided further that any such transaction shall not have as one
of its purposes the evasion of the foregoing limitations.
SECTION 5.02. Successor Substituted. Upon any consolidation
or merger, or any sale, conveyance, transfer or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; provided that the Company shall not be released from its
obligations to pay the principal of, premium, if any, or interest on the
Securities in the case of a lease of all or substantially all of its property
and assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. Any of the following events
shall constitute an Event of Default:
(a) default in the payment of principal of (or premium,
if any, on) any Security when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise;
(b) default in the payment of interest on any Security
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 this
Indenture or under the Securities 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 Securities;
(d) there occurs with respect to any issue or issues of
Indebtedness of the Company 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 (not covered by
insurance) for the payment of money in excess of $5 million in the
aggregate for all such final judgments or orders
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against all such Persons (treating any deductibles, self-insurance or
retention as not so covered) shall be rendered against the Company or
any Significant Subsidiary and shall not be paid or discharged, and
either (A) an enforcement proceeding shall have been commenced by a
creditor upon such judgment or order or (B) there shall be any 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 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 or
any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary or
(C) the winding up or liquidation of the affairs of the Company 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; or
(g) the Company 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 or any Significant Subsidiary or for
all or substantially all of the property and assets of the Company or
any Significant Subsidiary or (C) effects any general assignment for
the benefit of creditors.
SECTION 6.02. Acceleration. If an Event of Default (other
than an Event of Default specified in clause (f) or (g) of Section 6.01 that
occurs with respect to the Company) occurs and is continuing under this
Indenture, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Securities, 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 Securities 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) of Section 6.01 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) of Section 6.01
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 this Indenture have occurred and are continuing after giving pro
forma effect to such remedy, cure or waiver. If an Event of Default specified
in
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clause (f) or (g) of Section 6.01 occurs with respect to the Company, the
principal of, premium, if any, and accrued interest on the Securities 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.
At any time after such declaration of acceleration, but before
a judgment or decree for the payment of the money due has been obtained by the
Trustee, the Holders of at least a majority in principal amount of the
outstanding Securities, by written notice to the Company and to the Trustee,
may waive all past Defaults and rescind and annul a declaration of acceleration
and its consequences if (a) the Company has paid or deposited with the Trustee
a sum sufficient to pay (i) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, (ii) all overdue interest on all Securities,
(iii) the principal of and premium, if any, on any Securities that have become
due otherwise than by such declaration or occurrence of acceleration and
interest thereon at the rate prescribed therefor by such Securities, and (iv)
to the extent that payment of such interest is lawful, interest upon overdue
interest, if any, at the rate prescribed therefor by such Securities, (b) all
existing Events of Default, other than the non-payment of the principal of,
premium, if any, and accrued interest on the Securities that have become due
solely by such declaration of acceleration have been cured or waived as
provided in Section 6.04 and (c) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy by proceeding at
law or in equity to collect the payment of principal of, premium, if any, or
interest on the Securities or to enforce the performance of any provision of
the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections
6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount of
the outstanding Securities, by notice to the Trustee, may waive all existing
Defaults and Events of Default and its consequences, except a Default in the
payment of principal of, premium, if any, or interest on any Security as
specified in clause (a) or (b) of Section 6.01 or in respect of a covenant or
provision of this Indenture which cannot be modified or amended without the
consent of the Holder of each outstanding Security affected. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereto.
SECTION 6.05. Control by Majority. The Holders of at least a
majority in aggregate principal amount of the outstanding Securities may,
subject to Section 7.02(iv), 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
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follow any direction that conflicts with law or this 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 Securities not
joining in the giving of such direction and may take any other action it deems
proper that is not inconsistent with any direction received from Holders of
Securities pursuant to this Section 6.05.
SECTION 6.06. Limitation on Suits. A Holder may not pursue
any remedy with respect to
this Indenture or the
Securities 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 Securities 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, liabilities or expenses
which may be incurred in compliance with such request;
(iv) the Trustee does not comply with the request within
60 days after receipt of the written request and the offer of
indemnity; and
(v) during such 60-day period, the Holders of a majority
in aggregate principal amount of the outstanding Securities do not
give the Trustee a direction that is inconsistent with the request.
For purposes of Section 6.05 and this Section 6.06, the
Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Securities have concurred in any request or direction of the Trustee to pursue
any remedy available to the Trustee or the Holders with respect to this
Indenture or the Securities or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Security to receive payment of the principal of, premium, if any, or
interest on such Security, or to bring suit for the enforcement of any such
payment, on or after the due date expressed in such Security, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default in payment of principal, premium or interest specified in clause (a) or
(b) of Section 6.01 occurs and is continuing, the Trustee may recover judgment
in its own name and as trustee of an express trust
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against the Company or any other obligor of the Securities for the whole amount
of principal, premium, if any, and accrued interest remaining unpaid, together
with interest on overdue principal, premium, if any, and, to the extent that
payment of such interest is lawful, interest on overdue installments of
interest, in each case at the rate specified in the Securities, and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor of the Securities), its creditors or its
property and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Securities or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money
pursuant to this Article Six, it shall pay out the money in the following
order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to the Holders for amounts then due and unpaid for
principal of, premium, if any, and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal, premium, if any, and interest, respectively; and
Third: to the Company or any other obligors of the
Securities, as their interests may appear, or as a court of competent
jurisdiction may direct.
The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Holders pursuant to this
Section 6.10.
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SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court may
require any party litigant in such suit to file an undertaking to pay the costs
of the suit, and the court may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by Holders of more than 10% in principal
amount of the outstanding Securities.
SECTION 6.12. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then, and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Company, Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Securities in Section 2.09, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.14. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Six or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General. The duties and responsibilities of
the Trustee shall be as provided by the TIA and as set forth herein. Whether
or not herein expressly so provided, every provision of this Indenture relating
to the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Article Seven.
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SECTION 7.02. Certain Rights of Trustee. Subject to TIA
Sections 315(a) through (d):
(i) the Trustee may rely, and shall be protected in
acting or refraining from acting, upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document and may in good
faith conclusively rely as to the truth of the statements and the
correctness of the opinions therein;
(ii) before the Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel. The
Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such certificate, opinion and/or an
accountants' certificate;
(iii) the Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any
attorney or agent appointed with due care;
(iv) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee security or indemnity reasonably
satisfactory to it against the costs, expenses and liabilities that
might be incurred by it in compliance with such request or direction;
(v) the Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized
or within its rights or powers or for any action it takes or omits to
take in accordance with the direction of the Holders of a majority in
principal amount of the outstanding Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture; provided that the Trustee's conduct
does not constitute negligence or bad faith;
(vi) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(vii) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall
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determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company
personally or by agent or attorney; and
(viii) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by
a Board Resolution.
SECTION 7.03. Individual Rights of Trustee. The Trustee, in
its individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not the Trustee. Any Agent may do the
same with like rights. However, the Trustee is subject to TIA Sections 310(b)
and 311.
SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the
Securities, (ii) shall not be accountable for the Company's use or application
of the proceeds from the Securities and (iii) shall not be responsible for any
statement in the Securities other than its certificate of authentication.
SECTION 7.05. Notice of Default. If any Default or any Event
of Default occurs and is continuing and if such Default or Event of Default is
known to an officer assigned to administer corporate trust matters of the
Trustee, the Trustee shall mail to each Holder in the manner and to the extent
provided in TIA Section 313(c) notice of the Default or Event of Default within
45 days after it occurs, unless such Default or Event of Default has been
cured; provided, however, that, except in the case of a default in the payment
of the principal of, premium, if any, or interest on any Security, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days
after each May 15, beginning with May 15, 1999, the Trustee shall mail to each
Holder as provided in TIA Section 313(c) a brief report that complies with TIA
Section 313(a) dated as of such May 15, if required by TIA Section 313(a).
A copy of each report at the time of its mailing to the
Holders of Securities shall be mailed to the Company and filed with the
Commission and each stock exchange on which the Securities are listed in
accordance with TIA Section 313(d). The Company shall promptly notify the
Trustee when the Securities are listed on any stock exchange or of any
delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time such compensation as shall be agreed upon
in writing for its services. The compensation of the Trustee shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses (including costs of collection) and advances incurred or
made by the Trustee.
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Such expenses shall include the reasonable compensation and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it
harmless against, any loss or liability or expense incurred by it without
negligence or bad faith on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and the
Securities, including, without limitation, the costs and expenses of
investigating or defending itself against any claim or liability and of
complying with any process served upon it or any of its officers in connection
with the exercise or performance of any of its powers or duties under this
Indenture and the Securities.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of, premium, if any, and
interest on, particular Securities.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (f) or (g) of Section
6.01, the expenses and the compensation for the services will be intended to
constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
SECTION 7.08. Replacement of Trustee. A resignation or
removal of the Trustee and appointment of a successor Trustee shall become
effective only upon the successor Trustee's acceptance of appointment as
provided in this Section 7.08.
The Trustee may resign at any time by so notifying the Company
in writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Trustee in writing and may appoint a
successor Trustee with the consent of the Company. The Company may at any time
remove the Trustee, by Company Order given at least 30 days prior to the date
of the proposed removal if: (i) the Trustee is no longer eligible under
Section 7.10; (ii) the Trustee is adjudged a bankrupt or an insolvent; (iii) a
receiver or other public officer takes charge of the Trustee or its property;
or (iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists
in the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the outstanding Securities
may appoint a successor Trustee to replace the successor Trustee appointed by
the Company. If the successor Trustee does not deliver its written acceptance
required by the next succeeding paragraph of this Section 7.08 within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of a majority in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as
Trustee to the successor Trustee, (ii) the resignation or removal of the
retiring Trustee shall become effective and (iii) the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. A
successor Trustee shall mail notice of its succession to each Holder.
If the Trustee is no longer eligible under Section 7.10 or
shall fail to comply with TIA Section 310(b), any Holder who satisfies the
requirements of TIA Section 310(b) may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
The Company shall give notice of any resignation and any
removal of the Trustee and each appointment of a successor Trustee to all
Holders. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue
indefinitely for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc. If the
Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation or
national banking association, the resulting, surviving or transferee
corporation or national banking association without any further act shall be
the successor Trustee with the same effect as if the successor Trustee had been
named as the Trustee herein, provided such corporation shall be otherwise
qualified and eligible under this Article.
SECTION 7.10. Eligibility. This Indenture shall always have
a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee
shall have a combined capital and surplus of at least $25,000,000 as set forth
in its most recent published annual report of condition.
SECTION 7.11. Money Held in Trust. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may agree
in writing with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law and except for
money held in trust under Article Eight of this Indenture.
SECTION 7.12. Withholding Taxes. The Trustee, as agent for
the Company, shall exclude and withhold from each payment of principal and
interest and other amounts due hereunder or under the Securities any and all
withholding taxes applicable thereto as required by the federal law of the
United States or the law of the State of New York or any political subdivision
thereof ("U.S. Taxes"). The Trustee agrees to act as such withholding agent
and, in connection therewith, whenever any present or future U.S. Taxes or
similar charges are required
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to be withheld with respect to any amounts payable in respect of the
Securities, to withhold such amounts and timely pay the same to the appropriate
authority in the name of and on behalf of the holders of the Securities, that
it will file any necessary withholding tax returns or statements when due, and
that, as promptly as possible after the payment thereof, it will deliver to
each holder of a Security appropriate documentation showing the payment
thereof, together with such additional documentary evidence as such holders may
reasonably request from time to time.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations. Except
as otherwise provided in this Section 8.01, the Company may terminate its
obligations under the Securities and this Indenture if:
(i) all Securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities that have been
replaced or Securities that are paid pursuant to Section 4.01 or
Securities for whose payment money or securities have theretofore been
held in trust and thereafter repaid to the Company, as provided in
Section 8.05) have been delivered to the Trustee for cancellation and
the Company has paid all sums payable by it hereunder; or
(ii) (A) the Securities mature within one year or all of
them are to be called for redemption within one year under
arrangements satisfactory to the Trustee for giving the notice of
redemption, (B) the Company irrevocably deposits in trust with the
Trustee during such one-year period, under the terms of an irrevocable
trust agreement in form and substance satisfactory to the Trustee, as
trust funds solely for the benefit of the Holders for that purpose,
money or U.S. Government Obligations sufficient (in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee), without
consideration of any reinvestment of any interest thereon, to pay
principal, premium, if, any, and interest on the Securities to
maturity or redemption, as the case may be, and to pay all other sums
payable by it hereunder, (C) no Default or Event of Default with
respect to the Securities shall have occurred and be continuing on the
date of such deposit, (D) such deposit will not result in a breach or
violation of, or constitute a default under, this Indenture or any
other agreement or instrument to which the Company is a party or by
which it is bound and (E) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, in each case stating
that all conditions precedent provided for herein relating to the
satisfaction and discharge of this Indenture have been complied with.
With respect to the foregoing clause (i), the Company's
obligations under Section 7.07 shall survive. With respect to the foregoing
clause (ii), the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05,
2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall
survive until the Securities are no longer outstanding. Thereafter, only the
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Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After any
such irrevocable deposit, the Trustee upon request shall acknowledge in writing
the discharge of the Company's obligations under the Securities and this
Indenture except for those surviving obligations specified above.
SECTION 8.02. Defeasance and Discharge of Indenture. The
Company will be deemed to have paid and will be discharged from any and all
obligations in respect of the Securities on the 123rd day or, to the extent
applicable under clause (B) below, one year after the date of the deposit
referred to in clause (A) of this Section 8.02, and the provisions of this
Indenture will no longer be in effect with respect to the Securities, and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same if:
(A) the Company has irrevocably deposited or caused to be
irrevocably deposited with the Trustee (or another trustee satisfying
the requirements of Section 7.10) and conveyed all right, title and
interest for the benefit of the Holders, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the
Trustee as trust funds in trust, specifically pledged to the Trustee
for the benefit of the Holders as security for payment of the
principal of, premium, if any, and interest, if any, on the
Securities, and dedicated solely to, the benefit of the Holders, in
and to (1) money in an amount, (2) U.S. Government Obligations that,
through the payment of interest, premium, if any, and principal in
respect thereof in accordance with their terms, will provide, not
later than one day before the due date of any payment referred to in
this clause (A), money in an amount or (3) a combination thereof in an
amount sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, without
consideration of the reinvestment of such interest and after payment
of all federal, state and local taxes or other charges and assessments
in respect thereof payable by the Trustee, the principal of, premium,
if any, and accrued interest on the outstanding Securities at the
Stated Maturity of such principal or interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations to the payment of
such principal, premium, if any, and interest with respect to the
Securities;
(B) the Company shall have delivered to the Trustee (i)
either (x) an Opinion of Counsel to the effect that Holders will not
recognize income, gain or loss for United States federal income tax
purposes as a result of the Company's exercise of its option under
this Section 8.02 and will be subject to United States 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 option had not been exercised, which
Opinion of Counsel must be based upon (and accompanied by a copy of) a
ruling of the United States Internal Revenue Service to the same
effect unless there has been a change in applicable United States
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 United States Internal Revenue Service to the same effect as the
aforementioned Opinion of Counsel; and (ii) an Opinion of Counsel to
the effect that (x) the creation of the defeasance trust does not
violate the Investment Company Act of
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1940 and (y) after the passage of 123 days following the deposit
(except, with respect to any trust funds for the account of any Holder
who may be deemed to be an "insider" for purposes of the United States
Bankruptcy Code, after one year following the deposit), the trust
funds 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 in a case commenced by or against the Company under
either such statute, and either (I) the trust funds will no longer
remain the property of the Company (and therefore will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally) or (II) if a
court were to rule under any such law in any case or proceeding that
the trust funds remained property of the Company (a) assuming such
trust funds remained in the possession of the Trustee prior to such
court ruling to the extent not paid to the Holders, the Trustee will
hold, for the benefit of the Holders, a valid and perfected security
interest in such trust funds that is not avoidable in bankruptcy or
otherwise (except for the effect of Section 552(b) of the United
States Bankruptcy Code on interest on the trust funds accruing after
the commencement of a case under such statute), (b) the Holders will
be entitled to receive adequate protection of their interests in such
trust funds if such trust funds are used in such case or proceeding
and (c) no property, rights in property or other interests granted to
the Trustee or the Holders in exchange for, or with respect to, such
trust funds will be subject to any prior rights of holders of other
Indebtedness of the Company or any of its Subsidiaries;
(C) immediately after giving effect to such deposit on a
pro forma basis, no Default or Event of Default shall have occurred
and be continuing on the date of such deposit or during the period
ending on the 123rd day (or one year) 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;
(D) if the Securities are then listed on a national
securities exchange, the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that the Securities will not be
delisted as a result of such deposit, defeasance and discharge; and
(E) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day
(or one year) period referred to in clause (B)(2)(y) of this Section 8.02, none
of the Company's obligations under this Indenture shall be discharged.
Subsequent to the end of such 123-day (or one-year) period with respect to this
Section 8.02, the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05,
2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 8.04, 8.05 and 8.06 shall
survive until the Securities are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.07, 8.04, 8.05 and 8.06 shall survive. If
and when a ruling from the United States Internal Revenue Service or an Opinion
of Counsel referred to in clause (B)(i) of this Section 8.02 may be provided
specifically
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without regard to, and not in reliance upon, the continuance of the Company's
obligations under Section 4.01, then the Company's obligations under such
Section 4.01 shall cease upon delivery to the Trustee of such ruling or Opinion
of Counsel and compliance with the other conditions precedent provided for
herein relating to the defeasance contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Securities and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. Defeasance of Certain Obligations. The Company
may omit to comply with any term, provision or condition set forth in clauses
(iii) and (iv) of Section 5.01 and Sections 4.03 through 4.11, and clause (c)
of Section 6.01 with respect to clauses (iii) and (iv) of Section 5.01 and
clauses (d) and (e) of Section 6.01 shall be deemed not to be Events of
Default, in each case with respect to the outstanding Securities if:
(i) the Company has irrevocably deposited or caused to be
irrevocably deposited with the Trustee (or another trustee satisfying
the requirements of Section 7.10) and conveyed all right, title and
interest to the Trustee for the benefit of the Holders, under the
terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee as trust funds in trust, specifically
pledged to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on
the Securities, and dedicated solely to, the benefit of the Holders,
in and to (A) money in an amount, (B) U.S. Government Obligations
that, through the payment of interest and principal in respect thereof
in accordance with their terms, will provide, not later than one day
before the due date of any payment referred to in this clause (i),
money in an amount or (C) a combination thereof in an amount
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, without
consideration of the reinvestment of such interest and after payment
of all federal, state and local taxes or other charges and assessments
in respect thereof payable by the Trustee, the principal of, premium,
if any, and interest on the outstanding Securities on the Stated
Maturity of such principal or interest; provided that the Trustee
shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to the payment of such
principal, premium, if any, and interest with respect to the
Securities;
(ii) such deposit will not result in a breach or violation
of, or constitute a default under, this Indenture or any other
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it is bound;
(iii) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit;
(iv) the Company has delivered to the Trustee an Opinion
of Counsel to the effect that (A) the creation of the defeasance trust
does not violate the Investment Company
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Act of 1940, (B) the Holders have a valid first-priority security
interest in the trust funds, (C) the Holders will not recognize
income, gain or loss for United States federal income tax purposes as
a result of such deposit and the defeasance of the obligations
referred to in the first paragraph of this Section 8.03 and will be
subject to United States 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, and (D) after the
passage of 123 days following the deposit (except, with respect to any
trust funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust funds 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 in a case commenced
by or against the Company under either such statute, and either (1)
the trust funds will no longer remain the property of the Company (and
therefore will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally) or (2) if a court were to rule under any
such law in any case or proceeding that the trust funds remained the
property of the Company (x) assuming such trust funds remained in the
possession of the Trustee prior to such court ruling to the extent not
paid to the Holders, the Trustee will hold, for the benefit of the
Holders, a valid and perfected security interest in such trust funds
that is not avoidable in bankruptcy or otherwise (except for the
effect of Section 552(b) of the United States Bankruptcy Code on
interest on the trust funds accruing after the commencement of a case
under such statute), (y) the Holders will be entitled to receive
adequate protection of their interests in such trust funds if such
trust funds are used in such case or proceeding and (z) no property,
rights in property or other interests granted to the Trustee or the
Holders in exchange for, or with respect to, such trust funds will be
subject to any prior rights of holders of other Indebtedness of the
Company or any of its Subsidiaries;
(v) if the Securities are then listed on a national
securities exchange, the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that such deposit and defeasance
will not cause the Securities to be delisted; and
(vi) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
SECTION 8.04. Application of Trust Money. Subject to Section
8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Securities and this Indenture to
the payment of principal of, premium, if any, and interest on the Securities;
but such money need not be segregated from other funds except to the extent
required by law.
