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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________________ TO________________
COMMISSION FILE NUMBER 333-12977
IMPSAT CORPORATION
IMPSAT S.A.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-1910372
ARGENTINA NOT APPLICABLE
(state or other jurisdiction (IRS employer identification
incorporation or organization) number)
ALFEREZ PAREJA 256 (1107)
BUENOS AIRES, ARGENTINA
(541) 362-4240
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- ---------------------
___________________ _____________________
___________________ _____________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. YES X NO___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by
non-affiliates of the registrants.
As of December 31, 1997, IMPSAT Corporation had 100,792,640 shares of
Common Stock, $1.00 Par Value, outstanding.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I
ITEM 1. BUSINESS......................................................... 3
ITEM 2. PROPERTIES....................................................... 3
ITEM 3. LEGAL PROCEEDINGS................................................ 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.............. 14
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS................................................................... 14
ITEM 6. SELECTED FINANCIAL DATA
THE COMPANY............................................................... 14
IMPSAT ARGENTINA.......................................................... 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..................................................... 18
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK....... 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE...................................................... 28
PART III.................................................................... 28
ITEM 10. DIRECTORS AND OFFICERS.......................................... 28
ITEM 11. EXECUTIVE COMPENSATION.......................................... 32
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.. 33
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................. 35
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 37
SIGNATURES.................................................................. 39
POWER OF ATTORNEY........................................................... 41
EXHIBIT INDEX............................................................... 42
</TABLE>
_____________________________
OUTLOOK AND UNCERTAINTIES
Certain information in this Report contains "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical fact are
"forward-looking statements" for purposes of these provisions, including any
projections of earnings, revenues or other financial items, any statements of
the plans and objectives of management for future operations, any statements
concerning proposed new products or services, any statements regarding future
economic conditions or performance, and any statement of assumptions underlying
any of the foregoing. In some cases, forward-looking statements can be
identified by the use of terminology such as "may", "will", "expects", "plans",
"anticipates", "estimates", "potential", or "continue", or the negative thereof
or other comparable terminology. Although IMPSAT Corporation (the "Company")
believes that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations or any of its
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the Company's
forward-looking statements.
_____________________________
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.
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PART I
ITEM 1. BUSINESS
GENERAL
The Company is a leading provider of private telecommunications network
services in Latin America and is the largest provider of data transmission
services in Argentina. The Company provides private network integrated data
and voice telecommunications services for national and multinational companies,
financial institutions, governmental agencies and other business customers. The
Company believes that it operates one of the largest shared hub VSAT networks
in Latin America. A substantial majority of the Company's revenues currently
are derived from Argentina and Colombia. The Company is an established provider
of such services in Venezuela and Ecuador and commenced operations in Mexico
and the United States in 1995. Services are provided through the Company's
advanced telecommunications networks comprised of owned teleports, earth
stations, fiber optic and microwave links, and leased satellite and fiber optic
capacity.
The Company has grown rapidly since the commencement of its operations in
Argentina in 1990. Its customer base has expanded from 125 customers in two
countries as of December 31, 1992 to 1,189 customers in six countries as of
December 31, 1997. From 1992 to 1997, total 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 property, plant and equipment have grown
from $47.9 million to $255.4 million.
The Company anticipates continued growth in the demand for private
telecommunications network services in Latin America. Continued deregulation of
the telecommunications market throughout the region should lead to growth in
the telecommunications sector, which is relatively limited as compared with
more developed countries. As the Latin American telecommunications sector
matures, the Company believes that the proportionate share accounted for by
data transmission services will also increase, as it has in more developed
countries. The Company also expects that continuing economic growth in Latin
America will bring greater opportunities for expansion and that economic
integration of the Latin American countries should add to the demand for
telecommunications services in the region. The Company may consider expansion
into new services, including voice telephony, upon the deregulation of the
telecommunications markets in the countries in which it operates or anticipates
operating.
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) ability to provide
diverse, cost-efficient networking solutions; (iii) superior marketing skill,
knowledge of the customer's needs and responsiveness; and (iv) position as a
market leader and its significant existing network infrastructure in numerous
Latin American markets.
The Company is a privately-held corporation. Prior to March 19, 1998, 75%
of the common stock of the Company was owned by Nevasa Holdings Ltd.
("Nevasa"), and the remaining 25% was controlled by STET International
Netherlands NV ("STET International"). Nevasa is a holding company controlled
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.
STET International is a wholly-owned subsidiary of STET International SpA, the
international communications affiliate of the Italian telecommunications
holding company STET SpA ("STET"). See "Security Ownership of Certain
Beneficial Owners and Management."
On March 19, 1998, IMPSAT Corporation redeemed the 25% of its outstanding
common stock previously held by STET International (the "STET Shares") with the
proceeds of a substantially concurrent issuance and sale of $125 million
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of the Company's Series A Convertible Preferred Stock (the "Series A Preferred
Stock"). The Series A Preferred Stock were offered and sold, pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), 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 MSGEM, the "Purchasers").
See "Security Ownership of Certain Beneficial Owners and Management." 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 Purchasers (the "Series A Preferred Stock
Offering"), refer to "Recent Developments -- STET Share Purchase and Series A
Preferred Stock Offering."
The Company's operations commenced in Argentina in 1990 under the name
IMPSAT S.A. ("IMPSAT Argentina"). The Company began operations outside of
Argentina with the establishment of IMPSAT S.A. ("IMPSAT Colombia") in 1991 and
the establishment of Telecomunicaciones IMPSAT S.A. ("IMPSAT Venezuela") in
1992. In June and July of 1997, the Company's ownership interest in IMPSAT
Argentina increased to 94.5% with the acquisition by the Company from Nevasa
and STET International of an additional 43.5% of IMPSAT Argentina's outstanding
common stock under purchase accounting principles. On March 19, 1998, the
Company acquired a 0.64% interest in IMPSAT Argentina (the "Argentina Shares")
then held by STET International, as part of the Series A Preferred Stock
Offering. As a result, the Company currently owns a 95.14% equity interest in
IMPSAT Argentina. New operating subsidiaries were created in Ecuador (IMPSATEL
del Ecuador S.A., hereinafter, "IMPSAT Ecuador") and Mexico (IMPSAT, S.A. de
C.V., hereinafter, "IMPSAT Mexico") in 1994 and in the United States (IMPSAT
USA, Inc., hereinafter, "IMPSAT USA") in 1995. The Company expects to expand
its presence in Latin America through the acquisition of an operating
subsidiary in Brazil later in the second quarter of 1998. See "Recent
Developments -- Acquisition of IMPSAT Brazil."
The Company utilizes satellite, fiber optic cable and microwave links and
employs state-of-the-art technology in its network systems. Satellite
communication links, which constitute the core of the Company's private network
service infrastructure, are complemented and supported by terrestrial microwave
radio and fiber optic cable systems.
The principal services offered by the Company described below are
identified by their service marks:
VSAT. VSAT is a digital information transmission service which permits
communications between and among many remote locations and a central location
via satellite and a central earth station, known as a Teleport. Teleports are
currently located in Buenos Aires, Argentina; Bogota, Colombia; Caracas,
Venezuela; Quito, Ecuador; and Mexico City, Mexico. In addition, IMPSAT USA
operates leased teleport facilities in New Jersey and southern Florida. VSAT
generates the largest share of the Company's revenues from services, accounting
for approximately 43.4% and 35.8% of such revenues during 1996 and 1997,
respectively. As of December 31, 1997, the Company had 3,585 VSAT microstations
installed.
Dataplus. Dataplus is a high capacity digital information transmission
("SCPC") service designed for customers that require speedy transmission of
large quantities of information between relatively few fixed locations.
Dataplus is the second most significant of the Company's private
telecommunications network service offerings in terms of revenue generation.
Dataplus accounted for approximately 23.3% and 23.5% of the Company's revenues
from services in 1996 and 1997, respectively. At December 31, 1997, the Company
had a total of 908 Dataplus earth stations installed.
Teledatos Networks. Teledatos Networks are microwave and fiber optic cable
Metropolitan Area Networks ("MANs"). The Company's first Teledatos network was
established in Buenos Aires, Argentina in 1990. Other Teledatos networks now
exist in Cordoba, Mendoza, Rosario, Mar del Plata, Tucuman and La Plata,
Argentina; Bogota, Medellin, Cali and Barranquilla, Colombia; and Caracas,
Venezuela. At December 31, 1997, there were a total of 5,457 connections in
service on the Teledatos networks.
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Regional Teleports. Regional Teleports are earth stations linking smaller
MANs outside a country's capital to the Teleport in that country via satellite.
The first Regional Teleport was established in Mendoza, Argentina in 1991, and
the Company now has Regional Teleports in Cordoba, Rosario, Tucuman, La Plata
and Mar del Plata in Argentina; Medellin, Cali and Barranquilla in Colombia;
and Guayaquil, Ecuador. Customers are connected to a Regional Teleport through
one of the Company's MANs or satellite links.
Difusat. Difusat is the Company's unidirectional Teleport-to-VSAT
broadcast service whereby a signal received by a Teleport is transmitted to
multiple locations. 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 receive-only VSAT receptors via satellite. At December
31, 1997, the Company had installed 480 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. 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. 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.
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. 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 access software, worldwide web
browser, electronic mail, 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 Communications Corporation,
Sprint Corporation, Intermedia Communications and UUNET.
At December 31, 1997, the Company had 22,378 dial-up Internet access
retail customers and 64 dedicated Internet access corporate 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 the company via Internet). In December 1997, the Company
executed an agreement to provide electronic data interchange services
(electronic transactions via Internet) to Harbinger Corporation a supplier of
electronic commerce software, headquartered in Atlanta, Georgia, exclusively in
Argentina and Colombia, with an option to provide such services in Venezuela
and Ecuador.
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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 December 31, 1997,
the Company had 225 customers for this service and was handling approximately
140,000 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 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 December 31, 1997, the Company had installed 119 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 a real time environment, 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 in accordance with the
Company's specifications 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 in
comparison to that of its other service offerings.
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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:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
SERVICE 1995 1996 1997
- ------- ---- ---- ----
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
VSAT..... $ 52,756 49.9% $ 55,680 43.4% $ 57,420 35.8%
Dataplus. 23,953 22.7 29,962 23.3 37,603 23.5
Interplus 2,806 2.7 4,457 3.5 11,400 7.1
Internet. 0 0 1,267 1.0 7,597 4.7
Other (1) 26,126 24.7 37,027 28.8 46,216 28.9
-------- ----- -------- ----- -------- -----
Total.... $105,641 100% $128,393 100% $160,236 100%
======== ===== ======== ===== ======== =====
</TABLE>
___________________
(1) The figure for "Other" includes revenues from Teledatos networks, Regional
Teleports, Difusat, Internet, Global Fax, Minidat, Conexia and Telecampus.
CUSTOMERS
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: Banco de
la Nacion Argentina (BNA), a state-owned bank and the largest bank in
Argentina, with 525 branches throughout Argentina; Administracion Nacional de
la Seguridad Social (ANSeS), the Argentine Social Security Administration;
Banco de Galicia y Buenos Aires S.A., a private bank with 170 branches
throughout Argentina; YPF S.A., which is engaged in hydrocarbon exploitation
and is one of the largest companies in Argentina; Banco de Colombia, a private
bank headquartered in Bogota, Colombia and the second largest commercial bank
in Colombia; Gendarmeria Nacional Argentina (GNA), the Argentine governmental
agency charged with policing Argentina's borders; Direccion General Impositiva
(DGI), 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 Company expects that its contract to provide private
telecommunications network services to DGI will not be renewed upon its
expiration in the third quarter of 1998. DGI recently announced that Startel
S.A. ("Startel") had been awarded the contract to provide DGI with private
telecommunications network services. Startel 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 monopoly public telephony operators in northern and
southern Argentina, respectively. IMPSAT Argentina recorded $1.9 million in
revenues from its contract with DGI during 1997.
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The following table sets forth the Company's customers by country as of
the dates indicated(1):
<TABLE>
<CAPTION>
NUMBER OF CUSTOMERS
AS OF DECEMBER 31,
-------------------
COUNTRY 1996 1997
------- ---- ----
<S> <C> <C>
Argentina (2).... 358 436
Colombia......... 410 524
Venezuela........ 75 102
Ecuador.......... 44 96
Mexico........... 7 16
USA.............. 10 15
----- -----
Total............ 904 1,189
===== =====
</TABLE>
__________________________
(1) Totals presented do not include customers from the Company's newer
services such as Global Fax, Internet, Minidat and Connexia.
(2) The number of customers for IMPSAT Argentina is presented as of November
30, 1996 and 1997.
SALES, MARKETING AND CUSTOMER SERVICE
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
comprised of up to 12 persons and including 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.
In the Company's larger operations, including in Argentina and Colombia,
the Company has established several service teams, with service teams focusing
on a particular type of client. For example, in Argentina, the Company has one
service team devoted to industrial customers, one service team devoted to
financial institutions, another devoted to governmental agencies, a service
team that is devoted to companies with headquarters in the interior of the
country, and 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 follow-up of
existing customers. In addition, each customer is assigned an account manager,
who has overall responsibility for relations with that customer. An important
function of the account manager is to identify new or enhanced services that
can be marketed to the existing customer.
As the first step in the Company's marketing process, after an initial
contact has been established between the Company and a potential customer, the
Company evaluates the customer's telecommunications needs. After the Company
has completed its study, the Company creates a plan for the customer which
includes a description of the Company's proposed tailor-made technological
solution, utilizing and combining those components of the Company's private
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
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complexity of the package of services and the network to be provided to the
customer, the period between the date a contract is signed and the customer's
services are operating and generating revenue is typically between 45 days and
four months. 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 the case of IMPSAT Argentina, although third party sales
representatives also have been utilized in connection with IMPSAT Colombia's
customer generation. 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, to a lesser
extent, Colombia and that it primarily will use its own sales force in other
countries in which it does business. As of November 30, 1997, of IMPSAT
Argentina's total customer base of 436, IMPSAT Argentina had entered into
contracts with third party sales representatives for approximately 12% 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 total revenues for 1997.
COMPETITION
The Company's competitors fall into three broad categories. The first
category is comprised of the monopoly providers of public telephony services
("PTOs") in each of the countries in which it operates. The second category of
competitors is comprised of other companies, engaged in essentially the same
business as the Company, that operate competing VSAT and other satellite data
transmission businesses, along with other terrestrial telecommunications links.
The third category is comprised of companies that do not sell data
transmission services, but only the equipment for privately owned networks that
are operated and maintained by the customer. In addition, potential future
competitors include certain of the large international 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 will consider
strategic alliances and other cooperative ventures with the PTOs in the area of
private telecommunications network services to take advantage of each partner's
relative strengths.
With respect to the second category, i.e., current operators in the data
transmission sector of the telecommunications industry, the Company's
competitors, many of whom operate VSAT systems, include international satellite
providers such as COMSAT Corp. and local data transmission providers.
Regarding these competitors, the Company believes that it is able to compete
successfully in data transmission by virtue of having a broad array of services
and of providing high-quality, custom-designed services that are tailored to
meet the specific needs of each customer.
9
<PAGE> 10
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, with respect to this category of
competitors, the Company possesses significant competitive advantages by
providing comprehensive telecommunications services that offer the benefits of
a private network while freeing the customers from the burdens of operating and
maintaining the network.
The Company competes on the basis of its experience; quality of its
services, including 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 margins
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. These price and margin declines may
be accelerated if new competitors enter its markets. The principal barriers to
entry for 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 to provide quality services to meet those needs. The
Company believes that its operating experience as a pioneer in providing shared
hub VSAT services, its position as market leader and its significant existing
network infrastructure in its markets, and ability to offer a diversity of
cost-efficient networking solutions, create significant competitive advantages.
While the PTOs and international 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 in the future. Such entities have significantly
greater financial and other resources than the Company, including greater
access to financing, and may be able to subsidize their private
telecommunications network businesses with revenues from public telephony. 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 technology (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 spaced based systems dedicated to
data distribution services, generally known as "Little-LEOs" (low earth orbit
satellites) and "Broadband" (Ka-band) systems. 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. 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
SA of Spain, Worldcom Inc. and MCI Communications Inc. 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. The Company believes that increased competition in
the coming years will affect its pricing policies. There can be no assurance
that such greater competition will not adversely affect the Company's financial
condition or results of operations.
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
10
<PAGE> 11
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
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 its 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.
EMPLOYEES
As of December 31, 1997, the Company employed a total of 683 persons, of
whom 267 were employed by IMPSAT Argentina and 179 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. The Company does not
have any long-term employment contracts with any of its employees, including
management, and none of its employees are members of any union. The Company
believes that its relations with its employees are good.
SATELLITE CAPACITY
As of December 31, 1997, the Company had a total leased capacity of 412.6
MHZ on six satellites. The Company has satellite leases on the Intelsat 706
and 709 satellites for 55 MHZ and 177.5 MHZ of capacity, respectively. Total
leased capacity on Intelsat 706 is scheduled to expire on April 1, 2000 and 36
MHZ, 43 MHZ and 98.5 MHZ of leased capacity on Intelsat 709 is scheduled to
expire in February 2001, February 2005, and July 2006, 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 the Argentine Comision Nacional de Telecomunicaciones
("CNT"). The Company also has leased 38.2 MHZ of capacity on Nahuelsat's
Nahuel-1 satellite which will expire in January 2002. The Company has leased
65 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 54 MHZ of capacity on PanAmSat's PAS-5 satellite expiring at the end of
2008. The Company also has 22.9 MHZ of capacity on Mexico's Solidaridad-II
satellite 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 anticipates that it will
contract for additional leased satellite capacity as needed to the extent that
the Company's business so requires. A portion of the Company's satellite
capacity is leased by International Satellite Capacity Holding, NG ("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.
RECENT DEVELOPMENTS
Commercial Paper Offering. In February 1998, IMPSAT Argentina completed
the placement of $25 million of short-term promissory notes under its $50
million Global Commercial Paper Program (the "Global Commercial Paper
Program"). In April 1998, IMPSAT Argentina completed the placement of a
further $25 million of short-term promissory
11
<PAGE> 12
notes under the Global Commercial Paper Program. The proceeds of the notes
under the Global Commercial Paper Program have been or will be used by IMPSAT
Argentina for purposes which include the refinancing of existing indebtedness,
including $25 million of other short-term indebtedness coming due in the first
half of 1998, the investment in physical assets located in Argentina, and
working capital. After refinancing of existing short-term indebtedness with
the proceeds of the two completed placements, $50 million will be due and
payable under the Global Commercial Paper Program during 1998. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
STET Share Purchase and Series A Preferred Stock Offering. The
acquisition by the Company of the STET Shares and the Argentina Shares 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, Jonesboro
Financial Inc., a wholly owned British Virgin Islands subsidiary of Nevasa
("Jonesboro"), 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 the Company, 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 Note Purchase Agreement dated as of March 19, 1998 between
Jonesboro and the Purchasers, Jonesboro issued to the Purchasers $125 million
aggregate amount of Jonesboro's short-term notes (the "Jonesboro Notes").
Jonesboro thereafter purchased from STET International the STET Shares and the
Argentina Shares using the proceeds of the sale of the Jonesboro Notes.
Jonesboro then exchanged the STET Shares and the Argentina Shares for $125
million aggregate liquidation amount of the Company's Series A Preferred Stock.
The Series A Preferred Stock was then transferred by Jonesboro to the
Purchasers in satisfaction of Jonesboro's indebtedness under the Jonesboro
Notes.
The Series A Preferred Stock was convertible into 25% of the common stock
of the Company 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"), which was filed by the Company with the Secretary of State of
Delaware on March 19, 1998, is attached as an exhibit to this Report. 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
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 by Directors
appointed by the Purchasers holding a certain minimum number of outstanding
Series A Preferred Stock, to a veto over certain major corporate actions.
Acquisition of IMPSAT Brazil. On March 19, 1998, the Company's Board of
Directors approved the acquisition from Nevasa, the Company's majority
shareholder, of 99.93% of the capital stock of IMPSAT Comunicacoes Ltda., a
company organized and existing under the laws of the Federal Republic of Brazil
("IMPSAT Brazil"), for approximately $5.1 million. The purchase price for
IMPSAT Brazil represents the total amount of pre-operating and development
costs and expenses incurred for IMPSAT Brazil by Nevasa. IMPSAT Brazil was
established in 1993 by Nevasa to apply for a value-added telecommunications
license (the "Brazil License") in Brazil and to develop such business in Brazil
with the understanding between Nevasa and STET International that IMPSAT Brazil
would be combined with the Company at a later date to be agreed upon by the
shareholders. The Brazil License, which was granted on January 20, 1998,
permits
12
<PAGE> 13
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.
As of December 31, 1997, IMPSAT Brazil was providing private network
telecommunications services in Brazil to Shell do Brasil S.A., Fundacao
Cultural y Educacional, TCA Ltda., Ultrafertil, Sony Music Entertainment, and
HSBC Bamerindus, through a total of nine Dataplus earth stations installed.
IMPSAT Brazil recorded revenues of $0.3 million for 1997. The consummation of
the Company's acquisition of IMPSAT Brazil is subject to applicable regulatory
approvals from the government of Brazil, which approvals have been applied for
by Nevasa and the Company. There can be no assurance, however, that such
approvals will be obtained or that IMPSAT Brazil will be acquired by the
Company.
ITEM 2. PROPERTIES
Teleports. The Company operates Teleports in Buenos Aires, Argentina;
Bogota, Colombia; Caracas, Venezuela; Quito, Ecuador; and Mexico City, Mexico.
In addition, IMPSAT USA operates leased teleport facilities in New Jersey and
southern Florida.
Regional Teleports. As of December 31, 1997, the Company was operating a
total of ten Regional Teleports in major cities in Argentina, Colombia and
Ecuador.
Teledatos Networks. The Company has fiber optic and microwave MANs in
major cities in which it operates for connection with the Teleport or Regional
Teleport in such cities. Additionally, the Company manages and operates a fiber
optic network covering 186 route miles in Bogota, Colombia, pursuant to a joint
venture with Empresa de Telecomunicaciones de Santafe de Bogota, the Colombian
PTO that provides local telephone service in the Bogota, Colombia region. The
Company also operates a fiber optic network in Barranquilla, Colombia, pursuant
to a joint venture agreement with Empresa de Telefonos de Barranquilla, the PTO
in that region. The Teledatos networks, which as of December 31, 1997 were
operating in a total of twelve cities and covered a total of 2,658 square
miles, permit efficient connection to the Company's Teleports and Regional
Teleports.
The Company also operates in Argentina a high capacity digital microwave
circuit that provides voice and data telecommunications links between user
sites in Buenos Aires and Mendoza.
Undersea Fiber Optic Cable Networks. The Company is a member of the
Americas-1 and Columbus-II undersea fiber optic cable consortia, and has
purchased an initial total of 2 Mbps capacity on both systems for use in its
Interplus service. If needed, more capacity may be purchased by the Company in
the future. Americas-1, which commenced commercial operation in December 1994,
is a 4,960 mile fiber optic cable system connecting Vero Beach, Florida in the
United States with the U.S. Virgin Islands, Trinidad, Brazil and Venezuela.
Americas-1 is owned by a consortium of 64 carriers from 42 countries and plans
to extend its links to Curacao and Argentina. Columbus-II, which commenced
service in mid-1994 and is owned by 56 telecommunications administrations in 40
countries, links Mexico, Florida, the U.S. Virgin Islands, Spain, Portugal and
Italy with about 7,440 miles of fiber optic cable.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in or subject to various litigation and legal
proceedings incidental to the normal conduct of the Company's business,
including with respect to regulatory matters. The Company was not subject to
any pending litigation or legal proceedings required to be disclosed for the
period covered by this report.
13
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The following items were submitted to a vote of security holders for a
special meeting of stockholders which was held on March 19, 1998. The
amendment and restatement in its entirety of Article Fourth of the Company's
Articles of Incorporation to provide, among other things, for an increase in
the number of authorized shares from 100,792,640 shares of Class A common
stock, par value $1.00 per share, to 150,000,000 shares of Class A common
stock, par value $1.00 per share, and the authorization of up to 100,000 shares
of preferred stock, which may be issued from time to time, with such rights,
designations and preferences as may be fixed by the Board of Directors of the
Company.
Votes For 100,792,640 shares. Votes Against 0 shares.
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Not Applicable
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial and other data are for the Company on a
consolidated basis and separately for IMPSAT Argentina and its consolidated
subsidiaries, in each case in accordance with U.S. GAAP. The Company's
subsidiaries use the U.S. dollar as their functional currency. The Company owns
less than a 100% equity interest in certain of its subsidiaries, including a
95.1% equity interest in IMPSAT Argentina, a 74.2% equity interest in IMPSAT
Colombia and a 75.0% equity interest in IMPSAT Venezuela.
The fiscal year of the Company and all of its subsidiaries, other than
IMPSAT Argentina, ends on December 31, and IMPSAT Argentina's fiscal years,
prior to 1998, ended on November 30. IMPSAT Argentina has changed its fiscal
year end from November 30 to December 31, effective December 31, 1997. The
consolidated statement of operations and other financial and operating data of
the Company for the years ended December 31, 1993, 1994, 1995, 1996 and 1997
incorporate IMPSAT Argentina's results for the years ended November 30, 1993,
1994, 1995, 1996 and 1997, respectively. The consolidated balance sheet data
of the Company as of December 31, 1993, 1994, 1995, 1996 and 1997 incorporate
IMPSAT Argentina's balance sheet data as of November 30, 1993, 1994, 1995 and
1996 and December 31, 1997, respectively.
The selected financial data for the Company and for IMPSAT Argentina have
been derived from the Company's audited consolidated financial statements and
IMPSAT Argentina's audited consolidated financial statements for the respective
years.
14
<PAGE> 15
THE COMPANY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(U.S.$ THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues from
services...................... $37,695 $77,679 $105,641 $128,393 $160,236
Costs and expenses:
Variable cost of
services...................... (8,905) (12,770) (18,818) (21,494) (27,629)
Satellite capacity............ (3,126) (7,734) (10,973) (13,925) (18,906)
Salaries, wages and
benefits...................... (7,756) (13,528) (22,220) (25,561) (29,209)
Selling, general and
Administrative................ (9,244) (19,148) (26,094) (23,030) (32,739)
Depreciation and
amortization.................. (6,324) (12,874) (20,653) (26,318) (28,514)
-------- ------- -------- -------- --------
Operating income.............. 2,340 11,625 6,883 18,065 23,239
Other income (expenses):
Interest expense, net......... (6,220) (8,231) (15,677) (23,185) (24,743)
Net gain (loss) on foreign
Exchange...................... 1,518 1,352 1,838 910 (279)
Other income (expenses),
Net........................... (684) 599 511 1,035 (155)
-------- ------- -------- -------- --------
(Loss) income before
income taxes and
minority interest............. (3,046) 5,345 (6,445) (3,175) (1,938)
Benefit from
(provision for) income taxes.. 1,428 3,155 740 (3,542) (5,047)
-------- ------- -------- -------- --------
(Loss) income before
minority interest............. (1,618) 8,500 (5,705) (6,717) (6,985)
Income attributable to
Minority interest............. (1,218) (5,464) (1,712) (1,766) (981)
-------- ------- -------- -------- --------
Net (loss) income............. $(2,836) $3,036 $(7,417) $(8,483) $(7,966)
======== ======= ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA (1).................... $8,664 $24,499 $27,536 $44,383 $51,753
Ratio of earnings to
fixed charges (2)............. -- 1.38x -- -- --
Ratio of EBITDA to
interest expense.............. 1.30x 2.90x 1.67x 1.76x 1.99x
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(U.S.$ THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash Equivalents........... $7,130 $32,135 $6,216 $28,895 $10,439
Total current assets................ 26,344 57,948 36,906 68,304 65,015
Net property, plant and equipment... 77,970 152,909 199,701 227,086 255,422
Total assets........................ 111,283 222,684 249,095 315,230 339,916
Total current liabilities........... 24,796 68,984 128,813 78,126 103,438
Total short-term debt and current
portion of long-term debt........... 11,246 48,047 97,510 42,874 60,375
Total long-term debt, net........... 35,152 59,437 30,200 156,230 159,677
Minority interest................... 19,614 24,893 28,476 30,242 10,398
Stockholders' equity................ 26,794 62,780 55,363 46,880 63,389
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
---- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
VSAT microstations installed........ 931 1,925 2,841 3,476 3,585
Dataplus earth stations installed... 129 271 443 704 908
Satellites linked................... 3 4 4 6 6
Leased satellite capacity (Mhz)..... 51.5 128.4 198.3 253.0 412.6
Teleports........................... 2 3 4 5 5
Regional Teleports.................. 6 9 10 10 10
Teledatos Networks.................. 6 12 12 12 12
Customers........................... 262 445 656 907 1,189
</TABLE>
16
<PAGE> 17
IMPSAT ARGENTINA
<TABLE>
<CAPTION>
MONTH ENDED
YEAR ENDED NOVEMBER 30, DECEMBER 31,
---------------------------------------------------------------- --------------
1993 1994 1995 1996 1997 1997
-------- -------- -------- -------- -------- --------
(U.S.$ THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues from
services.................................. $34,672 $63,999 $80,346 $85,145 $90,011 $8,130
Costs and expenses:
Variable cost of services................. (2,956) (11,040) (11,083) (14,665) (14,606) (1,590)
Satellite capacity........................ (2,262) (5,902) (8,358) (9,503) (9,614) (944)
Salaries, wages and
benefits.................................. (5,733) (9,567) (12,697) (12,590) (12,489) (1,086)
Selling, general and
administrative............................ (5,425) (12,885) (17,814) (10,731) (16,798) (1,045)
Depreciation and
amortization.............................. (5,570) (10,719) (16,067) (18,786) (17,792) (1,562)
-------- -------- -------- -------- -------- --------
Operating income.......................... 12,726 13,886 14,327 18,870 18,712 1,903
Other income (expenses):
Interest expense, net..................... (5,453) (4,556) (10,384) (12,527) (12,595) (976)
Other income net.......................... (468) (83) 523 638 9 4
-------- -------- -------- -------- -------- --------
Income before income taxes and minority
interest................................... 6,805 9,247 4,466 6,981 6,126 931
Benefit from (provision for) income taxes.. -- 3,220 -- (3,963) (3,247) (311)
-------- -------- -------- -------- -------- --------
Income before minority interest............ 6,805 12,467 4,466 3,018 2,879 620
(Income) loss attributable
to minority interest....................... -- (3) 6 3 -- --
-------- -------- -------- -------- -------- --------
Net income................................. $6,805 $12,464 $4,472 $3,021 $2,879 $620
======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(1).................................. $18,296 $24,605 $30,394 $37,656 $36,504 $3,465
Ratio of earnings
to fixed charges........................... 2.24x 2.92x 1.37x 1.57x 1.43x 1.95x
Ratio of EBITDA to Interest expense........ 3.22x 5.17x 2.90x 2,82x 2.81x 3.55x
</TABLE>
<TABLE>
<CAPTION> AS OF
AS OF NOVEMBER 30, DECEMBER 31,
------------------------------------------------------- --------------
1993 1994 1995 1996 1997 1997
-------- -------- -------- -------- -------- --------
(U.S.$ THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $6,749 $514 $1,160 $1,882 $5,739 $6,065
Total current assets.......................... 24,441 22,169 20,776 28,823 32,047 34,375
Net property, plant and equipment............ 58,393 118,024 140,205 143,430 148,295 146,940
Total assets................................. 83,650 144,504 165,945 174,239 190,059 191,029
Total current liabilities...................... 14,245 54,331 102,557 45,038 70,889 71,661
Total short-term debt and current
portion of long-term debt...................... 3,867 37,275 70,998 25,512 40,570 43,644
Total long-term debt, net...................... 31,476 39,609 8,705 4,270 63,338 63,029
Long-term advances from parent company........ -- -- -- 69,719 -- --
Minority interest............................. -- 9 3 -- -- --
Stockholders' equity........................... 33,000 43,964 48,436 51,457 54,336 54,956
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
AS OF
AS OF NOVEMBER 30, DECEMBER 31,
-------------------------------------- -------------
1993 1994 1995 1996 1997 1997
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
VSAT microstations installed..... 756 1,462 1,951 2,111 2,446 2,452
Dataplus earth stations installed 114 236 355 398 465 467
Satellites linked................ 3 4 4 6 5 5
Leased satellite capacity (Mhz).. 31.0 96.0 148.0 148.0 186.6 188.7
Teleports........................ 1 1 1 1 1 1
Regional Teleports............... 5 6 6 6 6 6
Teledatos Networks............... 6 7 7 7 7 7
Customers........................ 200 292 319 358 436 439
</TABLE>
- -------------
(1) EBITDA consists of operating income (loss) plus depreciation and
amortization and income taxes. EBITDA is presented because it is a measure
commonly used in the industry and to enhance an understanding of the
Company's operating results and is not intended to represent or be a
substitute for cash flow under generally accepted accounting principles
("GAAP"). Because EBITDA is not calculated under 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
debt expense and discount or premium related to indebtedness. Earnings of
the Company were insufficient to cover fixed charges by approximately $4.3
million, $9.6 million, $7.1 million and $0.7 million, for the years ended
December 31, 1993, 1995, 1996 and 1997, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve 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 expenditures.
Certain of these factors are described in the description of the Company's
business, operations and financial condition contained in this Form 10-K.
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
future changes make it clear that any projected results (expressed or implied)
will not be realized.
The Company's contracts with its customers generally provide for payment
in U.S. dollars or for payment in local currency linked to the exchange rate at
the time of payment between the local currency and the U.S. dollar.
Accordingly, inflationary pressures experienced in the Company's countries of
operations did not have direct effect on the Company's revenues during 1997.
Nevertheless, inflation has in the past, and could in the future, adversely
affect the economies of the Company's countries of operations by, among other
things, increasing the cost of local capital and deterring capital inflows from
the United States and elsewhere.
18
<PAGE> 19
The Company believes that its geographic diversification provides some
protection against economic downturns in any particular country, although there
can be no assurance in this regard. However, many of the countries in which
the Company operates have experienced political and economic volatility in
recent years. For example, the economy of Colombia performed poorly in 1997
relative to most expectations. Similarly, Presidential elections are scheduled
in 1998 for Colombia and Venezuela, and changes in economic or
telecommunications policies upon a change in government 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.