SECTION 8.05. Repayment to Company. Subject to Sections
7.07, 8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay
to the Company upon request any
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excess money held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall
pay to the Company any money held by them for the payment of principal,
premium, if any, or interest that remains unclaimed for two years; provided
that the Trustee or such Paying Agent before being required to make any payment
may cause to be published at the expense of the Company once in a newspaper of
general circulation in the City of New York or mail to each Holder entitled to
such money at such Holder's address (as set forth in the Security Register)
notice that such money remains unclaimed and that after a date specified
therein (which shall be at least 30 days from the date of such publication or
mailing) any unclaimed balance of such money then remaining will be repaid to
the Company. After payment to the Company, Holders entitled to such money must
look to the Company for payment as general creditors unless an applicable law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance with
Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02
or 8.03, as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.01, 8.02 or 8.03, as the case may be; provided that, if the
Company has made any payment of principal of, premium, if any, or interest on
any Securities because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
SECTION 8.07. Insiders. With respect to the determination of the
Persons constituting beneficial owners of Securities and whether any such
Person is an "insider" for purposes of Sections 8.02(B)(ii)(y) and 8.03(iv)(E),
the Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Officers' Certificate.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, when
authorized by resolutions of its Boards of Directors, and the Trustee may amend
or supplement this Indenture or the Securities without notice to or the consent
of any Holder:
(a) to cure any ambiguity, defect or inconsistency in
this Indenture; provided that such amendments or supplements shall not
adversely affect the interests of the Holders in any material respect;
(b) to comply with Article Five;
<PAGE> 77
68
(c) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(d) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee; or
(e) to make any change that, in the good faith opinion of
the Board of Directors as evidenced by a Board Resolution, does not
materially and adversely affect the rights of any Holder.
SECTION 9.02. With Consent of Holders. Subject to Sections
6.04 and 6.07 and without prior notice to the Holders, the Company, when
authorized by its Boards of Directors (as evidenced by a Board Resolution), and
the Trustee may amend this Indenture and the Securities with the written
consent of the Holders of a majority in principal amount of the Securities then
outstanding, and the Holders of a majority in principal amount of the
Securities then outstanding by written notice to the Trustee may waive future
compliance by the Company with any provision of this Indenture or the
Securities.
Notwithstanding the provisions of this Section 9.02, without
the consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or
any installment of interest on, any Security;
(ii) reduce the principal amount of, or premium, if any,
or interest on, any Security, or adversely affect any right of
repayment at the option of any Holder of any Security, or;
(iii) change the place or currency of payment of principal
of, or premium, if any, or interest on, any Security;
(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
Security;
(v) reduce the above-stated percentage of outstanding
Securities the consent of whose Holders is required for any
supplemental indenture, for any waiver of compliance with certain
provisions of this Indenture or for waiver of certain Defaults and
their consequences provided for in this Indenture;
(vi) waive a default in the payment of principal of,
premium, if any, or interest on the Securities; or
<PAGE> 78
69
(vii) modify any of the provisions of this Section 9.02,
except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each outstanding Security
affected thereby.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby
a notice briefly describing the amendment, supplement or waiver. The Company
will mail supplemental indentures to Holders upon request. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. Revocation and Effect of Consent. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the Security of the
consenting Holder, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to its
Security or portion of its Security. Such revocation shall be effective only
if the Trustee receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective. An amendment, supplement or waiver
shall become effective on receipt by the Trustee of written consents from the
Holders of the requisite percentage in principal amount of the outstanding
Securities.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies) and only those persons shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder unless it is of the type described in any of clauses
(i) through (v) of Section 9.02. In case of an amendment or waiver of the type
described in clauses (i) through (v) of Section 9.02, the amendment or waiver
shall bind each Holder who has consented to it and every subsequent Holder of a
Security that evidences the same indebtedness as the Security of the consenting
Holder.
SECTION 9.04. Notation on or Exchange of Securities. If an
amendment, supplement or waiver changes the terms of a Security, the Trustee
may require the Holder to deliver such Security to the Trustee. At the
Company's expense the Trustee may place an
<PAGE> 79
70
appropriate notation on the Security about the changed terms and return it to
the Holder and the Trustee may place an appropriate notation on any Security
thereafter authenticated. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article Nine is authorized or permitted by
this Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver if the same does not adversely affect the
rights, duties or immunities of the Trustee under this Indenture or otherwise.
The Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.06. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article Nine shall conform to
the requirements of the TIA as then in effect.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act of 1939. Prior to the
effectiveness of the Registration Statement, this Indenture shall incorporate
and be governed by the provisions of the TIA that are required to be part of
and to govern indentures qualified under the TIA. After the effectiveness of
the Registration Statement, this Indenture shall be subject to the provisions
of the TIA that are required to be a part of this Indenture and shall, to the
extent applicable, be governed by such provisions.
SECTION 10.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:
if to the Company:
Alferez Pareja 256
1107 Buenos Aires Argentina
Attention: Chief Executive Officer
<PAGE> 80
71
if to the Trustee:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed
to him at his address as it appears on the Security Register by first class
mail and shall be sufficiently given to him if so mailed within the time
prescribed. Copies of any such communication or notice to a Holder shall also
be mailed to the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except for a notice to the Trustee, which is deemed given only when received,
and except as otherwise provided in this Indenture, if a notice or
communication is mailed in the manner provided in this Section 10.02, it is
duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 10.03. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of
such Counsel, all such conditions precedent have been complied with.
<PAGE> 81
72
SECTION 10.04. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each person signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of
each such person, such condition or covenant has been complied with;
provided, however, that, with respect to matters of fact, an Opinion
of Counsel may rely on an Officers' Certificate or certificates of
public officials.
SECTION 10.05. Rules by Trustee, Paying Agent or Registrar.
The Trustee may make reasonable rules for action by or at a meeting of Holders.
The Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 10.06. Payment Date Other Than a Business Day. If an
Interest Payment Date, Redemption Date, Payment Date, Stated Maturity or date
of maturity of any Security shall not be a Business Day, then payment of
principal of, premium, if any, or interest on such Security, as the case may
be, need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Payment Date, Redemption Date, or at the Stated Maturity or date of
maturity of such Security; provided that no interest shall accrue for the
period from and after such Interest Payment Date, Payment Date, Redemption
Date, Stated Maturity or date of maturity, as the case may be.
SECTION 10.07. Governing Law. This Indenture and the
Securities shall be governed by the laws of the State of New York. The Company
hereby agrees that service of process upon the Company's registered agent in
the State of Delaware, currently located at Corporation Trust Center, 1209
Orange Street, Wilmington, DE, 19801 and written notice of such service to the
Company (mailed or delivered to the Chief Executive Officer of the Company at
its principal office at Alferez Pareja 256, 1107 Buenos Aires, Republic of
Argentina), shall be deemed to be in every respect effective service of process
upon the Company, in any suit, action or proceeding arising out of or relating
to this Indenture or the Securities.
Each of the Company, the Trustee and the Holders agrees to
submit to the non-exclusive jurisdiction of the federal or state courts of the
State of New York sitting in the City of
<PAGE> 82
73
New York, Borough of Manhatan, in any such action or proceeding. The Company
hereby waives to the fullest extent permitted by law any defense to the
institution or continuance of any such suit, action or proceeding based upon
lack of proper venue, inconvenient forum or similar grounds.
SECTION 10.08. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any Subsidiary of the Company. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.09. No Recourse Against Others. No recourse for
the payment of the principal of, premium, if any, or interest on any of the
Securities, 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
contained in this Indenture, or in any of the Securities, or because of the
creation of any Indebtedness represented thereby, shall be had against any
incorporator or against any past, present or future partner, shareholder, other
equity holder, officer, director, employee or controlling person, as such, of
the Company or of any successor Person, either directly or through the Company
or any successor Person, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Securities.
SECTION 10.10. Successors. All agreements of the Company in
this Indenture and the Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 10.11. Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
SECTION 10.12. Currency Indemnity. U.S. dollars are the sole
currency of account and payment for all sums payable by the Company under or in
connection with the Securities, including damages. Any amount received or
recovered in a currency other than U.S. 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 otherwise) by any Holder of a
Security in respect of any sum expressed to be due to it from the Company shall
only constitute a discharge to the Company to the extent of the U.S. dollar
amount which the recipient is able to purchase with the amount so received or
recovered in that 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 U.S. dollar amount is less than
the U.S. dollar amount expressed to be due to the recipient under any Security,
the Company shall indemnify the recipient against any loss sustained by it as a
result. In any event, the Company 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 Security to certify in a satisfactory manner
(indicating the sources of information used) that it would have suffered a loss
had an actual purchase of U.S. dollars been
<PAGE> 83
74
made with the amount so received in that other currency on the date of receipt
or recovery (or, if a purchase of U.S. 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 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 Security 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 Security.
SECTION 10.13. Currency Translations. For purposes of
determining compliance with this 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 of such foreign
currency amount is received, incurred or paid. For other financial reporting
purposes, currency translations will be performed in accordance with GAAP.
SECTION 10.14. Table of Contents, Headings, Etc. The Table
of Contents, Cross-Reference Table and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms and provisions hereof.
<PAGE> 84
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
IMPSAT CORPORATION
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
------------------------------------
Name:
Title:
<PAGE> 85
EXHIBIT A
[FACE OF NOTE]
IMPSAT CORPORATION
12_% Senior Note Due 2008
[CUSIP_________] [CINS_________]
No. $_________
IMPSAT Corporation, a Delaware corporation (the "Company",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to __________, or its registered assigns,
the principal sum of ___________ ($_____) on [ ], 2008.
Interest Payment Dates: June 15 and December 15, commencing
December 15, 1998.
Regular Record Dates: June 1 and December 1.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
<PAGE> 86
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
IMPSAT CORPORATION
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
<PAGE> 87
A-3
(Form of Trustee's Certificate of Authentication)
This is one of the 12_% Senior Notes due 2008 described in the within-mentioned
Indenture.
Date: June 17, 1998 THE BANK OF NEW YORK,
as Trustee
By:
-----------------------------
Authorized Signatory
<PAGE> 88
A-4
[REVERSE SIDE OF NOTE]
IMPSAT CORPORATION
12_% Senior Note due 2008
1. Principal and Interest.
The Company will pay the principal of this Note on June 15,
2008.
The Company promises to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of
record of the Notes at the close of business on the June 15 or December 15
immediately preceding the Interest Payment Date) on each Interest Payment Date,
commencing December 15, 1998.
If an exchange offer registered under the Securities Act is
not consummated, and a shelf registration statement under the Securities Act
with respect to resales of the Notes is not declared effective by the
Commission, on or before December 17, 1998 in accordance with the terms of the
Registration Rights Agreement dated June 17, 1998 among the Company, Morgan
Stanley & Co. Incorporated and Credit Suisse First Boston Corporation, the
rate of interest will increase by 0.5% per annum to 12_% per annum, payable in
cash semiannually, in arrears, on each Interest Payment Date, commencing June
15, 1999. Notwithstanding the preceding two sentences, the failure to cause
such exchange offer to be consummated or such shelf registration statement to
be declared effective shall be deemed not to be a default or breach of a
covenant for purposes of Section 6.01(c) of the Indenture. Upon consummation
of the exchange offer or the effectiveness of the shelf registration statement,
as the case may be, the rate of interest will decrease to the original rate of
interest as set forth on the face of this Note. The Holder of this Note is
entitled to the benefits of such Registration Rights Agreement. To the extent
there is a conflict between this Note and such Registration Rights Agreement,
such Registration Rights Agreement shall control to the extent permitted by
applicable law.
Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from June 17,
1998; provided that, if there is no existing default in the payment of interest
and this Note is authenticated between a Regular Record Date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such Interest Payment Date. Interest will be computed on the basis
of a 360-day year of twelve 30-day months.
<PAGE> 89
A-5
The Company shall pay interest on overdue principal and
premium, if any, and (to the extent lawful) interest on overdue installments of
interest at the rate per annum borne by the Notes.
2. Method of Payment.
The Company will pay principal as provided above and interest
(except defaulted interest) on the principal amount of the Notes as provided
above on each June 15 and December 15 to the persons who are Holders (as
reflected in the Security Register at the close of business on the June 1 and
December 1 immediately preceding the Interest Payment Date), in each case, even
if the Note is canceled on registration of transfer or registration of exchange
after such record date; provided that, with respect to the payment of
principal, the Company will not make payment to the Holder unless this Note is
surrendered to a Paying Agent.
The Company will pay principal, premium, if any, and as
provided above, interest in money of the United States of America that at the
time of payment is legal tender for payment of public and private debts.
However, the Company may pay interest by its check payable in such money mailed
to a Holder's registered address (as reflected in the Security Register). If a
payment date is a date other than a Business Day at a place of payment, payment
may be made at that place on the next succeeding day that is a Business Day and
no interest shall accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent,
Paying Agent and Registrar. The Company may change any authenticating agent,
Paying Agent or Registrar without notice. The Company, any Subsidiary or any
Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of
June 17, 1998 (the "Indenture"), between the Company, as issuer, and The Bank
of New York, as trustee (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are general unsecured unsubordinated indebtedness of
the Company, will rank pari passu in right of payment with all existing and
future unsecured, unsubordinated indebtedness of the Company and will be senior
in right of payment to all subordinated
<PAGE> 90
A-6
indebtedness of the Company. The Company may, subject to Article Five of the
Indenture and applicable law, issue additional Notes under the Indenture.
5. Redemption.
The Notes are redeemable, at the Company's option, in whole or
in part, at any time or from time to time, on or after June 15, 2003 and prior
to maturity, upon not less than 30 nor more than 60 days' prior notice mailed
by first class mail to each Holder's last address as it appears in the Security
Register. The Notes are redeemable at the Redemption Price (expressed in
percentages of principal amount) set forth below, plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is on or prior to the
Redemption Date to receive interest due on an Interest Payment Date), if
redeemed during the 12-month period commencing June 15, of the years set forth
below. The Redemption Prices with respect to the Notes are as follows:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- -------------------------------------- -----------------------------------
<S> <C>
2003 . . . . . . . . . . . . . . . . 106.188%
2004 . . . . . . . . . . . . . . . . 104.125
2005 . . . . . . . . . . . . . . . . 102.063
2006 and thereafter . . . . . . . . . 100.000
</TABLE>
In addition, at any time prior to June 15, 2001, the Company
may redeem up to 35% of the principal amount of the Notes originally issued
with the Net Cash Proceeds of one or more public or private issuances of
Capital Stock (other than Disqualified Stock) at any time or from time to time
in part, at a Redemption Price of 112.375% of the principal amount thereof on
the Redemption Date, together with accrued and unpaid interest, if any,
thereon; provided that (i) at least 65% of the principal amount of the Notes
remain outstanding after each such redemption and (ii) notice of such
redemption is mailed within 60 days of such issuance.
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at such Holder's last address as it appears in the Security Register.
Notes in original denominations larger than $1,000 may be redeemed in part;
provided that Notes will only be issued in denominations of $1,000 principal
amount or integral multiples thereof. On and after the Redemption Date,
interest ceases to accrue on Notes or portions of Notes called for redemption,
unless the Company defaults in the payment of the Redemption Price.
7. Repurchase upon Change in Control.
Upon the occurrence of any Change of Control, each Holder
shall have the right to require the repurchase of its Notes by the Company in
cash pursuant to the offer described in
<PAGE> 91
A-7
the Indenture at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase (the
"Change of Control Payment").
A notice of such Change of Control will be mailed within 30
days after any Change of Control occurs to each Holder at his last address as
it appears in the Security Register. Notes in original denominations larger
than $1,000 may be sold to the Company in part; provided that Notes will only
be issued in denominations of $1,000 principal amount or integral multiples
thereof. On and after the Change of Control Payment Date, interest ceases to
accrue on Notes or portions of Notes surrendered for purchase by the Company,
unless the Company defaults in the payment of the Change of Control Payment.
8. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in
denominations of $1,000 of principal amount and integral multiples thereof. A
Holder may register the transfer or exchange of Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Notes selected for redemption. Also, it need
not register the transfer or exchange of any Notes for a period of 15 days
before a selection of Notes to be redeemed is made.
9. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all
purposes.
10. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, Holders entitled to the money
must look to the Company for payment, unless an applicable law designates
another Person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S.
Government Obligations sufficient to pay the then outstanding principal of,
premium, if any, and accrued interest on the Notes (a) to maturity, the Company
will be discharged from the Indenture and the Notes, except in certain
circumstances for certain sections thereof, and (b) to the Stated Maturity, the
Company will be discharged from certain covenants set forth in the Indenture.
12. Amendment; Supplement; Waiver.
<PAGE> 92
A-8
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency and make any change that
does not materially and adversely affect the rights of any Holder.
13. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries, among other things, to incur
additional indebtedness; create liens; engage in sale-leaseback transactions;
pay dividends or make distributions in respect of their capital stock; make
investments or make certain other restricted payments; sell assets; issue or
sell stock of Restricted Subsidiaries; enter into transactions with
stockholders or affiliates; or, with respect to the Company, consolidate,
merge or sell all or substantially all of their assets. Within 90 days after
the end of the last fiscal quarter of each year, the Company must report to the
Trustee on compliance with such limitations.
14. Successor Persons.
Generally, when a successor person or other entity assumes all
the obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
15. Defaults and Remedies.
Any of the following events shall constitute an Event of
Default under 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;
<PAGE> 93
A-9
(d) there occurs with respect to any issue or issues of
Indebtedness of the Company 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 (not covered by
insurance) 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 or any Significant
Subsidiary and shall not be paid or discharged, and either (A) an
enforcement proceeding shall have been commenced by a creditor upon
such judgment or order or (B) there shall be any 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 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 or
any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary or
(C) the winding up or liquidation of the affairs of the Company 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; or
(g) the Company 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 or any Significant Subsidiary or for
all or substantially all of the property and assets of the Company or
any Significant Subsidiary or (C) effects any general assignment for
the benefit of creditors.
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
<PAGE> 94
A-10
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, premium, if any, and accrued interest on
the Notes to be immediately due and payable. If a bankruptcy or insolvency
default with respect to the Company occurs and is continuing, the principal of,
premium, if any, and accrued interest on the Notes automatically becomes due
and payable without any declaration or other act on the part of the Trustee or
any Holder. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may require indemnity satisfactory to
it before it enforces the Indenture or the Notes. Subject to certain
limitations, Holders of at least a majority in principal amount of the Notes
then outstanding may direct the Trustee in its exercise of any trust or power.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from and perform services
for the Company or its Affiliates and may otherwise deal with the Company or
its Affiliates as if it were not the Trustee.
17. No Recourse Against Others.
No incorporator or any past, present or future partner,
shareholder, other equity holder, officer, director, employee or controlling
person as such, of the Company or of any successor Person shall have any
liability for any obligations of the Company under the Notes or the Indenture
or for any claim based on, in respect of or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes.
18. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to IMPSAT
Corporation, Alferez Pareja 256, 1107 Buenos Aires, Republic of Argentina,
Attention: Chief Executive Officer.
<PAGE> 95
A-11
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ---------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- ---------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting
and appointing _____________________ attorney to transfer said Note on the
books of the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL SECURITIES OTHER THAN EXCHANGE SECURITIES,
OFFSHORE GLOBAL SECURITIES AND
OFFSHORE PHYSICAL SECURITIES]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of an effective Registration
Statement or (ii) the end of the period referred to in Rule 144(k) under the
Securities Act, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933,
as amended, provided by Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the
Indenture.
<PAGE> 96
A-12
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
<TABLE>
<S> <C>
Date:
-------------------- ------------------------------------------------------------------------------------
NOTICE: The signature to this assignment must correspond
with the name as written upon the face of the within-
mentioned instrument in every particular, without alteration
or any change whatsoever.
</TABLE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, as amended, and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
------------------- -------------------------------------------------
NOTICE: To be executed by an executive officer
<PAGE> 97
A-13
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 4.11 or Section 4.12 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 4.11 or Section 4.12 of the Indenture, state the
amount (in principal amount):
$________________.
Date:
--------------------
Your Signature:
----------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
------------------------------
<PAGE> 98
EXHIBIT B
Form of Certificate
_______ __, ____
THE BANK OF NEW YORK
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: IMPSAT CORPORATION (the "Company")
12_% Senior Notes
due 2008 (the "Securities")
Ladies and Gentlemen:
This letter relates to U.S. $__________ principal amount of
Securities represented by a Note (the "Legended Note") which bears a legend
outlining restrictions upon transfer of such Legended Note. Pursuant to
Section 2.02 of the Indenture (the "Indenture") dated as of June 17, 1998
relating to the Securities, we hereby certify that we are (or we will hold such
Securities on behalf of) a person outside the United States to whom the
Securities could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933, as amended. Accordingly,
you are hereby requested to exchange the legended certificate for an unlegended
certificate representing an identical principal amount of Securities, all in
the manner provided for in the Indenture.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
------
Authorized Signature
<PAGE> 99
EXHIBIT C
Form of Certificate to be Delivered
in Connection with Transfers
Pursuant to Regulation S
______ __, ____
THE BANK OF NEW YORK
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: IMPSAT CORPORATION (the "Company")
12_% Senior Notes
due 2008 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of U.S.$__________
aggregate principal amount of the Securities, we confirm that such sale has
been effected pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended, and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act of 1933.
<PAGE> 100
C-2
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-------------------------------------
Authorized Signature
<PAGE> 101
EXHIBIT D
Form of Certificate to be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
______ __, ____
THE BANK OF NEW YORK
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: IMPSAT CORPORATION (the "Company")
12_% Senior Notes
due 2008 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed purchase of $___________
aggregate principal amount of the Securities, we confirm that:
1. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth
in the Indenture dated as of June 17, 1998 relating to the Securities
(the "Indenture") and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Securities except in compliance
with, such restrictions and conditions and the Securities Act of 1933,
as amended (the "Securities Act").
2. We understand that the offer and sale of the Securities
have not been registered under the Securities Act, and that the
Securities may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we
should sell any Securities, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined
therein), (C) to an institutional "accredited investor" (as defined
below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed
letter substantially in the form of this letter, and, if such transfer
is in respect of an aggregate principal amount of less than $250,000, an
opinion of counsel acceptable to the
<PAGE> 102
D-2
Company that such transfer is in compliance with the Securities Act, (D)
outside the United States in accordance with Rule 904 of Regulation S
under the Securities Act, (E) pursuant to the provisions of Rule 144
under the Securities Act (if available) or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing any of the Securities from us a notice
advising such purchaser that resales of the Securities are restricted as
stated herein.
3. We understand that, on any proposed resale of any
Securities, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that
the Securities purchased by us will bear a legend to the foregoing
effect.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
our investment in the Securities, and we and any accounts for which we
are acting are each able to bear the economic risk of our or its
investment.
5. We are acquiring the Securities purchased by us for our
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise
sole investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
-------------------------------------
Authorized Signature
<PAGE> 1
EXHIBIT 4.2
$225,000,000
IMPSAT CORPORATION
$225,000,000 12_% SENIOR NOTES DUE 2008
PLACEMENT AGREEMENT
June 12, 1998
<PAGE> 2
June 12, 1998
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
IMPSAT Corporation, a Delaware corporation (the "Company"), proposes
to issue and sell to the several placement agents named in Schedule I hereto
(collectively, the "Placement Agents") $225,000,000 principal amount of its 12_%
Senior Notes due 2008 (the "Notes") to be issued pursuant to the provisions of
an Indenture to be dated as of June 17, 1998 (the "Indenture") between the
Company and The Bank of New York, as Trustee.
The Notes will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act"), to qualified
institutional buyers (as defined in Rule 144A under the Securities Act) in
compliance with the exemption from registration provided by Rule 144A under the
Securities Act ("Rule 144A"), in offshore transactions in reliance on Regulation
S under the Securities Act ("Regulation S") and to institutional accredited
investors (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) that deliver a letter in the form annexed to the Final Memorandum (as
defined below).
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum (the "Preliminary Memorandum") and will prepare
a final offering memorandum (the "Final Memorandum" and, with the Preliminary
Memorandum, each a "Memorandum") setting forth or including a description of the
terms of the Notes, the terms of the offering and a description of the Company
and its business.
The purchasers of the Notes and their direct and indirect transferees
will be entitled to the benefits of a Registration Rights Agreement (the
"Registration Rights Agreement") dated the date hereof (as defined below).
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, you that as of the date hereof:
(a) The Preliminary Memorandum does not contain and the Final
Memorandum, in the form used by the Placement Agents to confirm sales and on the
Closing Date, will not contain any untrue statement of a material fact or omit
to state a
<PAGE> 3
2
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section 1(a) do not apply to
statements or omissions in either Memorandum based upon information relating to
any Placement Agent furnished to the Company in writing by such Placement Agent
through Morgan Stanley & Co. Incorporated expressly for use therein.
(b) The Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the State of Delaware, United
States of America, has the corporate power and authority to own its property and
to conduct its business as described in each Memorandum and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole. All of the shares of capital stock of the
Company's subsidiaries owned by the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are directly owned
by the Company, free and clear of all liens, encumbrances, equities or claims.
(c) Each subsidiary of the Company has been duly incorporated and
is validly existing under the laws of the jurisdiction of its incorporation, has
the corporate power and authority to own its property and to conduct its
business as described in each Memorandum and is duly qualified to transact
business in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified would not have a material adverse
effect on such subsidiary. IMPSAT S.A. ("Impsat Argentina") is a 95.2% owned
subsidiary of the Company, IMPSAT S.A. ("Impsat Colombia") is a 74.2% owned
subsidiary of the Company, Impsatel del Ecuador S.A. ("Impsat Ecuador") is a
wholly owned subsidiary of the Company, IMPSAT S.A. de C.V. ("Impsat Mexico") is
a 99.9% owned subsidiary of the Company, Telecomunicaciones IMPSAT S.A. ("Impsat
Venezuela") is a 75% owned subsidiary of the Company and IMPSAT Comunicacoes
Ltda. ("Impsat Brazil") is a 99.9% owned subsidiary of the Company.
(d) This Agreement has been duly authorized, executed and delivered
by the Company.
(e) The Registration Rights Agreement has been duly authorized and,
when executed and delivered by the Company, will be a valid and binding
agreement of the Company enforceable in accordance with its terms, except as (x)
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally, (y) the availability of equitable
remedies may be limited by equitable
<PAGE> 4
3
principles of general applicability and (z) any rights to indemnity and
contribution may be limited by federal and state securities laws and public
policy considerations.
(f) The Notes have been duly authorized and, when executed,
authenticated and delivered in accordance with the terms of the Indenture and
paid for by the Placement Agents in accordance with the terms of this Agreement,
will (x) be valid and binding obligations of the Company enforceable in
accordance with their terms, except as (A) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (B) rights of acceleration, if applicable, and the availability of
equitable remedies may be limited by equitable principles of general
applicability and (y) be entitled to the benefits of the Indenture and the
Registration Rights Agreement.
(g) The Indenture has been duly authorized, executed and delivered
by the Company, and is a valid and binding agreement of the Company, enforceable
in accordance with its terms except as (x) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration, if applicable, and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(h) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Indenture, the Registration Rights Agreement, the Notes and the issuance, sale
and delivery of the Notes will not contravene any provision of applicable law or
the certificate of incorporation or by-laws of the Company or any agreement or
other instrument binding upon the Company or any of its subsidiaries or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary of the Company, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under this Agreement, the Indenture, the Registration Rights Agreement or the
Notes or the issuance, sale and delivery of the Notes, except such as may be
required by the securities or Blue Sky laws of the various states in connection
with the offer and sale of the Notes.
(i) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, from that set forth in the
Preliminary Memorandum.
(j) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is subject
other than proceedings
<PAGE> 5
4
accurately described in all material respects in each Memorandum and proceedings
that would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole, or on the power or ability of the Company to
perform its obligations under this Agreement, the Indenture, the Registration
Rights Agreement or the Notes, to consummate the transactions contemplated by
each such agreement, or to apply the net proceeds of the issuance of the Notes
as described in the Final Memorandum under the caption "Use of Proceeds."
(k) Each of the Company and its subsidiaries has all necessary
certificates, orders, permits, licenses, authorizations, consents and approvals
of and from, and has made all declarations and filings with, all federal, state,
local, foreign supranational, national, regional and other governmental
authorities and all courts and tribunals, to own, lease, license and use its
properties and assets and to conduct its business in the manner described in the
Final Memorandum, and neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to revocation or modification of any
such certificates, orders, permits, licenses, authorizations, consents or
approvals, nor is the Company or any of its subsidiaries in violation of, or in
default under, any federal, state, local, foreign supranational, national or
regional law, regulation, rule, decree, order or judgment applicable to the
Company or any of its subsidiaries the effect of which, singly or in the
aggregate, would have a material adverse effect on the Company and its
subsidiaries, taken as a whole, except as described in the Final Memorandum.
(l) Neither the Company nor any affiliate (as defined in
Rule 501(b) of Regulation D under the Securities Act, an "Affiliate") of the
Company has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any security (as
defined in the Securities Act) which is or will be integrated with the sale of
the Notes in a manner that would require the registration under the Securities
Act of the Notes or (ii) engaged in any form of general solicitation or general
advertising in connection with the offering of the Notes (as those terms are
used in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act;
provided, however, that no such representation or warranty is given or made with
respect to the Placement Agents or any of their Affiliates.
(m) The Company is not, and after giving effect to the offering and
sale of the Notes and the application of the proceeds thereof as described in
the Final Memorandum, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(n) It is not necessary in connection with the offer, sale and
delivery of the Notes to the Placement Agents in the manner contemplated by this
Agreement to
<PAGE> 6
5
register the Notes under the Securities Act or to qualify the Indenture under
the Trust Indenture Act of 1939, as amended.
(o) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(p) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(q) None of the Company, its Affiliates or any person acting on its
or their behalf has engaged in any directed selling efforts (as that term is
defined in Regulation S under the Securities Act ("Regulation S")) with respect
to the Notes and the Company and its Affiliates and any person acting on its or
their behalf have complied and will comply with the offering restrictions
requirement of Regulation S; provided, however, that no such representation or
warranty is given or made with respect to the Placement Agents or any of their
Affiliates.
(r) Subsequent to the respective dates as of which information is
given in the Final Memorandum, (1) the Company and its subsidiaries have not
incurred any material liability or obligation, direct or contingent, nor entered
into any material transaction not in the ordinary course of business; (2) the
Company has not purchased any of its outstanding capital stock, nor declared,
paid or otherwise made any dividend or distribution of any kind on its capital
stock other than ordinary and customary dividends; and (3) there has not been
any material change in the capital stock, short-term debt or long-term debt of
the Company and its consolidated subsidiaries, except in each case as described
in the Final Memorandum.
(s) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned
<PAGE> 7
6
by them which is material to the business of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such
as are described in the Final Memorandum or such as do not materially affect the
value of such property and do not interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries; and any real property
and buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries, in each case
except as described in the Final Memorandum.
(t) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in or contemplated by the
Final Memorandum, or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing, threatened or imminent labor disturbance
by the employees of any of its principal suppliers, manufacturers or contractors
that could have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(u) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which they
are engaged; neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole, except as described in the Final
Memorandum.
(v) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or specific
authorizations; (2) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (3) access to assets is
permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(w) The Notes satisfy the requirements set forth in Rule 144A(d)(3)
under the Securities Act.
<PAGE> 8
7
2. Agreements to Sell and Purchase. The Company hereby agrees to
sell to the several Placement Agents, and the Placement Agents, upon the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agree, severally and not jointly, to purchase
from the Company the respective principal amount of Notes as set forth in
Schedule I hereto opposite their names at a purchase price of 97.375% of the
principal amount of the Notes plus accrued interest, if any, to the Closing Date
(the "Purchase Price").
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Placement Agents, it will
not, during the period beginning on the date hereof and continuing to and
including the Closing Date, offer, sell, contract to sell or otherwise dispose
of any debt of the Company or warrants to purchase debt of the Company
substantially similar to the Notes (other than the sale of the Notes under this
Agreement).
3. Terms of Offering. You have advised the Company that the
Placement Agents will make an offering of the Notes purchased by the Placement
Agents hereunder on the terms to be set forth in the Final Memorandum, as soon
as practicable after this Agreement is entered into as in your judgment is
advisable.
4. Payment and Delivery. Payment for the Notes shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Notes for the respective accounts of the several
Placement Agents at 10:00 a.m., New York city time, on June 17, 1998, or at such
other time on the same or such other date, not later than June 27, 1998, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Closing Date."
Certificates for the Notes shall be in definitive form or global
form, as specified by you, and registered in such names and in such
denominations as you shall request in writing not later than one full business
day prior to the Closing Date. The certificates evidencing the Notes shall be
delivered to you on the Closing Date for the respective accounts of the several
Placement Agents, with any transfer taxes payable in connection with the
transfer of the Notes to the Placement Agents duly paid, against payment of the
Purchase Price therefor.
5. Conditions to the Placement Agent's Obligations. The several
obligations of the Placement Agents under this Agreement to purchase the Notes
will be subject to the following conditions:
(a) Subsequent to the date of this Agreement and prior to the
Closing Date,
(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading
or of any
<PAGE> 9
8
review for a possible change that does not indicate the direction of
the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations,
of the Company and its subsidiaries, taken as a whole, from that set
forth in the Preliminary Memorandum (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement) that,
in the judgment of Morgan Stanley & Co. Incorporated, is material and
adverse and that makes it, in the judgment of Morgan Stanley & Co.
Incorporated, impracticable to market the Notes on the terms and in
the manner contemplated in the Preliminary Memorandum.
(b) You shall have received on the Closing Date a certificate,
dated the Closing Date and signed by an executive officer of the Company,
to the effect set forth in clause (a)(i) above and to the effect that the
representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has
complied with all of the agreements and satisfied all of the conditions on
its part to be performed or satisfied on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date an opinion of
Arnold & Porter, United States counsel for the Company, dated the Closing
Date, to the effect set forth in Exhibit A.
(d) You shall have received on the Closing Date an opinion of
Nicolson & Cano, Argentine counsel for the Company and Impsat Argentina,
dated the Closing Date, to the effect set forth in Exhibit B.
(e) You shall have received on the Closing Date an opinion of
Portocarrero & Rodriguez, Colombian counsel for Impsat Colombia, dated the
Closing Date, to the effect set forth in Exhibit C.
(f) You shall have received on the Closing Date an opinion of Perez
Bustamante & Perez, Ecuadoran counsel for Impsat Ecuador, dated the Closing
Date, to the effect set forth in Exhibit D.
<PAGE> 10
9
(g) You shall have received on the Closing Date an opinion of
Basham, Ringe & Correa, Mexican counsel for Impsat Mexico, dated the
Closing Date, to the effect set forth in Exhibit E.
(h) You shall have received on the Closing Date an opinion of
Baumeister & Brewer, Venezuelan counsel for Impsat Venezuela, dated the
Closing Date, to the effect set forth in Exhibit F.
(i) You shall have received on the Closing Date an opinion of
Pinheiro Neto, Brazilian counsel for Impsat Brazil, dated the Closing Date,
to the effect set forth in Exhibit G.
(j) You shall have received on the Closing Date an opinion of
Latham & Watkins, United States regulatory counsel for the Company, dated
the Closing Date, to the effect set forth in Exhibit H.
Each of the opinions referred to in clauses (c) through (j) shall be
rendered to the Placement Agents at the request of the Company and shall so
state therein.
(k) You shall have received on the Closing Date an opinion of
Shearman & Sterling, United States counsel for the Placement Agents, dated
the Closing Date, with respect to such matters as you may reasonably
request.
(l) You shall have received on each of the date hereof and the
Closing Date a letter, dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to you, from Deloitte &
Touche LLP, independent public accountants for the Company, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in the Final Memorandum;
provided that the letter delivered on the Closing Date shall use a "cut-off
date" not earlier than the date hereof.
(m) You shall have received such other documents and certificates
as are reasonably requested by you and your counsel.
6. Covenants of the Company. In further consideration of the
agreements of the Placement Agents contained in this Agreement, the Company
covenants as follows:
(a) To furnish to you in New York City, without charge, prior to
10:00 a.m. New York City time on the business day next succeeding the date
of this Agreement and during the period mentioned in Section 6(c), as many
copies of the Final
<PAGE> 11
10
Memorandum and any supplements and amendments thereto as you may reasonably
request.
(b) Before amending or supplementing either Memorandum, to furnish
to you a copy of each such proposed amendment or supplement and not to use
any such proposed amendment or supplement to which you reasonably object.
(c) If, during such period after the date hereof and prior to the
date on which all of the Notes shall have been sold by the Placement
Agents, any event shall occur or condition exist as a result of which it is
necessary in your judgment to amend or supplement the Final Memorandum in
order to make the statements therein, in the light of the circumstances
when such Memorandum is delivered to a purchaser, not misleading, or if, in
the opinion of United States counsel to the Placement Agents it is
necessary to amend or supplement such Memorandum to comply with applicable
law, forthwith to prepare and furnish, at its own expense, to the Placement
Agents, either amendments or supplements to such Memorandum so that the
statements in such Memorandum as so amended or supplemented will not, in
the light of the circumstances when such Memorandum is delivered to a
purchaser, be misleading or so that such Memorandum, as so amended or
supplemented, will comply with applicable law.
(d) To endeavor to qualify the Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) Whether or not any sale of the Notes is consummated, to pay all
expenses incident to the performance of its obligations under this
Agreement, including: (i) the preparation of each Memorandum and all
amendments and supplements thereto, (ii) the preparation, issuance and
delivery of the Notes, (iii) the fees and disbursements of the Company's
counsel and accountants and the Trustee and its counsel, (iv) the
qualification of such Notes under securities or Blue Sky laws in accordance
with the provisions of Section 5(d), including filing fees and the fees and
disbursements of counsel for the Placement Agents in connection therewith
and in connection with the preparation of any Blue Sky or legal investment
memoranda, (v) the printing and delivery to the Placement Agents in
quantities as hereinabove stated of copies of the Memorandum and any
amendments or supplements thereto, (vi) any fees charged by rating agencies
for the rating of the Notes, (vii) all document production charges and
expenses of counsel to the Placement Agents (but not including their fees
for professional services) in connection with the preparation of this
Agreement, (viii) the fees and expenses, if any, incurred in connection
with the admission of the Notes for trading in any appropriate market
system and (ix) any expenses incurred by the Company in connection with a
"road show" presentation to potential investors.
<PAGE> 12
11
(f) Neither the Company nor any Affiliate will sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in the Securities Act) which could be integrated with the sale
of the Notes in a manner which would require the registration under the
Securities Act of the Notes.
(g) Not to solicit any offer to buy or offer or sell the Notes by
means of any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(h) While any of the Notes remain outstanding, to make available,
upon request, to any seller of such Notes the information specified in Rule
144A(d)(4) under the Securities Act, unless the Company is then subject to
Section 13 or 15(d) of the Exchange Act.
(i) To use its best efforts to permit the Notes to be designated
PORTAL securities in accordance with the rules and regulations adopted by
the National Association of Securities Dealers, Inc. relating to trading in
the PORTAL Market.