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 costs, sales commissions paid to
third party sales representatives and maintenance costs. Selling, general and
administrative expenses for the Company consist principally of publicity and
promotion costs; provisions for doubtful accounts; professional fees and other
remunerations; travel and entertainment; rent; and plant services, telephone
and energy expenses.
RESULTS OF OPERATIONS
The following table presents the Company's results of operations as a
percentage of revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1996 1997
------------------- ------------------- -------------------
(U.S.$ THOUSANDS AND % OF CONSOLIDATED REVENUES)
<S> <C> <C> <C> <C> <C> <C>
Revenues..................... $105,641 100.0% $128,393 100.0% $160,236 100.0%
Variable costs of services... 18,818 17.8 21,494 16.7 27,629 17.2
Satellite capacity cost...... 10,973 10.4 13,925 10.8 18,906 11.8
Salaries, wages and benefits. 22,220 21.0 25,561 19.9 29,209 18.2
Selling, general and
administrative expenses...... 26,094 24.7 23,030 17.9 32,739 20.4
Depreciation and amortization 20,653 19.6 26,318 20.5 28,514 17.8
Interest expense, net........ 15,677 14.8 23,185 18.1 24,743 15.4
Net gain (loss) on foreign
exchange..................... 1,838 1.7 910 0.7 (279) (0.2)
Benefit from (provision for)
foreign income taxes......... 740 0.7 (3,542) (2.8) (5,047) (3.2)
Net loss..................... (7,417) (7.0) (8,483) (6.6) (7,966) (5.0)
</TABLE>
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 IMPSAT Argentina's
revenues for 1996. IMPSAT Colombia's revenues for 1997 totaled $49.5 million.
This represents an increase of $14.4 million, or 41.0%, from IMPSAT Colombia's
revenues for 1996. IMPSAT Venezuela's revenues for 1997 totaled $8.6 million,
representing an increase of $4.1 million (or 91.1%) from IMPSAT Venezuela's
revenues for 1996. In addition, the revenues at IMPSAT Ecuador ($2.8 million
and $5.5 million for 1996 and 1997, respectively) and IMPSAT USA ($0.5 million
and $5.0 million for 1996 and 1997, respectively) increased as the Company's
operations in those countries continued to grow. As part of their respective
revenues, IMPSAT Argentina and IMPSAT USA recorded revenues of $2.2 million and
$0.9 million, respectively, during 1997 from certain one-time equipment sales.
The
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<PAGE> 20
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.
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.
The number of customers at IMPSAT Argentina as of December 31, 1997
(excluding Internet, Global Fax, Minidat and Conexia customers) totaled 436,
compared to IMPSAT Argentina's customer base of 358 (excluding Internet, Global
Fax, Minidat and Conexia customers) at November 30, 1996. IMPSAT Argentina had
a total of 2,446 VSAT microstations and 465 Dataplus earth stations installed
as of November 30, 1997. Such installations reflect a net total of 335 VSAT
microstations and 67 Dataplus earth stations installed for new and existing
customers during 1997.
IMPSAT Colombia had 524 customers as of December 31, 1997 (excluding
Internet, Global Fax, Minidat and Conexia customers). This represents an
increase of 114 customers during 1997. At December 31, 1997, IMPSAT Colombia
had installed 886 VSAT microstations and 324 Dataplus earth stations. During
1997, IMPSAT Colombia withdrew from service a net total of 276 VSAT
microstations and installed a net total of 150 Dataplus earth stations for new
and existing customers. During 1997, certain of IMPSAT Colombia's customers
supplemented or replaced VSAT microstations with higher capacity Dataplus earth
stations.
IMPSAT Venezuela had 102 customers as of December 31, 1997 compared to 75
customers as of December 31, 1996. IMPSAT Venezuela installed a net total of 5
VSAT microstations and 11 Dataplus earth stations during 1997.
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%, from the
Company's variable cost of services for 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.
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 for the Company totaled $12.5 million during 1997. This
represents an increase of $4.0 million over maintenance costs incurred by the
Company for 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
IMPSAT Colombia's maintenance costs during 1996. 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 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. The increase in maintenance costs of the Company during 1997
compared to 1996 is primarily attributable to the increased level and amount of
the Company's telecommunications infrastructure in service as the Company's
operations have grown and expanded over time.
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
utilizes the services of outside providers of installation services.
Sales commissions paid to third party sales representatives totaled $5.9
million for 1997, compared to sales commissions paid to third party sales
representatives totaling $8.9 million during 1996. The overwhelming amount of
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<PAGE> 21
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 to direct renegotiations of IMPSAT Argentina's contracts with
third-party sales representatives, 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
services provided to BNA by IMPSAT Argentina and a concomitant reduction in
related sales commissions to the third party sales representatives contracted
with respect to such agreements.
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. The
cost of equipment sold during 1997 relates to the revenues recorded by IMPSAT
Argentina and IMPSAT USA during the third quarter of 1997 of $2.2 million and
$0.9 million, respectively, as a result of certain one-time equipment sales.
Satellite Capacity Cost. The Company's satellite capacity costs for 1997
totaled $18.9 million, an increase of $5.0 million over satellite capacity
costs for 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 costs for satellite capacity are related to the increase in the
Company's customer and revenue bases. The increase in satellite capacity
during 1997 consists primarily of amounts contractually scheduled to match
anticipated growth in the total number of Dataplus earth stations to be
installed by the Company over time which, because of their greater transmission
capacity and bandwidth requirements compared to VSATs, utilize larger amounts
of satellite capacity. Increases in the Company's utilization of satellite
capacity utilized have not been matched by proportionate increases in revenues
from its services. As discussed above in "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. Upon the
renewal and/or expansion of its contracts with existing customers, the prices
charged to such customers have generally declined, resulting in a lower
revenues per unit of satellite capacity utilized relative to prior years.
Salaries, Wages and Benefits. Salaries, wages and benefits for 1997
totaled $29.2 million, an increase of $3.7 million over the Company's expenses
for salaries, wages and benefits 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. In Colombia, 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 has resulted in an increase in U.S. dollar terms in salaries,
wages and benefits paid to employees of IMPSAT Colombia during that period.
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. Selling, general and
administrative ("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.
21
<PAGE> 22
The Company incurred SG&A expenses of $32.7 million for 1997, an increase
of $9.7 million from SG&A expenses incurred by the Company during 1996. The
increase in SG&A expenses incurred by the Company during 1997 compared to 1996,
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 include the creation of a specific provision of $2.5 million relating to
services invoiced to Empresa Nacional de Correos y Telegrafos S.A.
("ENCOTESA"), the former Argentine state postal agency that was privatized in
1997. In addition to the specific provision relating to ENCOTESA, the Company
increased its provision for doubtful accounts from $2.5 million for 1996 to
$5.6 million for 1997. The Company has increased its allowance for doubtful
accounts as a result of certain payment arrears experienced by a number of
customers in Argentina. The Company's current policy is to reserve 30% for
accounts receivable in excess of 180 days but less than one year, and 100% for
all accounts receivable in excess of 360 days. In 1997, the Company
provisioned $1.2 million with respect to a receivable from BNA, a state-owned
bank and the largest bank in Argentina, which receivable was generated during
1996 and 1997 under a contract with the Company that was terminated and
renegotiated in the second quarter of 1997. The Company has increased the
provision over time in light of its age. 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 awarded contracts to its
service providers. BNA is current on its payments under its existing contract
for the Company's services.
As a percentage of total revenues, the Company's provision for doubtful
accounts increased from 1.9% of total revenues for 1996 to 3.5% of total
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 $0.3 million of severance payments incurred due to termination
of certain of IMPSAT Venezuela's management personnel and increased facilities
rental expenses. 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 in connection with its legal proceeding commenced against
ENCOTESA, described in Note 9 to the Company's financial statements, the
Company's ongoing financing activities and the conduct of preliminary
feasibility assessments of the proposed 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
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<PAGE> 23
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 $1.6 million (or
6.7%), from net interest expense for 1996. IMPSAT Argentina's net interest
expense for 1997 (before eliminating intercompany items) 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. The increase in net
interest expense is also associated with general effect on investment levels
and increases in interest rates in "emerging markets" such as Latin America, as
a result of the current economic crises in Asia that commenced in mid-1997.
As of November 30, 1997, total outstanding indebtedness at IMPSAT
Argentina (before eliminating intercompany items) equaled $103.9 million,
compared to $99.5 million (before eliminating intercompany items) 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 (before
eliminating intercompany items) as of December 31, 1996. In addition, the
average interest rate on the Company's indebtedness for 1997 was 11.9%,
compared to an average interest rate of 15.4% 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. IMPSAT
Argentina recorded a provision for income taxes for 1997 for $3.2 million,
compared to $4.0 million in 1996. IMPSAT Colombia recorded a provision for
income taxes for 1997 of $1.8 million, 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); Mexico (a net loss of $1.4 million); as well as management services
provided, and overhead expenses incurred, by IMPSAT Corporation of $2.2 million
for 1997. IMPSAT Argentina recorded net income of $2.9 million for 1997, a
decrease of $0.1 million compared to IMPSAT Argentina's net income for 1996.
IMPSAT Colombia recorded net income of $8.4 million for 1997, an increase of
$6.2 million compared to IMPSAT Colombia's net income for 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). Revenue growth
for 1996 was attributable to an increase in the number of customers and
services provided.
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
23
<PAGE> 24
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 $5.9
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
declined at IMPSAT Argentina primarily as a result of fewer installations in
1996 due to a lower rate of growth of new services provided and new customers
and increased at IMPSAT Colombia because of the rapid growth experienced in
that market in new installations and new 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 ($8.5
million, or 95.5% of 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 costs for satellite capacity 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 253.03 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
24
<PAGE> 25
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 Ingenieria,
S.A. ("Resis"), a wholly-owned subsidiary that provides management services for
the Company.
Selling, General and Administrative Expenses. SG&A expenses for the
Company consist principally of publicity and promotion costs; provision for
doubtful accounts; fees and other remunerations; travel and entertainment;
rent; and plant services, telephone and energy expenses.
The Company incurred SG&A expenses of $23.0 million for 1996, a decrease
of $3.1 million, or 11.8%, from SG&A expenses incurred by the Company during
1995. SG&A expenses at IMPSAT Argentina for 1996 totaled $10.7 million, a
decrease of $3.5 million, or 24.6%, from SG&A expenses incurred by IMPSAT
Argentina for 1995. SG&A expenses at IMPSAT Colombia for 1996 totaled $4.3
million, an increase of $0.6 million, or 16.2%, from SG&A expenses incurred by
IMPSAT Colombia for 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 gross total revenues, the Company's allowance
for doubtful accounts increased from 1.1% of total revenues for 1995 to 1.9% of
total revenues for 1996.
The Company in 1996 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 the office space which it leased in the
business district 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 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 depreciation and amortization for 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. 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
(before eliminating intercompany items) totaled $13.4 million ($9.6 million
after eliminating intercompany items), a decrease of $3.0 million, or 28.8%,
from net interest expense for 1995. Net interest expense at IMPSAT Colombia for
1996 (before eliminating intercompany items totaled $7.3 million ($7.0 million
after eliminating intercompany items), an increase of $1.2 million, or 19.7%,
from IMPSAT Colombia's net interest expense for 1995. 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 Company's 121/8% Senior Guaranteed Notes
due 2003 (the "Senior Notes") and the
25
<PAGE> 26
maturity dates for the indebtedness refinanced with the proceeds of the Senior
Notes, the Company was required to incur the interest expense on the existing
indebtedness as well as on the 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 $101.3 million (including
parent company advances of $71.5 million from the proceeds of the 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
Senior Notes), compared to $43.6 million as of December 31, 1995. The average
interest rate on the Company's indebtedness for 1996 was 15.4%, compared to an
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 an
provision for foreign income taxes for 1996 of $4.3 million, a decrease of $2.8
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 and Note 9 to IMPSAT Argentina'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 total net revenues
for 1996 declined to 6.6% of total net revenues from a loss of 7.0% of total
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 expenses 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's operations have required significant capital expenditures
for the development and construction of its private telecommunications network
systems in each country in which it operates. The Company anticipates that it
will continue to incur significant capital expenditures in the next several
years in connection with the expected growth of its existing operations
currently in the commercial stages (Argentina, Colombia, Venezuela and
Ecuador), with the planned development of its operations now primarily in the
build-out stage (principally Mexico) and in the future with the planned
establishment of operations in Brazil.
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. While the Company anticipates that
cash flows from operations, combined with cash and cash equivalents, bank lines
of credit and other external sources of financing, are adequate to finance the
Company's operating and debt service requirements over the
26
<PAGE> 27
next several years, 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 historical levels of
growth and market position in each of the countries in which it operates, which
could have an adverse effect on the business and prospects of the Company.
As set forth in its 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 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 December 31, 1997, the Company had a cash balance of $10.4 million. At
that date, the Company's consolidated total debt was $220.1 million,
approximately $50.2 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 February and April 1998 with the proceeds of notes
issued by IMPSAT Argentina under the Global Commercial Paper Program. In
addition, as of December 31, 1997, approximately $10.2 million of the Company's
long-term debt was scheduled to mature in 1998, approximately $16.3 million in
1999, and approximately $143.4 million in the year 2000 and thereafter.
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. Subject to market conditions, the Company is presently
considering a medium-term note offering of approximately $200 million to $250
million. Such medium-term note offering would not be registered under the
Securities Act, but would be offered and sold in the United States pursuant to
an applicable exemption from the registration requirements of the Securities
Act. The Company anticipates that it will require approximately $360 million
during the period 1998 to 2000 for capital expenditures. With continued
deregulation of the telecommunications market throughout the region, the
Company may in the future expand its business to include other
telecommunications services, such as general voice telephony. In such an
event, the Company would need significant amounts of additional financing for
required capital expenditures. The Company's projected capital expenditure
requirements take into account the establishment of operations and development
of private telecommunications network systems in Brazil. The Company's budget
contemplates that the Company will need approximately $90 million for the
period from 1998 to 2000 for the adequate build-out of a private
telecommunications network system in Brazil over that period of time.
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 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 of $25 million of short-term promissory notes under
the Global Commercial Paper Program, which will mature on December 18, 1998.
YEAR 2000
The Company has recognized the need to ensure that its services, computer
operations and operating systems will not be adversely affected by the upcoming
calendar 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. Such plans are likely to
involve
27
<PAGE> 28
a combination of software modification, upgrades and replacement. The Year
2000 date conversion effort is expected to increase costs in 1998 and 1999.
While final cost estimates are not complete, management does not expect these
costs will have a material adverse impact on the Company's financial position,
results of operations or cash flows. 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial statements schedules are set forth
beginning on page F-1 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND OFFICERS
In accordance with its Bylaws, IMPSAT Corporation currently has eight
members on its Board of Directors. In accordance with its Estatutos, IMPSAT
Argentina currently has six members on its Board of Directors. The directors
of the Company and IMPSAT Argentina, respectively, will hold office until the
next annual meeting of their respective stockholders and until successors of
such directors have been elected and qualified, or until their earlier death,
resignation or removal.
The President of IMPSAT Corporation is elected at the annual meeting of
stockholders. The other officers are elected at the annual meetings of the
Board of Directors. All officers hold office until their successors are elected
and qualified, or until their earlier death, resignation or removal. The
Chairman of the Board of Directors of IMPSAT Argentina is elected at the
regular annual meeting of the Board of Directors. Officers of IMPSAT Argentina
are appointed by its Board of Directors.
28
<PAGE> 29
Set forth below are the names, ages and positions of directors and
executive officers of the Company and IMPSAT Argentina as of December 31, 1997.
The officers designated as executive officers of the Company are employees of
Resis, a wholly-owned subsidiary of the Company, which provides services to the
Company pursuant to a management services agreement with the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Directors
Enrique M. Pescarmona 55 Chairman of the Board; Director
of IMPSAT Argentina
Ricardo A. Verdaguer 47 President and Chief Executive
Officer; Chairman of the Board of
Directors of IMPSAT Argentina
Roberto Vivo 44 Director, Deputy Chief Executive
Officer and Vice President,
Marketing; Director of IMPSAT
Argentina
Alexander Rivelis 57 Director and Vice President,
International Development
Lucas Pescarmona 27 Director
Sofia Pescarmona 24 Director
Renato De Rimini* 46 Director
Girolamo Di Genova* 58 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;
Director of IMPSAT Argentina
Luca Minzolini* 36 Vice President, Control Management
Giulio Masserano* 45 Vice President, New Business
Alejandro Suarez del Cerro 44 Vice President, Technology
Rafael Carchak Canes 48 President and Director of IMPSAT
Argentina
Pedro O. Mayol 58 Director of IMPSAT Argentina
Jorge Marine 35 Manager, Administration of IMPSAT Argentina
Horacio Sajoux 45 President of IMPSAT Colombia
</TABLE>
_____________________
* Pursuant to the terms of the Stock Purchase and Termination Agreement,
effective as of March 19, 1998, Messrs. De Rimini and Mr. DiGenova resigned as
Directors of the Company, and Messrs. Minzolini and Masserano resigned as
officers of the Company. 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 Purchasers holding a
majority of the shares of Series A Preferred Stock issued on March 19, 1998.
See "Recent Developments - STET Share Purchase and Series A Preferred Stock
Offering."
29
<PAGE> 30
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
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
</TABLE>
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") 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. (an insurance company), TCA Argentina S.A.
(a manufacturer of automobile parts), Buenos Aires al Pacifico San Martin S.A.
and Ferrocarriles Mesopotomico General Urquiza S.A. (Argentine railway
companies); and is Vice President of Henri Lagarde S.A. (an agribusiness). Mr.
Pescarmona is an electromechanical engineer with a master's degree in economics
and business administration from the University of Navarra in Spain.
Ricardo A. Verdaguer has been President, Chief Executive Officer and a
member of the Board of Directors of IMPSAT Corporation since September 1994.
Mr. Verdaguer also has served as President of IMPSAT Argentina since April 1988
until February 1990 and has served as Chairman of the Board of Directors of
IMPSAT Argentina since 1990. Mr. Verdaguer served in a number of management
positions with IMPSA from 1976 to 1988, including as Manager of the Contracts
and Construction Department and Manager of the Commercial Department. Mr.
Verdaguer holds a degree in electromechanical engineering from Ingenieria de la
Universidad Juan Agustin Maza, Mendoza.
Roberto Vivo has been Deputy Chief Executive Officer, Vice President,
Marketing and a member of the Board of Directors of IMPSAT Corporation since
September 1994. Mr. Vivo has also served as Marketing Director of IMPSAT
Argentina from April 1988 to December 1994 and as a member of the Board of
Directors of IMPSAT Argentina since 1988 to the present. Mr. Vivo also serves
as Chairman of the Board of Directors of FAICSA, an Argentina company engaged
in public construction projects. Mr. Vivo holds a degree in business
administration from Universidad Argentina de la Empresa.
Alexander Rivelis has been Vice President of International Development and
a member of the Board of Directors of IMPSAT Corporation since December 1994.
Mr. Rivelis also serves as a member of the Board of Directors of IMPSAT USA.
Mr. Rivelis served as President of IMPSAT USA from 1995 to March 1996,
President of IMPSAT Colombia from 1991 to 1993, and has held a variety of
managerial positions with companies in the Pescarmona group from 1978 through
1990. Mr. Rivelis holds a degree in electrical and mechanical engineering from
the University of Rosario, Argentina.
Lucas Enrique Pescarmona, the son of Enrique M. Pescarmona, has been a
member of the Board of Directors of IMPSAT Corporation since February 1996.
From 1993 to 1995 he held positions in the Buenos Aires, Argentina office of
Arthur Andersen & Co. In 1995 he transferred to Tecnologica em Componentes
Automotivas Ltda., a Brazilian
30
<PAGE> 31
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 Argentina S.A., a 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, the 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 the 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 IEA, 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.
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 the Private Investment
Department. 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. Prior to joining Morgan Stanley, Mr. Munger was Vice President at
Merrill Lynch & Co. 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
approximately ten years of experience in management positions with companies in
Argentina, Germany and Switzerland. Presently, Mr. Jofre also serves as a
member of the Board of Directors of the investment fund Bemberg Inversiones
S.A. Mr. Jofre holds a degree in public accounting from University of Cordoba
and an MBA from Imede of Switzerland.
Guillermo V. Pardo has been Vice President, Planning of IMPSAT Corporation
since January 1995. Mr. Pardo was previously Managing Director of the Guido Di
Tella companies and has had over 20 years of experience in finance positions in
a number of companies in Argentina and Spain. Mr. Pardo is currently a member
of the Board of Directors of IMPSAT Argentina, FAICSA and the Fundacion
Torcuato Di Tella. Mr. Pardo holds a degree in business administration from
Universidad de Buenos Aires.
Jose R. Torres has been Vice President, Administration and Chief
Accounting Officer of IMPSAT Corporation since January 1995 and a Director of
IMPSAT Argentina since 1990. Mr. Torres served as external auditor of the
Mendoza Stock Exchange from 1982 to 1983. Mr. Torres previously worked as
assistant finance manager of IMPSA and as finance manager of IMPSAT Argentina
until December 1994. Mr. Torres holds a degree in public accounting from
Universidad Nacional de Cuyo.
31
<PAGE> 32
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.
Pedro 0. Mayol has been a member of the Board of Directors of IMPSAT
Argentina since 1990. He also serves as a member of the Board of Directors of
several other Argentine corporations, including Lagarde S.A., ICSA, TCA
Argentina S.A., Mercantil Andina S.A., CORIM and IMPSA. Mr. Mayol, who is a
brother-in- law of Enrique Pescarmona, is an architect.
Jorge Marine joined the Company as Manager, Administration in June 1995.
Previously, Mr. Marine was employed as a Manager, Administration and Finance by
BNL Inversiones, a company within the Banca Nazionale del Lavoro group. Mr.
Marine is a public accountant.
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.
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.
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 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.
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.
ITEM 11. EXECUTIVE COMPENSATION
32
<PAGE> 33
The following tables set forth the compensation paid or accrued to the
chief executive officer and the seven most highly compensated other executive
officers receiving over $100,000 per year for services rendered of each of the
Company and IMPSAT Argentina during fiscal year 1997. No bonuses were paid by
the Company or IMPSAT Argentina to such executive officers during fiscal year
1997. The Company and IMPSAT Argentina do not maintain any long-term incentive
plans and do not grant stock appreciation rights, stock options or restricted
stock awards.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND
PRINCIPAL POSITION ANNUAL COMPENSATION
------------------ -------------------------------------
OTHER ANNUAL
THE COMPANY YEAR SALARY BONUS COMPENSATION
----------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Enrique M. Pescarmona
Chairman of the Board.... 1997 $291,045 $-- $--
Ricardo A. Verdaguer
President and Chief
Executive Officer........ 1997 $240,500 $-- $--
Roberto Vivo
Director, Deputy Chief
Executive Officer and
Vice President, Marketing 1997 $198,250 $-- $--
Hector Alonso
Chief Operating Officer.. 1997 $134,680 $-- $--
Guillermo Jofre
Chief Financial Officer.. 1997 $134,680 $-- $--
Guillermo Pardo
Vice President, Planning. 1997 $134,680 $-- $--
Alexander Rivelis
Vice President,
International
Development.............. 1997 $134,680 $-- $--
Jose R. Torres
Vice President,
Administration, Chief
Accounting Officer....... 1997 $134,680 $-- $--
IMPSAT ARGENTINA
- -------------------------
Rafael Carchak Canes
President and Chief
Executive Officer........ 1997 $203,372 $-- $--
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and the accompanying notes set forth certain
information concerning the beneficial ownership of IMPSAT Corporation's capital
stock and IMPSAT Argentina's common stock as of December 31, 1997 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 or IMPSAT
Argentina's common stock, (ii) each director, (iii) each executive officer and
(iv) all directors and executive officers as a group. Except as otherwise
indicated, each person listed in the table has informed the
33
<PAGE> 34
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
Beneficial Owners of more than 5%
Nevasa Holdings Ltd.(1).............
17 Dame Street
Dublin 2, Ireland 75,594,480 75%
STET International Netherlands NV(2)
6-8 Hoeckenrode
Amsterdam, The Netherlands 25,198,160 25%
Directors and Executive Officers(1). 0 0%
All Directors and Officers as a
Group (23 persons)(1)............... 0 0%
IMPSAT ARGENTINA COMMON STOCK
Beneficial Owners of more than 5%
Invertel S.A.(3)
Viamonte 1526
Buenos Aires, Argentina............. 2,613 51.0%
Credit Suisse
Esmeralda 130
Capital Federal,
Buenos Aires, Argentina............. 248 4.84%
IMPSAT Corporation
Alferez Pareja 256 (1107)
Buenos Aires, Argentina............. 2,229 43.51%
STET International Netherlands NV(2)
6-8 Hoeckenrode
Amsterdam, The Netherlands.......... 33 0.64%
Directors and Executive Officers(1). 0 0%
All Directors and Officers as a
Group (7 persons)(1)................ 0 0%
</TABLE>
- --------------------
(1) Nevasa Holdings Ltd. 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.
34
<PAGE> 35
(2) STET International Netherlands NV is a wholly-owned subsidiary of STET
International SpA. STET International SpA is in turn held 51% by STET SpA,
37% by Telecom Italia and 12% by Telecom Italia Mobile, each of
which are controlled by IRI-Instituto per la Ricostruzione Industriale SpA.
(3) The Company holds a 99.9% equity interest in Invertel S.A.
As described under "Recent Developments - STET Share Purchase and Series A
Preferred Stock Offering," 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 Purchasers. As
a result, Nevasa currently owns 100% of the Company's outstanding common stock
of the Company and the Purchasers own 100% of the Series A Preferred Stock. In
connection with these transactions, effective as of March 19, 1998, Nevasa and
the Purchasers have entered into a securityholders agreement relating to the
joint management of IMPSAT Corporation. The securityholders agreement, which
is filed as an exhibit to this Report, provides the Purchasers with veto rights
with respect to certain significant corporate actions and provides the
Purchasers 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 Purchasers.
ITEM 13. 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, STET and entities affiliated with the Suramericana Group (as
defined in the following paragraph) have an interest. Total telecommunications
services provided to companies in which CORIM or members of the Pescarmona
family have an interest during 1997 totaled approximately $1.9 million. Total
telecommunications services provided to companies affiliated with the
Suramericana Group for 1997 totaled approximately $4.8 million.
The Company holds a 74.2% equity interest in IMPSAT Colombia, of which
18.75% is held directly and 55.45% held indirectly through Colinvertel, a
holding company in which the IMPSAT Corporation holds a 71.74% equity interest.
The shareholders of Colinvertel have agreed to merge Colinvertel with and into
IMPSAT Colombia. The consummation of such merger is pending receipt of certain
necessary Colombian governmental approvals. Suramericana de Seguros and
Suramericana de Capitalizacion, the insurance and finance companies,
respectively of the Sindicato Antioqueno (Suramericana de Seguros, Suramericana
de Capitalization and affiliated entities being referred to as the
"Suramericana Group"), together hold a 27% equity interest in Colinvertel. 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,
STET 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 Industrias
Metalurgicas Pescarmona, S.A.I.C. y F. ("IMPSA"), a company controlled by CORIM
that produces heavy steel capital goods, including hydromechanical equipment
and cranes, and through subsidiaries, engages in other business including but
not limited to cargo transportation, auto parts manufacturing and general
environmental services. Total telecommunications services provided to IMPSA
for 1997 totaled approximately $414,000.
IMPSAT Argentina provides telecommunications services to TCA S.A. ("TCA"),
a company controlled by CORIM and IMPSA that produces wire harnesses for
automobile electrical systems and coil springs for automobile suspension
systems in Argentina and Brazil. Total telecommunications services provided to
TCA for 1997 totaled approximately $80,000.
35
<PAGE> 36
IMPSAT Argentina provides telecommunications services to Buenos Aires al
Pacifico San Martin S.A. ("BAPSA"), a company controlled by CORIM and IMPSA
that operates the San Martin Railway between 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 1997 totaled approximately $1,042,000.
IMPSAT Argentina provides telecommunications services to Mercantil Andina
S.A., an insurance company owned by CORIM and members of the Pescarmona family.
Total telecommunications services provided to Mercantile Andina S.A. for 1997
totaled approximately $230,000.
IMPSAT Argentina provides telecommunications services to Lagarde S.A., a
company owned by members of the Pescarmona family that owns and operates a
winery in the Mendoza area of Argentina. Total telecommunications services
provided to Lagarde S.A. for 1997 totaled approximately $62,000.
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, the total amount of telecommunications services rendered
to the Suramericana Group totaled approximately $4,161,000, the most
significant of which are detailed in the following breakdown:
<TABLE>
<CAPTION>
<S> <C>
Suramericana de Seguros $650,386
Corfinsura 140,423
Susalud 79,449
Sufinanciamiento 103,379
Proteccion 119,323
Suleasing 85,837
Conavi 860,131
Suvalor 140,266
Cementos Rio Claro 65,961
Industrias Noel 405,684
Acerias Paz del Rio 116,100
Almacenes Exito 190,294
Banco Industrial Colombiano 1,135,842
</TABLE>
During 1997, IMPSAT Venezuela provided telecommunications services to
several companies within the Suramericana Group, including Industrias
Alimenticias Noel de Venezuela S.A., which totaled approximately $98,000, and
Cadena de Tiendas Venezolanas S.A., which totaled approximately $563,000.
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.
Mercantil Andina acts from time to time as an insurance broker and an
insurer for IMPSAT Argentina. IMPSAT Argentina paid premiums to Mercantil
Andina S.A., totaling approximately $474,000 during 1997.
The Company received technical assistance in 1997 from Telecom Italia and
ITALCABLE, affiliates of STET, which assistance consisted of the seconding of
three employees from Telecom Italia and ITALCABLE to the Company. Total
invoices from Telecom Italia and ITALCABLE for such services for 1997 totaled
approximately $360,000.
36
<PAGE> 37
Corfinsura and Banco Industrial Colombiano, are creditors of IMPSAT
Colombia. As of December 31, 1997, IMPSAT Colombia was indebted to Corfinsura
in the amount of $7,390,000 and to Banco Industrial Colombiano in the amount of
approximately $6,081,000. The total interest paid for 1997 was approximately
$1,695,000.
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 $384,000 in 1997.
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 December 31, 1997 was approximately
$1,604,000 and the total interest paid in 1997 was approximately $117,000.
Other payments by IMPSAT Colombia to companies of Suramericana Group in
1997 included: payments of approximately $239,000 to Proteccion, S.A. for
pension fund services; Susalud, had total payments of approximately $177,000 to
Susalud, S.A. for health benefit services; and payments of approximately
$309,000 to Sodexho Pass for employee luncheon services.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)(1) LIST OF FINANCIAL STATEMENTS
Consolidated Financial Statements of IMPSAT Corporation and Subsidiaries
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Operations for Each of the Three Years in the
Period Ended December 31, 1997
Consolidated Statements of Stockholders' Equity for Each of the Three
Years in the Period Ended December 31, 1997
Consolidated Statements of Cash Flows for Each of the Three Years in the
Period Ended December 31, 1997
Consolidated Financial Statements of IMPSAT S.A. and Subsidiaries
Balance Sheets as of November 30, 1996 and 1997 and December 31, 1997
Statements of Income for the One Month Period Ended December 31, 1997,
and for Each of the Three Years in the Period Ended November 30, 1997
Statements of Stockholders' Equity for the One Month Period Ended
December 31, 1997, and for Each of the Three Years in the Period Ended
November 30, 1997
Statements of Cash Flows for the One Month Period Ended December 31,
1997, and for Each of the Three Years in the Period Ended November 30,
1997
(A)(2) LIST OF 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.
37
<PAGE> 38
(A)(3) EXHIBITS
The exhibits listed in the accompanying Exhibit Index and required by Item
601 of Regulation S-K (numbered in accordance with Item 601 of Regulation S-K)
are filed or incorporated by reference as part of this Report.
(B) REPORTS ON FORM 8-K.
None.
38
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, each of the registrants has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized,
in the City of Buenos Aires in the Republic of Argentina, April 15, 1998.
IMPSAT Corporation
By: /s/ Ricardo A. Verdaguer
________________________
Ricardo A. Verdaguer,
President and Chief
Executive Officer
Date: April 15, 1998
IMPSAT S.A.
By: /s/ Rafael Carchak Canes
________________________
Rafael Carchak Canes,
President
Date: April 15, 1998
39
<PAGE> 40
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, each with full power of
substitution and resubstitution, for and in his name, place and stead, in any
and all capacities, to sign this Report and any and all 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, or their or his other substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report 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 of IMPSAT April 15, 1998
Corporation
/s/ Guillermo Jofre Vice President, Finance of IMPSAT Corporation April 15, 1998
/s/ Jose R. Torres Vice President, Administration and Chief April 15, 1998
Accounting Officer of IMPSAT Corporation
/s/ Roberto Vivo Director, Deputy Chief Executive Officer and April 15, 1998
Vice President, Marketing of IMPSAT
Corporation
/s/ Alexander Rivelis Director and Vice President, International April 15, 1998
Development of IMPSAT Corporation
/s/ Lucas Pescarmona Director of IMPSAT Corporation April 15, 1998
/s/ Sofia Pescarmona Director of IMPSAT Corporation April 15, 1998
/s/ Marianne Hay Director of IMPSAT Corporation April 13, 1998
/s/ Stephen R. Munger Director of IMPSAT Corporation April 13, 1998
</TABLE>
<PAGE> 41
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below (each, a "Signatory") constitutes and appoints Guillermo Jofre,
Jose R. Torres and Richard Horner (each, an "Agent," and collectively,
"Agents") and each or any of them, his true and lawful attorney-in-fact and
agent, each with full power of substitution and resubstitution, for and in his
name, place and stead, in any and all capacities, to sign this Report and any
and all 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, or their or his other substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Ricardo A. Verdaguer Chairman of the Board of April 15, 1998
Directors of IMPSAT
Argentina
/s/ Enrique M. Pescarmona Director of IMPSAT Argentina April 15, 1998
/s/ Roberto Vivo Director of IMPSAT Argentina April 15, 1998
/s/ Pedro Mayol Director of IMPSAT Argentina April 15, 1998
/s/ Rafael Carchak Canes Director of IMPSAT Argentina April 15, 1998
/s/ Jose R. Torres Director of IMPSAT April 15, 1998
Argentina (principal
financial officer)
/s/ Jorge I. Marine Manager, Administration of April 15, 1998
IMPSAT Argentina (principal
accounting officer)
/s/ Richard Horner Attorney-in-Fact April 13, 1998
</TABLE>
41
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C> <C>
3.1. Restated Certificate of Incorporation of the Company.
Filed herewith.
3.2. Restated Bylaws of the Company. Filed herewith.
4.1. Supplemental Indenture dated as of May 13, 1997 among
IMPSAT Corporation, IMPSAT S.A. and The Bank of New York.
Filed herewith.
4.2 Certificate of Designations dated as of March 19, 1998.
Filed herewith.
9.1 Securityholders Agreement dated as of March 19, 1998,
among Nevasa and the Purchasers and certain other
parties. Filed herewith.
10.1. Stock Purchase and Termination Agreement dated as of
February 19, 1998, among the Company, Nevasa, STET
International, and certain other parties. Filed herewith.
10.2. Securities Purchase Agreement dated as of March 19, 1998,
among the Company, Newco and the Purchasers. Filed
herewith.
21.1. List of subsidiaries of the registrants (incorporated by
reference to the"Business - General" section of this
report).
24.1. Power of Attorney (included on the signature page hereto).
27.1. Financial Data Schedule. Filed herewith.
</TABLE>
42
<PAGE> 43
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, 1997 and 1996, 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, 1997 and 1996, 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-1
<PAGE> 44
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996 (IN THOUSANDS OF U.S. DOLLARS)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,439 $ 28,895
Trade accounts receivable, net 36,596 22,969
Other receivables 15,583 12,372
Prepaid expenses 2,397 4,068
------------ ------------
Total current assets 65,015 68,304
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, Net 255,422 227,086
------------ ------------
NON-CURRENT ASSETS:
Trade account receivables, net 5,143 5,143
License and permit costs, net 2,003 2,413
Deferred income taxes, net 4,812
Deferred financing costs, net 4,044 4,761
Other non-current assets 8,289 2,711
------------ ------------
Total non-current assets 19,479 19,840
------------ ------------
TOTAL $339,916 $315,230
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 25,289 $ 19,250
Short-term debt 50,189 31,852
Current portion of long-term debt 10,186 11,022
Accrued liabilities 8,878 11,708
Deferred income taxes, net 247
Other liabilities 8,649 4,293
------------ ------------
Total current liabilities 103,438 78,125
------------ ------------
LONG-TERM DEBT, Net 159,677 156,230
------------ ------------
OTHER LONG-TERM LIABILITIES 3,014 3,752
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 9)
MINORITY INTEREST 10,398 30,242
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 100,792,640 and
77,750,640 shares authorized, issued and outstanding
at December 31, 1997 and 1996, respectively 100,793 77,751
Accumulated deficit (37,404) (30,870)
------------ ------------
Total stockholders' equity 63,389 46,881
------------ ------------
TOTAL $339,916 $315,230
============ ============
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 45
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1997 (IN THOUSANDS OF U.S. DOLLARS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
NET REVENUES FROM SERVICES $160,236 $128,393 $105,641
--------------- --------------- ---------------
COST AND EXPENSES:
Variable cost of services 27,629 21,494 18,818
Satellite capacity cost 18,906 13,925 10,973
Salaries, wages and benefits 29,209 26,631 22,220
Selling, general and administrative 32,739 21,960 26,094
Depreciation and amortization 28,514 26,318 20,653
--------------- --------------- ---------------
Total cost and expenses 136,997 110,328 98,758
--------------- --------------- ---------------
Operating income 23,239 18,065 6,883
--------------- --------------- ---------------
OTHER INCOME (EXPENSES):
Interest expense, net (24,743) (23,185) (15,677)
Net (loss) gain on foreign exchange (279) 910 1,838
Other (expense) income, net (155) 1,035 511
--------------- --------------- ---------------
Total other income (expense) (25,177) (21,240) (13,328)
--------------- --------------- ---------------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (1,938) (3,175) (6,445)
(PROVISION FOR) BENEFIT FROM INCOME TAXES (5,047) (3,542) 740
--------------- --------------- ---------------
LOSS BEFORE MINORITY INTEREST (6,985) (6,717) (5,705)
INCOME ATTRIBUTABLE TO MINORITY INTEREST (981) (1,766) (1,712)
--------------- --------------- ---------------
NET LOSS $(7,966) $(8,483) $(7,417)
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 46
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS OF U.S. DOLLARS)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION
----------------------
COMPANY IMPSAT ACCUMULATED MINORITY
SHARES AMOUNT ARGENTINA DEFICIT TOTAL INTEREST
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 51,301 $51,301 $13,360 $(1,880) $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 51,301 51,301 13,360 (9,297)(*) 55,364 28,476
IMPSAT Argentina exchange (51%) 26,450 26,450 (13,360) (13,090)
Net loss for the year (8,483) (8,483) 1,766
------- -------- ---------- --------- -------- -------
BALANCE AT DECEMBER 31, 1996 77,751 77,751 - (30,870)(*) 46,881 30,242
IMPSAT Argentina exchange (43.5%) 23,042 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 100,793 $100,793 $ $(37,404)(*) $63,389 $10,398
======= ======== ========== ========= ======== =======
</TABLE>
(*) Includes an appropriation of retained earnings amounting to $449, $1,254
and $1,410 in 1995, 1996 and 1997, respectively, to comply with legal reserve
requirements in Argentina.
See notes to consolidated financial statements.
F-4
<PAGE> 47
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(7,966) $(8,483) $(7,417)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization and depreciation 28,514 26,318 20,653
Deferred income tax provision (benefit) 4,748 3,012 (936)
Adjustment for change in IMPSAT Argentina's fiscal year end 1,774
Income attributable to minority interest 981 1,766 1,712
Changes in assets and liabilities:
Increase in trade accounts receivable, net (13,627) (6,525) (5,940)
Decrease (increase) in prepaid expenses 1,671 (1,406) 1,513
Increase in other receivables and other non-current assets (8,072) (6,647) (446)
Increase (decrease) in accounts payable - trade 4,627 (41) 8,444
Increase in accrued and other liabilities 1,526 4,340 1,658
Decrease in other long-term liabilities (89) (2,491) (347)
----------------- ----------------- -----------------
Net cash provided by operating activities 14,087 9,843 18,894
----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (55,028) (53,648) (66,796)
Capitalized preoperating costs (33) (114)
----------------- ----------------- -----------------
Net cash used by investing activities (55,028) (53,681) (66,910)
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from (payments on) short-term debt 18,337 (28,483) 15,533
Capital contribution from minority interest 1,537 1,872
Proceeds from long-term debt, net of deferred financing costs 10,483 132,888 8,545
Repayments of long-term debt (7,872) (37,888) (3,853)
----------------- ----------------- -----------------
Net cash provided by financing activities 22,485 66,517 22,097
----------------- ----------------- -----------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (18,456) 22,679 (25,919)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 28,895 6,216 32,135
----------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $10,439 $28,895 $6,216
================= ================= =================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $23,442 $19,413 $16,498
================= ================= =================
Foreign income taxes paid $1,375 $1,015 $244
================= ================= =================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
ACTIVITIES:
Equipment in transit $1,412 $350 $264
================= ================= =================
See notes to consolidated financial statements.
</TABLE>
F-5
<PAGE> 48
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 link and leased satellite and fiber optic
capacity.
The Company was formed in August 1994 for the purpose of combining
operating entities in Argentina, Colombia and Venezuela, which were previously
controlled by common ownership. The original operating entity was established
in Argentina in 1990 under the name of IMPSAT S.A. ("IMPSAT Argentina").
Thereafter, operating entities were established in Colombia in 1992 ("IMPSAT
Colombia") and in Venezuela in 1993 ("IMPSAT Venezuela").
As part of the formation of the Company, a shareholder of the Company
contributed its ownership in the operating entities in Colombia and Venezuela
in exchange for common stock. At the same time, cash was contributed by four
shareholders in exchange for common stock. In July 1996, shareholders of
IMPSAT Argentina exchanged a 51% ownership interest in IMPSAT Argentina for
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.
Since the establishment of the Company, new operating subsidiaries have
been created in Mexico, Ecuador, Peru (inactive) and the United States.
Accordingly, the Company's operating subsidiaries at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
OPERATING
OWNERSHIP INCOME
COUNTRY OPERATING SUBSIDIARIES PERCENTAGE TOTAL ASSETS REVENUES (LOSS)
<S> <C> <C> <C> <C> <C>
Argentina Impsat S.A. 94.5% $191,029 $ 89,960 $19,813
Colombia Impsat S.A. 74.2 87,546 49,514 20,213
Venezuela Telecomunicaciones Impsat 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 Impsat 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>
In addition, the Company owns other subsidiaries which serve as
intermediaries or provide support functions to the Company and its operating
subsidiaries. They are Resis Ingenieria, S.A. (Argentina) and ISCH Ltd.
(Liechtenstein).
F-6
<PAGE> 49
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The 1997 and 1996 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 1996 and
1995, 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.
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 range from six months to five years but generally
are for three years. The customer generally pays an engineering fee, an
installation charge and a monthly fee based on the number of microsystems
installations. The fees stipulated in the contracts are denominated in U.S.
dollars equivalents. Services are billed on a monthly, predetermined basis,
which coincides with when the services are rendered. No single customer
accounted for greater than 10% of total revenue from services for the years
ended December 31, 1997, 1996 and 1995.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are recorded
at cost and depreciated using the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements 20-25 years
Operating communications equipment 5-10 years
Furniture, fixtures and other equipment 2-10 years
</TABLE>
LICENSE AND PERMIT COSTS - License and permit costs, such as legal cost,
regulatory fees and application costs incurred to obtain and make functional
the operating licenses in each respective country were capitalized and are
being amortized on the straight-line basis over periods not to exceed ten
years. The Company reviews the carrying value of its license and permit costs
on an ongoing basis. If such review indicates that these values may not be
recoverable, the Company's carrying value will be reduced to its estimated fair
value. The amounts capitalized, by operating subsidiaries, at December 31 are
as follows:
<TABLE>
<CAPTION>
1997 1996
<C> <C> <C>
IMPSAT Colombia $ 3,020 $ 3,020
IMPSAT Ecuador 287 287
IMPSAT Mexico 293 293
IMPSAT USA 147 147
-------- --------
Total costs capitalized 3,747 3,747
Less: accumulated amortization (1,744) (1,334)
-------- --------
Unamortized balance $ 2,003 $ 2,413
======== ========
</TABLE>
F-7
<PAGE> 50
INCOME TAXES - Deferred income taxes result from temporary differences in
the recognition of expenses for tax and financial reporting purposes and are
accounted for in accordance with Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes, which requires the liability method of computing deferred income
taxes. Under the liability method, deferred taxes are adjusted for tax rate
changes as they occur.
DEFERRED FINANCING COSTS - Debt issuance costs and transaction fees, which
are associated with the issuance of the senior guaranteed notes (see Note 7)
are being amortized (and charged to interest expense) over the term of the
related notes on a method which approximates the level yield method.
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, 1997 and 1996, the fair value of the 12-1/8% Senior
Guaranteed Notes due 2003 was approximately $129,000 and $132,000, 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.
RECLASSIFICATIONS - Certain amounts in the 1996 and 1995 consolidated
financial statements have been reclassified to conform with the 1997
presentation.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the 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 is not expected to 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 is not expected to have a material
impact on the Company's consolidated financial statement presentation.
F-8
<PAGE> 51
3. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable, by operating subsidiaries, at December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
IMPSAT Argentina $27,531 $17,958
IMPSAT Colombia 10,102 5,846
IMPSAT Venezuela 2,202 1,331
All others 2,694 637
------- -------
Total 42,529 25,772
Less: allowance for doubtful accounts (5,933) (2,803)
------- -------
Trade accounts receivable, net $36,596 $22,969
======= =======
</TABLE>
The Company's subsidiaries provide trade credit to their customers in the
normal course of business. The collection of a substantial portion of the
trade receivables are susceptible to changes in the Latin American economies
and political climates. Prior to extending credit, the customers' financial
history is analyzed.
The activity for the allowance for doubtful accounts at December 31 is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Beginning balance $2,803 $1,130 $712
Provision for doubtful accounts 3,269 1,673 418
Write-offs, net of recoveries (139)
------ ------ ------
Ending balance $5,933 $2,803 $1,130
====== ====== ======
</TABLE>
See Note 9.
4. OTHER RECEIVABLES
Other receivables consist primarily of refunds or credits pending from
local governments for taxes other than income and other miscellaneous amounts
due to the Company and its operating subsidiaries as follows at December 31:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
IMPSAT Argentina $4,753 $4,290
IMPSAT Colombia 4,460 3,696
IMPSAT Venezuela 2,133 2,224
IMPSAT Ecuador 548 494
All others 3,689 1,668
------- -------
Total $15,583 $12,372
======= =======
</TABLE>
F-9
<PAGE> 52
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 consisted of:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Land $ 1,478 $ 1,478
Building and improvements 23,312 22,604
Operating communications equipment 310,321 258,593
Furniture, fixtures and other equipment 14,503 11,311
--------------- ---------------
Total 349,614 293,986
Less: accumulated depreciation (101,051) (73,046)
--------------- ---------------
Total 248,563 220,940
Deposit on purchase of equipment and in transit 6,859 6,146
--------------- ---------------
Property, plant and equipment, net $ 255,422 $ 227,086
=============== ===============
</TABLE>
The recap of accumulated depreciation at December 31 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Beginning balance $ 73,046 $47,155 $27,188
Depreciation expense 29,665 25,913 20,268
Disposals and retirements (1,660) (22) (301)
------------- ------------ ----------------
Ending balance $101,051 $73,046 $47,155
============= ============ ================
</TABLE>
6. SHORT-TERM DEBT
The Company's short-term debt at December 31 is detailed as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
$50 million commercial paper program (7.55% to 8.33%) $25,000 $20,000
Short-term credit facilities, denominated in U.S. dollars;
interest rates ranging from 7% to 15%:
IMPSAT Argentina 15,850 327
IMPSAT Colombia 5,414 3,345
IMPSAT Venezuela 1,714 1,400
IMPSAT Ecuador 992 53
Short-term credit facilities, denominated in local
currencies; local interest rates:
IMPSAT Colombia (27%) 5,700
IMPSAT Venezuela (28% to 32%) 1,219 1,027
------------ ------------
Total short-term debt $50,189 $31,852
============ ============
</TABLE>
F-10
<PAGE> 53
7. LONG-TERM DEBT
The Company's long-term debt at December 31 is detailed as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
12-1/8% Senior Guaranteed Notes due 2003 $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 totalling approximately $12,000
denominated in:
U.S. dollars (interest rates 9% - 13%) 27,111 25,324
Local currency (interest rates 25% - 34%) 6,380 1,551
IMPSAT Argentina (7%), maturing
semiannually through 1998, collateralized
by certain assets 2,435 4,374
IMPSAT Venezuela (9% - 11%), maturing
during 2001 5,550 5,922
Eximbank notes payable (7%), maturing
semiannually through 1999 3,387 5,081
---------- ----------
Total long-term debt 169,863 167,252
Less: current portion (10,186) (11,022)
---------- ----------
Long-term debt, net $159,677 $156,230
========== ==========
</TABLE>
The scheduled maturities of long-term debt at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR
<S> <C>
1998 $ 10,186
1999 16,280
2000 14,234
2001 3,058
2002 and thereafter 126,105
------------
Total $169,863
============
</TABLE>
The Senior Guaranteed Notes 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.
F-11
<PAGE> 54
8. INCOME TAXES
For the years ended December 31, 1997, 1996 and 1995, the provision for
(benefits from) income taxes, all of which are for foreign taxes, consist of a
current provision of $299, $530 and $196, respectively, and a deferred
provision of $4,748 and $3,012 and a deferred benefit of $936, 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 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>
1997 1996
<S> <C> <C>
DEFERRED TAX ASSETS:
Preoperating costs:
IMPSAT Colombia $ 1,698 $ 2,038
IMPSAT Venezuela 1,380 1,695
IMPSAT Ecuador 58 85
Net operating loss carryforwards:
IMPSAT Colombia 900
IMPSAT Venezuela 4,048 4,625
IMPSAT Mexico 2,487 1,741
IMPSAT Ecuador 876 684
Company and IMPSAT USA 2,745 255
Other:
IMPSAT Colombia 139 273
IMPSAT Mexico 54
-------------- ---------
Gross deferred tax assets 13,485 12,296
-------------- ---------
DEFERRED TAX LIABILITIES:
IMPSAT Argentina (4,301) (743)
IMPSAT Colombia (389)
IMPSAT Mexico (293) (336)
-------------- ---------
Gross deferred tax liabilities (4,983) (1,079)
-------------- ---------
Less: valuation allowance (8,749) (6,405)
-------------- ---------
Net deferred tax (liabilities) assets $ (247) $ 4,812
============== =========
</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.
F-12
<PAGE> 55
9. COMMITMENTS AND CONTINGENCIES
The Company leases satellite capacity with annual rental commitments of
approximately $20,067 through the year 2001. In addition, the Company has
commitments to purchase communications equipment amounting to approximately
$8,531 and was obligated under letter of credits amounting to approximately
$422 at December 31, 1997.
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, the balance outstanding on the credit facility amounted to
approximately $5,600.
During May 1997, the Company and one of its subsidiary 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 set off and, accordingly, the amounts have
been netted for purposes of the consolidated financial statement presentation.
The arrangement expires in May 1999.
In the normal course of business, the Company is involved in or subject to
various litigation and legal proceedings incidental to the normal conduct of
the Company's business. Whenever justified, the Company intends to vigorously
defends such claims; however, there can be no assurance that the Company will
ultimately prevail.
In November 1996, IMPSAT Argentina filed suit against one of its
customers, ENCOTESA for amounts due and arising under IMPSAT Argentina's
contracts with ENCOTESA, the Argentine national postal service. On December
27, 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 Argentina S.A. In
connection therewith, the claim by IMPSAT Argentina remained with ENCOTESA and
the operating contract was transferred to Correo Argentina. Based on these
developments, the Argentina Company has reclassified the trade account
receivables from ENCOTESA to non-current assets at the estimated net realizable
value 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 situation will have on its results of operations, liquidity or
capital resources.
<TABLE>
<CAPTION>
ALLOWANCE NET TRADE
TRADE ACCOUNT FOR DOUBTFUL ACCOUNT
RECEIVABLES ACCOUNT RECEIVABLES
$
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $2,532 $ $2,532
Total invoices (provision) for the year 3,393 (782) 2,611
-------------- ------------ -----------
BALANCE AT DECEMBER 31, 1996 5,925 (782) 5,143
Total invoices (provision) for the year 2,537 (2,537)
-------------- ------------ -----------
BALANCE AT DECEMBER 31, 1997 $8,462 $(3,319) $5,143
============== ============ ===========
</TABLE>
F-13
<PAGE> 56
10. SUBSEQUENT EVENTS
COMMERCIAL PAPER OFFERING -- IMPSAT Argentina has a five year program for
the issuance of up to $50,000 in commercial paper. At December 31, 1997, there
was $25,000 outstanding under this program (see Note 6). During January 1998,
IMPSAT Argentina issued $25,000 maturing August 1998. In April 1998, IMPSAT
Argentina completed the placement of a further $25,000 of short-term promissory
notes, maturing December 1998. The proceeds of the notes under the commercial
paper program have been used by IMPSAT Argentina for purposes which include the
refinancing of existing indebtedness (including outstanding commercial paper),
the investment in physical assets located in Argentina, and working capital.
SHARE PURCHASE AND SERIES A PREFERRED STOCK OFFERING -- On March 19, 1998,
the Company redeemed 25% of its outstanding common stock previously held by
STET International (the "STET Shares") with the proceeds of a substantially
concurrent issuance and sale of $125,000,000 of the Company's Series A
Convertible Preferred Stock (the "Series A Preferred Stock"). The Series A
Preferred Stock were 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 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 by Directors
appointed by the Purchasers holding a certain minimum number of outstanding
Series A Preferred Stock, to a veto over certain major corporate actions.
ACQUISITION OF IMPSAT BRAZIL -- On March 19, 1998, the Company's Board of
Directors approved the acquisition from Nevasa Holdings Ltd. ("Nevasa"), the
Company's majority shareholder, of 99.93% of the capital stock of IMPSAT
Comunicacoes Ltda., a company organized and existing under the laws of the
Federal Republic of Brazil ("IMPSAT Brazil") for $5,125,500. The purchase
price for IMPSAT Brazil represents the total amount of pre-operating and
development costs and expenses incurred for IMPSAT Brazil by Nevasa. IMPSAT
Brazil was established in 1993 by Nevasa to apply for a value-added
telecommunications license (the "Brazil License") in Brazil and to develop such
business in Brazil with the understanding between Nevasa and STET International
that IMPSAT Brazil would be combined with the Company at a later date to be
agreed upon by the shareholders. The Brazil License, which was granted on
January 20, 1998, 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.
* * * * * *
F-14
<PAGE> 57
INDEPENDENT AUDITORS' REPORT
To the Stockholders of IMPSAT S.A.:
We have audited the accompanying balance sheets of IMPSAT S.A. (the "Company")
as of December 31, 1997, and November 30, 1997 and 1996, and the related
statements of income, of stockholders' equity and of cash flow for the
one-month period ended December 31, 1997, and for each of the three years in
the period ended November 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statement based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by 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 financial statements present fairly, in all material
respects, the financial position of IMPSAT S.A. at December 31, 1997, and
November 30, 1997 and 1996, and the results of its operations and its cash
flows for the one-month period ended December 31, 1997, and for each of the
three years in the period ended November 30, 1997 in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE
Buenos Aires, Argentina
March 9, 1998
F-15
<PAGE> 58
IMPSAT S.A.
BALANCE SHEETS
(IN THOUSANDS OF U. S. DOLLARS)
- -------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1997 1997 1996
---- ---- ----
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,065 $ 5,739 $ 1,882
Trade accounts receivable, net 22,034 19,460 15,246
Receivables from affiliated companies 734 703 429
Other receivables 4,753 5,093 4,290
Prepaid expenses 789 1,052 1,833
-------- -------- --------
Total current assets 34,375 32,047 23,680
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 146,940 148,295 143,430
-------- -------- --------
NON-CURRENT ASSETS:
Trade accounts receivable, net 5,143 5,143 5,143
Other non-current assets 4,571 4,574 1,986
-------- -------- --------
Total non-current assets 9,714 9,717 7,129
-------- -------- --------
TOTAL $191,029 $190,059 $174,239
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payables - trade $ 13,521 $ 16,865 $ 12,311
Short-term debt 40,850 37,741 20,327
Advances from affiliated companies 5,194 4,561 2,125
Current portion of long-term debt 2,794 2,829 5,185
Accrued liabilities 432 473 2,210
Deferred income taxes 4,301 3,990 743
Other liabilities 4,569 4,430 2,137
-------- -------- --------
Total current liabilities 71,661 70,889 45,038
-------- -------- --------
LONG-TERM DEBT, NET 63,029 63,338 4,270
-------- -------- --------
OTHER LONG-TERM LIABILITIES 1,383 1,496 3,755
-------- -------- --------
ADVANCES FROM PARENT COMPANY, LONG-TERM 69,719
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY:
Common Stock; 5,123 shares authorized,
issued, and outstanding 3 3 3
Paid-in capital 26,191 26,191 26,191
Retained earnings 28,762 28,142 25,263
-------- -------- --------
Total stockholders' equity 54,956 54,336 51,457
-------- -------- --------
TOTAL $191,029 $190,059 $174,239
======== ======== ========
</TABLE>
See notes to financial statements.
F-16
<PAGE> 59
IMPSAT S.A.
STATEMENTS OF INCOME
FOR THE ONE MONTH PERIOD ENDED DECEMBER 31, 1997, AND FOR EACH OF THE THREE
YEARS IN THE PERIOD ENDED NOVEMBER 30, 1997 (IN THOUSANDS OF U. S. DOLLARS)
<TABLE>
<CAPTION>
NOVEMBER 30,
DECEMBER 31, ---------------------------------------
1997 1997 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET REVENUES FROM SERVICES $8,130 $90,011 $85,145 $80,346
------ ------- ------- -------
COSTS AND EXPENSES:
Variable cost of services 1,590 14,606 14,665 11,083
Satellite capacity cost 944 9,614 9,503 8,358
Salaries, wages and benefits 1,086 12,489 12,590 12,697
Selling, general and administrative 1,045 16,798 10,731 17,814
Depreciation and amortization 1,562 17,792 18,786 16,067
------ ------- ------- -------
Total cost and expenses 6,227 71,299 66,275 66,019
------ ------- ------- -------
Operating income 1,903 18,712 18,870 14,327
------ ------- ------- -------
OTHER INCOME (EXPENSES):
Interest expense, net (976) (12,595) (12,527) (10,384)
Other income, net 4 9 638 523
------ ------- ------- -------
Total other (expenses) (972) (12,586) (11,889) (9,861)
------ ------- ------- -------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 931 6,126 6,981 4,466
PROVISION FOR INCOME TAX (311) (3,247) (3963)
------ ------- ------- -------
INCOME BEFORE MINORITY INTEREST 620 2,879 3,018 4,466
LOSS ATTRIBUTABLE TO MINORITY
INTEREST 3 6
------ ------- ------- -------
NET INCOME $620 $2,879 $3,021 $4,472
====== ======= ======= =======
</TABLE>
See notes to financial statements.
F-17
<PAGE> 60
IMPSAT S.A.
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE ONE MONTH PERIOD ENDED DECEMBER 31,
1997, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED NOVEMBER 30, 1997
(IN THOUSANDS OF U. S. DOLLARS)
<TABLE>
<CAPTION>
COMMON STOCKHOLDERS'
--------------------------------
PAID-IN RETAINED MINORITY
COMMON STOCK CAPITAL EARNINGS TOTAL INTEREST
------------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT NOVEMBER 30,1994 $ 3 $26,191 $17,770(*) $43,964 $ 9
Net income 4,472 4,472 (6)
----- ------- ------- ------ ------
BALANCE AT NOVEMBER 30, 1995 3 26,191 22,242(*) 48,436 3
Net income 3,021 3,021 (3)
----- ------- ------- ------- ------
BALANCE AT NOVEMBER 30, 1996 3 26,191 25,263(*) 51,457 --
Net income 2,879 2,879
----- ------- ------- ------- ------
BALANCE AT NOVEMBER 30, 1997 $ 3 $26,191 $28,142(*) $54,336 --
Net income 620 620
----- ------- ------- ------- ------
ALANCE AT DECEMBER 31, 1997 $ 3 $26,191 $28,762(*) $54,956 --
===== ======= ======= ======= ======
</TABLE>
(*) Includes an appropriation of retained earnings, amounting to $295, $881,
$1,254 and $1,410 in 1994, 1995, 1996 and 1997, respectively, to comply
with legal reserve requirements in Argentina.
See notes to financial statements.
F-18
<PAGE> 61
IMPSAT S.A.
STATEMENTS OF CASH FLOWS
FOR THE ONE MONTH PERIOD ENDED DECEMBER 31, 1997, AND FOR EACH OF THE THREE
YEARS IN THE PERIOD ENDED NOVEMBER 30, 1997 (IN THOUSANDS OF U. S. DOLLARS)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
------------- ----------------------------
1997 1997 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $620 $2,879 $3,021 $4,472
Adjustment to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 1,562 17,792 18,786 16,067
Deferred income tax provision 311 3,247 3,963
Minority interest (3) (6)
Changes in assets and liabilities:
Increase in trade accounts receivable, net (2,574) (4,214) (4,746) (2,840)
Decrease (increase) in prepaid expenses 263 781 (631) 2,408
(Increase) decrease in other receivable
assets and other non-current assets 342 (3,665) (2,190) 1,017
(Decrease) increase in accounts payable- trade (2,711) (1,346) (8,910) 6,048
Increase (Decrease) in accrued and other liabilities 98 1,259 (3,866) 878
Decrease in other long-term liabilities (113) (843) (2,489) (347)
------- -------- -------- --------
Net cash provided by operating activities (2,232) 15,890 2,935 27,697
------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (207) (16,441) (22,011) (37,984)
------- -------- -------- --------
Net cash used in investing activities (207) (16,441) (22,011) (37,984)
------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from (payments of) short-term debt 3,109 17,414 (16,481) 2,778
(Decrease) increase in advances from/to affiliates (69,719) 69,719 8,114
Repayments of long - term debt (344) (6,385) (33,440) (750)
Proceeds from long - term debt 63,098 791
------- -------- -------- --------
Net cash provided by operating activities 2,765 4,408 19,798 10,933
NET INCREASE IN CASH AND CASH EQUIVALENTS 326 3,857 722 646
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE YEAR 5,739 1,882 1,160 514
------ ------- ------- ------
CASH AND CASH EQUIVALENTS AT END OF THE
YEAR $6,065 $5,739 $1,882 $1,160
====== ======= ======= ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $98 $10,448 $10,613 $9,208
====== ======= ======= ======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Equipment in transit $236 $350 $264
==== ==== ====
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE> 62
IMPSAT S.A.
NOTES TO FINANCIAL STATEMENTS (IN THOUSANDS OF U. S. DOLLARS)
_______________________________________________________________
1. CHANGE OF FISCAL YEAR END
On November 12, 1997, the Extraordinary Shareholders' Meeting approved the
change of IMPSAT S.A.'s fiscal year end to December 31, 1997, effective
December 31, 1997, to conform with the Parent Company's fiscal year end.
2. BACKGROUND
IMPSAT S.A. provides and operates private networks of integrated data and voice
telecommunications systems in Argentina. IMPSAT S. A.'s principal line of
business comprises the provision of data transmission services for large
national and multinational companies, financial institutions, governmental
agencies and other business customers in Argentina. It provides its services
through its advanced telecommunications networks comprised of teleports, earth
stations, fiber optic and microwave links and leased satellite capacity.
During July 1997, IMPSAT S.A. became a 94.52% owned subsidiary of IMPSAT
Corporation, a Delaware holding company (the "Parent Company").
On November 18, 1996, IMPSAT S.A. and its subsidiaries, Teledatos S.A. and
Satelnet S.A., merged and the subsidiaries ceased operations. The merger was
ratified by the shareholders of IMPSAT S.A. on January 20, 1997. The financial
statements recognize the effect of the merger.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 -- IMPSAT S. A. provides services to its customers pursuant
to contracts which range from six months to five years but generally are for
three years. The customer generally pays an engineering fee, an installation
charge and a monthly fee based on the number of microsystems installations. The
fees stipulated in the contracts are generally denominated in U.S. dollars.
Services are billed on a monthly, predetermined basis, which coincides with when
the services are rendered. For the year ended November 30, 1996, IMPSAT S. A.
had one customer that represented approximately 15% net revenue from services.
No single customer accounted for greater than 10% of total revenue from services
for the fiscal year ended December 31, 1997 (period of one month), and for the
years ended November 30, 1997 and 1995.
Property, Plant and Equipment -- Property, plant and equipment are recorded at
cost and depreciated using the straight-line method over the following estimated
useful lives:
<TABLE>
<S> <C>
Building and improvement 10-25 years
</TABLE>
<PAGE> 63
<TABLE>
<S> <C>
Operating communications equipment 10 years
Furniture, fixtures and other equipment 5-10 years
</TABLE>
Income Taxes -- Deferred income taxes result from timing differences in the
recognition of expenses for tax and financial reporting purposes and are
accounted for in accordance with Financial Accounting Standards Board (the
"FASB") Statements of Financial Accounting Standards ("SFAS") No. 109,
accounting for Income Taxes, which required the liability method of computing
deferred income taxes. Under the liability method, deferred taxes are adjusted
for tax rate changes as they occur.
Foreign Currencies Translation -- The translation of these consolidated
financial statements into U.S. dollars has been made following the guidelines of
SFAS No. 52, Foreign Currency Translation. Major operations of IMPSAT S. A. are
stated in U.S. dollars. Accordingly, the U.S. dollar has been designated as the
functional currency. Local currency denominated transactions are remeasured
into the functional currency. Accordingly, fixed assets and stockholders
account have been translated into U.S. dollars taking into account the exchange
rate prevailing at each transaction date. Monetary assets and liabilities are
translated using the year-end exchange. Profit and loss accounts were
translated using average exchange rates for the periods in which they were
accrued, except for the consumption of non-monetary assets for which their
respective dollar translated costs were considered.
Fair Value of Financial Instruments -- IMPSAT S. A.'s financial instruments
include receivables, payables, short and long-term debt. The fair value of such
financial instruments have been determined based on market interest rates as of
December 31, 1997. The fair values were not materially different than their
carrying (or contract) values.
Long-Lived Assets -- Long-lived assets are reviewed on an ongoing basis for
impairment. Estimated fair value is calculated using discounted cash flow
methods and other valuation techniques.
Long-Lived Assets -- Long-lived assets are reviewed on an ongoing basis for
impairment. Estimated fair value is calculated using discounted cash flow
methods and other valuation techniques.
Reclassifications -- Certain amounts in the 1996 and 1995's financial statements
have been reclassified to conform with the 1997 presentation.
4. TRADE ACCOUNTS RECEIVABLE
The detail of trade accounts receivable is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1997 1997 1996
<S> <C> <C> <C>
Trade accounts receivable $27,531 $24,742 $17,958
Less: allowance for doubtful accounts (5,497) (5,282) (2,712)
------- ------- -------
Trade accounts receivable, net $22,034 $19,460 $15,246
======= ======= =======
</TABLE>
IMPSAT S. A. provides trade credit to its customers in the normal course of
business. Prior to extending credit, the customers' financial history is
analyzed.
The activity for the allowance for doubtful account is as follows:
F-21
<PAGE> 64
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
------------ ---------------------------
1997 1997 1996 1995
------ ------ ------ -----
<S> <C> <C> <C> <C>
Beginning balance $5,282 $2,712 $1,110 $712
Provision for doubtful accounts 215 2,654 1,602 398
Net write-off (84)
------ ------ ------ ------
Ending balance $5,497 $5,282 $2,712 $1,110
====== ====== ====== ======
</TABLE>
5. OTHER RECEIVABLES
Other receivables consist primarily of refunds or credits pending from local
government for taxes other than income, advances to suppliers other than for
fixed assets, related parties receivables and other miscellaneous amounts due
to IMPSAT S. A.