(j) None of the Company, its Affiliates or any person acting on
its or their behalf (other than the Placement Agents) will engage in any
directed selling efforts (as that term is defined in Regulation S) with
respect to the Notes, and the Company and its Affiliates and each person
acting on its or their behalf (other than the Placement Agents) will comply
with the offering restrictions of Regulation S.
(k) For the sole benefit of the Placement Agents;
(i) prior to the consummation of the Exchange Offer (as defined
in the Registration Rights Agreement) or the effectiveness of a Shelf
Registration Statement if, in the reasonable judgment of any Placement
Agent, such Placement Agent or any of its affiliates (as such term is
defined in the rules and regulations under the Securities Act) is required
to deliver an offering memorandum in connection with sales of, or
market-making activities with respect to, the Notes or the Exchange
Securities (as defined in the Registration Rights Agreement), (A) to
periodically amend or supplement the Final Memorandum so that the
information contained in the Final Memorandum complies with the
requirements of Rule 144A of the Securities Act, (B) to amend or supplement
the Final Memorandum when necessary to reflect any material changes in the
information provided therein so that the Final Memorandum will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances existing as of the date the Final Memorandum is so delivered,
not misleading and (C) to provide such Placement Agent
<PAGE> 13
12
with copies of each such amended or supplemental Final Memorandum, as such
Placement Agent may reasonably request;
(ii) following the consummation of the Exchange Offer or the
effectiveness of a Shelf Registration Statement and for so long as the
Notes or, the Exchange Securities are outstanding if, in the reasonable
judgment of any Placement Agent, such Placement Agent or any of its
affiliates (as such term is defined in the rules and regulations under the
Securities Act) is required to deliver a prospectus in connection with
sales of, or market-making activities with respect to the Notes or the
Exchange Securities, (A) to periodically amend the applicable registration
statement so that the information contained therein complies with the
requirements of Section 10(a) of the Securities Act, (B) if requested by
such Placement Agent, within 45 days following the end of the Company's
most recent fiscal quarter, file a supplement to the prospectus included in
the applicable registration statement which sets forth the financial
results of the Company for the previous quarter, (C) to amend the
applicable registration statement or supplement the related prospectus or
the documents incorporated therein when necessary to reflect any material
changes in the information provided therein so that the registration
statement and the prospectus will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances existing as of the
date the prospectus is so delivered, not misleading and (D) to provide such
Placement Agent with copies of each such amendment or supplement as such
Placement Agent may reasonably request;
(iii) notwithstanding clauses (i) and (ii) above, (A) prior to
amending the Final Memorandum or to filing any post-effective amendment to
any registration statement or to supplementing any related prospectus, to
furnish to the Placement Agents and their counsel, copies of all such
documents proposed to be amended, filed or supplemented, and (B) it will
not issue any amendment to the Final Memorandum, any post-effective
amendment to a registration statement or any supplement to a prospectus to
which the Placement Agents or their counsel shall reasonably object;
(iv) it shall notify the Placement Agents and their counsel and
(if requested by any such person) confirm such advice in writing, (A) when
any amendment to the Final Memorandum has been issued, when any prospectus
supplement or amendment or post-effective amendment has been filed, and,
with respect to any post-effective amendment, when the same has become
effective, (B) of any request by the SEC for any post-effective amendment
or supplement to a registration statement, any supplement or amendment to a
prospectus or for additional information, (C) the issuance by the SEC of
any stop order suspending the effectiveness of a registration statement or
the initiation of any proceedings for that purpose, (D) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Notes or the Exchange Securities for sale in any
jurisdiction or the initiation or threatening of any proceedings for such
purpose and (E) of the happening of any event which makes any
<PAGE> 14
13
statement made in the Final Memorandum, a registration statement, a
prospectus or any amendment or supplement thereto untrue or which requires
the making of any change in the Final Memorandum, a registration
statement, a prospectus or any amendment or supplement thereto, in order
to make the statements therein not misleading;
(v) it consents to the use of the Final Memorandum and any
prospectus referred to in this paragraph (k) or any amendment or supplement
thereto, by the Placement Agents in connection with the offering and sale
of the Notes or Exchange Securities, as the case may be;
(vi) it will comply with the provisions of this paragraph (k) at
its own expense and will reimburse the Placement Agents for its expenses
associated with this paragraph (j) (including fees of counsel); and
(vii) it expressly acknowledges that the indemnification and
contribution provisions of Section 8 of this Agreement shall be
specifically applicable and relate to each offering memorandum,
registration statement, prospectus, amendment or supplement referred to in
this paragraph (k).
7. Offering of Notes; Restrictions on Transfer. (a) Each
Placement Agent, severally and not jointly, represents and warrants that such
Placement Agent is a qualified institutional buyer as defined in Rule 144A under
the Securities Act (a "QIB"). Each Placement Agent, severally and not jointly,
agrees with the Company that (i) it will not solicit offers for, or offer or
sell, the Notes by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act and (ii) it will solicit offers for the Notes only from, and will offer the
Notes only to, persons that it reasonably believes to be (A) in the case of
offers inside the United States, (x) QIBs or (y) other institutional accredited
investors (as defined in Rule 501(a) (1), (2), (3) or (7) under the Securities
Act) ("institutional accredited investors") that, prior to their purchase of the
Notes, deliver to such Placement Agent a letter containing the representations
and agreements set forth in Appendix A to the Final Memorandum and (B) in the
case of offers outside the United States, to persons other than U.S. persons
("foreign purchasers," which term shall include dealers or other professional
fiduciaries in the United States acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust)) that, in each case, in
purchasing the Notes are deemed to have represented and agreed as provided in
the Final Memorandum under the caption "Transfer Restrictions."
(b) Each Placement Agent, severally and not jointly, represents,
warrants, and agrees with respect to offers and sales outside the United States
that:
<PAGE> 15
14
(i) it understands that no action has been or will be taken in
any jurisdiction by the Company that would permit a public offering of the
Notes, or possession or distribution of either Memorandum or any other
offering or publicity material relating to the Notes, in any country or
jurisdiction where action for that purpose is required;
(ii) such Placement Agent will comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers, sells or
delivers Notes or has in its possession or distributes either Memorandum or
any such other material, in all cases at its own expense;
(iii) the Notes have not been registered under the Securities Act
and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with Regulation S
under the Securities Act or pursuant to another exemption from the
registration requirements of the Securities Act;
(iv) such Placement Agent has offered the Notes and will offer and
sell the Notes (A) as part of its distribution at any time and (B)
otherwise until 40 days after the later of the commencement of the offering
of the Notes and the Closing Date, only in accordance with Rule 903 of
Regulation S or another exemption from the registration requirements of the
Securities Act. Accordingly, neither such Placement Agent, its Affiliates
nor any persons acting on its or their behalf have engaged or will engage
in any directed selling efforts (within the meaning of Regulation S) with
respect to the Notes, and any such Placement Agent, its Affiliates and any
such persons have complied and will comply with the offering restrictions
requirements of Regulation S;
(v) such Placement Agent (A) has not offered or sold and, prior
to the date six months after the Closing Date, will not offer or sell any
Notes to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (B) complied and will comply
with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Notes in, from or
otherwise involving the United Kingdom; and (C) only issued or passed on
and will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the Notes if that
person is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person
to whom such document may otherwise lawfully be issued or passed on;
(vi) such Placement Agent understands that the Notes have not been
and will not be registered under the Securities and Exchange Law of Japan,
and represents that it
<PAGE> 16
15
has not offered or sold, and agrees not to offer or sell, any of the Notes,
directly or indirectly in Japan or for the account of any resident of Japan
except (A) pursuant to any exemption from the registration requirements of
the Securities and Exchange Law of Japan and (B) in compliance with
applicable requirements of Japanese law; and
(vii) such Placement Agent agrees that, at or prior to confirmation
of sales of the Notes, it will have sent to each distributor, dealer or
person receiving a selling concession, fee or other remuneration that
purchases Notes from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Notes covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their distribution at any
time or (ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date, except in either
case in accordance with Regulation S (or Rule 144A, if available)
under the Securities Act. Terms used above have the meaning given to
them by Regulation S."
Terms used in this Section 7 have the meanings given to them by Regulation S.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Placement Agent, and each person, if any, who
controls any Placement Agent within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, or is under common control
with, or is controlled by, such Placement Agent, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred by any Placement Agent or any such
controlling or affiliated person in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in either Memorandum (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to any Placement Agent furnished to the Company in writing by such
Placement Agent through you expressly for use therein.
(b) Each Placement Agent agrees, severally and not jointly, to
indemnify and hold harmless the Company and its directors, officers and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the
<PAGE> 17
16
Company to such Placement Agent, but only with reference to information relating
to such Placement Agent furnished to the Company in writing by such Placement
Agent through you expressly for use in either Memorandum or any amendments or
supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or (b) above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
reasonably satisfactory to Morgan Stanley & Co. Incorporated in the case of
parties indemnified pursuant to paragraph (a) above and reasonably satisfactory
to the Company in the case of parties indemnified pursuant to paragraph (b)
above. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
<PAGE> 18
17
(d) To the extent the indemnification provided for in paragraph
(a) or (b) of this Section 8 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Placement Agents, on
the other hand, from the offering of such Notes or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company, on the one
hand, and the Placement Agents, on the other hand, in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company, on the one hand, and the Placement
Agents, on the other hand, in connection with the offering of such Notes shall
be deemed to be in the same respective proportions as the net proceeds from the
offering of such Notes (before deducting expenses) received by the Company and
the total discounts and commissions received by the Placement Agents in respect
thereof bear to the aggregate offering price of such Notes. The relative fault
of the Company, on the one hand, and of the Placement Agents, on the other hand,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Placement Agents and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Placement Agents' respective obligations to contribute pursuant to this
Section 8 are several in proportion to the respective principal amounts of Notes
they have purchased hereunder, and not joint.
(e) The Company and the Placement Agents agree that it would not
be just or equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation (even if the Placement Agents were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Placement Agent shall be required to contribute
any amount in excess of the amount by which the total price at which the Notes
resold by it in the initial placement of such Notes were offered to investors
exceeds the amount of any damages that such Placement Agent has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
<PAGE> 19
18
misrepresentation. The indemnity and contribution provisions contained in this
Section 8 and the representations and warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Placement Agent or any person
controlling any Placement Agents or by or on behalf of the Company or its
officers or directors or any person controlling the Company and (iii) acceptance
of and payment for any of the Notes. The remedies provided for in this Section 8
are not exclusive and shall not limit any rights or remedies which may otherwise
be available to any indemnified party at law or in equity.
9. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange or the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event, singly or
together with any other such event makes it, in your judgment, impracticable to
market the Notes on the terms and in the manner contemplated in the Final
Memorandum.
10. Effectiveness; Defaulting Placement Agents. This Agreement
shall become effective upon the execution and delivery hereof by the parties
hereto.
If, on the Closing Date, either of the Placement Agents shall
fail or refuse to purchase Notes that it has agreed to purchase hereunder on
such date, and the aggregate principal amount of Notes which such defaulting
Placement Agent agreed but failed or refused to purchase is not more than
one-tenth of the aggregate principal amount of Notes to be purchased on such
date, the other Placement Agent shall be obligated to purchase the Notes which
such defaulting Placement Agent agreed but failed or refused to purchase on such
date; provided that in no event shall the principal amount of Notes that any
Placement Agent has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 10 by an amount in excess of one-ninth of such
principal amount of Notes without the written consent of such Placement Agent.
If, on the Closing Date any Placement Agent shall fail or refuse to purchase
Notes which it has agreed to purchase hereunder on such date and the aggregate
principal amount of Notes with respect to which such default occurs is more than
one-tenth of the aggregate principal amount of Notes to be purchased on such
date and arrangements satisfactory to you and the Company for the purchase of
such Notes are not made within
<PAGE> 20
19
36 hours after such default, this Agreement shall terminate without liability on
the part of any non-defaulting Placement Agent or of the Company. In any such
case either you or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Final Memorandum or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Placement Agent from liability in respect of any default
of such Placement Agent under this Agreement.
If this Agreement shall be terminated by the Placement Agents, or
any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Placement Agents or such
Placement Agents as have so terminated this Agreement with respect to
themselves, severally, for all out-of-pocket expenses (including the fees and
disbursements of their counsel) reasonably incurred by such Placement Agents in
connection with this Agreement or the offering contemplated hereunder.
11. Notices. All notices and other communications under this
Agreement shall be in writing and mailed, delivered or sent by facsimile
transmission to: if sent to the Placement Agents, Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, New York 10036, Attention: High Yield New
Issues Group, facsimile number (212) 761-0587 and if sent to the Company, to
Alferez Pareja 256, 1107 Buenos Aires, Argentina, attention: Chief Financial
Officer, facsimile number 011 (541) 307 1525.
12. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
14. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
<PAGE> 21
20
Please confirm your agreement to the foregoing by signing in the
space provided below for that purpose and returning to us a copy hereof,
whereupon this Agreement shall constitute a binding agreement between us.
Very truly yours,
IMPSAT CORPORATION
By
-------------------------
Name:
Title:
By
-------------------------
Name:
Title:
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
By: Morgan Stanley & Co. Incorporated
By
------------------------------------
Name:
Title:
<PAGE> 22
SCHEDULE I
Principal Amount of
Placement Agent Notes to be Purchased
--------------- ---------------------------------
Morgan Stanley & Co. Incorporated $ 213,750,000
Credit Suisse First Boston
Corporation $ 11,250,000
---------------
Total............... $225,000,000
===============
<PAGE> 23
EXHIBIT A
Opinion of Arnold & Porter
(A) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the State of Delaware, and
has the corporate power and authority to own its property and to conduct its
business as described in the Final Memorandum (references herein to the Final
Memorandum being taken to mean the same, as amended or supplemented);
(B) the Placement Agreement has been duly authorized, executed
and delivered by the Company;
(C) the Indenture has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms;
(D) the Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms;
(E) the Notes have been duly authorized by the Company, and when
executed, authenticated and delivered in accordance with the terms of the
Indenture and paid for in accordance with the terms of the Placement Agreement,
will constitute valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, and will be entitled to the benefits
of the Indenture and the Registration Rights Agreement;
(F) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, the Placement Agreement,
the Indenture, the Registration Rights Agreement, the Notes, and the issuance,
sale and delivery of the Notes, will not result in a breach or violation of any
of the terms or provisions of, or constitute a default under, (a) the
Certificate of Incorporation or Bylaws of the Company, (b) to such counsel's
knowledge, any statute, rule, regulation or order of general applicability of
any United States federal, New York or Delaware governmental agency, body or
court, (c) to such counsel's knowledge, any judgment, decree or order of any
United States federal, New York or Delaware governmental agency, body or court
or (d) any of the agreements or instruments listed in Schedule 1 hereto;
(G) no consent, approval, authorization or order of, or
qualification with any court or governmental agency or body of the United
States, New York or Delaware is required
<PAGE> 24
A-2
for the performance by the Company of its obligations under the Placement
Agreement, the Indenture, the Registration Rights Agreement, the Notes, or the
issuance, sale and delivery of the Notes, except in each case as may be required
by the securities or Blue Sky laws of the various states in connection with the
offer and sale of the Notes;
(H) after reasonable inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject other than proceedings fairly
summarized in the Final Memorandum and proceedings which such counsel believes
are not likely to have a material adverse effect on the Company and its
subsidiaries, taken as a whole, or on the power or ability of the Company to
perform its obligations under the Placement Agreement, the Indenture, the
Registration Rights Agreement or the Notes or to consummate the transactions
contemplated by the Placement Agreement, the Indenture, the Registration Rights
Agreement and the Notes;
(I) the Company is not an "investment company" within the meaning
of the United States Investment Company Act of 1940, as amended (the "Investment
Company Act"), and the offer and sale of the Notes in the manner contemplated by
the Placement Agreement does not require registration of the Company as an
"investment company" under the Investment Company Act;
(J) the statements set forth in the Final Memorandum under the
captions "Description of the Notes", "Private Placement" and "Description of
Certain Indebtedness", insofar as such statements constitute a summary of the
legal matters and documents referred to therein, accurately summarize such
matters and documents in all material respects;
(K) the discussion set forth in the Final Memorandum, under the
caption "Certain United States Federal Income Tax Considerations" to the extent
such discussion constitutes matters of law or legal conclusions, accurately
describes the material United States federal income tax consequences of an
investment in the Notes;
(L) such counsel believes that (except for financial statements
and other financial data as to which such counsel need not express any belief)
the Final Memorandum when issued did not, and as of the date such opinion is
delivered does not, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(M) based upon the representations, warranties, and agreements of
the Company in the Placement Agreement and of the Placement Agents in the
Placement Agreement, it is not necessary in connection with the offer, sale and
delivery of the Notes to the Placement Agents under the Placement Agreement or
in connection with the initial resale of
<PAGE> 25
A-3
such Notes by the Placement Agents in accordance with the Placement Agreement to
register the Notes under the Securities Act of 1933, it being understood that no
opinion is expressed as to any subsequent resale of any Notes; and
With respect to paragraph (L) above, counsel may state that their
opinion and belief are based upon their participation in the preparation of the
Final Memorandum (and any amendments or supplements thereto) and review and
discussion of the contents thereof, but are without independent check or
verification except with respect to paragraphs (J) and (K) above.
<PAGE> 26
EXHIBIT B
Opinion of Nicholson & Cano
(A) Impsat Argentina has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the Republic of
Argentina, has the corporate power and authority to own its property and to
conduct its business as described in the Final Memorandum and is duly qualified
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(B) all of the shares of capital stock of Impsat Argentina owned
by the Company have been duly and validly authorized and issued and are fully
paid and non-assessable and are directly owned by the Company, free and clear of
all liens, encumbrances, equities or claims;
(C) Impsat Argentina has all necessary certificates, orders,
permits, licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all Argentine governmental authorities,
courts and tribunals, to own, lease, license and use its properties and assets
and to conduct its business in the manner described in the Final Memorandum, and
Impsat Argentina has not received any notice of proceedings relating to
revocation or modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is Impsat Argentina in violation of,
or in default under, any federal, state, local, foreign supranational, national
or regional law, regulation, rule, decree, order or judgment applicable to
Impsat Argentina the effect of which, singly or in the aggregate, would have a
material adverse effect on the prospects, condition, financial or otherwise, or
in the earnings, business or operations of the Company and its subsidiaries,
taken as a whole, except as described in the Final Memorandum; and
(D) the statements in the Final Memorandum under the caption
"Risk Factors - Government Regulation; Regulatory Uncertainty", "Business -
Legal Matters" and "Business Description of Country Operations - Impsat
Argentina - Regulation" in each case insofar as such statements constitute
summaries of the Argentine legal matters, documents or proceedings referred to
therein, are accurate in all material respects and fairly summarize all matters
referred to therein.
(E) There are no restrictions (legal, contractual or otherwise)
on the ability Impsat Argentina to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
described in the Final Memorandum
<PAGE> 27
B-2
(including, without limitation, the description of withholding taxes contained
therein) and any applicable creditors' rights under Argentine law, and such
restrictions as would not have a material adverse effect on the prospects,
condition, financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole; and such descriptions, if
any, fairly summarize such restrictions.
<PAGE> 28
EXHIBIT C
Opinion of Portocarrero & Rodriguez
(A) Impsat Colombia has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the Republic of
Colombia, has the corporate power and authority to own its property and to
conduct its business as described in the Final Memorandum and is duly qualified
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(B) all of the shares of capital stock of Impsat Colombia owned
by the Company have been duly and validly authorized and issued and are fully
paid and non-assessable and are directly owned by the Company, free and clear of
all liens, encumbrances, equities or claims;
(C) Impsat Colombia has all necessary certificates, orders,
permits, licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all Colombian governmental authorities,
courts and tribunals, to own, lease, license and use its properties and assets
and to conduct its business in the manner described in the Final Memorandum, and
Impsat Colombia has not received any notice of proceedings relating to
revocation or modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is Impsat Colombia in violation of,
or in default under, any federal, state, local, foreign supranational, national
or regional law, regulation, rule, decree, order or judgment applicable to
Impsat Colombia the effect of which, singly or in the aggregate, would have a
material adverse effect on the prospects, condition, financial or otherwise, or
in the earnings, business or operations of the Company and its subsidiaries,
taken as a whole, except as described in the Final Memorandum; and
(D) the statements in the Final Memorandum under the caption
"Business Description of Country Operations - Impsat Colombia - Regulation"
insofar as such statements constitute summaries of the Colombian legal matters,
documents or proceedings referred to therein, are accurate in all material
respects and fairly summarize all matters referred to therein.