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at consists of:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
-------------- ----------------------------
1997 1997 1996
----------- -------- ------
<S> <C> <C> <C>
Building installations and improvements $ 15,993 $ 15,993 $ 15,962
Operating communications equipment 200,019 199,250 175,199
Furniture, fixtures and other equipment 6,517 6,468 7,836
-------- -------- --------
Total 222,529 221,711 198,997
Less: accumulated depreciation (76,976) (75,534) (59,245)
-------- -------- --------
Total 145,553 146,177 139,752
Deposit on purchase of equipment and in transit 1,387 2,118 3,678
-------- -------- --------
Property, plant and equipment, net $146,940 $148,295 $143,430
======== ======== ========
</TABLE>
The recap of accumulated depreciation is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
------------ ------------------------------------------
1997 1997 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
Beginning balance $75,534 $59,245 $40,477 $24,712
Depreciation expense 1,562 17,792 18,786 16,067
Disposals and retirements (120) (1,503) (18) (302)
------- ------- ------- -------
Ending balance $76,976 $75,534 $59,245 $40,477
======= ======= ======= =======
</TABLE>
7. SHORT-TERM DEBT
IMPSAT S. A.'s short-term debt is detailed as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
------------ ----------------
1997 1997 1996
------ ------ -----
<S> <C> <C> <C>
Commercial paper (7.55% to 8.33%) $25,000 $25,000 $20,000
Short-term credit facilities, denominated in
U.S. dollars, interest rates ranging from 9.5% to 12% 15,850 12,741 327
------- ------- -------
Total short-term debt $40,850 $37,741 $20,327
======= ======= =======
</TABLE>
IMPSAT S. A. has historically refinanced its short-term credit facilities on an
annual basis.
F-22
<PAGE> 65
8. LONG-TERM DEBT
IMPSAT S. A.'s long-term debt is detailed as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1997 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Term notes payable (6.91%-12.63%) maturing
semiannually through 1999, collateralized
by certain assets $62,435 $62,780 $4,374
Eximbank notes payable (7%)
maturing semiannually through 1999 3,388 3,387 5,081
------- ------- ------
Total long-term debt 65,823 66,167 9,455
Less: current portion (2,794) (2,829) (5,185)
------- ------- ------
Long-term debt, net $63,029 $63,338 $4,270
======= ======= ======
</TABLE>
The scheduled maturities of debt and credit facilities at December 31, 1997
are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR: AMOUNT
------------- -------
<S> <C>
1998 $2,794
1999 62,794
2000 235
-------
Total $65,823
=======
</TABLE>
9. INCOME TAXES
The provision for income taxes of IMPSAT S.A. is comprised as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1997 1997 1996
------ ------ ------
<S> <C> <C> <C>
Current $743
Deferred $311 $3,247 3,220
---- ------ ------
Total $311 $3,247 $3,963
==== ====== ======
</TABLE>
IMSAT S.A.'s current provision for income taxes for the year ended November 30,
1995 amounted to $1,340. Such amount was offset by deferred tax benefit
resulting from the realization of carryforward operating losses. The statutory
tax rate in Argentina is 33%.
10. COMMITMENTS AND CONTINGENCIES
IMPSAT S. A. leases satellite capacity with annual rental commitments of
approximately $7,880 through the year 2001. In addition, IMPSAT S.A. has
commitments to purchase communications equipment amounting to approximately
$7,075 at December 31, 1997.
IMPSAT S.A. is guarantor on the $125,000,000, 12 1/8% Senior Guaranteed Notes
Due 2003 issued on July 30, 1996 by the Parent Company.
F-23
<PAGE> 66
During May, 1997, the Parent Company and IMPSAT S.A. entered into a three party
arrangement with a financial institution whereby $ 60 million was borrowed by
IMPSAT S.A. and concurrently a like amount Certificate of Deposit was placed at
the financial institution by the Parent Company. The arrangement expires in May
1999.
In the normal course of business, IMPSAT S.A. faces challenges to its various
licenses and rights to operate on an exclusive basis, which it vigorously
defends. There can be no assurance it will ultimately prevail on these
challenges.
In November 1996, IMPSAT S.A. filed suit against one of its customers, ENCOTESA
for amounts due and arising under IMPSAT S.A.'s contracts with ENCOTESA, the
Argentine national postal service. On December 27, 1996, ENCOTESA filed its
reply to IMPSAT S.A.'s claim. The court has not yet ruled upon IMPSAT S.A.'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 and the operating contract was transferred to Correo
Argentino. Based on these developments, the IMPSAT S.A. has reclassified the
trade account receivables form ENCOTESA to non-current assets at the estimated
net realizable value as determined by the IMPSAT S.A.'s management based on the
advice of local legal counsel. The operating contract is currently being
negotiated between IMPSAT S.A. and Correo Argentino. IMPSAT S.A. will continue
to assess the effect that the ENCOTESA receivables situation and its contract
negotiations with Correo Argentino will have on its results of operations,
liquidity or capital resources.
<TABLE>
<CAPTION>
NET TRADE ACCOUNT
TRADE ACCOUNT DALLOWANCE FOR RECEIVABLES
RECEIVABLES DOUBTFUL ACCOUNT $
------------- ---------------- -----------------
<S> <C> <C> <C>
BALANCE AT NOVEMBER
30, 1996 $5,925 $(782) $5,143
Total invoices
(provision) for the
period $2,537 $(2,537)
------ ------- ------
BALANCE AT NOVEMBER
30, 1997 AND
DECEMBER 31, 1997 $8,462 $(3,319) $5,143
====== ======= ======
</TABLE>
11. SUBSEQUENT EVENTS
IMPSAT S.A. has a five year program for the issuance of up to $50,000 in
commercial paper. At December 31, 1997, there was $25,000 outstanding under
this program: $19,000 maturing February 1998 and $6,000 maturing May 1998 (see
Note 7). During January 1998, IMPSAT S.A. issued $25,000 maturing August 1998,
which was used to cancel the U.S.$19,000, maturing February 1998.
F-24
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
IMPSAT CORPORATION
(ORIGINAL CERTIFICATE FILED ON 31 AUGUST 1994)
It is hereby certified that:
1. The name of the corporation (the "corporation") is IMPSAT
CORPORATION.
2. The Certificate of Incorporation of the corporation is hereby
amended and restated as follows:
"FIRST: The name of the corporation is "IMPSAT Corporation"
SECOND: The address of the corporation's registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH: The corporation shall have the authority to issue One
Hundred Fifty Million (150,000,000) shares of Class A common stock with a par
value of $1.00 per share and each such share shall have five votes per share.
The corporation shall also have the authority to issue One Hundred Thousand
(100,000) shares of Preferred Stock (the "Preferred Stock"), with a par value
of one dollar ($1.00) per share, amounting in the aggregate to One Hundred
Thousand Dollars ($100,000.00) par value. The Board of Directors is hereby
authorized, as it may determine, to issue such number of the authorized shares
of Preferred Stock at any time and from time to time, in one or more series,
and to fix or alter the designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions, of such shares of Preferred Stock, including without limitation
of the generality of the foregoing, dividend rights, dividend rates, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price and or prices and liquidation preferences of
any wholly unissued series of preferred shares and the number of shares
constituting any such series and the designation thereof, or any of them; and
to increase or decrease the number of shares of that series, but not below the
number of shares of such series then outstanding. In case the number of any
series shall be so decreased, the shares
<PAGE> 2
2
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
FIFTH: The corporation is to have perpetual existence.
SIXTH: In furtherance of (and not in limitation of) the
powers conferred by statute, the stockholders of the corporation are
expressly authorized to make, alter or repeal the by-laws of the corporation.
SEVENTH: Meetings of the stockholders of the corporation may be
held within or without the State of Delaware, as the by-laws may provide. The
books of the corporation may be kept outside the State of Delaware at such
place or places as may be designated from time to time by the board of
directors or in the by-laws of the corporation, except as and to the extent
provided by applicable law. Elections of directors need not be by written
ballot unless the by-laws of the corporation shall so provide.
EIGHTH: The corporation may amend this certificate of
incorporation from time to time in any and as many respects as may be desired
so long as this certificate of incorporation, as amended, contains only such
provisions as it would be lawful and proper to insert in an original
certificate of incorporation filed at time of the filing of the amendment, and,
if a change in stock or the rights of stockholders, or an exchange,
reclassification or cancellation of stock or rights of stockholders, is to be
made, such provisions as may be necessary to effect such change, exchange,
reclassification or cancellation.
NINTH: No director of the corporation shall be personally
liable to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that this article NINTH shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under section 174 of the General Corporation
Law of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
ELEVENTH: The Corporation shall indemnify every person who
was or is a party or is or was threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than an action, suit or
proceeding by or in the right of the corporation) whether civil, criminal,
administrative or investigative by reason of the fact he is or was a director
or officer, or is or was serving at the request of the Corporation as a
director or officer, general partner or trustee of any partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably
<PAGE> 3
2
I. Certain Definitions. (a) As used herein, the following terms shall have
the following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Corporation 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 Corporation and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade
names, trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the quarterly or annual consolidated balance
sheet of the Corporation and its Restricted Subsidiaries, prepared in
conformity with GAAP and most recently sent to Holders.
"Affiliate", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person and "Affiliated" has a meaning correlative with the
foregoing. 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.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required 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
Original Issue Date or issued thereafter, including, without limitation, all
Common Shares and Preferred Stock.
"Capitalized Lease Obligations" has the meaning set forth in the
Indenture.
"Change of Control" means such time as (i)(a) prior to the occurrences
of a Public Market, the Existing Stockholders ultimately "benefically own" (as
defined in Rule 13d-3 of the Exchange Act) Voting Stock representing less than
50% of the voting power of the total outstanding Voting Stock of the
Corporation on a fully diluted basis 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) other than the Purchasers (as defined in the
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
IMPSAT CORPORATION
ARTICLE I
Offices
Section 1. Principal Office. The principal office of IMPSAT Corporation
(the "Corporation") shall be in the City, County and State designated in the
Certificate of Incorporation of the Corporation (such Certificate and any
amendments thereof being hereinafter collectively referred to as the
"Certificate of Incorporation").
Section 2. Other Offices. The Corporation also may have offices at such
other places both within and without the State of Florida as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Stockholders
Section 1. Time and Place of Meeting. Meetings of the stockholders
shall be held at such times and at such places, within or without the
State of Delaware, as shall be determined by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of stockholders, at which
they shall elect a Board of Directors, and transact such other business as may
properly be brought before the meeting, shall be held at such date and time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting.
Section 3. Special Meetings. Except as provided in the Securityholders
Agreement dated as of March 19, 1998 among the Corporation and certain other
parties thereto, for so long as it remains in force and effect (as supplemented
and amended from time to time, herein the "Securityholders Agreement") or in the
Certificate of Incorporation, special meetings of the stockholders may be called
at any time by the Chairman of the Board or the Board of Directors, and shall be
called by the Chairman of the Board or the Secretary at the request in writing
of a majority of the Board of Directors, or at the request in writing of the
holders of not less than ten percent (10%) of all the capital stock issued,
outstanding and entitled to vote at the meeting; provided, however, that any
special meeting of the stockholders of any individual class of capital stock
shall be called at the request in writing of the holders of not less than
twenty-five percent (25%) of the shares of such class then outstanding and
entitled to vote at such meeting. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at special meetings shall
be confined to the purposes stated in the notice of the meeting.
<PAGE> 2
Section 4. Notice. Written or printed notice stating the place, day and
hour of any stockholders' meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the Secretary or the
officer or person calling the meeting, to each stockholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, postage prepaid, to the stockholder at
his address as it appears on the stock transfer books of the Corporation.
Section 5. Closing of Transfer Books and Fixing Record Date. For the
purpose of determining stockholders entitled to notice of, or to vote at, any
meeting of stockholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of stockholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, sixty (60) days. If the stock transfer books shall be
closed for the purpose of determining stockholders, such books shall be closed
for at least ten (10) days immediately preceding such meeting. In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of stockholders, such date in
any case to be not more than sixty (60) days and, in case of a meeting of
stockholders, not less than ten (10) days prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of stockholders entitled to notice of, or to vote at, a meeting of
stockholders, or stockholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of stockholders.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof, except where the determination has been made
through the closing of stock transfer books and the stated period of closing has
expired.
Section 6. List of Stockholders. The officer or agent of the
Corporation having charge of the stock transfer books for stocks of the
Corporation shall make, at least ten (10) days before each meeting of the
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of, and the number of voting stocks held by, each, which list, for a
period of ten (10) days prior to such meeting, shall be kept on file either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the location
for the meeting as specified in the notice for such meeting and shall be subject
to inspection by any stockholder at any time during the usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any stockholder during the
whole time of the meeting. The original stock transfer books shall be prima
facie evidence as to who are the stockholders entitled to examine such list of
transfer books or to vote at any meetings of stockholders.
-2-
<PAGE> 3
Section 7. Quorum. The holders of a majority of the issued and
outstanding stock and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by the Certificate of
Incorporation or by the General Corporation Law of the State of De/aware (herein
called the "Act"); provided, however, that in the case of a meeting of
stockholders pertaining to a particular class of capital stock or as to any
matter on which such class of stock is entitled to vote separately from any
other class of stock, the holders of a majority of the issued and outstanding
stock of such class, present in person or represented by proxy, shall constitute
a quorum for the transaction of business at any such meeting. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote, present in person or represented by proxy,
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. Once a quorum is constituted, the
stockholders present or represented by proxy at a meeting may continue to
transact business until adjournment, notwithstanding the subsequent withdrawal
therefrom of such number of stockholders as to leave less than a quorum.
Section 8. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the stockholders present or represented by proxy at
such meeting and entitled to vote shall be the act of the stockholders;
provided, however, that when a quorum is present at any meeting of stockholders
pertaining to a particular class of capital stock or as to any matter on which
such class of stock is entitled to vote separately from any other class of
stock, the vote of the holders of a majority of the issued and outstanding stock
of such class present in person or represented by proxy, shall be the act of the
stockholders of such class of stock. Each stockholder shall at every meeting of
the stockholders be entitled to one vote in person or by proxy for stock having
voting power held by such stockholder, except to the extent that the voting
rights of the stock of any class or classes are limited or denied by the
Certificate of Incorporation. At each election for directors every stockholder
shall be entitled to vote, in person or by proxy, the number of shares of stock
owned by him for as many persons as there are directors to be elected and for
whose election he has a right to vote. Cumulative voting is not permitted by the
Certificate of Incorporation and, hence, is prohibited. Every proxy must be
executed in writing by the stockholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after three (3) years from the date of
its execution unless otherwise provided therein. Each proxy shall be revocable
unless expressly provided therein to be irrevocable or unless otherwise made
irrevocable bylaw. Stock registered in the name of another corporation may be
voted by such officer, agent, or proxy as the Bylaws of such corporation may
prescribe or, in the absence of such provisions, as the board of directors of
such corporation may determine. Stock held by an administrator, executor,
guardian, or conservator may be voted by him, either in person or by proxy
without a transfer of such stock into his name. Stock standing in the name of a
trustee may be voted by him, either in person or by proxy, but no trustee shall
be entitled to vote the stock held by him without a transfer of such stock into
his name as trustee. Stock standing in the name of a receiver may be voted by
such receiver, and stock held by or under the control of a receiver may be voted
by such receiver without being transferred into his name, if such authority is
contained in an appropriate order of the court that appointed the receiver. A
-3-
<PAGE> 4
stockholder whose stock is pledged shall be entitled to vote such stock until
the stock has been transferred into the name of the pledgee, and thereafter the
pledgee shall be entitled to vote the shares so transferred. Stock belonging to
the Corporation or held by it in a fiduciary capacity shall not be voted,
directly or indirectly, at any meeting, and shall not be counted in determining
the total amount of outstanding stock at any given time.
Section 9. Action by Unanimous Consent. Any action required to be taken
at an annual or special meeting of the stockholders, or any action which may be
taken at any annual or special meeting of such stock holders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
Section 10. Presence at Meetings by Means of Communication Equipment.
Stockholders may participate in and hold a meeting of such stockholders by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and participation
in a meeting pursuant to this section shall constitute presence in person at
such meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Section 11. Inspectors of Election. The Board of Directors shall, in
advance of any meeting of stockholders, appoint one or more inspectors of
election and may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate so
appointed shall be willing or able to serve, the chairman of the meeting shall
appoint the necessary inspector of elections. Each inspector so appointed,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability. The inspector shall: (a) ascertain the
number of shares of capital stock of the Corporation outstanding and the voting
power of each; (b) determine the shares represented at the meeting, the
existence of a quorum, and the validity of proxies and ballots; (c) count and
tabulate all votes and ballots; (d) determine and retain for a reasonable period
a record of the disposition of any challenges made to any determination by the
inspectors; (e) certify their determination of the number of shares represented
at the meeting and their count of all votes and ballots; and (f) do such acts as
are proper to conduct the election or vote with fairness to all stockholders.
The date and time of the opening and closing of the polls for each matter upon
which stockholders will vote at a meeting shall be announced at the meeting, and
no ballots, proxies or votes, nor any revocations thereof or change thereto,
shall be accepted by the inspectors after the closing of the polls. No director
or candidate for the office of director shall act as an inspector of election of
directors Inspectors need not be stockholders.
ARTICLE III
Directors
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Section 1. Number of Directors. The number of directors of the
Corporation shall be fixed from time to time by resolution of the Board of
Directors, but in no case shall the number of directors be less than eight (8)
or more than twelve (12); provided, however, the Securityholders Agreement, for
as long as it remains in force and effect, shall prescribe the number of
directors and their method of election, removal and replacement. Until otherwise
fixed by resolution of the Board of Directors, the number of directors shall be
the number stated in the Certificate of Incorporation of the Corporation. No
decrease in the number of directors shall have the effect of reducing the term
of any incumbent director. Directors shall be elected at the annual meeting of
the stockholders, except as provided in Section 2 of this Article III or in the
Certificate of Incorporation, and each director shall hold office until (i) his
successor is elected and qualified, (ii) he dies, (iii) he resigns, or (iv) he
is removed. Directors need not be residents of the State of Delaware or
stockholders of the Corporation.
Section 2. Vacancies. Subject to other provisions of this Section, the
Certificate of Incorporation and except as otherwise provided in the
Securityholders Agreement, any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors,
though the remaining directors may constitute less than a quorum of the Board of
Directors as fixed by Section 10 of this Article III. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors shall be filled by unanimous vote of the existing directors. Except as
otherwise provided in the Securityholders Agreement, Stockholders holding a
majority of the issued and outstanding stock entitled to vote may, at any time,
terminate the term of office of all or any of the directors, with or without
cause, by a vote at any annual or special meeting, or by written statement,
signed by the holders of all of such stock, and filed with the Secretary or, in
his absence, with any other officer; provided, however, that the term of office
of any director elected by holders of Series A Stock or Series A Common Shares
(each as defined in the Securityholders Agreement) may only be terminated in the
manner provided herein by a majority of the issued and outstanding stock of such
class that has elected such director. Such removal shall be effective
immediately upon such stockholder action even if successors are not elected
simultaneously, and the vacancies on the Board of Directors caused by such
action shall be filled only by election by the stockholders.
Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things, as are not by the Act, the
Certificate of Incorporation or these Bylaws directed or required to be
exercised or done by the stockholders
Section 4. Place of Meetings. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.
Section 5. Annual Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this bylaw in conjunction with and at
the same place as the annual meeting of stockholders. In the event such meeting
is not held at the time and place specified in the preceding sentence, the
meeting may be held at such time and place as shall be specified in a
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notice given as hereinafter provided for special meetings of the Board of
Directors, or as shall be specified in a written waiver of notice signed by all
the directors.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
shall be held without special notice at such time and at such place as shall
from time to time be determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by, or at the request of, the Chairman or Vice Chairman of the
Board of Directors, or the President and shall be called by the Secretary on the
written request of a majority of the incumbent directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
for holding any special meeting of the Board of Directors called by them.
Section 8. Notice of Special Meetings. Notice of any special meetings
shall be given at least forty-eight (48) hours previous thereto if given either
personally (including written notice delivered personally (including by
telecopy) or telephone notice) or by telegram, and at least one hundred twenty
(120) hours previous thereto if given by written notice mailed to each director
at the address of his business or residence. If mailed, the notice shall be
deemed to be delivered when deposited in the United States mail addressed, in
the above-specified manner, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
Section 9. Waiver of Notice. Any Director may waive notice of any
meeting, as provided in Article IV, Section 2, of these Bylaws. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
Section 10. Quorum and Voting. At all meetings of the Board of
Directors, the presence of a majority of the number of directors fixed by
Article III, Section 1, of these Bylaws shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the affirmative vote of
at least a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by the Act, the Certificate of Incorporation or these
Bylaws. If a quorum shall not be present at any meeting of directors, a majority
of the directors present thereat may adjourn the meeting from time to time
without notice other than announcement at the meeting, until a quorum shall be
present.
Section 11. Committees. The Board of Directors by resolution passed by
a majority of the whole Board may designate committees (other than an Executive
Committee), each committee to consist of two or more directors, one of whom
shall be designated as Chairman and shall preside at all meetings of such
committee, which committees shall have such
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power and authority and shall perform such functions as may be provided in such
resolution. At any meeting of the committee a majority of the members of the
committee shall constitute a quorum for the transaction of business, and the act
of a majority of the members present at any meeting at which a quorum is present
shall be the act of the committee. Such committee or committees shall have such
name or names as may be designated by the Board of Directors. All other such
committees shall keep regular minutes of their proceedings and report the same
to the Board of Directors when required.
Section 12. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors;
provided, however, that any director appointed by the holders of Series A
Preferred Stock and Series A Common Shares (as each such term is defined in the
Securityholders Agreement) shall be entitled to reimbursements in respect of any
expenses incurred by such director in its capacity as such. Nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of any committee may, by resolution of the Board of Directors, be allowed like
compensation of attending meetings.
Section 13. Action By Unanimous Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors or of a committee
designated by the Board of Directors may be taken without a meeting if a written
consent, setting forth the action so taken, is signed by all the members of the
Board of Directors or the committee, as the case may be, and such consent shall
have the same force and effect as a unanimous vote at a meeting.
Section 14. Presence at Meetings by Means of Communication Equipment.
Members of the Board of Directors of the Corporation or any committee designated
by the Board of Directors may participate in and hold a meeting of such board or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this section shall constitute
presence in person at such meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
ARTICLE IV
Notices
Section 1. Form of Notice. Whenever under the provisions of the Act,
the Certificate of Incorporation or these Bylaws, notice is required to be given
to any director or stockholder, and no provision is made as to how such notice
shall be given, such notice shall be given in writing, by mail, postage prepaid,
addressed to such director or stockholder at such address as appears on the
books of the Corporation, provided, that such notice as is required to be given
to any director also may be given either personally (including written notice
delivered personally or telephone notice) or by telegram. Any notice required or
permitted to be given by
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mail shall be deemed to be given at the time when the same be thus deposited in
the United States mail addressed, in the above-specified manner, with postage
thereon prepaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the Act, the
Certificate of Incorporation or these Bylaws, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated in such notice, shall be equivalent to the giving of such notice.
ARTICLE V
Officers
Section 1. General. The elected officers of the Corporation shall be a
Chairman of the Board, a Vice Chairman of the Board, a President, one or more
Vice Presidents, with or without such descriptive titles as the Board of
Directors shall deem appropriate, a Secretary, a Chief Financial Officer and a
Treasurer. The Board of Directors by resolution may also appoint one or more
Assistant Secretaries, and such other officers and assistant officers and agents
as from time to time may appear to be necessary or advisable in the conduct of
the affairs of the corporation. Any two or more offices may be held by the same
person.
Section 2. Election. The Board of Directors shall elect and appoint the
officers to fill the positions designated in Section 1 of this Article V. The
Board of Directors may appoint such other officers and agents as it shall deem
necessary and may determine the salaries, powers and duties of all officers and
agents from time to time. The officers shall hold office until their successors
are chosen and qualified. Except as set forth in the Certificate of
Incorporation or the Securityholders Agreement, any officer elected or appointed
by the Board of Directors may be removed for or without cause, at any time by a
majority vote of the whole Board when in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Election or
appointments of an officer or agent shall not of itself create contract rights.
Any vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
Section 3. Chairman of the Board. The Chairman of the Board shall be a
director of the Corporation and shall preside at all meetings of the
stockholders and Board of Directors. The Chairman of the Board shall have
general supervision of the affairs of the Corporation and general control of all
of its business or businesses.
Section 4. Vice Chairman of the Board. The Vice Chairman of the Board
shall be a director of the Corporation and shall be subordinate only to the
Chairman of the Board, the Executive Committee and the Board of Directors. The
Vice Chairman of the Board shall, in the absence of the Chairman, preside at all
meetings of the Board of Directors and stockholders of the Corporation. The Vice
Chairman of the Board shall assist the Chairman of the Board with the general
supervision of the affairs of the Corporation and the general control of all of
its
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business or businesses and the Vice Chairman of the Board shall perform such
duties and services in connection therewith as shall be assigned to or required
of the Vice Chairman of the Board from time to time by the Chairman of the Board
and Board of Directors.
Section 5. President. The President shall have active control of the
operations and business or businesses of the Corporation, subordinate only to
the Chairman of the Board and the Board of Directors. The President shall have
authority to execute bonds, deeds, contracts in the name of the Corporation and
to affix the corporate seal thereto; and, in general, to exercise all the power
usually appertaining to the office of President of a corporation, except as
otherwise provided in these Bylaws. The President shall perform such other
duties and services as shall be assigned to or required of the President from
time to time by the Chairman of the Board and Board of Directors.
Section 6. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents, shall perform all such duties and services as
shall be assigned to or required of them from time to time by the Chairman of
the Board, Board of Directors or President.
Section 7. Secretary and Assistant Secretaries. The Secretary shall
have charge of the seal of the Corporation and have authority to affix the same
to any instrument requiring it, and when so affixed, it shall be attested by the
Secretary's signature or by the signature of an Assistant Secretary, which may
be in facsimile. The Secretary shall keep and account for all books, documents,
papers and records of the Corporation except those for which some other officer
or agent is properly accountable. The Secretary shall have authority to sign
stock certificates, and shall generally perform all the duties usually
appertaining to the office of the Secretary of a corporation. Assistant
Secretaries, in the order of their seniority unless otherwise determined by the
Board of Directors, shall assist the Secretary, and in the absence,
unavailability or disability of the Secretary, perform the duties and exercise
the powers of the Secretary.
Section 8. Chief Financial Officer. The Chief Financial Officer shall
be the principal financial officer of the Corporation. The Chief Financial
Officer shall have active control of and shall be responsible for all matters
pertaining to the finances of the Corporation. The Chief Financial Officer shall
perform such other duties and services as shall be assigned to or required of
the Chief Financial Officer from time to time by the Chairman of the Board,
Executive Committee, Board of Directors and the President.
Section 9. Treasurer. The Treasurer shall have the care and custody of
all monies, funds and securities of the Corporation and shall deposit all monies
and other valuable effects in the name of and to the credit of the Corporation
in such depositories as may be designated by the Board of Directors. The
Treasurer shall cause to be recorded a statement of all receipts and
disbursements of the Corporation in order that proper entries may be made in the
books of account. The Treasurer shall have the power to endorse for deposit or
collection, or otherwise, all checks, drafts, notes, bills of exchange, or other
commercial paper payable to the Corporation, and to give proper receipts or
discharges for payments to the Corporation.
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Section 10. Bonding. If required by the Board of Directors, all or
certain of the officers shall give the Corporation a bond in such form, in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors, for the faithful performance of the duties of their office and for
the restoration to the Corporation, in case of their death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in their possession or under their control
belonging to the Corporation.
ARTICLE VI
Certificates Representing Stock
Section 1. Form of Certificates. The Corporation shall deliver
certificates representing all stock to which stockholders are entitled.
Certificates representing stock of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the name of the registered
holder; the number, class of stock and the designation of the series, if any,
which said certificate represents; and either the par value of the stocks or
statement that the stock is without par value. Each certificate shall also set
forth on the back thereof, a full or summary statement of matters required by
the Act, or Certificate of Incorporation to be described on certificates
representing the stock, and shall contain a statement on the face thereof
referring to the matters set forth on the back thereof. Certificates shall be
signed by the Chairman of the Board or the President or any Vice President and
the Secretary or any Assistant Secretary, and may be sealed with the seal of the
Corporation or a facsimile thereof. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the signatures of the
Corporation's officers may be facsimiles. In case any officer or officers who
have signed, or whose facsimile signature or signatures have been used on such
certificate or certificates, shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the Corporation or its
agents, such certificate or certificates may be adopted, nevertheless, by the
Corporation and issued and delivered as though the person or persons who or
whose facsimile signature or signatures have been used thereon had not ceased to
be such officer or officers of the Corporation.
Section 2. Restrictions on Transferability of Stock. In the event any
restriction on the transfer, or registration of the transfer of stock, shall be
imposed or agreed to, by the Corporation, as permitted by law, each certificate
representing stock so restricted shall conspicuously set forth a full or summary
statement of the restriction on the face of the certificate, or shall set forth
such statement on the back of the certificate and conspicuously refer to the
same on the face of the certificate, or shall conspicuously state on the face or
back of the certificate that such restriction exists pursuant to a specified
document and that the Corporation will furnish to the holder of the certificate
without charge upon written request to the Corporation at its principal place of
business or registered office a copy of the specified document.
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Section 3. Lost Certificates. The Corporation may direct that a new
certificate or certificates be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate or certificates, the officers of the Corporation,
in their discretion and as a condition precedent to the issuance thereof, may
require the owner of the lost, stolen or destroyed certificate or certificates,
or his legal representative, to advertise the same in such manner as it shall
require and give the Corporation a bond in such form, in such sum, and with such
surety or sureties as the Corporation may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Transfer of Shares. Stock shall be transferable on the books
of the Corporation by the holder thereof in person or by his duly authorized
attorney. Subject to any restrictions on transfer set forth in the Certificate
of Incorporation of the Corporation, these Bylaws, the Securityholders Agreement
or any other agreement among stockholders to which the Corporation is a party or
has notice, upon surrender to the Corporation or to the transfer agent of the
Corporation of a certificate representing stock duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation or the transfer agent of the Corporation to issue a
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books
Section 5. Registered Stockholders. The Corporation shall be entitled
to recognize the holder of record of any stock as the holder in fact thereof
and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such stock on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by law.
ARTICLE VII
Indemnification of Directors and Officers
Section 1. Indemnification.
(A) Subject to the conditions and limitations of this Article VII and
the Corporation's Certificate of Incorporation, the Corporation shall, to the
fullest extent permitted by the Delaware General Corporation Law as it may then
be in effect, indemnify and hold harmless any person who is or was a party, or
is threatened to be made a party to, any threatened, pending or completed
action, claim, litigation, suit or proceeding, whether civil, criminal,
administrative or investigative, whether predicated on foreign, federal, state
or local law, and whether formal or informal (collectively, "actions") by reason
of his status as, or the fact that he is or was or has agreed to become, a
director or officer (an "executive") of the Corporation or of an affiliate, and
as to acts performed in the course of the executive's duty to the Corporation or
to an affiliate, against expenses, fees, costs and charges, including, without
limitation, attorneys' fees and disbursements (collectively, "expenses"),
judgments, fines and amounts paid in
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settlement actually and reasonably incurred by or on behalf of the executive in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including, without
limitation, in connection with the investigation, defense, settlement or appeal
of such action), no matter by whom brought; provided, that it is not determined
pursuant to Section 2 of this Article VII or by the court before which such
action was brought, that:
(i) the executive did not act in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of
the Corporation and its stockholders,
(ii) the executive engaged in criminal conduct, and had no
reasonable cause to believe his conduct was lawful; or
(iii) the executive engaged in fraudulent or intentional
misconduct in the performance of his duty to the Corporation.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interest of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
B. Subject to the conditions and limitations of this Article VII and
the Corporation's Certificate of Incorporation, the Corporation shall, to the
fullest extent permitted by the Delaware General Corporation Law as it may then
be in effect, indemnify and hold harmless any person who is or was a party, or
is threatened to be made a party to, any threatened, pending or completed
action, claim, litigation, suit or proceeding, by or in the right of the
Corporation to procure a judgment in its favor, whether predicated on foreign,
federal, state or local law, and whether formal or informal (collectively,
"actions") by reason of his status as, or the fact that he is or was or has
agreed to become, a director or officer (an "executive") of the Corporation or
of an affiliate, and as to acts performed in the course of the executive's duty
to the Corporation or to an affiliate, against expenses including, without
limitation, attorneys' fees and disbursements (collectively, "expenses"),
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit; provided, that
(i) it is not determined pursuant to Section 2 of this
Article VII or by the court before which such action was brought, that
the executive did not act in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Corporation and its stockholders; and
(ii) no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged
to be liable to the Corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such
action or suit was brought shall determine
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upon application that, despite the adjudication of liability, but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall be deemed proper.
(C) To the extent the executive has been successful on the merits or
otherwise in connection with any action referred to in Section 1(A) or (B) of
this Article VII, no matter by whom brought (including, without limitation, the
settlement, dismissal, abandonment or withdrawal of any such action where the
executive does not pay, incur or assume any material liability), or in
connection with any claim, issue or matter therein, he shall be indemnified by
the Corporation against expenses reasonably incurred by or on behalf of him in
connection therewith. The Corporation shall pay such amounts (net of all
amounts, if any, previously advanced to the executive pursuant to Section 4 of
this Article VII) to the executive (or to such other person or entity as the
executive may designate in writing to the Corporation) upon the executive's
written request therefor without regard to the provisions of Section 2 of this
Article VII.