(E) there are no restrictions (legal, contractual or otherwise)
on the ability of Impsat Colombia to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
described in the Final Memorandum (including, without limitation the description
of withholding taxes described therein) and such
<PAGE> 29
C-2
restrictions as would not have a material adverse effect on the prospects,
condition, financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole; and such descriptions, if
any, fairly summarize such restrictions.
<PAGE> 30
EXHIBIT D
Opinion of Perez Bustamante & Perez
(A) Impsat Ecuador has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the Republic of Ecuador, has
the corporate power and authority to own its property and to conduct its
business as described in the Final Memorandum dated June 12, 1998 (the "Final
Memorandum") and is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole;
(B) all of the shares of capital stock of Impsat Ecuador owned by
the Company have been duly and validly authorized and issued and are fully paid
and non-assessable and are directly owned by the Company, free and clear of all
liens, encumbrances, equities or claims;
(C) Impsat Ecuador has all necessary certificates, orders,
permits, licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all Ecuadoran governmental authorities,
courts and tribunals, to own, lease, license and use its properties and assets
and to conduct its business in the manner described in the Final Memorandum, and
Impsat Ecuador has not received any notice of proceedings relating to revocation
or modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is Impsat Ecuador in violation of, or
in default under, any federal, state, local, foreign supranational, national or
regional law, regulation, rule, decree, order or judgment applicable to Impsat
Ecuador the effect of which, singly or in the aggregate, would have a material
adverse effect on the prospects, condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken as a
whole, except as described in the Final Memorandum; and
(D) the statements in the Final Memorandum under the caption
"Business Description of Country Operations - Impsat Ecuador" insofar as such
statements constitute summaries of the legal matters of Ecuador, documents or
proceedings referred to therein, are accurate in all material respects and
fairly summarize all matters referred to therein.
(E) There are no restrictions (legal, contractual or otherwise)
on the ability of Impsat Ecuador to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
described in the Final Memorandum (including, without limitation, the
description of withholding taxes contained therein) and such restrictions as
would not have a material adverse effect on the prospects, condition, financial
or
<PAGE> 31
D-2
otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole; and such descriptions, if any, fairly summarize
such restrictions.
<PAGE> 32
EXHIBIT E
Opinion of Basham, Ringe & Correa
(A) Impsat Mexico has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
organization, has the corporate power and authority to own its property and to
conduct its business as described in the Final Memorandum under the caption
"Business - Description of Country Operations - Impsat Mexico" and is duly
qualified to transact business and is in good standing in each Mexican
jurisdiction in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material adverse effect
on the Company taken as a whole;
(B) all of the shares of capital stock of Impsat Mexico owned by
the Company have been duly and validly authorized and issued and are fully paid
and non-assessable and are directly owned by the Company, free and clear of all
liens, encumbrances, equities or claims;
(C) Impsat Mexico has all necessary certificates, orders,
permits, licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all Mexican governmental authorities,
all self-regulatory organizations and all courts and tribunals, to own, lease,
license and use its properties and assets and to conduct its business in the
manner described in the Final Memorandum under the caption "Business -
Description of Country Operations - Impsat Mexico" and Impsat Mexico has not
received any notice of proceedings relating to revocation or modification of any
such certificates, orders, permits, licenses, authorizations, consents or
approvals, nor is Impsat Mexico in violation of, or in default under, any
federal, state, local, foreign supranational, national or regional law,
regulation, rule, decree, order or judgment applicable to Impsat Mexico the
effect of which, singly or in the aggregate, would have a material adverse
effect on the prospects, condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries, taken as a whole,
except as described in the Final Memorandum; and
(D) the statements in the Final Memorandum under the caption
"Business Description of Country Operations - Impsat Mexico" insofar as such
statements constitute summaries of the Mexican legal matters, documents or
proceedings referred to therein, are accurate in all material respects and
fairly summarize all matters referred to therein.
(E) There are no restrictions (legal, contractual or otherwise)
on the ability of Impsat Mexico to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
described in the Final Memorandum (including without limitation, the description
of withholding taxes contained therein) and such
<PAGE> 33
E-2
restrictions as would not have a material adverse effect on the prospects,
condition, financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole; and such descriptions, if
any, fairly summarize such restrictions.
<PAGE> 34
EXHIBIT F
Opinion of Baumeister & Brewer
(A) Impsat Venezuela has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its organization, has the corporate power and authority to own its property and
to conduct its business as described in the Final Memorandum and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole;
(B) all of the shares of capital stock of Impsat Venezuela owned
by the Company have been duly and validly authorized and issued and are fully
paid and non-assessable and are directly owned by the Company, free and clear of
all liens, encumbrances, equities or claims;
(C) Impsat Venezuela has no subsidiaries;
(D) Impsat Venezuela, to our better knowledge, has all necessary
certificates, orders, permits, licenses, authorizations, consents and approvals
of and from, and has made all declarations and filings with, all Venezuelan
governmental authorities, all self-regulatory organizations and all courts and
tribunals, to own, lease, license and use its properties and assets and to
conduct its business in the manner described in the Final Memorandum. Up to this
date, Impsat Venezuela has not received any notice of proceedings relating to
revocation or modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is Impsat Venezuela in violation of,
or in default under, any federal, state, local, foreign supranational, national
or regional law, regulation, rule, decree, order or judgment applicable to
Impsat Venezuela the effect of which, singly or in the aggregate, would have a
material adverse effect on the prospects, condition, financial or otherwise, or
in the earnings, business or operations of the Company, taken as a whole, except
as described in the Final Memorandum; and
(E) the statements in the Final Memorandum under the captions
(including, without limitation, the description of withholding taxes contained
therein) "Business Description of Country Operations - Impsat Venezuela" insofar
as such statements constitute summaries of the Venezuelan legal matters,
documents or proceedings referred to therein, are accurate in all material
respects and fairly summarize all matters referred to therein.
<PAGE> 35
F-2
(F) There are no restrictions (legal, contractual or otherwise)
on the ability of Impsat Venezuela to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
described in the Final Memorandum (including without limitation the description
of withholding taxes contained therein) and such restrictions as would not have
a material adverse effect on the prospects, condition, financial or otherwise,
or in the earnings, business or operations of the Company and its subsidiaries,
taken as a whole; and such descriptions, if any, fairly summarize such
restrictions.
<PAGE> 36
EXHIBIT G
Opinion of Pinheiro Neto
(A) Impsat Comunicacoes Ltda. ("Impsat Brazil") has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of Brazil, has the corporate power and authority to own its property and to
conduct its business as described in the Final Memorandum and is duly qualified
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries as a whole;
(B) all of the shares of capital stock of Impsat Brazil owned by
the Company have been duly and validly authorized and issued and are fully paid
and non-assessable and are directly owned by the Company, free and clear of all
liens, encumbrances, equities or claims;
(C) Impsat Brazil has all necessary certificates, orders,
permits, licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all Brazilian governmental authorities,
courts and tribunals, to own, lease, license and use its properties and assets
and to conduct its business in the manner described in the Final Memorandum, and
Impsat Brazil has not received any notice of proceedings relating to revocation
or modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is Impsat Brazil in violation of, or
in default under, any federal, state, local, foreign supranational, national or
regional law, regulation, rule, decree, order or judgment applicable to Impsat
Brazil the effect of which, singly or in the aggregate, would have a material
adverse effect on the prospects, condition, financial or otherwise, or in the
earnings, business or operation of the Company and its subsidiaries, taken as a
whole, except as described in the Final Memorandum;
(D) the statements in the Final Memorandum under the caption
"Business Description of Country Operations - Impsat Brazil" insofar as such
statements constitute summaries of the Brazil legal matters, documents or
proceedings referred to therein, are accurate in all material respects and
fairly summarize all matters referred to therein, and
(E) there are no restrictions (legal, contractual or otherwise)
on the ability of Impsat Brazil to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
described in the Final Memorandum (including, without limitation, the
description of withholding taxes contained therein) and such restrictions as
would not have a material adverse effect on the prospects, condition, financial
or otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole; and such descriptions, if any, fairly summarize
such restrictions.
<PAGE> 1
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
Dated June 17, 1998
among
IMPSAT CORPORATION
and
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into June 17, 1998, among IMPSAT CORPORATION, a Delaware
corporation (the "Company"), and MORGAN STANLEY & CO. INCORPORATED and CREDIT
SUISSE FIRST BOSTON CORPORATION (the "Placement Agents").
This Agreement is made pursuant to the Placement Agreement
dated June 12, 1998, among the Company and the Placement Agents (the "Placement
Agreement"), which provides for the sale by the Company to the Placement Agents
of an aggregate of $225,000,000 principal amount of the Company's 12_% Senior
Notes due 2008 (the "Securities"). In order to induce the Placement Agents to
enter into the Placement Agreement, the Company has agreed to provide to the
Placement Agents and their direct and indirect transferees the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Closing Date" shall mean the Closing Date as defined in the
Placement Agreement.
"Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Securities for Registrable Securities pursuant to Section
2(a) hereof.
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
<PAGE> 3
2
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on
another appropriate form) and all amendments and supplements to such
registration statement, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Exchange Securities" shall mean Securities issued by the
Company under the Indenture containing terms identical to the
Securities (except that the Exchange Securities will not contain terms
with respect to transfer restrictions) and to be offered to Holders in
exchange for Securities pursuant to the Exchange Offer.
"Holder" shall mean each of the Placement Agents, for so long
as any of them owns any Registrable Securities, and each of their
successors, assigns and direct and indirect transferees who become
registered owners of Registrable Securities under the Indenture;
provided that for purposes of Sections 4 and 5 of this Agreement, the
term "Holder" shall include Participating Broker-Dealers (as defined
in Section 4(a)).
"Indenture" shall mean the Indenture relating to the
Securities dated as of June 17, 1998 between the Company and The Bank
of New York, as trustee, and as the same may be amended from time to
time in accordance with the terms thereof.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities;
provided that whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or any of its affiliates
(other than the Placement Agents or any other Holder deemed an
affiliate solely by reason of its holding one or more Registrable
Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage or
amount.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Placement Agents" shall have the meaning set forth in the
preamble.
"Placement Agreement" shall have the meaning set forth in the
preamble.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with
<PAGE> 4
3
respect to the terms of the offering of any portion of the Registrable
Securities covered by a Shelf Registration Statement, and by all other
amendments and supplements to such prospectus, and in each case
including all material incorporated by reference therein.
"Registrable Securities" shall mean the Securities; provided,
however, that the Securities shall cease to be Registrable Securities
(i) when a Registration Statement with respect to such Securities
shall have been declared effective under the 1933 Act and such
Securities shall have been disposed of pursuant to such Registration
Statement, (ii) when such Securities have been sold to the public
pursuant to Rule 144(k) (or any similar provision then in force, but
not Rule 144A) under the 1933 Act or (iii) when such Securities shall
have ceased to be outstanding, provided, further, that the Securities
with respect to which the Company has caused to be filed and declared
effective an Exchange Offer Registration Statement and has commenced
an Exchange Offer, in each case pursuant to and in accordance with
Section 2 hereof, and which have not been tendered by the last
Exchange Date (as defined in Section 2(a)(ii) hereof) by the Holder
thereof shall be deemed not be to Registrable Securities.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC, stock exchange
or National Association of Securities Dealers, Inc. registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws (including
reasonable fees and disbursements of counsel for any underwriters or
Holders in connection with blue sky qualification of any of the
Exchange Securities or Registrable Securities), (iii) all expenses of
any Persons in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, any Prospectus,
any amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating
agency fees, (v) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (vi)
the fees and disbursements of the Trustee and its counsel, (vii) the
fees and disbursements of counsel for the Company and, in the case of
a Shelf Registration Statement, the fees and disbursements of one
counsel for the Holders (which counsel shall be selected by the
Majority Holders and which counsel may also be counsel for the
Placement Agents) and (viii) the fees and disbursements of the
independent public accountants of the Company, including the expenses
of any special audits or "comfort" letters required by or incident to
such performance and compliance, but excluding fees and expenses of
counsel to the underwriters (other than fees and expenses set forth in
clause (ii) above) or the Holders and underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a Holder.
<PAGE> 5
4
"Registration Statement" shall mean any registration statement
of the Company that covers any of the Exchange Securities or
Registrable Securities pursuant to the provisions of this Agreement
and all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the Registrable
Securities (but no other securities unless approved by the Holders
whose Registrable Securities are covered by such Shelf Registration
Statement) on an appropriate form under Rule 415 under the 1933 Act,
or any similar rule that may be adopted by the SEC, and all amendments
and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Trustee" shall mean the trustee with respect to the
Securities under the Indenture.
"Underwriter" shall have the meaning set forth in Section 3
hereof.
"Underwritten Registration" or "Underwritten Offering" shall
mean a registration in which Registrable Securities are sold to an
Underwriter for reoffering to the public.
2. Registration Under the 1933 Act.
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the Staff of the SEC, the Company shall use its
best efforts to cause to be filed an Exchange Offer Registration Statement
covering the offer by the Company to the Holders to exchange all of the
Registrable Securities for Exchange Securities and to have such Registration
Statement remain effective until the closing of the Exchange Offer. The
Company shall commence the Exchange Offer promptly after the Exchange Offer
Registration Statement has been declared effective by the SEC and use its best
efforts to have the Exchange Offer consummated not later than 60 days after
such effective date. The Company shall commence
<PAGE> 6
5
the Exchange Offer by mailing the related exchange offer Prospectus and
accompanying documents to each Holder stating, in addition to such other
disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to
this Registration Rights Agreement and that all Registrable Securities
validly tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be
a period of at least 20 business days from the date such notice is
mailed) (the "Exchange Dates");
(iii) that any Registrable Security not tendered will
remain outstanding and continue to accrue interest but will not retain
any rights under this Registration Rights Agreement (including any
right to have the interest rate therein increased pursuant thereto);
(iv) that Holders electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to surrender
such Registrable Security, together with the enclosed letters of
transmittal, to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice
prior to the close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their
election, not later than the close of business on the last Exchange
Date, by sending to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice a
telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Securities
delivered for exchange and a statement that such Holder is withdrawing
his election to have such Securities exchanged.
As soon as practicable after the last Exchange Date, the
Company shall:
(i) accept for exchange Registrable Securities or
portions thereof tendered and not validly withdrawn pursuant to the
Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so
accepted for exchange by the Company and issue, and cause the Trustee
to promptly authenticate and mail to each Holder, an Exchange Security
equal in principal amount of the Registrable Securities surrendered by
such Holder.
<PAGE> 7
6
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the Staff of the SEC. The Company shall inform
the Placement Agents of the names and addresses of the Holders to whom the
Exchange Offer is made, and the Placement Agents shall have the right, subject
to applicable law, to contact such Holders and otherwise facilitate the tender
of Registrable Securities in the Exchange Offer.
(b) In the event that (i) the Company determines that the
Exchange Offer Registration provided for in Section 2(a) above is not available
or may not be consummated as soon as practicable after the last Exchange Date
because it would violate applicable law or the applicable interpretations of
the Staff of the SEC, (ii) the Exchange Offer is not for any other reason
consummated by December 17, 1998 or (iii) the Exchange Offer has been completed
and in the opinion of counsel for the Placement Agents a Registration Statement
must be filed and a Prospectus must be delivered by the Placement Agents in
connection with any offering or sale of Registrable Securities, the Company
shall use its best efforts to cause to be filed as soon as practicable after
such determination, date or notice of such opinion of counsel is given to the
Company, as the case may be, a Shelf Registration Statement providing for the
sale by the Holders of all of the Registrable Securities and to have such Shelf
Registration Statement declared effective by the SEC (such obligation, arising
solely under clause (ii) above, to have filed a Shelf Registration Statement
shall be deemed satisfied with respect to any Holder upon consummation of the
Exchange Offer with respect to such Holder). In the event the Company is
required to file a Shelf Registration Statement solely as a result of the
matters referred to in clause (iii) of the preceding sentence, the Company
shall use its best efforts to file and have declared effective by the SEC both
an Exchange Offer Registration Statement pursuant to Section 2(a) with respect
to all Registrable Securities and a Shelf Registration Statement (which may be
a combined Registration Statement with the Exchange Offer Registration
Statement) with respect to offers and sales of Registrable Securities held by
the Placement Agents after completion of the Exchange Offer. The Company
agrees to use its best efforts to keep the Shelf Registration Statement
continuously effective until the expiration of the period referred to in Rule
144(k) with respect to the Registrable Securities or such shorter period that
will terminate when all of the Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement. The Company further agrees to supplement or amend the Shelf
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement or by the 1933 Act or by any other rules and regulations
thereunder for shelf registration or if reasonably requested by a Holder with
respect to information relating to such Holder, and to use its best efforts to
cause any such amendment to become effective and such Shelf Registration
Statement to become usable as soon as thereafter practicable. The
<PAGE> 8
7
Company agrees to furnish to the Holders of Registrable Securities copies of
any such supplement or amendment promptly after its being used or filed with
the SEC.
(c) The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or Section 2(b).
Each Holder shall pay all underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that, if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental agency or
court, such Registration Statement will be deemed not to have become effective
during the period of such interference until the offering of Registrable
Securities pursuant to such Registration Statement may legally resume. As
provided for in the Indenture, in the event the Exchange Offer is not
consummated and the Shelf Registration Statement is not declared effective on
or prior to December 17, 1998, the interest rate on the Securities will
increase by .5% per annum to 12_% per annum. Upon consummation of the Exchange
Offer or the effectiveness of the Shelf Registration Statement as declared by
the SEC, as the case may be, the rate of interest on the Securities will
decrease to the original rate of interest of 12_% per annum for the Securities.
If a Shelf Registration Statement is required solely by the matters referred to
in clause (iii) of the first sentence of Section 2(b), such increase in
interest rate shall be payable only to the Placement Agents, with respect to
the Securities held by them, and only with respect to any period (after
December 17, 1998) during which such Shelf Registration Statement is not
effective.
(e) Without limiting the remedies available to the
Placement Agents and the Holders, the Company acknowledges that any failure by
the Company to comply with its obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Placement Agents or the
Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Placement Agents or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Section 2(a) and Section 2(b) hereof.
3. Registration Procedures.
In connection with the obligations of the Company with respect
to the Registration Statements pursuant to Section 2(a) and Section 2(b)
hereof, the Company shall as expeditiously as possible:
<PAGE> 9
8
(a) prepare and file with the SEC a Registration
Statement on the appropriate form under the 1933 Act, which form (x)
shall be selected by the Company and (y) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Securities
by the selling Holders thereof and (z) shall comply as to form in all
material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed
therewith, and use its best efforts to cause such Registration
Statement to become effective and remain effective in accordance with
Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period and cause each Prospectus to be supplemented by any
required prospectus supplement and, as so supplemented, to be filed
pursuant to Rule 424 under the 1933 Act; to keep each Prospectus
current during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by brokers or
dealers with respect to the Registrable Securities or Exchange
Securities;
(c) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, to counsel for the Placement Agents,
to counsel for the Holders and to each Underwriter of an Underwritten
Offering of Registrable Securities, if any, without charge, as many
copies of each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto and such other documents as such
Holder or Underwriter may reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Securities;
and the Company consents to the use of such Prospectus and any
amendment or supplement thereto in accordance with applicable law by
each of the selling Holders of Registrable Securities and any such
Underwriters in connection with the offering and sale of the
Registrable Securities covered by and in the manner described in such
Prospectus or any amendment or supplement thereto in accordance with
applicable law;
(d) use its best efforts to register or qualify the
Exchange and Registrable Securities under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder of
Registrable Securities covered by a Registration Statement shall
reasonably request in writing by the time the applicable Registration
Statement is declared effective by the SEC, to cooperate with such
Holders in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. and do any and all
other acts and things which may be reasonably necessary or advisable
to enable such Holder to consummate the disposition in each such
jurisdiction of such Exchange and Registrable Securities owned by such
Holder; provided,
<PAGE> 10
9
however, that the Company shall not be required to (i) qualify as a
foreign corporation or as a dealer in securities in any jurisdiction
where it would not otherwise be required to qualify but for this
Section 3(d), (ii) file any general consent to service of process or
(iii) subject itself to taxation in any such jurisdiction if it is not
so subject;
(e) in the case of a Shelf Registration, notify each
Holder of Registrable Securities, counsel for the Holders and counsel
for the Placement Agents promptly and, if requested by any such Holder
or counsel, confirm such advice in writing (i) when a Registration
Statement has become effective and when any post-effective amendment
thereto has been filed and becomes effective, (ii) of any request by
the SEC or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities
covered thereby, the representations and warranties of the Company
contained in any underwriting agreement, securities sales agreement or
other similar agreement, if any, relating to the offering cease to be
true and correct in all material respects or if the Company receives
any notification with respect to the suspension of the qualification
of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, (v) of the happening of
any event during the period a Shelf Registration Statement is
effective which makes any statement made in such Registration
Statement or the related Prospectus untrue in any material respect or
which requires the making of any changes in such Registration
Statement or Prospectus in order to make the statements therein not
misleading and (vi) of any determination by the Company that a
post-effective amendment to a Registration Statement would be
appropriate;
(f) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of a Registration Statement
at the earliest possible moment and provide immediate notice to each
Holder of the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with
the selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends and
enable such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and registered in
such names as the selling Holders may
<PAGE> 11
10
reasonably request at least one business day prior to the closing of
any sale of Registrable Securities;
(i) in the case of a Shelf Registration, upon the
occurrence of any event contemplated by Section 3(e)(v) hereof, use
their best efforts to prepare and file with the SEC a supplement or
post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, such Prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
Company agrees to notify the Holders to suspend use of the Prospectus
as promptly as practicable after the occurrence of such an event, and
the Holders hereby agree to suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to correct such
misstatement or omission;
(j) a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a Prospectus or
any document which is to be incorporated by reference into a
Registration Statement or a Prospectus after the initial filing of a
Registration Statement, provide copies of such document to the
Placement Agents and their counsel (and, in the case of a Shelf
Registration Statement, to the Holders and their counsel) and make
such of the representatives of the Company as shall be reasonably
requested by the Placement Agents or their counsel (and, in the case
of a Shelf Registration Statement, to the Holders or their counsel)
available for discussion of such document, and shall not at any time
file or make any amendment to the Registration Statement, any
Prospectus or any amendment of or supplement to a Registration
Statement or a Prospectus or any document which is to be incorporated
by reference into a Registration Statement or a Prospectus, of which
the Placement Agents and their counsel (and, in the case of a Shelf
Registration Statement, the Holders and their counsel) shall not have
previously been advised and furnished a copy or to which the Placement
Agents or their counsel (and, in the case of a Shelf Registration
Statement, the Holders or their counsel) shall reasonably object;
(k) obtain a CUSIP number for all Exchange Securities, as
the case may be, not later than the effective date of a Registration
Statement;
(l) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Securities or Registrable Securities, as
the case may be, cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA and execute,
and use their
<PAGE> 12
11
best efforts to cause the Trustee to execute, all documents as may be
required to effect such changes and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, make available
for inspection by a representative of the Holders of the Registrable
Securities, any Underwriter participating in any disposition pursuant
to such Shelf Registration Statement, and attorneys and accountants
designated by the Holders, at reasonable times and in a reasonable
manner, all financial and other records, pertinent documents and
properties of the Company, and cause the officers, directors and
employees of the Company to supply all information reasonably
requested by any such representative, Underwriter, attorney or
accountant in connection with a Shelf Registration Statement;
(n) in the case of a Shelf Registration, use its best
efforts to cause all Registrable Securities to be listed on any
securities exchange or any automated quotation system on which the
Securities are then listed if requested by the Majority Holders, to
the extent such Registrable Securities satisfy applicable listing
requirements;
(o) use its best efforts to cause the Exchange Securities
to be rated or continue to be rated by two nationally recognized
statistical rating organizations (as such term is defined in Rule
436(g)(2) under the 1933 Act), if the Registrable Securities have been
so rated;
(p) if reasonably requested by any Holder of Registrable
Securities covered by a Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment
such information with respect to such Holder as such Holder reasonably
requests to be included therein and (ii) make all required filings of
such Prospectus supplement or such post-effective amendment as soon as
the Company has received notification of the matters to be
incorporated in such filing; and
(q) in the case of a Shelf Registration, enter into such
customary agreements and take all such other actions in connection
therewith (including those requested by the Holders of a majority of
the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities including,
but not limited to, an Underwritten Offering and in such connection,
(i) to the extent possible, make such representations and warranties
to the Holders and any Underwriters of such Registrable Securities
with respect to the business of the Company and its subsidiaries, the
Registration Statement, Prospectus and documents incorporated by
reference or deemed incorporated by reference, if any, in each case,
in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the
<PAGE> 13
12
same if and when requested, (ii) obtain opinions of counsel to the
Company (which counsel and opinions, in form, scope and substance,
shall be reasonably satisfactory to the Holders and such Underwriters
and their respective counsel) addressed to each selling Holder and
Underwriter of Registrable Securities, covering the matters
customarily covered in opinions requested in underwritten offerings,
(iii) obtain "comfort" letters from the independent certified public
accountants of the Company (and, if necessary, any other certified
public accountant of any subsidiary of the Company, or of any business
acquired by the Company for which financial statements and financial
data are or are required to be included in the Registration Statement)
addressed to each selling Holder and Underwriter of Registrable
Securities, such letters to be in customary form and covering matters
of the type customarily covered in "comfort" letters in connection
with underwritten offerings, and (iv) deliver such documents and
certificates as may be reasonably requested by the Holders of a
majority in principal amount of the Registrable Securities being sold
or the Underwriters, and which are customarily delivered in
underwritten offerings, to evidence the continued validity of the
representations and warranties of the Company made pursuant to clause
(i) above and to evidence compliance with any customary conditions
contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company may
require each Holder of Registrable Securities to furnish to the Company such
information regarding the Holder and the proposed distribution by such Holder
of such Registrable Securities as the Company may from time to time reasonably
request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 3(e)(v) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. The Company may
give any such notice only twice during any 365 day period and any such
suspensions may not exceed 30 days for each suspension and there may not be
more than two suspensions in effect during any 365-day period.
The Holders of Registrable Securities covered by a Shelf
Registration Statement who desire to do so may sell such Registrable Securities
in an Underwritten Offering. In any such Underwritten Offering, the investment
banker or investment bankers and manager or managers (the "Underwriters") that
will administer the offering will be selected by the Majority Holders of the
Registrable Securities included in such offering.
<PAGE> 14
13
4. Participation of Broker-Dealers in Exchange Offer.
(a) The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Securities that were acquired by such
broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within the
meaning of the 1933 Act and must deliver a prospectus meeting the requirements
of the 1933 Act in connection with any resale of such Exchange Securities.
The Company understands that it is the Staff's position that
if the Prospectus contained in the Exchange Offer Registration Statement
includes a plan of distribution containing a statement to the above effect and
the means by which Participating Broker-Dealers may resell the Exchange
Securities, without naming the Participating Broker-Dealers or specifying the
amount of Exchange Securities owned by them, such Prospectus may be delivered
by Participating Broker-Dealers to satisfy their prospectus delivery obligation
under the 1933 Act in connection with resales of Exchange Securities for their
own accounts, so long as the Prospectus otherwise meets the requirements of the
1933 Act.
(b) In light of the above, notwithstanding the other
provisions of this Agreement, the Company agrees that the provisions of this
Agreement as they relate to a Shelf Registration shall also apply to an
Exchange Offer Registration to the extent, and with such reasonable
modifications thereto as may be, reasonably requested by the Placement Agents
or by one or more Participating Broker-Dealers, in each case as provided in
clause (ii) below, in order to expedite or facilitate the disposition of any
Exchange Securities by Participating Broker-Dealers consistent with the
positions of the Staff recited in Section 4(a) above; provided that:
(i) the Company shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer Registration
Statement, as would otherwise be contemplated by Section 3(i), for a
period exceeding 180 days after the last Exchange Date (as such period
may be extended pursuant to the penultimate paragraph of Section 3 of
this Agreement) and Participating Broker-Dealers shall not be
authorized by the Company to deliver and shall not deliver such
Prospectus after such period in connection with the resales
contemplated by this Section 4; and
(ii) the application of the Shelf Registration procedures
set forth in Section 3 of this Agreement to an Exchange Offer
Registration, to the extent not required by the positions of the Staff
of the SEC or the 1933 Act and the rules and regulations thereunder,
will be in conformity with the reasonable request to the Company by
the Placement Agents or with the reasonable request in writing to the
Company by one or
<PAGE> 15
14
more broker-dealers who certify to the Placement Agents and the
Company in writing that they anticipate that they will be
Participating Broker-Dealers; and provided further that, in connection
with such application of the Shelf Registration procedures set forth
in Section 3 to an Exchange Offer Registration, the Company shall be
obligated (x) to deal only with one entity representing the
Participating Broker-Dealers, which shall be Morgan Stanley & Co.
Incorporated unless it elects not to act as such representative, (y)
to pay the fees and expenses of only one counsel representing the
Participating Broker-Dealers, which shall be counsel to the Placement
Agents unless such counsel elects not to so act and (z) to cause to be
delivered only one, if any, "comfort" letter with respect to the
Prospectus in the form existing on the last Exchange Date and with
respect to each subsequent amendment or supplement, if any, effected
during the period specified in clause (i) above.
(c) The Placement Agents shall have no liability to the
Company or any Holder with respect to any request that it may make pursuant to
Section 4(b) above.
5. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the
Placement Agents, each Holder and each person, if any, who controls the
Placement Agents or any Holder within the meaning of either Section 15 of the
1933 Act or Section 20 of the 1934 Act, or is under common control with, or is
controlled by, the Placement Agents or any Holder, from and against all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred by the Placement Agents, any Holder or any
such controlling or affiliated person in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) pursuant to which Exchange Securities or
Registrable Securities were registered under the 1933 Act, including all
documents incorporated therein by reference, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or caused by any
untrue statement or alleged untrue statement of a material fact contained in
any Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein in light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Placement Agents or any Holder
furnished to the Company in writing by the Placement Agents or any Holder
expressly for use therein; provided, however, that the foregoing indemnity
shall not inure to the benefit of any of the foregoing parties from whom the
person asserting any such losses, claims, damages or liabilities purchased the
Securities or Exchange Securities, or any person
<PAGE> 16
15
controlling any of the foregoing parties, if such party failed to send or give
a copy of the Prospectus (as amended or supplemented if the Company shall have
furnished such amendments or supplements thereto) to such person within the
time required by the Securities Act (and if so required), and if the Prospectus
(as so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities. In connection with any Underwritten
Offering permitted by Section 3, the Company will also indemnify the
Underwriters, if any, selling brokers, dealers and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who controls such Persons (within the meaning of the Securities
Act and the Exchange Act) to the same extent as provided above with respect to
the indemnification of the Holders, if requested in connection with any
Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Placement Agents and the other
selling Holders, and each of their respective directors, officers who sign the
Registration Statement and each Person, if any, who controls the Company, the
Placement Agents and any other selling Holder within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as
the foregoing indemnity from the Company to the Placement Agents and the
Holders, but only with reference to information relating to such Holder
furnished to the Company in writing by such Holder expressly for use in any
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or paragraph (b)
above, such person (the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for (a)
the fees and expenses of more than one separate firm (in addition to any local
counsel) for the Placement Agents and for all Holders and all persons, if any,
who control the Placement Agents and any Holders within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act,
<PAGE> 17
16
unless the Placement Agents determine in their sole discretion that such a
joint representation of the Placement Agents and the Holders would involve
differences or potential differences that render such joint representation
inadvisable, in which case the indemnifying party shall not be responsible for
(i) the fees and expenses of more than one separate firm (in addition to any
local counsel) for all Holders and all persons, if any, who control any Holders
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act and (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Placement Agents and all persons, if
any, who control the Placement Agents within the meaning of either Section 15
of the 1933 Act or Section 20 of the 1934 Act, and (b) the fees and expenses of
more than one separate firm (in addition to any local counsel) for the Company,
its directors, its officers who sign the Registration Statement and each
person, if any, who controls the Company within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In such case involving the Placement Agents and persons who control
the Placement Agents, such firm shall be designated in writing by the Placement
Agents. In such case involving the Holders and such persons who control
Holders, such firm shall be designated in writing by the Majority Holders. In
all other cases, such firm shall be designated by the Company. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but, if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed
the indemnified party for such fees and expenses of counsel in accordance with
such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which such
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a)
or paragraph (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the
<PAGE> 18
17
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company and the Holders shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Holders and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Holders' respective
obligations to contribute pursuant to this Section 5(d) are several in
proportion to the respective number of Registrable Securities of such Holder
that were registered pursuant to a Registration Statement.
(e) The Company and each Holder agree that it would not
be just or equitable if contribution pursuant to this Section 5 were determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
Registrable Securities were sold by such Holder exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Section 5 are not exclusive and shall not limit any rights or remedies which
may otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of the Placement Agents, any Holder or any person controlling the Placement
Agents or any Holder, or by or on behalf of the Company, its officers or
directors or any person controlling the Company, (iii) acceptance of any of the
Exchange Securities and (iv) any sale of Registrable Securities pursuant to a
Shelf Registration Statement.
<PAGE> 19
18
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not
entered into, and on or after the date of this Agreement will not enter into,
any agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's other issued and outstanding securities under any such
agreements.
(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or consent; provided, however, that no amendment,
modification, supplement, waiver or consents to any departure from the
provisions of Section 5 hereof shall be effective as against any Holder of
Registrable Securities unless consented to in writing by such Holder.
(c) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder, at the most current address given by
such Holder to the Company by means of a notice given in accordance with the
provisions of this Section 6(c), which address initially is, with respect to
the Placement Agents, the address set forth in the Placement Agreement; and
(ii) if to the Company, initially at the Company's address set forth in the
Placement Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 6(c).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the second succeeding business day if timely delivered to an air courier
guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to the Trustee,
at the address specified in the Indenture.
<PAGE> 20
19
(d) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees
of each of the parties, including, without limitation and without the need for
an express assignment, subsequent Holders; provided that nothing herein shall
be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Placement Agreement.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement and such person shall be entitled to receive the benefits
hereof. The Placement Agents (in their capacity as Placement Agents) shall
have no liability or obligation to the Company with respect to any failure by a
Holder to comply with, or any breach by any Holder of, any of the obligations
of such Holder under this Agreement.
(e) Third Party Beneficiary. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on
the one hand, and the Placement Agents, on the other hand, and shall have the
right to enforce such agreements directly to the extent they deems such
enforcement necessary or advisable to protect their rights or the rights of
Holders hereunder.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) Governing Law. This Agreement shall be governed by
the laws of the State of New York.
(i) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
IMPSAT CORPORATION
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
By: Morgan Stanley & Co. Incorporated
By: ------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.1
EXCHANGE AGENT AGREEMENT
This EXCHANGE AGENT AGREEMENT (this "Agreement") dated as of
_____________, 1998 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 12-3/8% Senior Notes due 2008 (the "Old Notes"), of which an
aggregate of $225,000,000 in principal amount are outstanding as of the date
hereof, for an equal principal amount of newly issued 12-3/8% Senior Notes due
2008 (the "New Notes"), on the terms and in the manner set forth in the
Prospectus, dated _____________, 1998 (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. The Exchange Agent shall establish an account with
respect to the Old Notes at the Depository Trust Company ("DTC") for purposes of
the Exchange Offer within two business days after the date of the Exchange Offer
Prospectus so that any Participant (as defined herein) may make book-entry
delivery of the Old Notes by causing DTC to transfer such Old Notes into such
account in accordance with DTC's procedures for such transfer. 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 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 beneficially owned by each such Participant; provided, however, that 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
<PAGE> 2
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 compliance
with the requirement of 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 or 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 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.
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<PAGE> 3
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) but 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 "canceled" 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.
5. Assignees; Signatures. If a New Note or beneficial ownership
thereof is to be delivered to, or reflected on the records of 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,
-3-
<PAGE> 4
together with such other information as may from time to time be 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. Except with respect to Section 10 hereof, 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 $5,000. 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:
(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 in good faith
reliance upon any certificate, instrument, opinion, notice, letter, telegram or
other document or security delivered to the Exchange Agent believed by it in
good faith 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 in good faith reliance upon the written
instructions of any person believed by it in good faith to be a proper officer
or representative of IMPSAT relating to the Exchange Agent's duties hereunder;
-4-
<PAGE> 5
(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 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 administration 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.
-5-
<PAGE> 6
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: (541) 307-1525
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 7 East
New York, New York 10286
Attn: Corporate Trust Operations,
Enrique Lopez
Facsimile Number: (212) 815-6339
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 _____________,
1998, or on such earlier date as may be agreed in a signed writing between
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<PAGE> 7
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.
-7-
<PAGE> 8
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
This is a fair and accurate English translation of a Spanish language
document as required by Rule 306(a) Regulation S-T.
/s/ JOSE R. TORRES
------------------------------
Jose R. Torres
Vice President, Administration
and Chief Accounting Officer
IMPSAT Corporation
July 15, 1998
<PAGE> 2
EXHIBIT 10.4
AMENDMENT TO AGREEMENT
BETWEEN:
NAHUELSAT S.A., hereafter the "SUPPLIER", on the one hand,
represented for the purposes herein by Mr. Daniel Salzer, General Manager, and
Mr. Fidel Morales Moreno, Marketing and Sales Manager, and
IMPSAT S.A., hereafter the "CLIENT", on the other hand, represented
for the purposes herein by Mr. Rafael Carchak Canes, as the Representative of
the said company,
jointly named hereafter the "Parties" and
PREAMBLE:
a) The CLIENT and the SUPPLIER executed on April 26, 1996 a Lease
Agreement for a Satellite Facility (hereafter the "Contract").
b) The CLIENT requested an increase in the lease of Satellite Capacity.
c) For such ends, it is necessary to amend certain articles of the
Contract and Appendix B.
d) Aside from the amendments which are expressly stated herein
(hereafter "Amendments") the Contract shall remain in force with
regard to all of its terms and appropriate Appendixes.
Therefore, the Parties AGREE as follows:
ARTICLE ONE. This Amendment shall become an integral part of the Contract.
Below, Contract shall be understood as: the instruments constituted by the
Contract, the instant amendment and the respective Appendices.
ARTICLE TWO. Substitute, with a validity date of September 8, 1997, the
following Articles of the Contract with the text below:
3.1 The capacity assigned to the CLIENT in Satellite NAHUEL consists of:
3.1.1 Thirty-six (36) Mega-Hertz (hereafter "Mhz"), starting
September 8, 1997, and ending November 30, 1998, divided into two
segments of thirty-two (32) MHz and four (4) MHz, respectively.
3.1.2 Sixty (60) Mhz starting December 1, 1998, and ending August 31,
2003, divided into two segments of thirty-two (32) MHz and four (28)
MHz, respectively.
3.1.3 The CLIENT, prior to the period indicated in 3.1.2, may
increase the Assigned Capacity up to sixty (60) MHz, as established
in 3.1.1, by way of a notification to the SUPPLIER, thirty (30) days
prior to the date on which it wishes to increase the Assigned
Capacity. The amounts
[initials]
<PAGE> 3
established in articles 3.2, 3.3, 3.4 and 3.5, for the Assigned
Capacity in Article 3.1.1, shall be modified in accordance with the
increase in Assigned Capacity.