(D) Notwithstanding the provisions of Section 1(A)(ii), and 1(A)(iii),
no executive shall be indemnified by the Corporation for monetary damages
incurred by the executive pursuant to an action brought by or in the right of
the Corporation to procure a judgment in its favor (sometimes hereinafter
referred to as a "derivative action") or an action brought by a stockholder of
the Corporation if it is determined pursuant to Section 2 of his Article VII, or
by the court before which such action was brought:
(i) the executive materially breached his duty of loyalty to
the Corporation or its stockholders;
(ii) the executive committed material acts or omissions in
bad faith or which involve intentional misconduct or a knowing
violation of the law;
(iii) the executive engaged in any material willful or
negligent conduct in paying dividends or repurchasing stock of the
Corporation out of other than lawfully available funds; or
(iv) the executive derived an improper personal benefit from
any transaction, unless such improper personal benefit is determined to
be immaterial in light of all of the circumstances of such action.
(E) If the executive is or was serving as an executive, trustee,
fiduciary, employee or agent of an employee benefit plan or similar plan the
Corporation shall indemnify and hold harmless the executive against any and all
of such reasonable amounts in the same manner and under the same conditions as
set forth in Section 1(A) and (B) above.
Section 2. Right to Indemnification: How Determined.
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(A) Except as otherwise set forth in this Section 2, any
indemnification to be provided to the executive by the Corporation under Section
1 of this Article VII upon the final disposition or conclusion of an action (or
a claim, issue or matter associated with such an action), unless otherwise
ordered by the court before which such action was brought, shall be paid by the
Corporation (net of amounts, if any, previously advanced to the executive
pursuant to Section 4 of this Article VII) to the executive (or to such other
person or entity as the executive may designate in writing to the Corporation)
within sixty (60) days after the receipt of the executive's written request
therefor, which request shall include a comprehensive accounting of amounts for
which indemnification is being sought and shall reference the provision of this
Article VII pursuant to which such claim is being made.
Notwithstanding the foregoing, the payment of the requested amounts may
be denied by the Corporation if (i) the Board of Directors of the Corporation by
a majority vote thereof determines that such payment, in whole or in part, would
not be in the best interests of the Corporation and its stockholders and would
contravene the terms and conditions of this Article VII; or (ii) a majority of
the directors of the Corporation are a party in interest to such action. In
either of such events, the Board shall immediately authorize and direct, by
resolution, that an independent determination be made as to whether the
executive has met the applicable standard of conduct set forth in Section 1 of
this Article VII and, therefore, whether indemnification is proper pursuant to
this Article VII.
Such independent determination shall be made by a panel of three
arbitrators, at the option of the Corporation in Miami, Florida, New York, New
York or Wilmington, Delaware, in accordance with the rules then prevailing of
the American Arbitration Association or, at the option of the executive, by an
independent legal counsel mutually selected by the Board of Directors and the
executive (such panel of arbitrators or independent legal counsel being
hereinafter referred to as the "authority").
In any such determination there shall exist a rebuttable presumption
that the executive has met such standard of conduct and is therefore entitled to
indemnification pursuant to this Article VII. The burden of rebutting such
presumption by clear and convincing evidence shall be on the Corporation.
If a panel of arbitrators is to be employed, one of such arbitrators
shall be selected by the Board of Directors by a majority vote of a quorum
thereof consisting of directors who were not parties in interest to such action
(or, if such quorum is not obtainable, by an independent legal counsel chosen by
the Board of Directors), the second by the executive and the third by the
previous two arbitrators.
The authority shall make a determination within sixty (60) days of
being selected and shall simultaneously submit a written opinion of its
conclusions to both the Corporation and the executive and, if the authority
determines that the executive is entitled to be indemnified for any amounts
pursuant to this Article VII, the Corporation shall pay such amounts (net of all
amounts, if any, previously advanced to the executive pursuant to Section 4 of
this Article VII), including interest thereon as provided in Section 5(C) of
this Article VII, to the executive (or to
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such other person or entity as the executive may designate in writing to the
Corporation) within ten (10) days of receipt of such opinion.
(B) The executive may, either before or within two (2) years after a
determination, if any, has been made by the authority, petition any court of
competent jurisdiction to determine whether the executive is entitled to
indemnification under this Article Vii. Such court shall thereupon have the
exclusive power to make such determination unless and until such court dismisses
or otherwise terminates such proceeding without having made such determination.
The court shall make an independent determination of whether the
executive is entitled to indemnification as provided under this Article VII,
irrespective of any prior determination made by the authority; provided,
however, that there shall exist a rebuttable presumption that the executive has
met the applicable standard of conduct and is therefore entitled to
indemnification pursuant to this Article VII. The burden of rebutting such
presumption by clear and convincing evidence shall be on the Corporation.
If the court determines that the executive is entitled to be
indemnified for any amounts pursuant to this Article VII, unless otherwise
ordered by such court, the Corporation shall pay such amounts (net of all
amounts, if any previously advanced to the executive pursuant to Section 4 of
this Article VII), including interest thereon as provided in Section 5(C) of
this Article VII, to the executive (or to such other person or entity as the
executive may designate in writing to the Corporation) within ten (10) days of
the rendering of such determination.
The executive shall pay all expenses incurred by the executive in
connection with the judicial determination provided in this Section 2(B), unless
it shall ultimately be determined by the court that he is entitled to be
indemnified, in whole or in part, by the Corporation as authorized hereby. All
expenses incurred by the executive in connection with any subsequent appeal of
the judicial determination provided for in this Section 2(B) shall be paid by
the executive regardless of the disposition of such appeal.
(C) Except as otherwise set forth in this Section 2, the expenses
associated with the indemnification process set forth in this Section 2,
including, without limitation, the expenses of the authority selected hereunder,
shall be paid by the Corporation.
Section 3. Termination of an Action is Nonconclusive. The termination
of any action, no matter by whom brought, by judgement, order, settlement,
conviction, or upon a plea of no contest or its equivalent, shall not, of
itself, create a presumption that the executive has not met the applicable
standard of conduct set forth in Section 1 of this Article VII.
Section 4 Advance Payment.
(A) Expenses reasonably incurred by or on behalf of the executive in
connection with any action (or claim, issue or matter associated with such
action), no matter by whom brought, shall be paid by the Corporation to the
executive (or to such other persons or entity as
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<PAGE> 16
the executive may designate in writing to the Corporation) in advance of the
final disposition or conclusion of such action (or claim, issue or matter
associated with such action) upon the receipt of the executive's written request
therefor; provided, the following conditions are satisfied:
(i) the executive has first requested an advance of such
expenses in writing (and delivered a copy of such request to the
Corporation) from each insurance carrier, to whom a claim has been
reported under and insurance policy purchased by the Corporation, if
any, as provided under Section 7 of this Article VII and each such
insurance carrier has decLined to make such an advance;
(ii) the executive furnishes to the Corporation an executed
written certificate affirming his good faith belief that he has met the
applicable standard of conduct set forth in Section 1 of this Article
VII; and
(iii) the executive furnishes to the Corporation, in a form
reasonably satisfactory to the Corporation, an executed written
agreement to repay any advances made under this Section 4 if it is
ultimately determined that he is not entitled to be indemnified by the
Corporation for such amounts pursuant to this Article VII.
(B) If the Corporation makes an advance of expenses to the executive
pursuant to this Section 4, the Corporation shall be subrogated to every right
of recovery the executive may have against any insurance carrier from whom the
Corporation has purchased insurance for such purpose.
Section 5. Partial Indemnification; Interest.
(A) If it is determined by the authority pursuant to Section 2 of this
Article VII, or by the court before which such action was brought, that the
executive is entitled to indemnification as to some claims, issues or masters,
but not as to other claims, issues or matters, involved in any action, no matter
by whom brought, the authority (or the court) shall authorize the reasonable
proration of such expenses, judgements, penalties, fines and amounts incurred in
settlement with respect to which indemnification is sought by the executive,
among such claims, issues or matters as the authority (or the court) shall deem
appropriate in light of all of the circumstances of such action.
(B) If it is determined by the authority pursuant to Section 2 of this
Article VII or by the court before which such action was brought, that certain
amounts incurred by the executive are for whatever reason unreasonable in
amount, the authority (or the court) shall authorize indemnification to be paid
by the Corporation to the executive for only such amounts as the authority (or
the court) shall deem reasonable in light of all of the circumstances of such
action.
(C) To the extent deemed appropriate by the authority, or by the court
before which such action was brought, interest shall be paid by the Corporation
to the executive, at a reasonable interest rate, for amounts for which the
Corporation indemnifies the executive.
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<PAGE> 17
Section 6. Non-exclusivity of Agreement. The right to indemnification
and advancement of expenses provided to the executive of this Article VII shall
not be deemed exclusive of any other rights to which the executive may be
entitled under any charter provision, bylaw, agreement, resolution, vote of
stockholders or disinterested directors of the Corporation or otherwise,
including, without limitation, under Delaware General Corporation Law Section
145 as it may then be in effect, both as to acts in his official capacity as
such executive or other employee or agent of the Corporation or of an affiliate
or as to acts in any other capacity while holding such office or position, and
the terms and provisions of this Article VII shall continue as to the executive
if he ceases to be an executive or other employee or agent of the Corporation or
of an affiliate, and such terms and provisions shall inure to the benefit of the
heirs, executors and administrators of the executive.
Section 7. Insurance.
(A) The Corporation may purchase and maintain insurance on behalf of
the executive against any liability asserted against him or incurred by or on
behalf of him in such capacity as an executive or other employee or agent of the
Corporation or of an affiliate, or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him against such liability
under the provisions of this Article VII or under Delaware General Corporation
Law Section 145 as it may then be in effect. The purchase and maintenance of
such insurance shall not in any way limit or affect the rights and obligations
of the Corporation or the executive under this Article VII and the adoption of
this Article VII by the Corporation shall not in any way limit or affect the
rights and obligations of the Corporation or of the other party or parties
thereto under any such policy or agreement of insurance.
(B) If the executive shall receive payment from any insurance carrier
or from the plaintiff in any action against the executive in respect of
indemnified amounts after payments on account of all or part of such indemnified
amounts have been made by the Corporation pursuant to this Article VII, the
executive shall promptly reimburse the Corporation for the amount, if any, by
which the sum of such payment by such insurance carrier or such plaintiff and
payments by the Corporation to the executive exceeds such indemnified amounts;
provided, however, that such portions, if any, of such insurance proceeds that
are required to be reimbursed to the insurance carrier under the terms of its
insurance policy, such as deductible or coinsurance payments, shall not be
deemed to be payments to the executive hereunder. In addition, upon payment of
indemnified amounts under this Article VII, the Corporation shall be subrogated
to the executive's rights against any insurance carrier in respect of such
indemnified amounts and the executive shall execute and deliver any and all
instruments and documents and perform any and all other acts and deeds which the
Corporation deems necessary or advisable to secure such rights. The executive
shall do nothing to prejudice such rights of recovery or subrogation.
Section 8. Witness Expenses. Upon the executive's written request, the
Corporation shall pay (in advance or otherwise) or reimburse any and all
expenses reasonably incurred by the executive in connection with his appearances
as a witness in any action at a time when he has not been formally named a
defendant or respondent to such an action.
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<PAGE> 18
Section 9. Contribution.
(A) If the indemnity provided for in Section 1 of this Article VII is
unavailable to the executive for any reason whatsoever, the Corporation, in lieu
of indemnifying the executive, shall contribute to the amount reasonably
incurred by or on behalf of the executive, whether for judgments, fees,
penalties, amounts incurred in settlement or for expenses in connection with any
action, no matter by whom brought, in such proportion as deemed fair and
reasonable by the authority pursuant to Section 2 of this Article VII, or by the
court before which such action was brought, taking into account all of the
circumstances of such action, in order to reflect (i) the relative benefits
received by the Corporation and the executive as a result of the event or
transaction giving cause to such action; and (ii) the relative fault of the
Corporation (and its other executives, employees and agents) and the executive
in connection with such event or transaction.
(B) The executive shall not be entitled to contribution from the
Corporation under this Section 9 if it is determined pursuant to Section 2 of
this Article VII, or by the court before which such action was brought, that the
executive engaged in criminal, fraudulent or intentional misconduct in the
performance of his duty to the Corporation or otherwise violated the provisions
of Section 1(C) of this Article VII.
(C) The Corporation's payment of, and the executive's right to,
contribution under this Section 9 shall be made and determined in accordance
with Section 2 of this Article VII relating to the Corporation's payment of, and
the executive's right to, indemnification.
Section 10. Severability. If any provision of this Article VII shall be
deemed invalid or inoperative, or if a court of competent jurisdiction
determines that any of the provisions of this Article VII contravene public
policy, this Article VII shall be construed so that the remaining provisions
shall not be affected, but shall remain in full force and effect, and any such
provisions which are invalid and inoperative or which contravene public policy
shall be deemed, without further action or deed on the part of any person, to be
modified, amended or limited, but only to the extent necessary to render the
same valid and enforceable, and the Corporation shall indemnify the executive as
to expenses, judgments, fines and amounts incurred in settlement with respect to
any action, no matter by whom brought, to the full extent permitted by any
applicable provision of this Article VII that shall not have been invalidated
and to the full extent otherwise permitted by the Delaware General Corporation
Law as it may then be in effect.
Section 11. Amendment and Modification. This Article VII has been
adopted by the affirmative vote of a majority of the stockholders of the
Corporation entitled to vote therefor and may only be altered, amended or
repealed by the affirmative vote of a majority of the stockholders of each class
of stock of the Corporation so entitled to vote; provided, however, that such
stockholder authorization shall not be required in the event such alteration or
amendment:
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<PAGE> 19
(A) is made in order to conform to any amendment or revision
of the Delaware General Corporation Law which expands an executive's
rights to indemnification thereunder or is otherwise beneficial to the
executive, or
(B) in the sole judgment and discretion of the Board of
Directors of the Corporation, does adversely affect the rights and
protection of the stockholders of the Corporation.
ARTICLE VIII
General Provisions
Section 1. Dividends. Dividends upon the outstanding stock of the
Corporation, subject to the provisions of the Act, the Certificate of
Incorporation and any agreements or obligations of the Corporation, if any, may
be declared by the Board of Directors at any regular or special meeting.
Dividends may be declared and paid in cash, in property, or in stock of the
Corporation, provided that all such declarations and payment of dividends shall
be in strict compliance with all applicable laws and the Certificate of
Incorporation. The Board may fix in advance a record date for the purpose of
determining stockholders entitled to receive payment of any dividend, such
record date to be not more than sixty (60) days nor less than ten (10) days
prior to the payment of such dividend. In the absence of any action by the Board
of Directors, the date upon which the Board of Directors adopts the resolution
declaring such dividend shall be the record date.
Section 2. Reserves. There may be created by resolution of the Board of
Directors such reserve or reserves as the Board of Directors from time to time,
in its absolute discretion, deems proper to provide for contingencies, or to
equalize dividends, or to repair or maintain any property of the Corporation, or
for such other proper purposes as the Board of Directors shall deem beneficial
to the Corporation, and the Board of Directors may modify or abolish any reserve
in the same manner in which it was created.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Seal. The Corporation shall have a seal which may be used by
causing it or a facsimile thereof to be impressed on, affixed to, or in any
manner reproduced upon, instruments of any nature required to be executed by its
proper officers.
Section 5. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the stockholders at any
special meeting of the stockholders, a full and clear statement of the business
and condition of the Corporation.
Section 6. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may designate from time to time.
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<PAGE> 20
Section 7. Voting Securities Owned by Corporation. Voting securities in
any other corporation held by this Corporation shall be voted by the Chairman of
the Board, the Vice Chairman of the Board, the President or any Vice President,
unless the Board of Directors confers authority to vote with respect thereto,
which may be general or confined to specific investments, upon some other person
or officer. Any person authorized to vote securities shall have the power to
appoint proxies with the general power of substitution.
Section 8. Resignation. Any director, officer, employee or agent of the
Corporation may resign by giving written notice to the Chairman of the Board or
the Secretary. The resignation shall take effect at the time specified therein,
or immediately if no time is specified therein. Unless specified in such notice,
the acceptance of such resignation shall not be necessary to make it effective.
Section 9. Restated Certificate of Incorporation. Notwithstanding
anything to the contrary herein, if any provision contained in these Restated
Bylaws is inconsistent with or conflicts with a provision of the Restated
Certificate of Incorporation, such provision of these Restated Bylaws shall be
superseded by the inconsistent provision in the Restated Certificate of
Incorporation to the extent necessary to give effect to such provision in the
Restated Certificate of Incorporation.
ARTICLE IX
Amendments To Bylaws
Except as set forth in the Securityholders Agreement, these Bylaws may
be altered, amended, modified or repealed, or new Bylaws may be adopted at any
meeting of the Board of Directors at which a quorum is present by the
affirmative vote of a majority of the directors present at such meeting.
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<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
================================================================================
IMPSAT CORPORATION,
as Issuer
IMPSAT S.A.,
as Guarantor
and
THE BANK OF NEW YORK,
as Trustee
--------------------
Senior Guaranteed Notes Supplemental Indenture
Dated as of May 13, 1997
--------------------
12 1/8 % Senior Guaranteed Notes due 2003
================================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as
of May 13, 1997, among IMPSAT Corporation, a Delaware Corporation, as issuer
(the "Company"), IMPSAT S.A., an Argentine corporation, as guarantor (the
"Guarantor"), and THE BANK OF NEW YORK, as Trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, in accordance with Section 9.01(e) of the Indenture relating
to the 12 1/8 % Senior Guaranteed Notes due 2003 of the Company, dated as of
July 30, 1996, among the Company, the Guarantor and the Trustee (the
"Indenture"), the Company, the Guarantor and the Trustee desire to amend certain
terms related to the definition of Permitted Investment, the Limitation on
Indebtedness covenant, the Limitation on Restricted Payments covenant and other
matters as provided for below;
WHEREAS, all things necessary to make this Supplemental Indenture a
valid supplement to the Indenture according to the terms of this Supplemental
Indenture and the terms of the Indenture have been done;
NOW THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
SECTION 1.1 Certain Terms Defined in the Indenture. All capitalized
terms used herein without definition herein shall have the meanings ascribed
thereto in the Indenture.
SECTION 1.2 Amendment of Section 1.01. (a) Section 1.01 of the
Indenture is hereby amended by adding the following definition:
"Intermediary Documents" means documents, substantially in the form
attached as Exhibit A hereto, relating to the issuance of one or more
Certificates of Deposit (the "Certificates of Deposit") by the Cayman
Islands branch (the "Issuer") of Banco Rio de la Plata S.A. (the
"Bank") 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 the Guarantor to
the Bank and the Guarantees of the Promissory Notes by the Company.
(b) Section 1.01 of the Indenture is hereby amended by adding a new
clause (ix) to the definition of "Permitted Investment" as follows:
(ix) 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
<PAGE> 3
2
making any such Investment after the date hereof, 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 the
date hereof, (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.
SECTION 2. Amendment of Section 4.03(a). Section 4.03(a) of the
Indenture is hereby amended by adding a new clause (xi) to the second paragraph
thereof as follows:
(xi) Indebtedness consisting of one or more loans to the
Guarantor, 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.
SECTION 3. Amendment of Section 4.04. Section 4.04 of the Indenture is
hereby amended by deleting clause (iv) of the second paragraph thereof and
replacing it with a new clause (iv) as follows:
(iv) the repurchase, redemption or other acquisition of
Capital Stock of the Company or the Guarantor (or options, warrants or
other rights to acquire such Capital Stock) in exchange for, or out of
the proceeds of a substantially concurrent offering of, shares of
Capital Stock (other than Disqualified Stock) of the Company (or
options, warrants or other rights to acquire such Capital Stock);
SECTION 4. New Section 4.22. A new Section 4.22 is hereby added to the
Indenture, which Section 4.22 shall read as follows:
SECTION 4.22. Protective Actions. The Company shall monitor
the creditworthiness of the Bank and the Issuer and, if the Company
shall in good faith conclude that there is any reason to believe that
there is a material possibility that the Bank or the Issuer may be or
may become liquidated,
<PAGE> 4
3
insolvent or bankrupt or that any trustee (with respect to the Bank,
the Issuer or the assets of either of them) may be appointed or that
the Bank or the Issuer may be subject to receivership or intervention
or that any similar event may occur, then the Company shall promptly
take such actions ("Mitigating Actions") as shall be necessary to cause
the obligations of the Bank and the Issuer under the Certificates of
Deposit to be promptly satisfied through the cancellation of the
Promissory Notes and the Guarantees; provided that the Company shall
not be required to take Mitigating Actions if it has been advised by
counsel, in writing, that such actions would probably enhance, rather
than mitigate, the Company's and its Restricted Subsidiaries' exposure
to credit risk with respect to the Bank and the Issuer.
SECTION 5. Effectiveness. This Supplemental Indenture shall become
effective on the date duly executed counterparts hereof shall have been signed
by the Company, the Guarantor and the Trustee.
SECTION 6. Governing Law. This Supplemental Indenture shall be governed
by the laws of the State of New York.
SECTION 7. Counterparts. This Supplemental Indenture may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto were upon the same instrument.
SECTION 8. Headings. The headings of the Sections of this Supplemental
Indenture have been inserted for convenience and reference only, are not
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.
<PAGE> 5
4
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
IMPSAT Corporation
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
IMPSAT S.A.
By:
---------------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
---------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.2
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
--------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
--------------------------
I, Brian Belt, Secretary of IMPSAT Corporation (the
"Corporation"), a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, DO HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors
by the Certificate of Incorporation as amended of said Corporation (the
"Certificate of Incorporation"), said Board of Directors, at a meeting duly
called and held on March 19, 1998, adopted a resolution providing for the
issuance of 25,000 authorized shares of Series A Convertible Preferred Stock,
which resolution is as follows:
WHEREAS, the Board of Directors is authorized, within the
limitations and restrictions stated in the Certificate of Incorporation, as
amended, to fix by resolution or resolutions the designation of each series
of preferred stock and the powers, designations, preferences and relative
participating, optional or other rights, if any, or the qualifications,
limitations or restrictions thereof, including, without limiting the
generality of the foregoing, such provisions as may be desired concerning
voting, redemption, dividends, dissolution or the distribution of assets,
conversion or exchange, and such other subjects or matters as may be fixed by
resolution or resolutions of the Board of Directors under the General
Corporation Law of Delaware; and
WHEREAS, it is the desire of the Board of Directors, pursuant to
its authority as aforesaid, to authorize and fix the terms of a series of
preferred stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized
such series of preferred stock on the terms and with the provisions herein
set forth:
<PAGE> 2
2
I. Certain Definitions. (a) As used herein, the following terms shall
have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Corporation 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 Corporation and its
Restricted Subsidiaries (excluding intercompany items) and (ii) all goodwill,
trade names, trademarks, patents, unamortized debt discount and expense and
other like intangibles, all as set forth on the quarterly or annual
consolidated balance sheet of the Corporation and its Restricted
Subsidiaries, prepared in conformity with GAAP and most recently sent to
Holders.
"Affiliate", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person and "Affiliated" has a meaning correlative with the
foregoing. 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.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required 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
Original Issue Date or issued thereafter, including, without limitation, all
Common Shares and Preferred Stock.
"Capitalized Lease Obligations" has the meaning set forth in the
Indenture.
"Change of Control" means such time as (i) (a) prior to the occurrence
of a Public Market, the Existing Stockholders ultimately "beneficially own"
(as defined in Rule 13d-3 of the Exchange Act) Voting Stock representing less
than 50% of the voting power of the total outstanding Voting Stock of the
Corporation on a fully diluted basis 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) other than the Purchasers (as defined in the
Securityholders Agreement) and their Affiliates becomes the ultimate
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
Voting Stock representing more than 30% of the voting
<PAGE> 3
3
power of the total Voting Stock of the Corporation on a fully diluted basis
and such ownership is greater than the voting power of the Voting Stock of
the Corporation ultimately held by the Existing Stockholders or
(ii) individuals who on the Original Issue 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 Corporation'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 Original Issue 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.
"Commission" means the Securities and Exchange Commission and any
successor agency having similar powers.
"Common Shares" 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 Original Issue Date, including, without limitation, all
series and classes of such common stock.
"Common Stock" means Class A common stock, par value $1.00 per share,
of the Corporation and any other class of stock that is the same class as the
securities to be issued upon the conversion of the Series A Stock.
"Corporation" means IMPSAT Corporation, a Delaware corporation.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Corporation or any of its Restricted Subsidiaries against fluctuations in
currency values to or under which the Corporation or any of its Restricted
Subsidiaries is a party or a beneficiary.
"Director" means a member of the Board of Directors.
"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 Mandatory Redemption Date, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Mandatory
Redemption Date 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 Mandatory Redemption Date; 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 Mandatory Redemption Date 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 Article X and Article VI(C), and such Capital Stock
<PAGE> 4
4
specifically provides that such Person will not repurchase or redeem any such
stock pursuant to such provision prior to the Corporation's repurchase of
Series A Stock as is required to be repurchased pursuant to Article VI(C).
"Dividend Accrual Date" has the meaning set forth in Article IV(A).
"Dividend Payment Date" means any Redemption Date and any other date on
which dividends in arrears are paid in cash.
"Dividend Record Date" means, with respect to dividends accruing on any
Dividend Accrual Date or payable on any Dividend Payment Date, as the case
may be, the close of business on the fifteenth day immediately preceding such
Dividend Accrual Date or Dividend Payment Date, as the case may be, or such
other record date as may be designated by the Board of Directors with respect
to dividends accruing or payable on such Dividend Accrual Date or Dividend
Payment Date, respectively; provided, however, that such record date may not
be more than 60 days or less than ten days prior to such Dividend Accrual
Date or Dividend Payment Date, as applicable.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute.
"Existing Stockholders" means Mr. Enrique Pescarmona, Mrs. Silvia
Monica Pescarmona de Baldini, Mrs. Liliana Pescarmona de Mayol, Mr. Roberto
Vivo Chaneton and Mr. Ricardo Verdaguer and each of their estates and heirs
by will or intestacy.
"fair market value" has the meaning set forth in the Indenture.
"Financial Expert" means one of Bear, Stearns & Co., Inc.; Donaldson,
Lufkin & Jenrette Securities Corporation; Goldman, Sachs & Co.; Lazard Freres
& Co.; Merrill Lynch, Pierce, Fenner & Smith Incorporated; Salomon Smith
Barney Inc.; SBC Warburg Dillon Read Inc.; or Lehman Brothers; or any
successor to any of the foregoing.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date of determination, including,
without limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved
by a significant segment of the accounting profession. All ratios and
computations contained in this Certificate of Designations 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 Certificate of Designations
shall be made without giving effect to (i) the amortization of any expenses
incurred in connection with the sale of the Series A Stock and (ii) except as
otherwise provided, the amortization of any
<PAGE> 5
5
amounts required or permitted by Accounting Principles Board Opinion Nos. 16
and 17.
"Guarantee" has the meaning set forth in the Indenture.
"Holder" means a registered holder of Series A Stock.
"Incur" has the meaning set forth in the Indenture.
"Indebtedness" has the meaning set forth in the Indenture.
"Indenture" means the Indenture dated as of July 30, 1996, as amended
through the Original Issue Date, relating to the Notes as in effect as of the
date hereof.
"Independent Financial Expert" means a Financial Expert that does not
(or whose directors, executive officers or 5% stockholders do not) have a
direct or indirect financial interest in the Corporation or any of its
subsidiaries, which has not been for at least five years, and, at the time it
is called upon to give independent financial advice to the Corporation is not
(and none of its directors, executive officers or 5% stockholders is) a
promoter, director, or officer of the Corporation or any of its
subsidiaries. The Independent Financial Expert may be compensated and
indemnified by the Corporation for opinions or services it provides as an
Independent Financial Expert.
"Initial Public Offering" means the first registration solely of shares
of Common Stock to be issued by the Corporation after the Original Issue Date
hereof under the Securities Act, using Form S-1, S-2 or S-3 or any successor
forms, and after which the Common Stock is listed or quoted for trading on
the New York Stock Exchange, the American Stock Exchange or the NASDAQ
National Market.
"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 or other similar agreement or arrangement
designed to protect the Corporation or any of its Restricted Subsidiaries
against fluctuations in interest rates in respect of Indebtedness to or under
which the Corporation or any of its Restricted Subsidiaries is a party or a
beneficiary on the date of this Indenture or becomes a party or a beneficiary
hereafter; provided that the notional principal amount thereof does not
exceed the principal amount of the Indebtedness of the Corporation and its
Restricted Subsidiaries that bears interest at floating rates.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition of
Capital Stock, bonds, notes, debentures or other similar instruments issued
by,
<PAGE> 6
6
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 Corporation and its Restricted
Subsidiaries of (or in) any Person that has ceased to be a Restricted
Subsidiary. For purposes of the definition of "Unrestricted Subsidiary" and
Article IX(A), (i) "Investment" shall include the fair market value of the
assets (net of liabilities, other than liabilities to the Corporation or any
Subsidiary) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market
value of the assets (net of liabilities, other than liabilities to the
Corporation or any Subsidiary) of any Unrestricted Subsidiary at the time
that such Unrestricted Subsidiary is designated a Restricted Subsidiary shall
be considered a reduction in outstanding "Investments" and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer. Notwithstanding the foregoing,
the term "Investment" shall not include advances to customers (other than
Unrestricted Subsidiaries of the Corporation) and accounts payable to
suppliers in the ordinary course of business that are, in conformity with
GAAP, recorded as accounts receivable or accounts payable, as the case may
be, and Trade Payables.
"Lien" has the meaning set forth in the Indenture.
"Liquidation Preference" means the Original Liquidation Preference,
plus an amount equal to all accrued and unpaid dividends from and after
(i) the Original Issue Date and (ii) any Dividend Payment Date on which
dividends were to be paid in cash. The Liquidation Preference of a share of
Series A Stock will increase by the amount of dividends that accrued on such
share on a Dividend Accrual Date and/or Dividend Payment Date, as applicable,
and will decrease only to the extent such dividends are actually paid in
cash, all as provided in Article IV hereof.
"Mandatory Redemption Date" means March 19, 2008.
"Material Debt" means Indebtedness of the Corporation and/or one or
more of its Subsidiaries that individually or in the aggregate have a
principal amount (or if any Indebtedness was issued at a discount from its
principal amount at maturity then the accreted value of such Indebtedness as
of the end of the most recent fiscal quarter shall be used in making this
calculation) equal to or exceeding the amount equal to 15% of the total
assets of the Corporation and its consolidated Subsidiaries as set forth on
its consolidated balance sheet for the fiscal year preceding the date of
determination.
"Material Debt Default" means the failure of the Corporation and/or any
of its Subsidiaries to pay any principal of or premium or interest or other
amount on any Material Debt when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise);
or any other event shall occur or condition shall exist with respect to any
financial or economic covenant or any event of default under any agreement or
instrument relating to any such Material Debt, if the effect of such event or
<PAGE> 7
7
condition or event of default is to accelerate or require early termination,
or with notice or passage of time would permit the acceleration or early
termination of, the original maturity of such Material Debt; or any such
Material Debt shall be declared to be due and payable, or required to be
prepaid, redeemed, terminated, purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Material Debt shall be required to be made
(other than by a regularly scheduled required prepayment or redemption or
pursuant to the exercise of a "change of control" provision under the terms
of any Indebtedness), in each case prior to the original stated maturity
thereof.
"Net Cash Proceeds" has the meaning set forth in the Indenture.
"Notes" means the Corporation's 12_% Senior Guaranteed Notes due 2003.
"Original Issue Date" means the date on which shares of Series A Stock
are first issued by the Corporation.
"Permitted Investment" means (i) an Investment in the Corporation 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
Corporation or a Restricted Subsidiary; provided that such Person's primary
business is related, ancillary or complementary to the businesses of the
Corporation 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 Corporation or its Restricted Subsidiaries and that do not in
the aggregate exceed $1 million at any time outstanding and (v) stock,
obligations or securities received in satisfaction of judgments, work-outs or
similar arrangements.
"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
<PAGE> 8
8
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 Corporation 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 Corporation or any of
its Restricted Subsidiaries; (vi) Liens (including extensions and renewals
thereof) upon real or personal property acquired after the Original Issue
Date; provided that (a) such Lien is created solely for the purpose of
securing Indebtedness Incurred (1) to finance the cost (including the cost of
design, development, construction, improvement, installation or integration)
of the item of property or assets subject thereto and such Lien is created
prior to, at the time of or within six months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (2) to refinance any Indebtedness previously so
secured, (b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such cost and (c) any such Lien shall not extend to
or cover any property or assets other than such item of property or assets
and any improvements on such item; (vii) leases or subleases granted to
others that do not materially interfere with the ordinary course of business
of the Corporation 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 Corporation or its
Restricted Subsidiaries relating to such property or assets; (ix) any
interest or title of a lessor in the property subject to any Capitalized
Lease or operating lease; (x) Liens arising from filing Uniform Commercial
Code financing statements regarding leases; (xi) Liens on property of, or on
shares of stock or Indebtedness of, any Person existing at the time such
Person becomes, or becomes a part of, any Restricted Subsidiary; provided
that such Liens do not extend to or cover any property or assets of the
Corporation or any Restricted Subsidiary other than the property or assets
acquired; (xii) Liens in favor of the Corporation or any Restricted
Subsidiary; (xiii) Liens arising from the rendering of a final judgment or
order against the Corporation or any Restricted Subsidiary that does not give
rise to a Special Trigger Event; (xiv) Liens securing reimbursement
obligations with respect to letters of credit that encumber documents and
other property relating to such letters of credit and the products and
proceeds thereof; (xv) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; (xvi) Liens encumbering customary initial
deposits and margin deposits, and other Liens that are either within the
general parameters customary in the industry and incurred in the ordinary
course of business, in each case, securing Indebtedness under Interest Rate
Agreements and Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed to
protect the Corporation or any of its Restricted Subsidiaries from
fluctuations in the price of commodities; (xvii) Liens arising out of
conditional sale, title retention, consignment or similar arrangements for
the sale of goods entered into by the Corporation or any of its Restricted
Subsidiaries in the ordinary course of business in accordance with the past
practices of the Corporation and its Restricted Subsidiaries prior to the
Original Issue Date and (xviii) Liens on or sales of existing or future
receivables.
<PAGE> 9
9
"Person" means any individual, partnership, corporation, business
trust, joint stock company, limited liability company, trust, joint stock
company, unincorporated association, joint venture or any other entity or
organization, whether or not a legal entity, including, without limitation, a
government or political subdivision or an agency or instrumentality thereof.