3.1.4 The CLIENT may, prior to April 30, 1998, and with a
notification period to the SUPPLIER of no less than 48 hours,
decrease the Satellite Capacity indicated in 3.2.1 down to the limit
in MHz of the Assigned Capacity which it actually uses by virtue of
article 3.1.3, at the time of requesting the decrease. In the instant
case, a new amendment to the Contract shall be executed bringing the
Contract into line with the new conditions with the SUPPLIER able to
put forward any claim owing to a decrease in the leased Satellite
Capacity.
3.2 The width of the Available Band of the Assigned Transponder is
fifty-four (54) MHz.
3.3 The percentage of the Band Width Available to the Assigned
Transponder which the CLIENT shall have a right to use is:
3.3.1 Fifty-nine point three percent (59.3%), and seven point four
percent (7.4%), respectively, for the Assigned Capacity segments
indicated in 3.3.1.
3.3.2 Fifty-nine point three percent (59.3%), and fifty-one point
nine percent (51.9%), respectively, for the Assigned Capacity
segments indicated in 3.3.2.
3.4 The Available Power of each assigned Transponder corresponds to an
output back-off of four point two (4.2) decibels (hereafter dB) of
the respective, progressive wave tube.
3.5 The maximum rate of Available Power of the Assigned Transponder the
CLINET shall have the right to use, is:
3.5.1 Fifty-nine point three percent (59.3%), and seven point four
percent (7.4%), respectively, for the Assigned Capacity segments
indicated in 3.1.1. These percentages correspond to the total output
back-off for the carriers, in Assigned Capacity segments of six point
five (6.5) dB, and fifteen point five (15.5) dB, respectively, of the
applicable, progressive wave tube amplifiers.
3.5.2 Fifty-nine point three percent (59.3%), and fifty-one point
nine percent (51.9%), respectively, for the Assigned Capacity
segments indicated in 3.1.2. These percentages correspond to the
total output back-off for the carriers, in Assigned Capacity segments
of six point five (6.5) dB, and seven point one (7.1) dB,
respectively, of the applicable, progressive wave tube amplifiers.
3.5.3 Should the CLIENT wish to use a greater percentage of the
Available Power of the Assigned Transponder than the one established,
it shall request it from the SUPPLIER, in writing, which will
establish whether it is possible, and determine the increase in rate
which the CLIENT should pay.
[initials]
<PAGE> 4
ARTICLE THREE. Taking into account the new Assigned Capacity in the Contract,
Appendix B of the Contract is replaced by a new Appendix named Appendix B-I.
Wherever in the articles of the Contract if mentioned Appendix "B", one should
read "B-I".
In witness thereof the Parties execute three copies of the same contents and one
sole effect, in the City of Buenos Aires, on the 8th day of September, 1997.
[signature] DANIEL T. SALZER [signature]
GENERAL MANAGER
SUPPLIER CLIENT Engineer RAFAEL CARCHAK CANES
GENERAL MANAGER
[signature]
Dr. FIDEL MORALES MORENO
Marketing Manager
[initials]
<PAGE> 5
- --------------------------------------------------------------------------------
APPENDIX B-I
Lease rates: NAHUEL Satellite
- --------------------------------------------------------------------------------
The price the CLIENT shall pay for leasing the Assigned Capacity is:
1997: Between September 8, 1997 and September 30, 1997, US$ 124,000
1997: Between October 1, 1997 and December 31, 1997, US$ 486,000, payable
in three equal consecutive monthly installments of US$ 162,000.
1998: Between January 1, 1998 and November 30, 1998, US$ 1,782,000, payable
in 11 (eleven) equal consecutive monthly installments of US$ 162,000.
1998: Between December 1, 1998 and August 31, 2003, US$ 15,390,000, payable
by 2003, in 57 (fifty-seven) equal consecutive monthly installments
of US$ 162,000.
[signature] [signature]
Dr. FIDEL MORALES MORENO Engineer RAFAEL CARCHAK CANES
Marketing Manager General Manager
[initials]
<PAGE> 1
This is a fair and accurate English translation of a Spanish language
document as required by Rule 306(a) Regulation S-T.
/s/ JOSE R. TORRES
------------------------------
Jose R. Torres
Vice President, Administration
and Chief Accounting Officer
IMPSAT Corporation
July 15, 1998
<PAGE> 2
EXHIBIT 10.5
SERVICE AGREEMENT
This agreement is being entered into on the ___ day of ___, 19__,
between Organizacion Internacional de Telecomunicaciones por Satelite (hereafter
"INTESALT"), an international organization established by an Agreement with
regard to Organizacion Internacional de Telecomunicaciones por Satelite
"INTESALT" (hereafter "INTESALT Agreement") and the Operational Agreement
regarding the same (hereafter "INTELSAT Operational Agreement"), executed in
Washington, D.C., on August 20, 1971, with headquarters in Washington, D.C.,
U.S.A., and IMPSAT S.A. (hereafter the "client"), ___________________ formed in,
and subject to the laws of COLOMBIA, and authorized by one or several
Signatories of INTELSAT to have direct access to a space segment of INTELSAT.
WHEREAS INTELSAT and the client wish to execute an agreement which
sets the basic terms and conditions for the client's direct access to the space
segment of INTELSAT,
INTELSAT and the client, THEREFORE, agree as follows:
1. Definitions
"Party" means a State for which the INTELSAT Agreement has come into
force.
"Signatory" means a Party, or a telecommunications entity designated
by a Party, which executed the Operational Agreement of INTELSAT.
2. Basic agreement for orders
This agreement serves as a basic contract for orders. Subject to the
terms and conditions of this agreement, INTELSAT agrees to do everything
possible to make available to the client the space segment capacity of INTELSAT
which the client requests periodically. The client shall present requests for
capacities on specific forms for seeking and changing the services listed in
SSOG-104, "Forms for orders, changes and information regarding services".
Requests for services and assigning of capacity, once approved by INTELSAT,
shall be regulated by the instant agreement. The client understands and accepts
that the present agreement does not constitute an obligation or a promise,
express or implicit, on the part of INTELSAT, in the sense that the client will
be assigned a space segment capacity of INTELSAT.
3. Terms and general conditions
On the date of the instant agreement, the client agrees to abide by
the terms and conditions established by INTELSAT for services supplied by way of
assigning space segment capacity by INTELSAT, in accordance with the instant
agreement. The said terms and conditions include those which are contained in
the Standards for Ground Stations of INTELSAT (IESS), the Manual for Using the
Satelite System (SSOG) and the INTELSAT Rates Manual, which are
<PAGE> 3
incorporated into the instant agreement by reference, as long as such terms and
conditions correspond to the specific type of services requested by the client,
and assigned by INTELSAT in accordance with the instant agreement; such term can
be modified periodically. The terms and conditions of each assignment of
capacity shall be those in force at the time the assignation is being made, and
will not change during the original period of assignation. The client also
agrees to abide by all of the regulation conditions and issuance of licenses by
the appropriate national authorities, and to respect the same.
4. Investment in INTELSAT
Should the client invest in INTELSAT, it obligates itself to abide by
the terms and conditions contained in the agreement with the investing entity
the client subscribes with INTELSAT.
5. Conditions for receiving capacity from INTELSAT
a. A request for reserve or supply of capacity for an INTELSAT space
segment submitted by a client may be denied unless the Management of INTELSAT
has determined that the said client is solvent. The client agrees to submit the
information required by INTELSAT regarding its financial and credit history.
Moreover, the client agrees to authorize INTELSAT to verify the said information
with various financial and banking institutions, and/or the client's creditors.
b. Requests for capacity of space segments of INTELSAT shall not be
accepted should the said client owe on the date of request for capacity, an
amount on an invoice past due for thirty (30) days or more.
c. As a condition for reserving or supplying services, INTELSAT may seek
from the client to offer other guaranties of its capability to abide by the
financial obligations for INTELSAT to agree to these, in the form of a credit
document, a guaranty deposit, or another form of guaranty meeting the
requirements of INTELSAT.
6. Sanctions for past due payments
a. In addition to the sanctions indicated in paragraph 5.b, above, any
payment not made on its due date shall accrue interest at an annual rate of
sixteen percent (16%), calculated from the due date to the payment date; the
Board of Directors of INTELSAT may change periodically the said rate.
b. INTELSAT may suspend or cancel all services, both current ones and
those on the client's waiting list should the amount owed to INTELSAT for using
the space segment not be paid within 60 days or more from its due date, or
within the period the Board of Director of INTELSAT establishes periodically.
<PAGE> 4
7. Ground station operation
With respect to any authorization from INTELSAT for ground stations
to have access to the space segment, the client obligates itself to operate such
a station at all times in accordance with the terms of the authorization and the
Standards for INTELSAT ground stations (IESS), and accepts the responsibility
for such an operation, including, among others, the financial responsibility.
8. Transfer
This agreement, the subsequent assigning of the segment space
capacity, the rights, duties and obligations of the client, shall not be
transferred or delegated without the prior written consent of INTELSAT. Any
transfer or delegation made without said consent shall be null and void. This
clause does not impede the client from using its assigned capacity to provide
services to third parties.
9. Rescission
In addition to the provisions regarding cancellation, contained in
the Manual for Rates, INTELSAT reserves the right, with a prior written
notification of at least thirty(30) days, to rescind the instant agreement
executed with the clinet should the latter not abide by the same. The notice of
rescission shall indicate the date the rescission goes into force and the
circumstances which brought it about. INTELSAT shall keep, at its discretion,
the deposits or other amounts paid by the client, and shall use these to
compensate for the prejudice which it may have suffered as a result of such a
lack of compliance. This holding of the client's funds shall not impede INTELSAT
from presenting other claims for compensation, or from seeking other payments
for damages and prejudice to which it has right by law or equity. Such a right
to rescission shall not take place if, within the said period of thirty days the
client resolves its infraction to the satisfaction of INTELSAT.
10. Confidentiality
INTELSAT and the client agree to take precautions to keep
confidential all information the parties present as confidential, and which are
designated as such in writing, or marked "confidential", "private property", or
"limited distribution", with an appropriate seal of markings. Neither party
shall reveal information which the other one designated as confidential,
personal property or limited distribution, except to its employees or agents, to
the extent required for the exclusive objective of executing the
responsibilities assigned in the instant agreement, or to establish or supply
the services by way of assignments granted by virtue of the instant agreement.
<PAGE> 5
11. Notifications
Notifications, announcements, payments and other communications
connected to the instant agreement, shall be sent to the following addresses:
<TABLE>
<S> <C>
For the client: For INTELSAT
IMPSAT S.A. Organizacion Internacional de Telecomunicaciones
Diagonal 126 No. 67-19 por Satelite (INTELSAT)
Santa Fe de Bogota - Colombia 3400 International Drive, N.W.
South America Washington, D.C. 20008-3098
United States [of America]
Attn: JAIME A. PELAEZ ESPINOSA
Financial and Adm. Vice-President Attn: Vice-President
Tel. (571) 433 6066 Sales and Marketing
Fax (571) 433 5958
Tel. +1 202 944-7700
Fax +1 202 944-7173
</TABLE>
It shall be deemed that such notifications, announcements or payments
have been duly delivered when they are presented by hand, certified mail, telex,
fax, or, in the case of payments, by sending cash, checks from the client's
business account, certified bank checks, or telegraphic money orders. All
payments from the client to INTELSAT required by the instant agreement shall be
made in United States dollars, or a currency which can be freely converted into
United States dollars. Both parties obligate themselves to keep this information
up-to-date, and to notify each other promptly of any changes in the pertinent
information regarding invoicing, use of the assigned capacity and communications
in general.
12. Resolution of disputes
The parties agree to try to resolve disputes or claims which [may]
arise with regard to the instant agreement, or services provided by virtue of
the same, within sixty (60 days), a long mutually agreed-upon period, from the
date on which one of the parties has notified the other party in writing of the
existence of a dispute or claim. Should the parties not reach an agreement
within the said period, either one of them may submit the dispute or claim to
arbitration for a resolution, in accordance with the UNCITRAL arbitration rules
in force on the date of the agreement. In accordance with the said rules, the
American Arbitration Association shall have the authority to designate
arbitrators, and the arbitration shall take place in Washington, D.C., U.S.A.
13. Jurisdiction
The instant agreement, except for the provisions connected to
conflicts between various laws, shall be subject to the laws of the District of
Columbia, U.S.A. The rights and recourse
<PAGE> 6
conferred by virtue of this instrument and other rights and recourses shall be
cumulative and exercised alone or concurrently. Should either party not exercise
its rights by virtue of this right, or other rights, this shall not be construed
as a waiver of these rights, or other rights, in the future. Should any
provision in the instant agreement be determined as null, this shall not affect
the other provisions herein, and the null provision shall be replaced with an
acceptable provision, in agreement with the original intent of the parties.
Each party acknowledges having read and understood the provisions
contained in the instant agreement, and agrees to submit to such provisions.
IN WITNESS WHEREOF the parties have instructed their duly authorized
representatives to execute the instant agreement.
<TABLE>
<S> <C>
Organizacion Internacional de ("Client")
Telecomunicaciones por Satelite
("INTELSAT")
By: [signature] By: [signatures]
- ---------------------------------------------------------- ----------------------------------------------------------
Dolores Martos JAIME A. PELAEZ ESPINOSA
- ---------------------------------------------------------- ----------------------------------------------------------
(in printed letters) (in printed letters)
Title: Group Marketing and Sales Title: Financial and Administrative Vice
------------------------- ---------------------------------
Manager, Latin America President
---------------------- ---------
Date: 9/4/97 Date: 8/13/97
---------------- -----------------
</TABLE>
CERTIFICATE
I, JOSE SAUL MOLANO BENITEZ, SECRETARY GENERAL of IMPSAT S.A., hereby
certify that JAIME A. PELAEZ ESPINOSA, who executed the above instrument, has
the position of Vice-President, and is duly authorized to execute the above
agreement in the name of IMPSAT S.A.
In witness whereof, I hereby sign this instrument on August 13, 1997.
[signatures]
<PAGE> 7
ADDITIONAL CONTRACT No. 1AL C-0057-95
EXECUTOR: IMPSAT S.A.
OBJECT: Extension of the period [of validity] and additional satellite space
TITLE: AGREEMENT FOR SUBSCRIPTION TO BASIC SATELLITE SERVICES FOR THE SUPPLYING
OF VALUE ADDED SERVICES.
Between us, JOSE BLACKBURN, of age, resident of Santafe de Bogota, with citizen
identification No. 17,178,909, issued in the city of Bogota, acting in the name
and stead of EMPRESA NACIONAL DE TELECOMUNICACIONES, which will be named
hereafter TELECOM, and MIGUEL ORTIZ, of age, resident of Santafe de Bogota, with
identification for foreigners No. 250,534, issued at the city of Bogota, acting
in the name and stead of IMPSAT S.A., a party which hereafter is named THE
SUBSCRIBER; we have agreed to execute the instant additional agreement No. 1 to
Contract C-0057-95 executed on December 26, 1995, of which the object was
supplying to THE SUBSCRIBER telecommunication services called basic satellite
services for provided valued added services. b) That THE SUBSCRIBER has sought
before INTELSAT, through TELECOM, an increase in the capacity of the space
segment, object of the guaranteed engagement of the principal Agreement,
capacity stated in the Financial Technical Appendix, which forms a part of the
instant Additional Agreement. c) That THE SUBSCRIBER has constituted before
INTELSAT, through TELECOM, an additional guaranty reserve with a commencement
date of January 1, 1997, and termination date of April 30, 2008, as stated in
Appendix in the Technical-Financial Appendix, attached to the instant additional
agreement. Given the above, the parties agree [as follows]: ONE. PURPOSE OF THE
AGREEMENT. The instant Additional Agreement, C-0057-95, has as its purpose to
add satellite capacity on Band C and Band Ku (in accordance with the
Technical-Financial Appendix), and to extend until April 30, 2008, the
termination the date for the lease Agreement on the satellite located at 310oE
of Intelsat, date on which will end the validity of the guaranteed additional
reserve constituted by THE SUBSCRIBER before INTELSAT through TELECOM.
TWO.VALIDITY OF THE ARTICLES IN THE PRINCIPAL AGREEMENT: All articles in the
principal Agreement shall remain in force, as long as they do not contradict the
provisions contained in the instant ADDITIONAL AGREEMENT. THREE. GUARANTY: THE
SUBSCRIBER shall, at its expense, proceed with extending the sole guaranty
within the scope of the Additional Agreement, under the terms of article Fifteen
of the Principal Agreement. FOUR. PUBLICATION: Within five (5) days following
the execution of the instant ADDITIONAL AGREEMENT, the subscriber shall submit
to TELECOM the consignment receipt for publication in Diario Unico de
Contratacion Publica. The publication is required to render the ADDITIONAL
AGREEMENT legal, which shall be deemed concluded with the payment of the
corresponding rights. FIVE. EXECUTION AND LEGALIZATION: The instant ADDITIONAL
AGREEMENT is [deemed] executed upon the signature of the Parties. THE SUBSCRIBER
shall pay the stamp tax in accordance with Law. In witness whereof this is
executed in Santafe de Bogota, on the 16th day of March, 1998.
FOR TELECOM FOR THE SUBSCRIBER
[signature] [signature]
JOSE BLACKBURN MIGUEL ORTIZ
President President
This is a true certified copy
Judicial Department
[signature]
Empresa Nacional de Telecomunicaciones
<PAGE> 8
TECHNICAL-FINANCIAL APPENDIX
TO ADDITIONAL AGREEMENT AL. C-0057-95
Page No. 1
SUBSCRIPTION: C-0057-95
SUBSCRIBER: IMPSAT S.A.
SERVICE ACCOUNT: 8001368351
PURPOSE: Supply of satellite capacity for Value Added services
CITY AND DATE: Santafe de Bogota
Diagonal 126 No. 67-19
IMPSAT S.A.
IN SATELLITE 705 OF INTELSAT
POSITION 310(degrees)E - NOT SUBJECT TO INTERRUPTION
<TABLE>
<CAPTION>
Lease SVOL-6064
- ---------------------------------------------------------------------------------------------------------------------------
BAND WIDTH
TOTAL LEASED BAND
ACTIVATION BASE FOR WIDTH FOR MONTHLY
PERIOD CALCULATION OF IMPSAT AMOUNT IN US$
MONTHLY RATE COLOMBIA
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From November 1, 1996,
to February 24, 1997 60 37 $ 108,225
- ---------------------------------------------------------------------------------------------------------------------------
From February 25, 1997,
to April 2, 1997 65 42 $ 122,850
- ---------------------------------------------------------------------------------------------------------------------------
From April 3, 1997, to
April 6, 1997 71 48 $ 140,411 (1)
- ---------------------------------------------------------------------------------------------------------------------------
From April 7, 1997, to
May 20, 1997 71 48 $ 135,011 (2)
- ---------------------------------------------------------------------------------------------------------------------------
From May 1, 1997, to
July 31, 1997 72 49 $ 113,982 (3)
- ---------------------------------------------------------------------------------------------------------------------------
From August 1, 1997,
to September 16, 1997 72 49 $ 126,647 (4)
- ---------------------------------------------------------------------------------------------------------------------------
From September 17, 1997,
to July 1, 2005 72 53 $ 136,986
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE AMOUNTS ABOVE DO NOT INCLUDE V.A.T. WHICH SHALL BE BORNE BY THE SUBSCRIBER.
THE APPLICABLE RATE IS THE RATE IN FORCE AT THE TIME OF ACTIVATION OF THE
CAPACITY.
<TABLE>
<S> <C> <C>
NOTES (1) Cost of 48 Mhz, prior rates with 10% discount the first year.
(2) Cost of 48 Mhz, with the new Telecom rates, with a 10% discount the first year.
(3) Cost of 48 Mhz, with the new Telecom rates, with a 10% discount the first year.
(4) Cost of 48 Mhz, with the new Telecom rates, without a 10% discount the first year.
This Appendix fully replaces the appendix executed by the parties in 1995.
</TABLE>
FOR TELECOM FOR IMPSAT S.A.
[signature] [signature]
CARLOS RUBEN CAMACHO CAMACHO MIGUEL ORTIZ
Executive Vice-President Legal Representative
I.D. 17,181,322 I.D. 250.534
This is a true certified copy
Judicial Department
[signature]
Empresa Nacional de Telecomunicaciones
<PAGE> 9
TECHNICAL-FINANCIAL APPENDIX
TO ADDITIONAL AGREEMENT AL. C-0057-95
Page No. 2
SUBSCRIPTION: C-0057-95
SUBSCRIBER: IMPSAT S.A.
SERVICE ACCOUNT: 8001368351
PURPOSE: Supply of satellite capacity for Value Added services
CITY AND DATE: Diagonal 126 No. 67-19
IMPSAT S.A.
IN SATELLITE 705 OF INTELSAT
POSITION 310(degrees)E - NOT SUBJECT TO INTERRUPTION
<TABLE>
<CAPTION>
2. ADDITIONAL LEASE IN INTELSAT (SVO-L-6557)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL BAND BAND WIDTH MONTHLY RATE IN
ACTIVATION WIDTH LEASED FOR IMPSAT US$ CONTRACTUAL
PERIOD TO INTELSAT COLOMBIA PERIOD 10 YEARS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From January 1, 1997, to
May 31, 1997 (note 1) 0.5 0.5 $ 2,545
- -------------------------------------------------------------------------------------------------------------------------------
From June 1, 1997, to
December 31, 1997 (note 1) 5 5 $ 20,689
- -------------------------------------------------------------------------------------------------------------------------------
From January 1, 1998, to
April 30, 2008. 5 5 $ 22,988
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE RATE APPLIED IS THE RATE IN FORCE AT THE TIME OF ACTIVATION OF THE CAPACITY.
<TABLE>
<S> <C> <C>
NOTES (1) Include the 10% discount for the first year.
(2) These rates do not include V.A.T. of which the payment is borne
by the Subscriber.
</TABLE>
FOR TELECOM FOR IMPSAT S.A.
[signature] [signature]
CARLOS RUBEN CAMACHO CAMACHO MIGUEL ORTIZ
Executive Vice-President Legal Representative
I.D. 17,181,322 I.D. 250.534
This is a true certified copy
Judicial Department
[signature]
Empresa Nacional de Telecomunicaciones
<PAGE> 10
TECHNICAL-FINANCIAL APPENDIX
TO ADDITIONAL AGREEMENT AL. C-0057-95
Page No. 3
IN SATELLITE 709 OF INTELSAT
POSITION 310(degrees)E - NOT SUBJECT TO INTERRUPTION
<TABLE>
<CAPTION>
Lease SVOL-6738
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL BAND WIDTH BAND CONTRACTUAL MONTHLY
ACTIVATION LEASED TO WIDTH FOR PERIOD VALUE IN
PERIOD INTELSAT BASED ON IMPSAT US$
CALCULATION OF COLOMBIA
MONTHLY RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From June 1, 1997,
to May 31, 1998 2 0.2 $ 832.00
(note 1)
- ---------------------------------------------------------------------------------------- 3 YEARS ------------------
From June 1, 1998,
to May 31, 2000 2 0.2 $ 924.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE RATE APPLIED IS THE RATE IN FORCE AT THE TIME OF ACTIVATION OF THE CAPACITY.
<TABLE>
<S> <C>
NOTE 1: Discount of 10% corresponding to the first year.
NOTE 2: These rates do not include V.A.T. of which the payment is borne by the
Subscriber.
</TABLE>
FOR TELECOM FOR IMPSAT S.A.
[signature] [signature]
CARLOS RUBEN CAMACHO CAMACHO MIGUEL ORTIZ
Executive Vice-President Legal Representative
I.D. 17,181,322 I.D. 250.534
This is a true certified copy
Judicial Department
[signature]
Empresa Nacional de Telecomunicaciones
<PAGE> 11
TECHNICAL-FINANCIAL APPENDIX
TO ADDITIONAL AGREEMENT AL. C-0057-95
Page No. 4
<TABLE>
<S> <C>
SUBSCRIPTION No.: C-0057-95
SUBSCRIBER: IMPSAT S.A.
SERVICE ACCOUNT: 8001368351
PURPOSE: Use of space segment required for supplying added value services.
DURATION: One year, automatically renewable until the expiration of the term, for which is constituted a
guaranteed reservation of the space segment, ten (10) years in which IMPSAT shall participate.
Commencement date: August 5, 1997
CITY AND DATE: Santafe de Bogota
PLACE OF INVOICING: Diagonal 126 No. 67-19
</TABLE>
SATELLITE SEGMENT IN BAND C
SATELLITE IS-VII OF INTELSAT - POSITION 310(degrees)E
STANDARD CAPACITY NOT SUBJECT TO INTERRUPTION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INVOICING WIDTH OF TYPE MONTHLY VALUE IN $US
PERIOD LEASED BAND OF BEAM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First year with
10% discount 4.2 MHZ NORTH INTELSAT $ 15,530
(note 1) ZONE TELECOM $ 1,941
Total payable to Telecom $ 17,471
- ------------------------------------------------------------------------------------------------------------------------------------
Automatically
renewable 4.2 MHZ NORTH INTELSAT $ 17,255
years ZONE TELECOM $ 2,157
Total payable to Telecom $ 19,412
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
TOTAL ANNUAL RATE PAYABLE TO TELECOM FROM AUGUST 5, 1997, TO AUGUST 4, 1998 ............US$ 209,652
TOTAL ANNUAL RATE FOR AUTOMATICALLY RENEWED YEARS ......................................US$ 232,944
</TABLE>
THE APPLICABLE RATE IS THE RATE IN FORCE AT THE TIME OF ACTIVATION OF THE
CAPACITY.
<TABLE>
<S> <C>
NOTE 1: Includes a 10% discount the first year.
NOTE 2: THESE RATES DO NOT INCLUDE V.A.T. WHICH AMOUNT SHALL BE BORNE BY
THE SUBSCRIBER.
</TABLE>
FOR TELECOM FOR IMPSAT S.A.
[signature] [signature]
CARLOS RUBEN CAMACHO CAMACHO MIGUEL ORTIZ
Executive Vice-President Legal Representative
I.D. 17,181,322 I.D. 250.534
This is a true certified copy
Judicial Department
[signature]
Empresa Nacional de Telecomunicaciones
<PAGE> 12
TECHNICAL-FINANCIAL APPENDIX
TO ADDITIONAL AGREEMENT AL. C-0057-95
Page No. 5
<TABLE>
<S> <C>
SUBSCRIPTION No.:
SUBSCRIBER: IMPSAT S.A.
SERVICE ACCOUNT: 8001368351
PURPOSE: Supply of basic satellite service for supply of added value services.
Date of the lease: 3 years, according to the commencement date of each link.
Date on which the amendment commences: In accordance with the amendment date of each link.
CITY AND DATE: Santafe de Bogota
PLACE OF INVOICING: Diagonal 126 No. 67-19, Santafe de Bogota
<CAPTION>
The subscriber shall pay the following fees to TELECOM:
<S> <C>
Connection rate: US$ 500 for each ground station not approved per type and there will be n
charges for transmission stations approved by type or for reception
stations.
</TABLE>
INTERNATIONAL CARRIER LEASED THROUGH INTELSAT
SATELLITE 325.5(degrees) E
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DATE OF ROUTE AND
ACTIVATION OF ANTENNA IN CHARACTERISTICS LAUNCHING MONTHLY
MODIFICATION COLOMBIA OF THE CARRIERS DATE AMOUNT TO BE COMMENTS
INVOICED IN US$
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
June 15, 1997 to BOGOTA-ROMA 256 KBPS March 23, 1995 3205.00 Increase in speed from 192
May 23, 1998 Antenna BOG18F1 FEC 1/2 OPSK m 256 kbps as of June 15
- ------------------------------------------------------------------------------------------------------------------------------------
April 27, 1997 to CALI-SANTIAGO 64 KBPS April 14, 1995 855 Reduction in speed as of 28
April 14, 1998 Antenna FEC 1/2 OPSK April 1997
CAL104F1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE APPLICABLE RATE IS THE RATE IN FORCE AT THE TIME OF ACTIVATION OF THE
CAPACITY.
<TABLE>
<S> <C>
NOTE 1:
NOTE 2: THESE RATES DO NOT INCLUDE V.A.T. WHICH AMOUNT SHALL BE BORNE BY THE CLIENT.
</TABLE>
FOR TELECOM FOR IMPSAT S.A.
[signature] [signature]
CARLOS RUBEN CAMACHO CAMACHO MIGUEL ORTIZ
Executive Vice-President Legal Representative
I.D. 17,181,322 I.D. 250.534
This is a true certified copy
Judicial Department
[signature]
Empresa Nacional de Telecomunicaciones
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of IMPSAT Corporation on
Form S-4 of our report dated April 13, 1998, appearing in the Prospectus, which
is part of this 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
July 20, 1998
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2). . .
---------------------------
THE BANK OF NEW YORK
(Exact Name of Trustee as Specified in its Charter)
NEW YORK 13-5160382
(State of Incorporation (I.R.S. Employer
if not a National Bank) Identification No.)
48 WALL STREET, NEW YORK, NY 10286
(Address of Principal Executive Offices) (Zip Code)
---------------------------
IMPSAT CORPORATION
(Exact Name of Obligor as Specified in its Charter)
DELAWARE 53-1910372
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
ALFEREZ PAREJA 256 NOT APPLICABLE
(1107) BUENOS AIRES, ARGENTINA (Zip Code)
(Address of Principal Executive Offices)
---------------------------
12 3/8% SENIOR NOTES DUE 2008
(TITLE OF THE INDENTURE SECURITIES)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Name Address
---------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the 2 Rector Street, New
State of New York York, NY 10006 and
Albany, NY 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New
York, NY 10045
Federal Deposit Insurance 550 17th Street, N.W.
Corporation Washington, D.C. 20429
New York Clearing House New York, New York
Association
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 4.)
16. LIST OF EXHIBITS.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 and Rule 24 of the
Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of
New York (formerly Irving Trust Company) as now in
effect, which contains the authority to commence
business and a grant of powers to exercise corporate
trust powers. (Exhibit 1 to Amendment No. 1 to Form
T-1, filed with Registration Statement No. 33-6215,
Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-
29637.)
- 2 -
<PAGE> 3
4. A copy of the existing By-Laws of the Trustee.
(Exhibit 4 to Form T-1 filed with Registration
Statement No. 33-31019.)
6. The consent of the Trustee required by section 321(b)
of the Act.
7. A copy of the latest report of condition of the
Trustee published pursuant to law or to the
requirements of its supervising or examining
authority.
- 3 -
<PAGE> 4
NOTE
Inasmuch as this Form T-1 is being filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Bank of New York, a corporation organized and existing under the
laws of the State of New York, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
The City of New York, and State of New York, on the 14th day of July, 1998.
THE BANK OF NEW YORK
By /s/ Thomas Tabor
---------------------------------
Assistant Vice President
- 4 -
<PAGE> 5
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939 in connection with the proposed issue of 12 3/8% Senior
Notes due 2008 by IMPSAT Corporation, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
THE BANK OF NEW YORK
By /s/ Thomas Tabor
---------------------------------
Assistant Vice President
Dated: July 14, 1998
- 5 -
<PAGE> 6
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ........................... $ 7,769,502
Interest-bearing balances .................................................... 1,472,524
Securities:
Held-to-maturity securities .................................................. 1,060,234
Available-for-sale securities ................................................ 3,048,199
Federal funds sold and Securities purchased under agreements to resell ............ 3,193,800
Loans and lease financing receivables:
Loans and leases, net of unearned income ......................... 35,352,045
LESS: Allowance for loan and lease losses ........................ 625,042
LESS: Allocated transfer risk reserve ............................ 429
Loans and leases, net of unearned income, allowance, and
reserve .................................................................... 34,726,574
Assets held in trading accounts ................................................... 1,611,096
Premises and fixed assets (including capitalized leases) .......................... 678,729
Other real estate owned ........................................................... 22,460
Investments in unconsolidated subsidiaries and associated companies ............... 209,959
Customers' liability to this bank on acceptances outstanding ...................... 1,357,731
Intangible assets ................................................................. 720,883
Other assets ...................................................................... 1,627,267
------------
Total assets ...................................................................... $ 57,514,958
============
LIABILITIES
Deposits:
In domestic offices .......................................................... $ 26,875,596
Noninterest-bearing .............................................. 11,213,657
Interest-bearing ................................................. 15,661,939
In foreign offices, Edge and Agreement subsidiaries, and IBFs ................ 16,334,270
Noninterest-bearing .............................................. 596,369
Interest-bearing ................................................. 15,737,901
Federal funds purchased and Securities sold under agreements to
repurchase ...................................................................... 1,583,157
Demand notes issued to the U.S. Treasury .......................................... 303,000
Trading liabilities ............................................................... 1,308,173
Other borrowed money:
With remaining maturity of one year or less .................................. 2,383,570
With remaining maturity of more than one year through three years ............ 0
With remaining maturity of more than three years ............................. 20,679
Bank's liability on acceptances executed and outstanding .......................... 1,377,244
Subordinated notes and debentures ................................................. 1,018,940
Other liabilities ................................................................. 1,732,792
------------
Total liabilities ................................................................. $ 52,937,421
============
EQUITY CAPITAL
Common stock ...................................................................... 1,135,284
Surplus ........................................................................... 731,319
Undivided profits and capital reserves ............................................ 2,721,258
Net unrealized holding gains (losses) on available-for-sale securities ............ 1,948
Cumulative foreign currency translation adjustments ............................... ( 12,272)
------------
Total equity capital .............................................................. 4,577,537
------------
Total liabilities and equity capital .............................................. $ 57,514,958
============
</TABLE>
I, Robert E. Kellman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Kellman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyl )
J. Carter Bacot ) Directors
Alan R. Griffith )
-------------------------
<PAGE> 1
EXHIBIT 99.1
IMPSAT CORPORATION
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
ALL OUTSTANDING 12 3/8% SENIOR NOTES DUE 2008
FOR
12 3/8% SENIOR NOTES DUE 2008, WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO THE PROSPECTUS DATED ____________, 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON __________,
1998 UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
THE BANK OF NEW YORK, EXCHANGE AGENT
<TABLE>
<S> <C> <C>
BY MAIL, HAND OR OVERNIGHT DELIVERY: BY REGISTERED OR CERTIFIED MAIL: BY FACSIMILE:
THE BANK OF NEW YORK THE BANK OF NEW YORK (212) 571-3080 OR
101 BARCLAY STREET 101 BARCLAY STREET (212) 815-6339
NEW YORK, NEW YORK 10286 NEW YORK, NEW YORK 10286
ATTENTION: SECURITIES PROCESSING WINDOW, CORPORATE TRUST OPERATIONS CONFIRM BY TELEPHONE:
GROUND LEVEL REORGANIZATION, 7E ATTENTION: CORPORATION TRUST OPERATIONS, 7E (212) 815-2742
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS 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 , ______, 1998 (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 $225,000,000 of the Company's
12-3/8% Senior Notes Due 2008 (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 12-3/8% Senior Notes Due 2008 (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 December 15, 1998. 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.
<PAGE> 2
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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES DELIVERED
- ----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS OF REGISTERED CERTIFICATE NUMBER(S)* AGGREGATE PRINCIPAL AMOUNT
HOLDERS (PLEASE FILL IN, IF BLANK) PRINCIPAL AMOUNT TENDERED**
REPRESENTED BY
CERTIFICATE(S)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ $
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTALS.................... $ $
------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old Notes will be deemed to have rendered the entire
aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificates(s)."
The minimum permitted tender is $1,000 in principal amount of Old Notes.
All other tenders must be in integral multiples of $1,000.
2
<PAGE> 3
[ ] 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
DEPOSITORY TRUST COMPANY ("DTC") AND COMPLETE THE FOLLOWING (FOR USE
BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER DEFINED) ONLY):
Name of Tendering Institution
---------------------------------------------
Account Number Transaction Code Number
------------------ ----------------
[ ] 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 Holder(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)
----------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE ADDITIONAL
COPIES OF THE PROSPECTUS AND ANY AMENDMENTS OR SUPPLEMENTS THERETO.
(UNLESS OTHERWISE SPECIFIED, 10 ADDITIONAL COPIES WILL BE FURNISHED.)
NAME
----------------------------------------------------------------------
ADDRESS
-------------------------------------------------------------------
--------------------------------------------------------------------------
3
<PAGE> 4
- --------------------------------------------------------------------------------
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").
Name:
---------------------------------------------------------------------------
(Please Type or Print)
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Zip Code)
Credit Old Notes not exchanged and delivered by book-entry transfer to the
Book-Entry Transfer Facility 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.
Name:
---------------------------------------------------------------------------
(Please Type or Print)
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security No.)
- --------------------------------------------------------------------------------
4
<PAGE> 5
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 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 the 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 in connection with any resale of such New Notes; however,
5
<PAGE> 6
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 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."
6
<PAGE> 7
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS ALONG
WITH ACCOMPANYING SUBSTITUTE FORM W-9)
Dated:______________________, 1998
X Date
--------------------------------------------- --------------------------
X Date
--------------------------------------------- --------------------------
Signature(s) of Owner(s)
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:
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Type or Print)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
Telephone:
----------------------------------------------------------------------
SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by an Eligible Institution:
-----------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name and Firm)
Dated:_____________________________________________________________________,1998
7
<PAGE> 8
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 Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to
8
<PAGE> 9
reject any and all Old Notes not properly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to particular Old Notes. The Company'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 Company shall determine. Neither the
Company, 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
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
9
<PAGE> 10
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.
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.
10
<PAGE> 11
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 at 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 (as defined in the
Prospectus) 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
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,
and payments made with respect to New Notes purchased in the Exchange Offer may
be subject to backup withholding. 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.
11
<PAGE> 12
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 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 information 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.
12
<PAGE> 13
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: IMPSAT CORPORATION
<TABLE>
<S> <C>
-------------------------------------------
SUBSTITUTE PART 1 - PLEASE PROVIDE TIN:
FORM W-9 YOUR TIN IN THE BOX AT ------------------------------------
RIGHT AND CERTIFY BY (Social Security Number or Employer
Department of the Treasury SIGNING AND DATING BELOW. Identification Number)
Internal Revenue Service
TIN Applied for [ ]
-------------------------------------------
PART 2 - 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 a
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:
--------------------------------------- ---------------------
</TABLE>
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
13
<PAGE> 1
EXHIBIT 99.2
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 ______, 1998 (the "Prospectus"), if certificates for the
outstanding 12-3/8% Senior Guaranteed Notes Due 2008 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
<TABLE>
<S> <C> <C>
BY MAIL, HAND OR OVERNIGHT BY REGISTERED OR CERTIFIED MAIL: BY FACSIMILE:
DELIVERY:
THE BANK OF NEW YORK THE BANK OF NEW YORK (212) 571-3080
101 BARCLAY STREET 101 BARCLAY STREET
NEW YORK, NEW YORK 10286 NEW YORK, NEW YORK 10286 CONFIRM BY TELEPHONE:
ATTENTION: SECURITIES CORPORATE TRUST OPERATIONS (212) 815-2742
PROCESSING WINDOW, GROUND ATTENTION: CORPORATION TRUST
LEVEL REORGANIZATION, 7E OPERATIONS, 7E
</TABLE>
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.
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.
<TABLE>
<S> <C>
If Old Notes will be delivered to Depository Trust
Principal Amount of Old Notes Tendered: Company, provide account number:
$
------------------------------------------------- ------------------------------------------------------------
Certificate Nos. (if available): Total Principal Amount Represented by Certificate(s):
$
- -------------------------------------------------- -----------------------------------------------------------
</TABLE>
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.
<PAGE> 2
PLEASE SIGN HERE
X Date
------------------------------------------------- ----------------------
X Date
------------------------------------------------- ----------------------
Signature(s) of Owner(s) or 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.
Name of Firm:
-------------------------------------------------------------------
Address:
-------------------------------------------------------------------
-------------------------------------------------------------------
Area Code & Telephone No.:
--------------------
2
<PAGE> 3
- ----------------------------------------------
Authorized Signature
- ----------------------------------------------
Name (Please Type or Print)
- ----------------------------------------------
Title
- ----------------------------------------------
Dated
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES OF OLD
NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF
TRANSMITTAL.
3