"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 Original Issue Date, including,
without limitation, all series and classes of such preferred or preference
stock.
"Public Equity Offering" means an underwritten primary public offering
of Common Stock that is broadly distributed to the public pursuant to an
effective registration statement under the Securities Act and after which the
Common Stock is listed or quoted for trading on the New York Stock Exchange,
the American Stock Exchange or the NASDAQ National Market.
"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 (not fully diluted) Common Stock has been distributed
by means of an effective registration statement under the Securities Act or
sales pursuant to Rule 144 under the Securities Act.
"Redemption Price" means, with respect to any share of Series A Stock,
the Liquidation Preference of such share.
"Restricted Subsidiary" means any Subsidiary of the Corporation other
than an Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor statute.
"Securities Purchase Agreement" means the Securities Purchase
Agreement, dated as of March 19, 1998 among the Corporation, Jonesboro
Financial Inc., Princes Gate Investors II, L.P., Morgan Stanley Global
Emerging Markets Private Investment Fund, L.P. and the other purchasers
signatory thereto.
"Securityholders Agreement" means the Securityholders Agreement, dated
as of March 19, 1998, among the Corporation, Princes Gate Investors II, L.P.,
Morgan Stanley Global Emerging Markets Private Investment Fund, L.P., PG
Investors II, Inc., as agent, and the other parties signatory thereto.
"Significant Subsidiary" shall mean a Significant Subsidiary within the
meaning of
<PAGE> 10
10
Regulation S-X under the Exchange Act or any group of non-Significant
Subsidiaries that at the end of any fiscal quarter collectively would
constitute a "Significant Subsidiary" within the meaning of Regulation S-X
under the Exchange Act.
"Special Redemption Price" means the Original Liquidation Preference of
the Series A Stock to be redeemed plus 12.5% compounded quarterly since the
Original Issue Date through and including the day prior to the relevant
Redemption Date.
"Special Trigger Event" shall be deemed to occur if (i) a Material Debt
Default occurs, (ii) the Corporation breaches any covenant or agreement
contained in the Securities Purchase Agreement, Article IV or V of the
Securityholders Agreement or in this Certificate of Designations and such
breach has not been cured within 30 days of written notice thereof, (iii) the
Corporation or any of its Significant Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the
benefit of creditors, (iv) a court of competent jurisdiction enters a decree
or order for (A) relief in respect of the Corporation or any of its
Significant Subsidiaries 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 Corporation or any of its Significant
Subsidiaries or for all or substantially all of the property and assets of
the Corporation or any of its Significant Subsidiaries or (C) the winding up
or liquidation of the affairs of the Corporation or any of its Significant
Subsidiaries, or (v) the Corporation or any of its Significant Subsidiaries
(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 Corporation or
any of its Significant Subsidiaries or for all or substantially all of the
property and assets of the Corporation or any of its Significant Subsidiaries
or (C) effects any general assignment for the benefit of creditors.
"Subsidiary" means, with respect to any Person, any other Person of
which more than fifty percent (50%) of (i) the economic interest in the
assets, earnings or cash flow or (ii) the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, managers or trustees thereof, is at the
time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of such Person or a combination thereof.
"Temporary Cash Investment" has the meaning set forth in the Indenture.
"Trade Payables" shall have the meaning set forth in the Indenture.
"Transaction Date" has the meaning set forth in the Indenture.
<PAGE> 11
11
"Unrestricted Subsidiary" means (i) any Subsidiary of the Corporation
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 Corporation) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, the Corporation or any Restricted Subsidiary; provided that any
Guarantee by the Corporation or any Restricted Subsidiary of any Indebtedness
of the Subsidiary being so designated shall be deemed an "Incurrence" of
Indebtedness by the Corporation or such Restricted Subsidiary (or both, if
applicable) at the time of such designation and either (A) the Subsidiary to
be so designated has total assets of $1,000 or less or (B) if such Subsidiary
has assets greater than $1,000, that such designation would be permitted
under Article IX(A). The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that immediately after
giving effect to such designation no Special Trigger Event shall have
occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Holders by promptly delivering to the Holders 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 (i) ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person or (ii) entitling the holder thereof to an economic interest in the
assets, earnings or cash flow of such Person.
"Wholly Owned" has the meaning set forth in the Indenture.
(b) Each of the following terms is defined in the Section
opposite such term:
<TABLE>
<CAPTION>
Term Section
<S> <C>
constituent entity VIII
Conversion Agent VIII
Conversion Date VIII(A)
Conversion Ratio VIII
Junior Securities III
non-electing share VIII
Original Liquidation Preference II
Redemption Date VI(D)
Redemption Notice VI(D)
</TABLE>
<PAGE> 12
12
II. Designation.
The series of preferred stock authorized hereunder shall be
designated as the "Series A Convertible Preferred Stock" and is referred to
herein as the "Series A Stock." The number of shares constituting such
series shall be 25,000. The par value of the Series A Stock shall be $1.00
per share of Series A Stock. The Series A Stock shall have an original
liquidation preference (the "Original Liquidation Preference") equal to
$5,000.00 per share.
III. Ranking.
The Series A Stock shall rank, with respect to dividends and
distributions upon the liquidation, dissolution or winding-up of the
Corporation, senior to all classes or series of any other Capital Stock of
the Corporation, whether now outstanding or hereafter issued (collectively
referred to as "Junior Securities"), including, without limitation, any
series of Preferred Stock of the Corporation hereafter created by the Board
of Directors.
IV. Dividends.
(A) The Series A Stock shall accrue cumulative dividends on
each outstanding share of Series A Stock at an annual rate of 10.0%, except
as otherwise specified herein. Such cumulative dividends shall accrue,
whether or not declared by the Board of Directors, from the Original Issue
Date on March 15, June 15, September 15 and December 15 of each year (each, a
"Dividend Accrual Date"), to Holders as they appear on the register for the
Series A Stock on the Dividend Record Date. Except as otherwise specified
herein, accrued and unpaid dividends shall compound quarterly at a rate of
10.0% per annum from the preceding Dividend Accrual Date until paid in full
in cash. As used herein, "accrued dividends" and "accrued and unpaid
dividends" shall mean accrued dividends, including, without limitation, the
amount compounded thereon.
Dividends on any share of Series A Stock shall not be paid in
cash prior to the Mandatory Redemption Date.
(B) So long as any shares of the Series A Stock are
outstanding, the Corporation (i) shall not declare, pay or set apart for
payment any dividend on any Junior Securities, or make any payment on account
of, or set apart for payment money for a sinking or other similar fund for,
the purchase, redemption or other retirement of, any of the Junior Securities
or any securities, warrants, rights, calls or options exchangeable or
exercisable for or convertible into any of the Junior Securities other than
the declaration or payment of dividends on the Common Stock following a
Public Equity Offering of such Common Stock of up to 6% per annum of the Net
Cash Proceeds received by the Corporation in such Public
<PAGE> 13
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Equity Offering, and (ii) shall not itself and shall not permit any of its
Subsidiaries to purchase or redeem any of the Junior Securities, or any
securities, warrants, rights, calls or options exchangeable or exercisable
for or convertible into any of the Junior Securities.
V. Payment on Liquidation.
(A) Upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, the Holders will be entitled to receive out
of the assets of the Corporation available for distribution to the holders of
its Capital Stock, whether such assets are capital, surplus or earnings, an
amount in cash equal to the Liquidation Preference, before any payment shall
be made or any assets distributed to the holders of any of the Junior
Securities. Except as set forth in the preceding sentence, the Holders shall
not be entitled to any distribution in the event of voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation. If upon any
voluntary or involuntary liquidation, dissolution or winding-up of the
affairs of the Corporation the assets of the Corporation are not sufficient
to pay in full the liquidation payments payable to the Holders, then the
Holders shall share equally and ratably in any distribution of assets in
proportion to the full Liquidation Preferences of the Series A Stock held by
them, determined as of the date of such voluntary or involuntary liquidation,
dissolution or winding-up, to which they are entitled.
(B) For the purposes of this Article V only, neither the sale,
lease, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the
property or assets of the Corporation nor the consolidation or merger of the
Corporation with or into one or more corporations shall be deemed to be a
liquidation, dissolution or winding-up of the Corporation.
VI. Redemption.
(A) Redemption at the Option of the Corporation. The
Corporation, at its option, concurrently with or at any time following the
consummation by the Corporation of an Initial Public Offering and prior to
the Mandatory Redemption Date, may redeem in whole (and not in part), from
any source of funds legally available therefor, in the manner provided in
Article VI(D) below, all of the then outstanding shares of Series A Stock, at
the Redemption Price, in cash on the Redemption Date. In addition, in
connection with any conversion of shares of Series A Stock, the Corporation
may redeem in whole from any source of funds legally available therefor, in
the manner provided in Article VI(D) below, shares of Series A Stock having
an aggregate liquidation preference equal to the Special Redemption Price of
the Series A Stock to be converted less the Original Liquidation Preference
of such Series A Stock at a redemption price, in cash, equal to such amount.
(B) Mandatory Redemption. On the Mandatory Redemption Date,
the
<PAGE> 14
14
Corporation shall redeem from any source of funds legally available therefor,
in the manner provided in Article VI(D) below, all of the shares of the
Series A Stock then outstanding at a redemption price, in cash, equal to the
Redemption Price. The Corporation shall use its best efforts to cause funds
to be legally available for the payment of the Redemption Price prior to the
Mandatory Redemption Date.
(C) Redemption at the Option of Holders upon a Change of
Control. Upon the occurrence of a Change of Control, each Holder shall have
the right to require the Corporation to promptly redeem all or any shares of
the Series A Stock at a redemption price (the "Change of Control Redemption
Price"), in cash, equal to the greater of (i) the fair market value of such
shares (which fair market value shall, for purposes of this section, be
determined by reference to the value of the transaction giving rise to the
Change of Control) and (ii) the Redemption Price. Notwithstanding the
foregoing, in the event that a Change of Control also constitutes a "Change
of Control" within the meaning of the Indenture, the Corporation shall not
make any payments in respect of the Change of Control Redemption Price to any
Holder until the Corporation has completed the repurchase of any Notes as are
then required to be repurchased pursuant to the provisions of the Indenture.
(D) Procedure for Redemption. (i) Not more than sixty (60)
and not less than thirty (30) days prior to the Mandatory Redemption Date or
any Redemption Date and within three days of any Change of Control, written
notice (the "Redemption Notice") shall be given by the Corporation by
facsimile and by first-class mail, postage prepaid, to each Holder at such
Holder's address as the same appears on the stock ledger of the Corporation;
provided, however, that no failure to give such notice nor any deficiency
therein shall affect the validity of the procedure for the redemption of any
shares of Series A Stock to be redeemed except as to the Holders to whom the
Corporation has failed to give such notice or except as to the Holders whose
notice was defective. The Redemption Notice shall state:
(a) the Redemption Price, Special Redemption Price or Change of
Control Redemption Price, as the case may be;
(b) the date fixed for redemption (the "Redemption Date");
(c) that the Holder is to surrender to the Corporation, at the
place or places, which shall be designated in such Redemption Notice,
its certificates representing the shares of Series A Stock to be
redeemed;
(d) the name of any bank or trust company performing the duties
referred to in Article VI(D)(v) below; and
(e) if there has occurred a Change of Control, a statement to
that effect and reasonable procedures for the Holder to follow if it
wishes the Corporation to redeem its Series A Stock.
<PAGE> 15
15
(ii) On or before the Redemption Date, each Holder of Series A
Stock to be redeemed shall surrender the certificate or certificates
representing such shares of Series A Stock to the Corporation, in the manner
and at the place designated in the Redemption Notice, and on the Redemption
Date the full Redemption Price, Special Redemption Price or Change of Control
Redemption Price, as the case may be, for such shares shall be payable in
cash to the Person whose name appears on such certificate or certificates as
the owner thereof, and each surrendered certificate shall be returned to
authorized but unissued shares.
(iii) Unless the Corporation defaults in the payment in full of
the applicable Redemption Price, Special Redemption Price or Change of
Control Redemption Price, as the case may be, dividends on the Series A Stock
called for redemption shall cease to accumulate on the day prior to the
Redemption Date, and the Holders of such shares shall cease to have any
further rights with respect thereto on the Redemption Date, other than the
right to receive the Redemption Price, Special Redemption Price or Change of
Control Redemption Price, as applicable.
(iv) If a Redemption Notice shall have been duly given, and if,
on or before the Redemption Date specified therein, all funds necessary for
such redemption shall have been set aside by the Corporation, separate and
apart from its other funds, in trust for the pro rata benefit of the Holders
of the Series A Stock called for redemption so as to be and continue to be
available therefor, then, notwithstanding that any certificate for shares so
called for redemption shall not have been surrendered for cancellation, all
shares so called for redemption shall no longer be deemed outstanding, and
all rights with respect to such shares shall forthwith on such Redemption
Date cease and terminate, excepting only the right of the Holders thereof to
receive the amount payable on redemption thereof, without interest.
(v) If a Redemption Notice shall have been duly given or if the
Corporation shall have given to the bank or trust company hereinafter
referred to irrevocable authorization promptly to give such notice, and if on
or before the Redemption Date specified therein the funds necessary for such
redemption shall have been irrevocably deposited by the Corporation with such
bank or trust company in trust for the pro rata benefit of the Holders of the
Series A Stock called for redemption, then, notwithstanding that any
certificate for shares so called for redemption shall not have been
surrendered for cancellation, from and after the time of such deposit, all
shares so called, or to be so called pursuant to such irrevocable
authorization, for redemption shall no longer be deemed to be outstanding and
all rights with respect of such shares shall forthwith cease and terminate,
excepting only the right of the Holders thereof to receive from such bank or
trust company at any time after the time of such deposit the funds so
deposited, without interest. The aforesaid bank or trust company shall be
organized and in good standing under the laws of the United States of America
or of the State of New York, shall be doing business in the Borough of
Manhattan, The City of New York, shall have capital, surplus and undivided
profits aggregating at least $100,000,000 according to its last published
statement of condition, and shall be identified in the Redemption Notice.
Any
<PAGE> 16
16
interest accrued on such funds shall be paid to the Corporation from time to
time. Any funds so set aside or deposited, as the case may be, and unclaimed
at the end of three years from such Redemption Date shall, to the extent
permitted by law, be released or repaid to the Corporation, after which
repayment the Holders of the shares to be redeemed shall look only to the
Corporation for payment thereof.
VII. Voting Rights.
(A) Except as otherwise required under Delaware law and as set
forth below, Holders shall not be entitled or permitted to vote on any matter
required or permitted to be voted upon by the stockholders of the Corporation.
(B) Without the approval of the Director(s) elected by the
Holders of the shares of Series A Stock, if any, the Corporation will not (i)
issue or grant any capital stock, stock options, warrants or other securities
exchangeable or exercisable for or convertible into any capital stock or
(ii) reclassify any Junior Securities into any securities that rank senior to
or on a parity with the Series A Stock with respect to dividends or upon
liquidation or dissolution of the Corporation or any securities, warrants,
rights, calls or options exercisable or exchangeable for or convertible into,
or any obligations evidencing the right to purchase or acquire, any
securities that rank senior to or on a parity with the Series A Stock with
respect to dividends or upon liquidation or dissolution of the Corporation;
provided, however, that no such approval will be required for an issuance of
Common Stock by the Corporation that is permitted by Section 4.7(a)(vi) of
the Securityholders Agreement.
(C) Without the approval of Holders of at least a majority of
the shares of Series A Stock then outstanding, voting or consenting, as the
case may be, separately as a single class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special meeting
called for the purpose, the Corporation will not amend, modify or repeal this
Certificate of Designations. The authorization or consummation of a
transaction that results in the Series A Stock being converted or exchanged
for or becoming shares of a constituent entity (as defined in Article
VIII(C)(i)) shall constitute an amendment, modification or repeal of this
Certificate of Designations for purposes of this Article VII.
(D) (i) For so long as the Purchasers (as defined in the
Securities Purchase Agreement) and their Affiliates beneficially own a
majority of the shares of Series A Stock issued on the Original Issue Date,
in the event of a Special Trigger Event the number of Directors constituting
the Board of Directors shall be immediately adjusted to permit the Holders of
a majority of the shares of Series A Stock then outstanding, voting or
consenting, as the case may be, separately as a single class, to immediately
appoint one-half of the members of the Board of Directors (and to remove and
replace such Directors), until the Special Trigger Event has been cured and
is no longer of any force or effect.
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(ii) The right of the Holders of Series A Stock to vote pursuant
to Article VII(D)(i) to appoint one-half of the members of the Board of
Directors (and to remove and replace such Directors) upon the occurrence of a
Special Trigger Event as aforesaid shall be effective immediately upon the
sending of a written notice thereof to the Corporation and shall continue
until such time as all Special Trigger Events shall be cured and no longer of
any force or effect.
(E) For so long as the Purchasers (as defined in the Securities
Purchase Agreement) and their Affiliates beneficially own a majority of the
shares of Series A Stock issued on the Original Issue Date, Princes Gate
Investors II, L.P. ("Princes Gate") and Morgan Stanley Global Emerging
Markets Private Investment Fund, L.P. ("MSGEM") shall each be entitled to
appoint one Director (and to remove and replace such Director). Any
appointment, removal or replacement referred to in this Article VII(E) shall
be effective immediately upon the sending by Princes Gate or MSGEM of a
written notice to the Corporation.
So long as MSGEM shall own any Series A Stock or Common Stock, it
shall have the following rights with respect to the Corporation: (a) the
right to routinely consult with the management of the Corporation on matters
relating to the Corporation; (b) the right to inspect the books and records
of the Corporation; (c) the right to inspect the properties and operations of
the Corporation; and (d) except for any period during which MSGEM, acting on
its own, has the right to elect a Director, the right to have its
representative attend the meetings of the Board of Directors and to
participate in discussions (but not vote) at such meetings; provided,
however, that any such rights may only be exercised during business hours and
on the giving by MSGEM of advance notice to the Corporation of the exercise
thereof. The rights provided to MSGEM in this Article VII(E) are intended to
enable MSGEM to be operated as a "venture capital operating company" within
the meaning of the regulations of the Department of Labor set forth in 29 CFR
Section 2510.3-101(d), and this Article VII(E) shall be interpreted
accordingly.
(F) Any vacancy occurring in the office of a director elected
by the Holders may be filled by the departing director unless and until such
vacancy shall be filled by the Holders.
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(G) Purchasers (as defined in the Securityholders Agreement)
and their Affiliates that are holders of Common Stock issued upon the
conversion of Series A Stock shall be entitled to appoint one Director (and
remove and replace such Director) to the Board of Directors for so long as
such Persons own (beneficially or of record) at least 5% of the Capital Stock
of the Corporation, but in no event (other than as provided in Article
VII(D)) will the holders of such Common Stock and Series A Stock be entitled
to elect more than two Directors in the aggregate. Each of the parties to
the Securityholders Agreement shall vote all Common Stock owned by it, at any
regular or special meeting of the stockholders of the Corporation at which
Directors will be elected, or in any written consent executed in lieu of such
a meeting of stockholders, and shall take all actions necessary to ensure the
election to the Board of Directors of any Person designated pursuant to this
Article VII(G) as a nominee for such position.
VIII. Conversion.
(A) Conversion at the Option of the Holders. (i) Each share
of Series A Stock shall be convertible, at any time, at the option of the
Holder thereof (but if such share is called for redemption pursuant to
Article VI, then only to and including but not after the close of business on
the fifth Business Day preceding the date fixed for such redemption, provided
that no default by the Corporation in the payment of the Redemption Price,
Special Redemption Price or Change of Control Redemption Price, as the case
may be, shall have occurred and be continuing on the date fixed for such
redemption in which case such right of conversion shall be reinstated), into
that number of fully paid and nonassessable shares of Common Stock
(calculated as to each conversion to the nearest 1/100th of a share)
determined by multiplying 1 by a conversion ratio (the "Conversion Ratio").
The Conversion Ratio shall be equal to the Original Liquidation Preference of
such share of Series A Stock plus 10.0% compounded quarterly since the
Original Issue Date through and including the day prior to the conversion
date (the "Conversion Date") divided by the conversion price, subject to
adjustment as provided herein (the "Conversion Price"), which shall initially
be $4.96067967.
(ii) In order to exercise the conversion privilege, a Holder
shall surrender the certificate(s) representing such shares, accompanied by
transfer instrument(s) satisfactory to the Corporation and sufficient to
transfer the Series A Stock being converted to the Corporation free of any
adverse interest, at any of the offices or agencies maintained for such
purpose by the conversion agent designated by the Corporation (the
"Conversion Agent") and shall give written notice to the Corporation that the
Holder elects to convert such shares. The initial Conversion Agent shall be
the Corporation. Such notice shall also state the name(s), together with
address(es), in which the certificate(s) for shares of Common Stock shall be
issued.
(B) Mechanics of Conversion. As promptly as practicable after
the surrender of any shares of Series A Stock as aforesaid, the Corporation
shall issue and deliver
<PAGE> 19
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at the office of the Conversion Agent to such Holder, or on such Holder's
written order, certificate(s) representing the number of full shares of
Common Stock issuable upon the conversion of such shares in accordance with
the provisions hereof, and any fractional interest in respect of a share of
Common Stock arising upon such conversion shall be settled as provided for
below. Certificates will be issued representing the balance of any remaining
shares of Series A Stock in any case in which fewer than all of the shares of
Series A Stock represented by a certificate are converted. Each conversion
shall be deemed to have been effected immediately prior to the close of
business on the date on which shares of Series A Stock shall have been
surrendered as aforesaid, and the Person(s) in whose name(s) any
certificate(s) for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder(s) of record of the
Common Stock represented thereby at such time, unless the stock transfer
books of the Corporation shall be closed on the date on which shares of
Series A Stock are so surrendered for conversion, in which event such
conversion shall be deemed to have been effected immediately prior to the
close of business on the next succeeding day on which such stock transfer
books are open, and such person(s) shall be deemed to have become such
holder(s) of record of the Common Stock at the close of business on such
later day. In either circumstance, such conversion shall be at the
Conversion Ratio in effect on the date upon which such share shall have been
surrendered to the Corporation.
Except as provided in the next sentence, shares of Series A Stock
surrendered for conversion during the period from the close of business on
any Dividend Record Date to the opening of business on the Dividend Accrual
Date with respect to such dividend shall not accrue any dividends in respect
of such period. Dividends with respect to a share of Series A Stock called
for redemption on a Redemption Date during the period from and including a
Dividend Record Date to and including the Dividend Accrual Date shall accrue
on such Dividend Accrual Date to the Holder of record of such share on such
Dividend Record Date notwithstanding the conversion of such share of Series A
Stock after the close of business on such Dividend Record Date and prior to
the opening of business on such Dividend Accrual Date. Except as provided in
this paragraph, no payment or adjustment shall be made upon any conversion on
account of any dividends accrued on shares of Series A Stock surrendered for
conversion or on account of any dividends on the Common Stock issued upon
conversion.
Any fractional interest in a share of Common Stock resulting from
conversion of any share(s) of Series A Stock shall, to the extent permitted
by the Indenture, be paid in cash (computed to the nearest cent) based on the
Current Market Value of Common Stock (calculated as provided in subsection
(C)(f) below) on the day prior to the date on which such share or shares of
Series A Stock are surrendered for conversion in the manner set forth above.
If more than one certificate representing shares of Series A Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Series A Stock represented by such certificates
which are to be converted.
<PAGE> 20
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(C) Adjustments. The Conversion Price and the number of shares
of Common Stock issuable upon the conversion of any shares of Series A Stock
shall be subject to adjustment from time to time as follows:
(a) Stock Dividends; Stock Splits; Reverse Stock Splits;
Reclassifications. In case the Corporation shall (i) pay a dividend or make
any other distribution with respect to its Common Stock in shares of any
class or series of its capital stock or securities exchangeable, convertible
or exercisable for Common Stock (except as provided for in Article
VIII(C)(b)), (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding Common Stock into a smaller number of shares,
or (iv) issue any shares of its capital stock in a reclassification of its
Common Stock (other than a reclassification in connection with a merger,
consolidation or other business combination which will be governed by Article
VIII(C)(i)), the number of shares of Common Stock into which the Series A
Stock was convertible immediately prior to the record date for such dividend
or distribution or the effective date of such subdivision, combination or
reclassification shall be adjusted so that a Holder shall thereafter be
entitled to receive the kind and number of shares of Common Stock or other
securities of the Corporation which such Holder would have been entitled to
receive after the happening of any of the events described above had such
Series A Stock been converted immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made pursuant
to this Article VIII(C)(a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) Rights; Options; Warrants. In case the Corporation shall
issue rights, options, warrants or convertible or exchangeable securities
(other than a convertible or exchangeable security subject to Article
VIII(C)(a)) to all holders of its Common Stock, entitling them to subscribe
for or purchase Common Stock at a price per share which is lower (at the
record date for such issuance) than the then Current Market Value per share
of Common Stock, the number of shares of Common Stock into which the Series A
Stock shall be convertible shall be determined by multiplying the number of
shares of Common Stock into which the Series A Stock was theretofore
convertible by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to the issuance of such
rights, options, warrants or convertible or exchangeable securities plus the
number of additional shares of Common Stock offered for subscription or
purchase, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such rights,
options, warrants or convertible or exchangeable securities plus the number
of shares which the aggregate offering price of the total number of shares of
Common Stock so offered would purchase at the then Current Market Value per
share of Common Stock. Such adjustment shall be made whenever such rights,
options, warrants or convertible or exchangeable securities are issued, and
shall become effective retroactively immediately after the record date for
the determination of shareholders entitled to receive such rights, options,
warrants or convertible or exchangeable securities.
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(c) Issuance of Common Stock at Lower Values. In case the
Corporation shall issue any Common Stock or Right (as defined below)
(excluding (i) any Right issued in any of the transactions described in
Article VIII(C)(a) or (b) above, (ii) shares of Common Stock issued pursuant
to (x) any Rights outstanding on the Original Issue Date and (y) a Right, if
on the date such Right was issued, the exercise, conversion or exchange price
per share of Common Stock with respect thereto was at least equal to the then
Current Market Value per share of Common Stock and (iii) any Right issued as
consideration when any corporation or business is acquired, merged into or
becomes part of the Corporation or a subsidiary of the Corporation in an
arm's-length transaction between the Corporation and a Person other than an
Affiliate of the Corporation) at a price per share of share of Common Stock
(determined in the case of such Right, by dividing (x) the total amount
receivable by the Corporation in consideration of the sale and issuance of
such Right, plus the total consideration payable to the Corporation upon
exercise, conversion or exchange thereof, by (y) the total number of shares
of Common Stock covered by such Right) that is lower than the Current Market
Value per share of Common Stock in effect immediately prior to such sale or
issuance, then the number of shares of Common Stock thereafter issuable upon
conversion of Series A Stock shall be determined by multiplying the number of
shares of Common Stock theretofore issuable by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
after such sale or issuance and the denominator of which shall be the number
of shares of Common Stock outstanding immediately prior to such sale or
issuance plus the number of shares of Common Stock which the aggregate
consideration received (determined as provided below) for such sale or
issuance would purchase at such Current Market Value per share of Common
Stock. For purposes of this Article VIII(C)(c), the number of shares of
Common Stock which the holder of any such Right shall be entitled to
subscribe for or purchase shall be deemed to be issued and outstanding as of
the date of such sale and issuance and the consideration received by the
Corporation therefor shall be deemed to be the consideration received by the
Corporation for such Right, plus the consideration or premiums stated in such
Right to be paid for the shares of Common Stock covered thereby. In case the
Corporation shall sell and issue shares of Common Stock or any Right, for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then in determining the "price per share of Common Stock" and
the "consideration received by the Corporation" for purposes of the first
sentence of this Article VIII(C)(c), the Board of Directors of the
Corporation shall determine, in good faith, the fair value of said property,
which determination shall be evidenced by a resolution of the Board of
Directors. In case the Corporation shall sell and issue any Right together
with one or more other securities as part of a unit at a price per unit, then
in determining the "price per share of Common Stock" and the "consideration
received by the Corporation" for purposes of the first sentence of this
Article VIII(C)(c), the Board of Directors of the Corporation shall
determine, in good faith, the fair value of the Right then being sold as part
of such unit. For purposes of this paragraph, a "Right" shall mean any
right, option, warrant or convertible or exchangeable security containing the
right to subscribe for or acquire one or more shares of Common Stock.
(d) Distributions of Debt, Assets, Subscription Rights or
Convertible
<PAGE> 22
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Securities. In case the Corporation shall fix a record date for the making
of a distribution to all holders of its Common Stock of evidences of its
indebtedness, assets, cash dividends or distributions (excluding dividends or
distributions referred to in Article VIII(C)(a) above and excluding
distributions in connection with the dissolution, liquidation or winding up
of the Corporation which will be governed by Article VIII(C)(i)(ii) below) or
securities (excluding those referred to in Article VIII(C)(a), Article
VIII(C)(b) or Article VIII(C)(c) above), then in each case the number of
shares of Common Stock into which the Series A Stock shall be convertible
after such record date upon the conversion of Series A Stock shall be
determined by multiplying the number of shares of Common Stock into which the
Series A Stock was convertible immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Value per share
of Common Stock immediately prior to the record date for such distribution
and the denominator of which shall be the Current Market Value per share of
Common Stock immediately prior to the record date for such distribution less
the then fair value (as determined in good faith by the Board of Directors)
of the portion of the assets, evidence of indebtedness, cash dividends or
distributions or securities so distributed applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made,
and shall become effective on the date of distribution retroactive to the
record date for the determination of shareholders entitled to receive such
distribution.
(e) Expiration of Rights, Options and Conversion Privileges.
Upon the expiration of any rights, options, warrants or conversion or
exchange privileges that have previously resulted in an adjustment hereunder,
if any thereof shall not have been converted, the Conversion Price and the
number of shares of Common Stock issuable upon the conversion of Series A
Stock shall, upon such expiration, be readjusted and shall thereafter, upon
any future conversion, be such as they would have been had they been
originally adjusted (or had the original adjustment not been required, as the
case may be) as if (i) the only shares of Common Stock so issued were the
shares of Common Stock, if any, actually issued or sold upon the exercise of
such rights, options, warrants or conversion or exchange rights and (ii) such
shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Corporation upon such exercise plus the
consideration, if any, actually received by the Corporation for issuance,
sale or grant of all such rights, options, warrants or conversion or exchange
rights whether or not exercised; provided further that no such readjustment
shall have the effect of increasing the Conversion Price by an amount, or
decreasing the number of shares of Common Stock issuable upon conversion of
Series A Stock by a number, in excess of the amount or number of the
adjustment initially made in respect to the issuance, sale or grant of such
rights, options, warrants or conversion or exchange rights.
(f) Current Market Value. For the purposes of any computation
under this Article VIII, the Current Market Value per share of Common Stock
or of any other security (herein collectively referred to as a "security") at
any date herein specified shall be:
(i) if the security is not registered under the Exchange Act,
as mutually agreed by the Corporation and the Holders. If the
Corporation and such Holders are
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unable to agree, then the Corporation and such Holders shall, within
five days from the date that either party determines that they cannot
agree and so notifies the other party in writing, each retain a
separate Independent Financial Expert (which Independent Financial
Expert, in either case, shall not be the investment banking firm or
accounting firm regularly retained by the Corporation or such
Holders). The Corporation shall cause each of the Independent
Financial Experts so selected to determine within thirty days of their
retention a proposed Current Market Value of a share of Common Stock
using one or more valuation methods that the Independent Financial
Expert, in its best professional judgment, determines to be most
appropriate. The value report (the "Value Report") shall state the
value of the shares of Common Stock and other securities or property of
the Corporation, if any, being valued as of the Valuation Date and
shall contain a brief statement as to the nature and scope of the
examination or investigation upon which the determination of value was
made. The Corporation shall cause each Independent Financial Expert to
deliver within such thirty day period their respective Value Reports in
writing to the Corporation and to the Holders. In the event such
proposed Current Market Values are within a 10% range, the Current
Market Value for the purposes of this Certificate of Designations shall
equal the average of such Current Market Values; provided, however,
that if such proposed Current Market Values fall outside of the range
specified above, then the two Independent Financial Experts shall
select a third Independent Financial Expert (which Independent
Financial Expert shall not be the investment banking firm or accounting
firm regularly retained by the Corporation or such Holders). The
Corporation shall thereafter cause such third Independent Financial
Expert to determine within thirty days of its retention which of the
two proposed Current Market Values determined as described above shall
constitute the Current Market Value and to deliver within such thirty
day period its Value Report in writing to the Corporation and to the
Holders. The determination as to value of the Common Stock as set
forth in the Value Report in accordance with the provisions of this
Article VIII(C)(f)(i) shall be conclusive on all Persons. The
Independent Financial Expert shall consult with management of the
Corporation in order to allow management to comment on the proposed
value prior to delivery to the Corporation and the Holders of any Value
Report of any Independent Financial Expert. The fees and expenses of
all Independent Financial Experts incurred in performing the services
contemplated by this Subsection (f)(i) shall be paid by the
Corporation, or
(ii) if the security is registered under the Exchange Act, the
average of the daily market prices of the security for the 20
consecutive trading days immediately preceding such date or, if the
security has been registered under the Exchange Act for less than 20
consecutive trading days before such date, then the average of the
daily market prices for all of the trading days before such date for
which daily market prices are available. The market price for such
trading day shall be: (A) in the case of a security listed or admitted
to trading on any national securities exchange, the closing sales
price, regular way, on such day, or if no sale takes place on such day,
the average of the closing bid and asked prices on such day on the
principal national securities
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exchange on which such security is listed or admitted, as determined by
the Board of Directors, in good faith, (B) in the case of a security
not then listed or admitted to trading on any national securities
exchange, the last reported sale price on such day, or if no sale takes
place on such day, the average of the closing bid and asked prices on
such day, as reported by a reputable quotation source designated by the
Corporation, (C) in the case of a security not then listed or admitted
to trading on any national securities exchange and as to which no such
reported sale price or bid and asked prices are available, the average
of the reported high bid and low asked prices on such day, as reported
by a reputable quotation service, or a newspaper of general circulation
in the Borough of Manhattan, City and State of New York, customarily
published on each Business Day, designated by the Corporation, or, if
there shall be no bid and asked prices on such day, the average of the
high bid and low asked prices, as so reported, on the most recent day
(not more than 30 days prior to the date in question) for which prices
have been so reported and (D) if there are no bid and asked prices
reported during the 30 days prior to the date in question, the Current
Market Value of the security shall be determined as if the security
were not registered under the Exchange Act.
(g) De Minimis Adjustments. No adjustment in the number of
shares of Common Stock into which the Series A Stock is convertible shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the number of shares of Common Stock issuable upon
the conversion of Series A Stock; provided, however, that any adjustments
which by reason of this Article VIII(C)(g) are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations shall be made to the nearest one-thousandth of a share.
(h) Adjustment of Conversion Price. Whenever the number of
shares of Common Stock into which the Series A Stock is convertible is
adjusted, as herein provided, the Conversion Price shall be adjusted
(calculated to the nearest $.0001) so that it shall equal the price
determined by multiplying the Conversion Price immediately prior to such
adjustment by a fraction the numerator of which shall be the number of shares
of Common Stock into which the Series A Stock was convertible immediately
prior to such adjustment and the denominator of which shall be the number of
shares so issuable immediately thereafter.
(i) Consolidation, Merger, Etc. In case of (i) any
consolidation of the Corporation with, or merger of the Corporation into, any
other entity, (ii) any merger of another entity into the Corporation (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock) or (iii) any
sale or transfer of all or substantially all of the assets of the
Corporation, each Holder shall have the right thereafter to convert each
share of Series A Stock only into the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer
by a holder of the number of shares of Common Stock into which one share of
Series A Stock might have been converted immediately prior to such
consolidation, merger,
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sale or transfer, assuming such holder of Common Stock is not an entity with
which the Corporation consolidated or into which the Corporation merged or
which merged into the Corporation or to which such sale or transfer was made,
as the case may be (a "constituent entity"), or an Affiliate of a constituent
entity and failed to exercise its rights of election, if any, as to the kind
or amount of securities, cash or other property receivable upon such
consolidation, merger, sale or transfer (provided that if the kind or amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer is not the same for each share of Common Stock held
immediately prior to such consolidation, merger, sale or transfer by other
than a constituent entity or an Affiliate thereof and in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purpose of this subsection (i) the kind and amount of
securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the non-electing
shares). If necessary, appropriate adjustment shall be made in the
application of the provisions set forth herein with respect to the rights and
interests thereafter of the Holders, to the end that the provisions set forth
herein shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the conversion of the shares. Any such
adjustment shall be evidenced by a certificate of independent public
accountants and a notice of such adjustment delivered and mailed in the
manner set forth in Subsection (D) below and containing the information set
forth in such Subsection (D), and any adjustment so certified, shall for all
purposes hereof conclusively be deemed to be an appropriate adjustment,
absent manifest error. The above provisions shall similarly apply to
successive consolidations, mergers, sales or transfers.
(j) In addition to the foregoing adjustments, the Board of
Directors of the Corporation may make any other adjustment to increase the
number of shares of Common Stock issuable upon conversion of Series A Stock
or to decrease the Conversion Price as it may, in good faith, deem desirable
to protect the rights and benefits of Holders.
(D) Notice of Adjustment. Whenever the number of shares of
Common Stock or other stock or property issuable upon the conversion of any
Series A Stock or the Conversion Price is adjusted, as herein provided, the
Corporation shall cause the Conversion Agent promptly to mail, at the expense of
the Corporation, to each Holder notice of such adjustment or adjustments and
shall deliver to the Holders a certificate of a firm of independent public
accountants selected by the Board of Directors (who may be the regular
accountants employed by the Corporation) setting forth the number of shares of
Common Stock or other stock or property purchasable upon the conversion of each
share of Series A Stock and the Conversion Price after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth
the computation by which such adjustment was made. Such certificate shall be
conclusive evidence of the correctness of such adjustment. The Conversion
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Agent shall be entitled to rely on such certificate and shall be under no
duty or responsibility with respect to any such certificate, except to
exhibit the same, from time to time, to any Holder desiring an inspection
thereof during reasonable business hours. The Conversion Agent shall not at
any time be under any duty or responsibility to any Holders to determine
whether any facts exist which may require any adjustment of the Conversion
Price or the number of shares of Common Stock or other stock or property
issuable on conversion of the Series A Stock, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method
employed in making such adjustment, or the validity or value (or the kind or
amount) of any shares of Common Stock or other stock or property which may be
issuable on conversion of the Series A Stock. The Conversion Agent shall not
be responsible for any failure of the Corporation to make any cash payment or
to issue, transfer or deliver any shares of Common Stock or stock
certificates or other common stock or properties upon the conversion of any
Series A Stock.
(E) Notice of Consolidation, Merger, Etc. In case at any time
after the date hereof and prior to 5:00 p.m., New York City time, on the
Mandatory Redemption Date, there shall be any (i) consolidation or merger
involving the Corporation or sale, transfer or other disposition of all or
substantially all of the Corporation's property, assets or business (except a
merger or other reorganization in which the Corporation shall be the surviving
corporation and holders of shares of Common Stock (or other securities or
property issuable upon conversion of the Series A Stock) receive no
consideration in respect of their shares) or (ii) any other transaction
contemplated by Article VIII(C)(i)(ii) above then in any one or more of such
cases, the Corporation shall cause to be mailed to the Conversion Agent and each
Holder, at the earliest practicable time (and, in any event, not less than 20
calendar days before any date set for definitive action), notice of the date on
which such reorganization, sale, consolidation, merger, dissolution, liquidation
or winding up shall take place, as the case may be. Such notice shall also set
forth the effect of such action (to the extent such effect may be known at the
date of such notice) on the Conversion Price and the kind and amount of the
shares of Common Stock and other securities, money and other property
deliverable upon conversion of the Series A Stock. Such notice shall also
specify the date as of which the holders of record of the shares of Common Stock
or other securities or property issuable upon conversion of the Series A Stock
shall be entitled to exchange their shares for securities, money or other
property deliverable upon such reorganization, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be.
(F) Documentary and Stamp Taxes. The Corporation will pay any
and all documentary stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of shares of Common Stock issued on
conversion of shares of Series A Stock pursuant hereto; provided, however,
that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the Holder of the Series
A Stock to be converted, and no such issue or delivery shall be made unless
and until the Person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(G) Valid Issuance of Common Stock. The Corporation covenants
that all
<PAGE> 27
27
shares of Common Stock which may be issued upon any conversion of shares of
Series A Stock will, upon issue, be duly and validly issued, fully paid and
nonassessable, free of all liens and charges and not subject to any preemptive
rights.
(H) Reservation of Common Stock. The Corporation covenants
that it will at all times reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but unissued shares of Common
Stock, for the purpose of effecting conversions of shares of Series A Stock,
the full number of shares of Common Stock deliverable upon the conversion of
all outstanding shares of Series A Stock not theretofore converted.
IX. Certain Covenants.
The following covenants shall apply for so long as the Purchasers
(as defined in the Securities Purchase Agreement) and their Affiliates
beneficially own at least 50% of the shares of Series A Stock originally
issued pursuant to the Securities Purchase Agreement and thereafter, the
Corporation shall comply with the covenants set forth in the Indenture as in
effect on the Original Issue Date (which are incorporated herein as if fully
set forth herein) for so long as any shares of Series A Stock are outstanding:
(A) Limitation on Restricted Payments. The Corporation shall
not, and shall 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 Corporation
or any of its Restricted Subsidiaries (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, (y) pro rata dividends
or distributions on Common Shares of Restricted Subsidiaries and (z) as
permitted by Article IV(B)(i)), (ii) purchase, redeem, retire or otherwise
acquire for value any shares of Capital Stock of the Corporation (including
options, warrants or other rights to acquire such shares of Capital Stock)
held by Persons other than the Corporation or any of its Wholly Owned
Restricted Subsidiaries, or (iii) make any Investment, other than a Permitted
Investment, in any Person.
(B) Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. So long as any of the Series A Stock is
outstanding, the Corporation shall not, and shall 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 Corporation or any other Restricted
Subsidiary, (ii) pay any Indebtedness owed to the Corporation or any other
Restricted Subsidiary, (iii) make loans or advances to the Corporation or any
other Restricted Subsidiary or (iv) transfer any of its property or assets to
the Corporation or any other Restricted Subsidiary.
<PAGE> 28
28
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Original Issue Date herein or any other
agreements in effect on the Original Issue 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 Corporation 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 Article IX(B), (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 Corporation or any Restricted Subsidiary not otherwise prohibited by
this Certificate of Designations 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 Corporation or any Restricted Subsidiary in any manner material
to the Corporation or any Restricted Subsidiary; (v) with respect to a
Restricted Subsidiary and imposed pursuant to an agreement that has been
entered into for the sale or disposition of any or all of the Capital Stock
of, or property and assets of, such Restricted Subsidiary during the period
between the execution of such agreement and the closing thereunder within
three months of such execution; (vi) with respect to Restricted Subsidiaries
in which, on and subsequent to the Original Issue Date, the Corporation 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 Mandatory Redemption Date; provided that such
encumbrances and restrictions expressly allow the payment of interest and
principal on such promissory notes; or (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 Shares of a Restricted
Subsidiary; provided that such restrictions consist solely of requirements
that transactions between such Restricted Subsidiaries and affiliates thereof
(including the Corporation and its Restricted Subsidiaries) be on fair and
reasonable terms no less favorable to such Restricted Subsidiary than could
be obtained in a comparable arm's-length transaction with a Person that is
not such an affiliate. Nothing contained in this Article IX(B) shall prevent
the Corporation or any Restricted Subsidiary from (1) creating, incurring,
assuming or suffering to exist any Liens otherwise permitted in Article IX(D)
or (2) restricting the sale or other disposition of property or assets of the
Corporation or any of its Restricted Subsidiaries that secure Indebtedness of
the Corporation or any of its Restricted Subsidiaries.
<PAGE> 29
29
(C) Limitation on Transactions with Shareholders and Affiliates.
The Corporation shall not, and shall 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
Corporation or with any Affiliate of the Corporation or any Restricted
Subsidiary, except upon fair and reasonable terms no less favorable to the
Corporation or such Restricted Subsidiary than could be obtained, at the time
of such transaction or at the time of the execution of the agreement
providing therefor, in a comparable arm's-length transaction with a Person
that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to
(i) transactions (A) approved by a majority of the disinterested members of
the Board of Directors or (B) for which the Corporation obtains a written
opinion of a Financial Expert stating that the transaction is fair to the
Corporation from a financial point of view; (ii) any transaction solely
between the Corporation 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 Corporation who are
not employees of the Corporation; (iv) any payments or other transactions
pursuant to any tax-sharing agreement between the Corporation and any other
Person with which the Corporation files a consolidated tax return or with
which the Corporation is part of a consolidated group for tax purposes; or
(v) any Restricted Payments not prohibited by Article IX(A) (other than
pursuant to clause (iv) of the definition of "Permitted Investment").
Notwithstanding the foregoing, any transaction or series of transactions
covered by the first paragraph of this Article IX(C) and not covered by
clauses (ii) through (iv) of this paragraph, the aggregate amount of which
exceeds $1 million in value, must be approved or determined to be fair in the
manner provided for in clause (i)(A) or (B) above.
(D) Limitation on Liens. The Corporation shall not, and shall
not permit any Restricted Subsidiary to, create, incur, assume or suffer to
exist any Lien on any of its assets or properties of any character, or any
shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without
making effective provision for all of the Series A Stock and other amounts
due in respect of the Series A Stock under this Certificate of Designations
to be directly secured equally and ratably with the obligation or liability
secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on
the Original Issue Date; (ii) Liens granted after the Original Issue Date on
any assets or Capital Stock of the Corporation 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
Corporation or a Wholly Owned Restricted Subsidiary to secure Indebtedness
owing to the Corporation or such other Restricted Subsidiary; (iv) 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 Original Issue Date; (v) Permitted Liens;
<PAGE> 30
30
or (vi) Liens permitted by Section 4.09(iv) of the Indenture.
(E) Existence. Subject to the foregoing, the Corporation 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 Corporation and
each such Subsidiary and the rights (whether pursuant to charter, partnership
certificate, agreement, statute or otherwise), material licenses and franchises
of the Corporation and each such Subsidiary; provided that the Corporation shall
not be required to preserve any such right, license or franchise, or the
existence of any Restricted Subsidiary, if the maintenance or preservation
thereof is no longer desirable in the conduct of the business of the Corporation
and its Restricted Subsidiaries taken as a whole.
(F) Payment of Taxes and Other Claims. The Corporation
shall pay or discharge and shall cause each of its Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (i) all material taxes, assessments and governmental charges
levied or imposed upon (a) the Corporation or any such Subsidiary, (b) the
income or profits of any such Subsidiary which is a corporation or (c) the
property of the Corporation 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 Corporation or any such Subsidiary;
provided that the Corporation 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.
(G) Maintenance of Properties and Insurance. The Corporation
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 Corporation 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 Article IX(G) shall prevent the Corporation or any such
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 Corporation, desirable in the conduct of the business of
the Corporation or such Subsidiary.
The Corporation 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
<PAGE> 31
31
Corporation or such Restricted Subsidiary, as the case may be, is then
conducting business.
(H) Commission Reports and Reports to Holders. Whether or not
the Corporation is required to file reports with the Commission, if any
Series A Stock is outstanding, the Corporation shall file with the Commission
all such reports and other information as it would be required to file with
the Commission by Section 13(a) or 15(d) under the Exchange Act, if it were
subject thereto, unless the Corporation shall be unable to effect such filing
or the Commission shall refuse to accept such filing. The Corporation shall
supply each Holder, without cost to such Holder, copies of such reports and
other information, whether or not the Corporation shall be unable to effect
such filing or the Commission refuses to accept such filing.
(I) Indemnification of Directors Appointed by Holders. The
Corporation shall obtain insurance for any Director appointed by the Holders
pursuant to Article VII of this Certificate of Designations in respect of,
without limitation, any expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement incurred by such Director in his capacity as
Director. Such insurance policy shall provide for coverage, including, without
limitation, as to dollar amount and scope, that is at least as favorable as the
Corporation's insurance in effect on the Original Issue Date.
(J) Notice of Special Trigger Events. In the event that the
Corporation becomes aware of any Special Trigger Event, the Corporation,
promptly after it becomes aware thereof, shall give written notice thereof to
the Holders.
X. Merger, Consolidation and Sale of Assets.
Without the affirmative vote or consent of the Holders of a
majority of the shares of Series A Stock voting or consenting, separately as
a single class, the Corporation may not consolidate or merge with or into, or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, any Person unless such transaction would
be permitted by the Indenture as in effect on the Original Issue Date.
XI. Mutilated or Missing Series A Stock Certificates.
If any of the Series A Stock certificates shall be mutilated,
lost, stolen or destroyed, the Corporation shall issue, in exchange and in
substitution for and upon cancellation of the mutilated Series A Stock
certificate, or in lieu of and substitution for the Series A Stock
certificate lost, stolen or destroyed, a new Series A Stock certificate of
like tenor and representing an equivalent amount of shares of Series A Stock,
but only upon receipt of evidence of such loss, theft or destruction of such
Series A Stock certificate and indemnity, if requested, satisfactory to the
Corporation.
<PAGE> 32
32
XII. Reissuance; Preemptive Rights.
(i) Shares of Series A Stock that have been issued and
reacquired in any manner, including shares purchased or redeemed, shall (upon
compliance with any applicable provisions of the laws of the State of
Delaware) have the status of authorized and unissued shares of preferred
stock undesignated as to series and may be redesignated and reissued as part
of any series of Preferred Stock of the Corporation other than the Series A
Stock.
(ii) No shares of Series A Stock shall have any rights of
preemption whatsoever as to any securities of the Corporation, or any
warrants, rights or options issued or granted with respect thereto,
regardless of how such securities or such warrants, rights or options may be
designated, issued or granted.
XIII. Business Day.
If any payment or redemption shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment or
redemption shall be made on the immediately succeeding Business Day and no
further dividends shall accumulate after the day payment was required.
XIV. Headings of Subdivisions.
The headings of various subdivisions hereof are for convenience
of reference only and shall not affect the interpretation of any of the
provisions hereof.
XV. Severability of Provisions.
If any right, preference or limitation of the Series A Stock set
forth in these resolutions and the Certificate of Designations filed pursuant
hereto (as such Certificate of Designations may be amended from time to time)
is invalid, unlawful or incapable of being enforced by reason of any rule or
law or public policy, all other rights, preferences and limitations set forth
in such Certificate of Designations, as amended, which can be given effect
without the invalid, unlawful or unenforceable right, preference or
limitation shall, nevertheless remain in full force and effect, and no right,
preference or limitation herein set forth shall be deemed dependent upon any
other such right, preference or limitation unless so expressed herein.
<PAGE> 33
33
XVI. Notice to the Corporation.
All notices and other communications required or permitted to be
given to the Corporation hereunder shall be made by certified first-class
mail, postage prepaid, or by Federal Express or similar overnight mail
service with signature required for receipt to the Corporation at its
principal executive offices (currently located on the date of the adoption of
these resolutions at the following address: IMPSAT Corporation, Alferez
Pareja 256, 1107 Buenos Aires, Argentina, Attention: Chief Executive
Officer). Minor imperfections in any such notice shall not affect the
validity thereof.
All notices, requests and other communications to any party
hereunder shall be in writing (including telecopier or similar writing) and
shall be given to such party by certified first class mail at its address
with a return receipt requested, by Federal Express or similar overnight mail
service with signature required for receipt, or by telecopy at the telecopier
number set forth below or such other address or telecopier number as such
party may hereinafter specify in writing for the purpose to the party giving
such notice. Each such notice, request or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section and the appropriate electronic
confirmation is received and a copy of such notice is sent by overnight mail
service or (ii) if given by certified mail or overnight courier, 72 hours
after such communication is deposited in the mails with first class postage
prepaid or given to overnight courier service, addressed as aforesaid.
XVII. Limitations.
Except as may otherwise be required by law, the shares of Series
A Stock shall not have any powers, preferences or relative, participating,
optional or other special rights other than those specifically set forth in
this resolution (as such resolution may be amended from time to time) or
otherwise in the Certificate of Incorporation of the Corporation.
IN WITNESS WHEREOF, this Certificate has been signed on this 19th
day of March, 1998.
IMPSAT CORPORATION
By:
----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 9.1
SECURITYHOLDERS AGREEMENT
dated as of March 19, 1998
among
IMPSAT CORPORATION,
CORPORACION IMPSA S.A.,
NEVASA HOLDINGS LTD.,
MILITELLO LIMITED,
ROTLING INTERNATIONAL CORPORATION,
PRINCES GATE INVESTORS II, L.P.,
MORGAN STANLEY GLOBAL EMERGING MARKETS PRIVATE INVESTMENT
FUND, L.P.,
MORGAN STANLEY GLOBAL EMERGING MARKETS PRIVATE INVESTORS, L.P.,
PGI INVESTMENTS LIMITED,
GREGOR VON OPEL,
INVESTOR INVESTMENTS AB
and
PG INVESTORS II, INC.
as Agent
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
RESTRICTIVE LEGEND
SECTION 2.1. Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1. Demand Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.2. Piggy-Back Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.3. Reduction of Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.4. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.5. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.7. Indemnification by the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.8. Indemnification by Selling Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.9. Conduct of Indemnification Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.10. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.11. Participation in Underwritten Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.12. Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.13. Holdback Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.14. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV
COVENANTS
SECTION 4.1. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.2. Right to Participate in Certain Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.3. Drag-Along . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.4. Prohibited Issuance of Additional Series A Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.5. Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.6. Annual Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
i
<PAGE> 3
<TABLE>
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SECTION 4.7. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE V
BOARD OF DIRECTORS
SECTION 5.1. Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.2. Appointment; Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.3. Special Trigger Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 5.4. Mechanics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VI
THE AGENT
SECTION 6.1. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.2. Reliance by the Issuer and Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.3. Liability of the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.5. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.2. No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.3. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.5. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.8. Successors, Assigns, Transferees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.9. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.10. Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.11. Recapitalization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.12. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.13. Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.14. Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
ii
<PAGE> 4
SECURITYHOLDERS AGREEMENT
SECURITYHOLDERS AGREEMENT (this "Agreement") dated as of March
19, 1998 among IMPSAT Corporation, a Delaware corporation (the "Issuer"),
Corporacion IMPSA S.A., Nevasa Holdings Ltd., Militello Limited ("Militello"),
Rotling International Corporation ("Rotling") and Princes Gate Investors II,
L.P., a Delaware limited partnership ("Princes Gate"), Morgan Stanley Global
Emerging Markets Private Investment Fund, L.P., a Delaware limited partnership
("MSGEM"), Morgan Stanley Global Emerging Markets Private Investors, L.P.
("Private Investors"), and the other purchasers stated on the signature pages
hereof (such purchasers, together with Princes Gate, MSGEM and Private
Investors, the "Purchasers"), and PG Investors II, Inc., as agent (to the
extent provided herein) (the "Agent") for the Holders (as defined below) of
Series A Stock (as defined below); and
WHEREAS, the Issuer and the Purchasers have entered into the
Securities Purchase Agreement (as defined below) pursuant to which the
Purchasers have agreed to purchase shares of Series A Stock (as defined below)
in accordance with the terms thereof.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions
(a) The following terms, as used herein, have the
following meanings:
"Affiliate", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person and "Affiliated" has a
meaning correlative with the foregoing. 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" has the meaning set forth in the first paragraph of
this Agreement.
"Agreement" has the meaning set forth in the first paragraph
of this Agreement.
"Annual Budget" means the annual budget of the Issuer and its
Subsidiaries on a consolidated basis, which shall include (i) a
detailed projected statement of operations/income statement, statement
of cash flows, balance sheet and other financial
<PAGE> 5
2
data in reasonable detail, broken down by quarter of the next
succeeding Fiscal Year and (ii) a written business plan describing the
business activities of the Issuer and its Subsidiaries for the next
succeeding Fiscal Year and specifying quarterly objectives, all in
reasonable detail, adopted in accordance with the procedures set forth
in Section 4.6(a) herein.
"Board of Directors" means the Board of Directors of the
Issuer.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in the City of New York are
authorized or required by law to close.
"Certificate of Designations" means 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 Stock.
"Charter" means the Certificate of Incorporation of the
Issuer, as amended as of the Closing Date, in the form attached as
Exhibit M to the Securities Purchase Agreement.
"Closing Date" means the date of the closing of the purchase
of Series A Stock pursuant to the Securities Purchase Agreement.
"Commission" means the United States Securities and Exchange
Commission and any successor agency having similar powers.
"Common Stock" means Class A common stock, par value $1.00 per
share, of the Issuer and any other class of stock that is the same
class as the securities to be issued on the conversion of the Series A
Stock.
"Director" means a member of the Board of Directors.
"Equity Securities" means the Series A Stock and the Series A
Common Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute.
"Financial Expert" has the meaning set forth in the
Certificate of Designations.
"Fiscal Year" means the fiscal year of the Issuer, beginning
on January 1 of each year and ending on the following December 31.
"Holder" means any registered holder of shares of Series A
Stock or Series A
<PAGE> 6
3
Common Shares.
"Indebtedness" has the meaning set forth in the Securities
Purchase Agreement.
"Initial Public Offering" means the first registration solely
of shares of Common Stock to be issued by the Issuer after the date
hereof under the Securities Act, using Form S-1, S-2 or S-3 or any
successor forms, and after which the Common Stock is listed or quoted
for trading on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ National Market.
"Issuer" has the meaning set forth in the first paragraph of
this Agreement.
"Liquidation Preference" has the meaning ascribed thereto in
the Certificate of Designations.
"Material Debt" means Indebtedness of the Issuer and/or one or
more of its Subsidiaries that individually or in the aggregate have a
principal amount (or if any Indebtedness was issued at a discount from
its principal amount at maturity then the accreted value of such
Indebtedness as of the end of the most recent fiscal quarter shall be
used in making this calculation) equal to or exceeding the amount
equal to 15% of the total assets of the Issuer and its consolidated
Subsidiaries as set forth on its consolidated balance sheet for the
fiscal year preceding the date of determination.
"Material Debt Default" means the failure of the Issuer and/or
any of its Subsidiaries to pay any principal of or premium or interest
or other amount on any Material Debt when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise); or any other event shall occur or
condition shall exist with respect to any financial or economic
covenant or any event of default under any agreement or instrument
relating to any such Material Debt, if the effect of such event or
condition or event of default is to accelerate or require early
termination, or with notice or passage of time would permit the
acceleration or early termination of, the original maturity of such
Material Debt; or any such Material Debt shall be declared to be due
and payable, or required to be prepaid, redeemed, terminated,
purchased or defeased, or an offer to prepay, redeem, purchase or
defease such Material Debt shall be required to be made (other than by
a regularly scheduled required prepayment or redemption or pursuant to
the exercise of a "change of control" provision under the terms of any
Indebtedness), in each case prior to the original stated maturity
thereof.
"Nevasa" means Nevasa Holdings Ltd. or any successor thereof.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, limited liability company,
unincorporated association, joint venture or
<PAGE> 7
4
any other entity or organization, whether or not a legal entity,
including, without limitation, a government or political subdivision
or an agency or instrumentality thereof.
"Purchasers" has the meaning set forth in the first paragraph
of this Agreement.
"Registrable Securities" means the Series A Common Shares;
provided, in any event, that such securities shall cease to be
Registrable Securities when a registration statement relating to such
securities shall have been declared effective by the Commission and
such securities shall have been disposed of pursuant to such effective
registration statement or sold under Rule 144 (but not Rule 144A).
"Registration Expenses" means any and all expenses incurred in
connection with or incidental to a registration or other offering,
listing, marketing or selling efforts (but not underwriting discounts
or commissions), including all (i) registration and filing fees, (ii)
fees and expenses of compliance with securities or blue sky laws or
the rules of the National Association of Securities Dealers, Inc. or
any successor agency and the cost of preparing any blue sky or legal
investment memorandum in connection with the qualification of
Registrable Securities (including reasonable fees and disbursements of
a qualified independent underwriter, if any, counsel in connection
therewith and the reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable
Securities), (iii) printing expenses, (iv) internal expenses of the
Issuer (including, without limitation, all salaries and expenses of
officers and employees performing legal or accounting duties), (v)
fees and disbursements of U.S. and foreign counsel for the Issuer,
(vi) customary fees and expenses for independent certified public
accountants retained by the Issuer (including the expenses of any
comfort letters or costs associated with the delivery by independent
certified public accountants of a comfort letter or comfort letters),
(vii) fees and expenses of any special experts retained by the Issuer
in connection with such registration or other offering, listing,
marketing or selling efforts, (viii) fees and expenses of one U.S.
counsel for the Holders and one foreign counsel, if any, for each
applicable foreign jurisdiction, (ix) fees and expenses of listing the
Registrable Securities on a securities exchange or on the NASDAQ
National Market System, (x) the costs and other out-of-pocket expenses
of the Issuer relating to investor presentations on the "road show"
undertaken in connection with the marketing of Registrable Securities,
including, without limitation, expenses associated with the production
of road show slides and graphics, fees and expenses of any consultants
engaged in connection with the road show presentations with the prior
approval of the Issuer, travel and lodging expense of the
representatives and officers of the Issuer and any such consultants,
and the cost of any transportation utilized in connection with the
road show, and (xi) all other costs or expenses incident to the
performance of the obligations of the Issuer with respect to Article
III.
"Rule 144" means Rule 144 under the Securities Act, as such
rule may be
<PAGE> 8
5
amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act, as such
rule may be amended from time to time.
"Rule 144(k)" means Rule 144(k) under the Securities Act, as
such rule may be amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any successor statute.
"Securities Purchase Agreement" means the Securities Purchase
Agreement, dated as of March 19, 1998 among the Issuer, Jonesboro
Financial Inc., Princes Gate, MSGEM and the other purchasers signatory
thereto.
"Series A Common Shares" means the shares of Common Stock to
be issued upon conversion of the Series A Stock.
"Series A Stock" means the Issuer's Convertible Preferred
Stock, Series A, having the rights, preferences and privileges set
forth in the Certificate of Designations.
"Significant Subsidiary" shall mean a Significant Subsidiary
within the meaning of Regulation S-X under the Exchange Act or any
group of non-Significant Subsidiaries that at the end of any fiscal
quarter collectively would constitute a "Significant Subsidiary"
within the meaning of Regulation S-X under the Exchange Act.
"Special Trigger Event" shall be deemed to occur if (i) a
Material Debt Default occurs, (ii) the Issuer breaches any covenant
or agreement contained in the Securities Purchase Agreement, the
Certificate of Designations or Article IV or V of this Agreement and
such breach has not been cured within 30 days of written notice
thereof, (iii) the Issuer or any of its Significant Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors, (iv) a court of
competent jurisdiction enters a decree or order for (A) relief in
respect of the Issuer or any of its Significant Subsidiaries 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 Issuer or any of its Significant Subsidiaries or for
all or substantially all of the property and assets of the Issuer or
any of its Significant Subsidiaries or (C) the winding up or
liquidation of the affairs of the Issuer or any of its Significant
Subsidiaries or (v) the Issuer or any of its Significant Subsidiaries
(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
<PAGE> 9
6
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 Issuer or any of its
Significant Subsidiaries or for all or substantially all of the
property and assets of the Issuer or any of its Significant
Subsidiaries or (C) effects any general assignment for the benefit of
creditor.
"Subsidiary" means, with respect to any Person, any other
Person of which more than fifty percent (50%) of (i) the economic
interest in the assets, earnings or cash flow or (ii) the total voting
power of shares of capital stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof, is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person or a combination thereof.
"Transfer" means any transfer, in whole or in part, by sale,
pledge, assignment, grant or other means.
"Underwriter" means a securities dealer who purchases any
Registrable Securities as a principal in connection with a
distribution of such Registrable Securities and not as part of such
dealer's market-making activities.
"Voting Securities" of any Person means any securities (i)
ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person
or (ii) entitling the holder thereof to an economic interest in the
assets, earnings or cash flow of such Person.
(b) Each of the following terms is defined in the Section
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Demand Registrant 3.1
Demand Registration 3.1
Effective Date 7.10
Indemnified Party 3.9
Indemnifying Party 3.9
IPO Demand 3.1
Piggy-Back Registration 3.2
Registration Demand 3.1
Selling Holder 3.2
</TABLE>
<PAGE> 10
7
ARTICLE II
RESTRICTIVE LEGEND
SECTION 2.1. Restrictive Legend.
(a) For so long as this Agreement remains in effect, each
certificate representing an Equity Security owned by any Holder or a subsequent
transferee shall (unless otherwise permitted by the provisions of Section
2.1(b) or the Charter) include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE ACT, THE RULES AND REGULATIONS PROMULGATED
THEREUNDER AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A SECURITYHOLDERS AGREEMENT DATED AS OF MARCH 19, 1998 THAT
FIXES CERTAIN RIGHTS AND OBLIGATIONS OF THE ISSUER AND THE
HOLDER OF THIS SECURITY. A COPY OF THE AGREEMENT IS ON FILE
AT THE ISSUER'S PRINCIPAL OFFICE.
(b) Any Holder or transferee of an Equity Security may,
upon providing evidence reasonably satisfactory to the Issuer that such Equity
Security is not a "restricted security" (as defined in Rule 144), may be sold
pursuant to Rule 144(k) or has been registered under the Securities Act,
exchange the certificate representing such Equity Security for a new
certificate that does not bear the legend set forth in Section 2.1(a).
<PAGE> 11
8
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1. Demand Registration.
Demand Registration Rights. (a) IPO Demand. From and after
the date of the third anniversary of the Closing Date until the consummation of
the Initial Public Offering, Holders of at least 10% of the outstanding
Registrable Securities (determined on a fully diluted basis, including assuming
the conversion of all Series A Stock then outstanding) may make a written
request (the "IPO Demand") that the Issuer consummate the Initial Public
Offering and, upon receipt of such IPO Demand, the Issuer shall be obligated to
promptly use its best efforts to proceed to consummate the Initial Public
Offering as provided for in Section 3.4 hereof.
(b) Subsequent Demand. At any time after the
consummation of the Initial Public Offering, the Holders of outstanding
Registrable Securities having a Current Market Value (as defined in the
Certificate of Designations) (determined on a fully diluted basis, including
assuming the conversion of all Series A Stock then outstanding) in excess of
$25 million may make written requests (each a "Registration Demand") for
registration (a "Demand Registration") under the Securities Act of such
Registrable Securities. The Registration Demand will specify the number of
Registrable Securities proposed to be sold and will also specify the intended
method of disposition thereof. The Issuer shall not be obligated to effect
more than one Demand Registration in any six-month period. The Holder or
Holders (as applicable) making such request are referred to herein collectively
as the "Demand Registrant."
(c) Effective Registration. A registration requested
pursuant to this Section 3.1 shall be deemed not to be effected (i) if a
registration statement with respect thereto shall not have become effective,
(ii) if, after it has become effective, such registration is interfered with
for any reason by any stop order, injunction or other order or requirement of
the Commission or any other governmental agency or any court, and the result of
such interference is to prevent a Holder from disposing of the Registrable
Securities to be sold thereunder in accordance with the intended methods of
disposition or (iii) if the closing specified in the purchase agreement or
underwriting agreement entered into in connection with any underwritten
registration shall not have occurred due to a breach by the Issuer of any
provision contained in any such purchase or underwriting agreement.
(d) Underwriting. If the Demand Registrant so elects,
the offering of Registrable Securities pursuant to a Demand Registration shall
be in the form of an underwritten offering consistent with the covenants of the
Issuer set forth in Section 4.5 hereof.
<PAGE> 12
9
SECTION 3.2. Piggy-Back Registration. If the Issuer proposes
to file a registration statement under the Securities Act with respect to an
offering of its Common Stock (i) for its own account (other than a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
Commission) and other than with respect to an Initial Public Offering) or (ii)
for the account of any holders of capital stock of the Issuer, then the Issuer
shall give written notice of such proposed filing to all other Holders as soon
as practicable (but in any event not less than 20 days before the anticipated
filing date), and such notice shall offer each of the Holders of Registrable
Securities the opportunity to register any of its Registrable Securities that
are then eligible for registration. If any Holder wishes to register
securities of the same class or series as the Issuer or such holder, such
registration shall be on the same terms and conditions as the registration of
the Issuer or such holders' securities (a "Piggy-Back Registration"). If the
Piggy-Back Registration is of a different class, then the Issuer has the option
of effecting a concurrent registration. Holders participating in a Piggy-Back
Registration, together with the Demand Registrant, if any, are referred to
herein as "Selling Holders."
SECTION 3.3. Reduction of Offering. Notwithstanding anything
contained in any other Section herein, if the lead Underwriter of an offering
described in Section 3.1 or 3.2 informs the Issuer in writing that the success
of such offering could be materially and adversely affected by inclusion of all
the securities of each class requested to be included, then the Issuer may,
upon written notice to the Selling Holders, reduce (if and to the extent stated
by such Underwriter to be necessary to eliminate such effect) the number of the
securities of each class requested to be registered so that the resultant
aggregate number of the securities of each class requested to be registered
that will be included in such registration shall be equal to the numbers of the
securities of each class stated in such Underwriter's letter; provided,
however, that priority in such registration shall be as follows:
(a) in the case of an Initial Public Offering resulting
from the giving of an IPO Demand, (i) first, securities offered for
the account of the Issuer, (ii) second, securities offered for the
account of the Selling Holders and (iii) third, among any other
securityholders entitled to registration rights pursuant to any
contractual right of registration, in accordance therewith;
(b) in the case of any other initial public offering, (i)
first, securities for the account of the Issuer and (ii) second, among
the Selling Holders and any other securityholders of the Issuer
entitled to registration rights pursuant to any contractual right of
registration, in accordance therewith, with one-half of the shares
requested to be registered allocated to the other securityholders of
the Issuer and the balance of such shares allocated to the Selling
Holders;
(c) in the case of any Registration Demand, (i) first,
securities offered for the account of the Demand Registrant, (ii)
second, pro rata among any other securityholders of the Issuer
entitled to register securities pursuant to a contractual right of
registration in accordance therewith and (iii) third, securities
offered for the account
<PAGE> 13
10
of the Issuer; and
(d) in any case where any securityholder other than a
holder of Registrable Securities has requested registration pursuant
to a contractual right of registration (i) first, among securities
offered for the account of any such holders, in accordance therewith,
and any securities of the holders of Registrable Securities, to the
extent requested to be registered pursuant to Section 3.2, with
one-half of the shares requested to be registered allocated to
securityholders of the Issuer other than holders of Registrable
Securities and the balance of such shares allocated to the holders of
Registrable Securities and (ii) second, securities offered for the
account of the Issuer.
SECTION 3.4. Registration Procedures. Whenever the Issuer
receives an IPO Demand or a Registration Demand or any holder of Registrable
Securities elects to participate in a Piggy-Back Registration pursuant to
Section 3.2 hereof, the Issuer will use its best efforts, (i) in the case of
the IPO Demand, to consummate the Initial Public Offering, and (ii) in the case
of a Registration Demand or election to participate in a Piggy-Back
Registration, to effect the registration and the sale of the relevant
Registrable Securities in accordance with the intended method of disposition
thereof, in each case as promptly as practicable, and in connection therewith:
(a) The Issuer will as expeditiously as possible prepare
and file with the Commission a registration statement on any form for
which the Issuer then qualifies or which counsel for the Issuer shall
deem appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with
the intended method of distribution thereof, and use its best efforts
to cause such filed registration statement to become and remain
effective until all Registrable Securities requested to be registered
thereunder have been sold thereunder.
(b) The Issuer will, concurrently with filing a
registration statement or prospectus or any amendment or supplement
thereto, furnish to the Selling Holders and each Underwriter, if any,
such number of copies of such registration statement, each amendment
and supplement thereto (in each case including all exhibits thereto
and documents incorporated by reference therein), the prospectus
included in such registration statement (including each preliminary
prospectus) and such other documents as the Selling Holders or such
Underwriter may reasonably request in order to facilitate the sale of
the Registrable Securities.
(c) After the filing of the registration statement, the
Issuer will promptly notify the Selling Holders of any comments from
or any material correspondence with the Commission or the National
Association of Securities Dealers, Inc. and of any stop order issued
or threatened by the Commission and use its best efforts to prevent
the entry of such stop order or to remove it if entered.
<PAGE> 14
11
(d) The Issuer will use its best efforts to (i) register
or qualify the Registrable Securities under such other securities or
blue sky laws of such jurisdictions in the United States or elsewhere
as the Selling Holders request and to keep such registration or
qualification in effect for so long as such registration statement
remains in effect, and to take any other action which may be
reasonably necessary or advisable to enable the Selling Holders to
consummate the disposition in such jurisdictions of the securities
owned by the Selling Holders and (ii) cause such disposition and
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary or advisable
by virtue of the business and operations of the Issuer and/or its
Subsidiaries, so as to enable the Selling Holders to consummate the
disposition of such Registrable Securities; provided that the Issuer
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction other than taxation arising with respect to the
registration of securities or (iii) consent to general service of
process in any such jurisdiction.
(e) At any time when a prospectus relating to the sale of
Registrable Securities is required to be delivered under the
Securities Act, the Issuer will immediately notify the Selling Holders
of the occurrence of an event requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading and promptly
make available to the Selling Holders and the Underwriters any such
supplement or amendment. The Selling Holders agree that, upon receipt
of any notice from the Issuer of the happening of any event of the
kind described in the preceding sentence, the Selling Holders will
forthwith discontinue the offer and sale of Registrable Securities
pursuant to the registration statement covering such Registrable
Securities until receipt of the copies of such supplemented or amended
prospectus and, if so directed by the Issuer, the Selling Holders will
deliver to the Issuer all copies, other than permanent file copies
then in the possession of the Selling Holders, of the most recent
prospectus covering such Registrable Securities at the time of receipt
of such notice.
(f) The Issuer will enter into customary agreements
(including an underwriting agreement in customary form) and take such
other actions (including engaging in a road show) as are necessary or
desirable in order to expedite or facilitate the disposition of such
Registrable Securities.
(g) The Issuer will furnish to the Selling Holders and to
each Underwriter, if any, addressed to the Selling Holders or such
Underwriter, signed copies of (i) an opinion or opinions of counsel to
the Issuer and (ii) a comfort letter or comfort letters from the
Issuer's independent public accountants, each in such form and
covering such
<PAGE> 15
12
matters as the Selling Holders or the lead Underwriter reasonably
requests.
(h) The Issuer will otherwise use its best efforts to
comply with all applicable rules and regulations of the Commission,
and make available to its securityholders, as soon as reasonably
practicable, an earnings statement covering a period of 12 months,
beginning within three months after the effective date of the
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
(i) The Issuer will provide and cause to be maintained a
transfer agent and registrar of national standing for all Registrable
Securities covered by such registration statement from and after a
date not later than the effective date of such registration statement.
(j) The Issuer will use its best efforts (i) to cause all
such Registrable Securities covered by such registration statement to
be listed or quoted on any U.S. national securities exchange or
quotation system on which the Common Stock is then listed or quoted or
will be listed or quoted in connection with an Initial Public Offering
if the listing of such Registrable Securities is then permitted under
the rules of such exchange; or (ii) to secure the designation of all
such Registrable Securities covered by such registration statement as
a NASDAQ "national market system security" within the meaning of Rule
11Aa2-1 under the Exchange Act or, failing that, to secure NASDAQ
authorization for listing or quoting such Registrable Securities, in
each case if the Registrable Securities so qualify, and, without
limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable
Securities with the National Association of Securities Dealers, Inc.
in the case of each action referred to in this clause (ii) if
requested by a Selling Holder or by the lead Underwriter.
SECTION 3.5. Shelf Registration.
(a) At any time after 180 days following the closing of
the Initial Public Offering, the Issuer, upon the request of any Purchaser or
any Affiliate of any Purchaser, as applicable, will use its best efforts to
file a "shelf" registration statement (the "Shelf Registration") with respect
to the Registrable Securities owned by such Purchaser or Affiliate of a
Purchaser on an appropriate form pursuant to Rule 415 (or any similar provision
that may be adopted by the Commission) under the Securities Act and to cause
such Shelf Registration to become effective and to keep such Shelf Registration
effective and the disclosure therein current and complete until the Purchasers
and their Affiliates shall no longer hold any Registrable Securities. Any sale
of Registrable Securities pursuant to the Shelf Registration in an underwritten
public offering shall be deemed to be a Demand Registration subject to the
provisions of Sections 3.1, 3.3 and 3.13 hereof.
<PAGE> 16
13
(b) In the event that counsel for the Purchasers
determines that any of the Purchasers, or any successors thereto, has become an
Affiliate (as such term is defined in Rule 405 under the Securities Act) of the
Issuer, or any successor thereto, the Issuer (or its successor) shall use its
best efforts to cause to be filed as soon as practicable after receiving notice
thereof from such counsel a shelf registration statement (the "Resales
Registration Statement") under the Securities Act providing for the resale by
the Purchasers (or any of their Affiliates) of all securities of the Issuer
that were originally offered to the public (in the case of debt securities of
the Issuer) or pursuant to Rule 144A and that they acquire from time to time in
connection with market-making activities and to have such shelf registration
statement declared effective by the Commission. The Issuer (or its successor)
will use its best efforts to keep the Resales Registration Statement effective
and current until such time as each Purchaser and its Affiliates shall, in its
opinion, cease to be an Affiliate of the Issuer, as evidenced by written notice
sent promptly upon such event to the Issuer.
(c) During any consecutive 365-day period, the Issuer
shall have the privilege to suspend availability of either or both of the Shelf
Registration or the Resales Registration Statement and the related prospectus,
in each case for up to 60 days, if the Board of Directors determines in good
faith that there is a valid purpose for such suspension and provides notice of
such determination to the Agent at its address set forth in the Securities
Purchase Agreement. Notice of such suspension shall be given promptly to the
Agent.
SECTION 3.6. Registration Expenses. The Issuer shall pay
Registration Expenses incurred in connection with (x) any registration made or
requested to be made pursuant to this Article III, whether or not any
registration statement becomes effective and (y) any resale of Registrable
Securities pursuant to any underwritten Rule 144A offering.
SECTION 3.7. Indemnification by the Issuer. The Issuer
agrees to indemnify and hold harmless each Selling Holder, its officers,
directors, agents and Affiliates, and each Person, if any, who controls each
such Selling Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and expenses caused by any untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities (as amended or supplemented
if the Issuer shall have furnished any amendments or supplements thereto) or
any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein (in the case of a prospectus, in the light
of the circumstances under which they were made) not misleading except insofar
as such losses, claims, damages, liabilities or expenses are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information furnished in writing to the Issuer by or on behalf of any such
Selling Holder expressly for use therein. The Issuer also agrees, to the
extent permitted by applicable law, to indemnify any Underwriters of the
Registrable Securities, their officers and directors and each Person who
controls such underwriters on reasonable and customary terms.
<PAGE> 17
14
SECTION 3.8. Indemnification by Selling Holders. Each
Selling Holder agrees, severally but not jointly, to indemnify and hold
harmless the Issuer, its officers, directors and agents and each Person, if
any, who controls the Issuer 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 Issuer to such Selling Holder, but only with
reference to information related to such Selling Holder furnished in writing by
such Selling Holder (or by the Purchasers on its behalf) expressly for use in
any registration statement or prospectus relating to the Registrable
Securities, or any amendment or supplement thereto, or any preliminary
prospectus. Each Selling Holder also agrees to indemnify and hold harmless
Underwriters of the Registrable Securities, their officers and directors and
each Person who controls such Underwriters on substantially the same basis as
that of the indemnification of the Issuer provided in this Section 3.8.
SECTION 3.9. Conduct of Indemnification Proceedings. In case
any proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
Section 3.7 or 3.8, 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 reasonable fees and
disbursements of such counsel related to the 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 Indemnified Party and the Indemnifying Party and representation of
both parties by the same counsel would be in conflict or otherwise
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 the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for all such Indemnified Parties,
and that all such fees and expenses shall be reimbursed as they are incurred.
In the case of any such separate firm for the Indemnified Parties, such firm
shall be designated in writing by the Indemnified Parties. 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 shall indemnify and hold
harmless such Indemnified Parties from and against any loss or liability (to
the extent stated above) 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 third sentence 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
<PAGE> 18
15
entered into more than 30 Business 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 (x) includes an unconditional release
of such Indemnified Party from all liability arising out of such proceeding and
(y) provides that such Indemnified Party does not admit any fault or guilt with
respect to the subject matter of such proceeding.
SECTION 3.10. Contribution.
(a) To the extent the indemnification provided for herein
is for any reason unavailable to the Indemnified Parties in respect of any
losses, claims, damages or liabilities referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities as between the Issuer on the one
hand and the Selling Holders on the other, in such proportion as is appropriate
to reflect the relative benefits received by the Issuer and such Selling
Holders from the offering of the securities, or if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits but also the relative fault of the Issuer on the
one hand and of the Selling Holders on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Issuer on the one hand and the Selling
Holders on the other shall be deemed to be in the same proportion as the total
proceeds from the offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Issuer and such Selling Holders, as
set forth in the table on the cover page of the prospectus. The relative fault
of the Issuer on the one hand and of any Selling Holder on the other 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 Issuer or such
Selling Holder. The relative fault of the Issuer on the one hand and any
Selling Holder on the other 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 such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(b) The Issuer and each Selling Holder agree that it
would not be just and equitable if contribution pursuant to this Section 3.10
were determined by pro rata allocation (even if the Selling Holders were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding
<PAGE> 19
16
paragraph. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in the immediately
preceding paragraph 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 3.10, no Selling
Holder shall be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities of such Selling
Holder were offered to the public (less underwriters' discounts and
commissions) exceeds the amount of any damages which such Selling 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 Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 3.11. Participation in Underwritten Registrations.
No Person may participate in any underwritten registration hereunder unless
such Person (a) agrees to sell such Person's securities on the basis provided
in any underwriting arrangements approved by such Person and (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and these registration rights.
SECTION 3.12. Rule 144. The Issuer covenants that it will
file any reports required to be filed by it under the Securities Act and the
Exchange Act and will take such further action as any Selling Holder shall
reasonably request, all to the extent required from time to time to enable the
Selling Holders to sell Registrable Securities without registration under the
Securities Act pursuant to (a) Rule 144 under the Securities Act and Rule 144A
under the Securities Act, as such Rules are amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the Commission. Upon the
request of any Holder, the Issuer will deliver to such Holder a written
statement as to whether it has complied with such requirements.
SECTION 3.13. Holdback Agreements.
(a) Restrictions on Public Sale by Holder of Registrable
Securities. If and to the extent requested by the Issuer, in the case of a
non-underwritten public offering, and if and to the extent requested by the
lead Underwriter or Underwriters, in the case of an underwritten public
offering, the Holders agree not to effect, except as part of such registration
or a concurrent registration, any public sale or distribution of the securities
being registered or a similar security of the Issuer, or any securities
convertible into or exchangeable or exercisable for such securities, including
a sale pursuant to Rule 144 or Rule 144A, during the 10 days prior to, and
during such period that the Issuer (in the case of a non-underwritten public
offering) or the lead Underwriter (in the case of an underwritten public
offering) may reasonably request, but in no event longer than (1) in the case
of the Initial Public Offering, 180 days and (2) in all other cases, 90 days,
in each case beginning on the effective date of the registration statement.
<PAGE> 20
17
(b) Restrictions on Public Sale by the Issuer. The
Issuer agrees (i) not to effect any public sale or distribution of any
securities similar to those being registered in accordance with Section 3.1 or
Section 3.2 hereof, or any securities convertible into or exchangeable or
exercisable for such securities, during the 10 days prior to, and during such
period as the lead Underwriter may reasonably request, but in no event longer
than 180 days, beginning on, the effective date of any registration statement
(except pursuant to such registration statement and except pursuant to
registrations on Form S-4 or S-8 or any successor or similar form thereto or
pursuant to an unregistered offering to employees of the Issuer or its
Subsidiaries pursuant to an employee benefit plan as defined in Rule 405 of
Regulation C of the Securities Act) or the commencement of a public
distribution of Registrable Securities; and (ii) that any agreement entered
into after the date of this Agreement pursuant to which the Issuer issues or
agrees to issue any securities shall contain a provision under which holders of
such securities agree not to effect any public sale or distribution of any such
securities during the periods described in (a) above, in each case including a
sale pursuant to Rule 144 or Rule 144A (except as part of any such
registration, if permitted); provided, however, that the provisions of this
paragraph (b) shall not prevent the exercise, conversion or exchange of any
securities pursuant to their terms into or for other securities.
SECTION 3.14. Exclusivity. For so long as the Purchasers and
their Affiliates own a majority of the Series A Stock or Series A Common
Shares, the Issuer shall not grant any registration rights, except to Nevasa or
any of its Affiliates, or register any of its equity securities (other than
Common Stock issued pursuant to Section 4.7(a)(vi)(i)), except in accordance
with this Agreement or with the consent of the Holders of a majority of the
shares of Series A Stock or Series A Common Shares then outstanding.
ARTICLE IV
COVENANTS
SECTION 4.1. Information. So long as any shares of the
Series A Stock remain outstanding, the Issuer shall deliver to (x) MSGEM and
(y) the Agent, on behalf of each of the Holders (other than MSGEM), for so long
as the Purchasers own a majority of the Series A Stock originally issued
pursuant to the Securities Purchase Agreement, and thereafter, to each of the
Holders (or in the case of clauses (c), (d) and (e) below, to each of the Agent
and MSGEM):
(a) as soon as practicable and in any event within
forty-five (45) days after the end of the first three fiscal quarters,
consolidated balance sheets of the Issuer and its Subsidiaries as at
the end of such period and the related consolidated statements of
operations, stockholders' equity and cash flows of the Issuer and its
Subsidiaries for such fiscal quarter, setting forth in each case in
comparative form the consolidated figures for the corresponding
periods of the previous fiscal year, all in reasonable detail
<PAGE> 21
18
and certified by the Issuer's Chief Financial Officer that they fairly
present the financial condition of the Issuer and its Subsidiaries as
at the dates indicated and the results of their operations and changes
in their financial position for the periods indicated in accordance
with generally accepted accounting principles in the United States
consistently applied except as described therein, subject to changes
resulting from normal year-end adjustments;
(b) as soon as practicable and in any event within ninety
(90) days after the end of each fiscal year of the Issuer commencing
with the fiscal year ended December 31, 1997, audited consolidated
balance sheets of the Issuer and its Subsidiaries as at the end of
such year and the related audited consolidated statements of income,
stockholders' equity and cash flow of the Issuer and its Subsidiaries
for such fiscal year, setting forth in each case, in comparative form
the consolidated figures for the previous year, all in reasonable
detail and accompanied by a report thereon of independent certified
public accountants of recognized national standing selected by the
Issuer, which report shall be unqualified as to scope of audit and
shall state that such consolidated financial statements present fairly
the financial position of the Issuer and its Subsidiaries as at the
dates indicated and the results of their operations and changes in
their financial position for the periods indicated in conformity with
generally accepted accounting principles in the United States applied
on a basis consistent with prior years (except as otherwise stated
therein) and that the examination by such accountants in connection
with such consolidated financial statements has been made in
accordance with generally accepted auditing standards in the United
States;
(c) for so long as the Purchasers and their Affiliates
own a majority of the Series A Stock and at least 20% of the Series A
Stock originally issued pursuant to the Securities Purchase Agreement
remains outstanding, promptly upon receipt thereof, copies of all
reports submitted to the Issuer by independent public accountants in
connection with each annual, interim or special audit of the Issuer's
financial statements made by such accountant, including, without
limitation, the comment letter submitted by such accountants to
management in connection with their annual audit;
(d) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent or
made available generally by the Issuer to its securityholders or by
any Subsidiary of the Issuer to its securityholders other than the
Issuer or another Subsidiary, of all regular and periodic reports and
all registration statements and prospectuses, if any, filed by the
Issuer or any of its Subsidiaries with any securities exchange or
quotation system or with the Commission or any governmental authority
succeeding to any of its functions, and of all press releases and
other written statements made available generally by the Issuer or any
Subsidiary to the public or to other investors or potential investors
in securities of the Issuer;
<PAGE> 22
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(e) within five (5) Business Days after the last day of
each fiscal quarter, a certificate signed by the Issuer's Chief
Financial Officer certifying that the Issuer is in compliance in all
material respects with the terms and conditions of this Agreement, the
Charter and the Securities Purchase Agreement; and
(f) for so long as the Purchasers and their Affiliates
own a majority of the Series A Stock and at least 20% of the Series A
Stock originally issued pursuant to the Securities Purchase Agreement
remains outstanding, from time to time such additional information
regarding the financial position or business of the Issuer and its
Subsidiaries as the Agent or the Holders may reasonably request.
SECTION 4.2. Right to Participate in Certain Dispositions.
(a) For so long as the Purchasers own at least 10% of the
issued and outstanding capital stock of the Issuer (determined on a fully
diluted basis, including assuming the conversion of all Series A Stock then
outstanding), any Transfer of shares of stock of the Issuer or Nevasa or of any
other Person that directly or in the aggregate with its Affiliates owns 10% or
more of the capital stock of the Issuer (an "IMPSAT Holder") by any holder (a
"Transferor") of such stock (except a Transfer (x) by any Holder of its Series
A Stock or Series A Common Shares, (y) by any Existing Stockholder (as defined
in the Securities Purchase Agreement) to any other Existing Stockholder or to
any Person the majority of the outstanding equity interests of which is owned
by any Existing Stockholder, in each case which is, or at the time of any
Transfer becomes, a party to this Agreement and (z) pursuant to a public
offering registered under the Securities Act or a sale through the facilities
of the New York Stock Exchange, American Stock Exchange or NASDAQ National
Market) shall include by its terms and conditions an offer to include in such
Transfer (in accordance with the provisions of paragraphs (a)-(d) of this
Section 4.2), at the option of each of the Holders, the Pro Rata Portion (as
hereinafter defined) of the Series A Common Shares then owned by each such
Holder, on the same terms and conditions as the Transfer by the Transferor.
(b) If any holder of shares of stock (other than Series A
Stock, in the case of the Issuer) of the Issuer or an IMPSAT Holder receives or
solicits from a third party or parties (a "Transferee") an offer (an "Offer")
or offers to purchase or otherwise acquire shares of Common Stock, in the case
of the Issuer, or any common equity interests, in the case of an IMPSAT Holder
(the "Offered Shares") held by such holder, and such holder intends to pursue a
Transfer of such Offered Shares to such Transferee, such holder shall provide
written notice (the "Offer Notice") of such Offer to each Holder not later than
30 days prior to the consummation of such Transfer. The Offer Notice shall
identify the Offered Shares, the price offered for such Offered Shares (which,
if the Offered Shares are equity interests in an IMPSAT Holder, shall be the
price effectively offered for the Common Stock of the Issuer held by the IMPSAT
Holder), all other material terms and conditions of the Offer and, in the case
of an Offer in which the consideration payable for the Offered Shares consists
in whole or in part of consideration other than cash, reasonably detailed
information regarding such other
<PAGE> 23
20
consideration. Each Holder shall have the right and option, for a period of
not less than 20 days after the date the Offer Notice is given to the Holder
(the "Notice Period"), to notify the Transferee of its interest in Transferring
to the Transferee up to the Pro Rata Portion of such Holder's Series A Common
Shares pursuant to the Offer. Each Holder desiring to exercise such option
shall, prior to the expiration of the Notice Period, provide the Transferee
with a written notice specifying the number of Series A Common Shares which
such Holder has an interest in Transferring pursuant to the Offer (a "Notice of
Interest"). In addition, the Transferor shall use reasonable efforts to cause
the Transferee to make himself available to the Holders and representatives
thereof, at reasonable times and places, and to respond to reasonable inquiries
with respect to the Offer, the terms and conditions thereof and all other
matters with respect thereto. This Section 4.2(b) shall not apply to any
Transfer not subject to Section 4.2(a).
(c) If, at the end of the Notice Period, any Holder shall
not have given a Notice of Interest with respect to some or all of the Pro Rata
Portion of such Holder's Series A Common Shares contemplated by the Offer, such
Holder will be deemed to have waived all its rights under this Section 4.2 with
respect to the Transfer pursuant to the Offer of the portion of the Pro Rata
Portion of the Series A Common Shares owned by such Holder with respect to
which a Notice of Interest shall not have been given.
(d) "Pro Rata Portion" means, with respect to each
Holder, (A) in the case of a Transfer in connection with a Change of Control
(as defined in the Certificate of Designations), the total number of Series A
Common Shares owned by such Holder, and (B) in all other cases, a number equal
to the product of (i) the total number of Series A Common Shares then owned
(beneficially or of record) by such Holder (calculated on an as converted basis
for any shares of Series A Stock owned by such Holder), times (ii) a fraction,
the numerator of which shall be the total number of shares of Common Stock (or
in the case of a Transfer of equity interests in an IMPSAT Holder, the number
of shares of Common Stock that will be effectively Transferred as a result of
such transfer (the "Effective Number")) proposed to be Transferred by any
Transferor (together with the number of shares of Common Stock (or, if
applicable, the Effective Number) issuable upon the exercise of any derivative
security proposed to be Transferred by any Transferor), and the denominator of
which shall be the total number of shares of Common Stock (or, if applicable,
the Effective Number) (together with the number of shares of Common Stock (or,
if applicable, the Effective Number) issuable upon the exercise of any
derivative security) owned (beneficially or of record) by all Transferors
(including such shares and derivative securities so proposed to be
Transferred). If a Transferor shall Transfer any other shares of stock of the
Issuer or an IMPSAT Holder, each Holder shall have the right to include with
such Transfer its pro rata portion of the equity value of the Issuer.
SECTION 4.3. Drag-Along. For so long as any shares of Series
A Stock remain outstanding, if Nevasa or any of its Affiliates (a "Non
Purchaser Holder") proposes to Transfer substantially all of the shares of
capital stock of the Issuer beneficially owned (as
<PAGE> 24
21
defined in Rule 13d-3 under the Exchange Act) by such Non Purchaser Holder, and
if such Non Purchaser Holder so requests, the Holders shall Transfer all of the
Series A Stock and Series A Common Shares held by them acquired pursuant to
this Agreement (or any securities into which such securities are convertible or
exchangeable or for which they are exercisable) on the same terms as the
Transfer by such Non Purchaser Holder. Notwithstanding the first two sentences
of this paragraph, any such Holder may instead, contemporaneously with the
Transfer contemplated above, require the Issuer to redeem the securities of the
Issuer otherwise subject to the first two sentences of this Section 4.3 in
accordance with Article VI(C) of the Certificate of Designations, as if a
Change of Control (as defined in the Certificate of Designations) had occurred.
SECTION 4.4. Prohibited Issuance of Additional Series A
Stock. As long as any of the shares of Series A Stock remain outstanding, the
Issuer shall not issue any shares of Series A Stock to any Person other than
pursuant to the Securities Purchase Agreement.
SECTION 4.5. Right of First Offer. For the period from the
date hereof to the third anniversary of the Closing Date, in the event that the
Issuer or any of its Subsidiaries shall engage in any public offering or
private placement of any of its securities (except with respect to any sale by
IMPSAT S.A. of its commercial paper under its existing commercial paper
program) or any sale, transfer or other disposition of any material assets, or
any merger, consolidation or other material corporate transaction (a "Material
Transaction"), in each case for which the Issuer or any of its Subsidiaries
utilizes an underwriter, placement agent or advisor, the Issuer shall offer
first to Morgan Stanley & Co. Incorporated (or any successor thereto or an
Affiliate thereof selected by Morgan Stanley & Co. Incorporated ("MS&Co.")) the
right to act (on market terms) as sole (or, at the option of MS&Co., co-)
underwriter, placement agent or advisor to the Issuer or such Subsidiary with
respect to such Material Transaction. Following the receipt of any written
offer by MS&Co. with respect to such Material Transaction, the Issuer may
solicit an offer from any other party to act as underwriter, placement agent or
advisor to the Issuer or its Subsidiaries in respect thereof. If during such
three year period the Issuer or any of its Subsidiaries is in receipt of an
offer from any party other than MS&Co. to act as underwriter, placement agent
or advisor to the Issuer or such Subsidiary in respect of any Material
Transaction which the Issuer or its Subsidiaries propose to accept, the Issuer
or such Subsidiary shall offer first to MS&Co. in writing, setting forth the
material terms on which such party offers to consummate the proposed Material
Transaction, the right to act as sole (or, at the option of MS&Co., co-)
underwriter, placement agent or advisor to the Issuer or such Subsidiary and to
consummate such Material Transaction on such terms in lieu of such other party.
If MS&Co. shall fail to accept in writing the Issuer's or any of its
Subsidiaries' offer with respect to such proposed Material Transaction within
15 days of receipt thereof, and the Issuer or any of its Subsidiaries shall use
any other party in the role offered to MS&Co. or if the Issuer or any of its
Subsidiaries shall fail to make such offer, the Issuer and each of its
Subsidiaries shall, jointly and severally, pay MS&Co., as liquidated damages,
in cash on the closing date of such proposed Material Transaction, all fees,
commissions and other remuneration earned by or paid to such other party for
fulfilling
<PAGE> 25
22
such role, unless such Material Transaction shall have been consummated in
accordance with such terms with such party within 105 days after the Issuer
provided written notice of the proposed Material Transaction to MS&Co. on the
terms specified in such writing. It is agreed that MS&Co.'s damages for a
breach of the foregoing are not currently calculable, in that they would
consist of monetary loss as well as damage to the reputation of MS&Co. The
Issuer and its Subsidiaries shall promptly deliver to MS&Co. all documents
requested by MS&Co. for the purpose of determining the terms of such proposed
Material Transaction and the fees, commissions and other remuneration earned by
or paid to such other party for fulfilling such role. MS&Co. shall be an
express, intended third party beneficiary of this Section 4.5.
SECTION 4.6. Annual Budget. The Issuer will adopt an Annual
Budget for each Fiscal Year at a regularly scheduled meeting of the Board of
Directors, held no later than the December 5 of the immediately preceding
Fiscal Year.
SECTION 4.7. Approvals.
(a) Unless specifically approved or consented to in
writing by the Director or Directors appointed by the Purchasers or their
Affiliates pursuant to Article V, and except as otherwise expressly provided by
this Agreement, the Issuer and its Subsidiaries shall not, and no Person acting
on behalf of the Issuer or any of its Subsidiaries shall, permit or cause the
Issuer or any of its Subsidiaries to:
(i) add to, or permit, an increase in the number of
members of the Board of Directors of the Issuer (other than as
provided for in Section 5.2 hereof);
(ii) hire, remove or change the Issuer's Chief Executive
Officer, Chief Financial Officer, Deputy Chief Executive Officer,
Chief Operating Officer or materially amend the employment contract or
arrangements with any such Person;
(iii) commence a voluntary case under any applicable
bankruptcy, insolvency or other similar laws now or hereafter in
effect, or consent to the entry of an order for relief in any
involuntary case under any such law;
(iv) authorize any amendment to the charter or by-laws of
the Issuer or any Significant Subsidiary (within the meaning of
Regulation S-X under the Exchange Act), except as required by law,
that would have a material adverse effect on the rights of the
Holders;
(v) merge or consolidate with or into any Person or enter
into a similar business combination transaction, or convey, sell,
transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or a substantial part of the Issuer's
or any Significant Subsidiary's assets or take any action to bring
about a liquidation, winding-up or dissolution of the Issuer or any
Significant Subsidiary
<PAGE> 26
23
thereof;
(vi) issue or grant any capital stock, stock options,
warrants or other securities exchangeable or exercisable for or
convertible into any capital stock except (i) any issuance of Common
Stock by the Issuer to the public as part of a Public Equity Offering
(as defined in the Certificate of Designations), (ii) prior to an
Initial Public Offering, issuance by the Issuer of Common Stock at a
price per share which is at least equal to the then Current Market
Value per share of Common Stock (as defined in the Certificate of
Designations) to Existing Stockholders (as defined in the Securities
Purchase Agreement) for cash if the Holders are provided pre-emptive
rights on the same terms and conditions (determined on a fully diluted
basis, including assuming the conversion of all Series A Stock then
outstanding), (iii) issuances of Common Stock by the Issuer to Credit
Suisse First Boston or its Affiliates solely in exchange for capital
stock of IMPSAT Argentina S.A. if a Financial Expert (as defined in
the Certificate of Designations) provides to the Purchasers a written
opinion that such transaction is fair to the Issuer from a financial
point of view and (iv) stock options pursuant to a bona fide employee
stock option plan approved by the Purchasers, which approval shall not
be unreasonably withheld;
(vii) engage in any transaction or series of related
transactions outside the ordinary course of business with any
Affiliate or any Director or officer of the Issuer or any material
Subsidiary or any relative of any such Director or officer; or
(viii) authorize, release, circulate, or permit the release
of any public announcement or press release relating to the
Purchasers, the Agent, Morgan Stanley & Co. Incorporated or any of
their Affiliates.
(b) The provisions of this Section 4.7 (other than
(a)(viii)) shall no longer be binding if at any time the Purchasers and their
Affiliates do not beneficially own a majority of the shares of Series A Stock
issued on the Closing Date.
ARTICLE V
BOARD OF DIRECTORS
SECTION 5.1. Number. The Board of Directors currently
consists of six Directors and shall be increased as specified in Section 5.2
and Section 5.3 below.
SECTION 5.2. Appointment; Removal. (a) For so long as the
Purchasers and their Affiliates beneficially own a majority of the shares of
Series A Stock issued on the Closing Date, each of Princes Gate and MSGEM shall
have the right to appoint one Director (and remove and replace such Director).
Purchasers and their Affiliates that are holders of
<PAGE> 27
24
Series A Common Shares shall have the right to appoint one Director (and remove
and replace such Director) for so long as such holders own (beneficially or of
record) at least 5% of the capital stock of the Issuer, but in no event (other
than as provided in Section 5.3) will the holders of the Series A Stock and
Series A Common Shares be entitled to elect more than two Directors in the
aggregate. Each of the parties hereto shall vote all Common Stock owned by it,
at any regular or special meeting of the stockholders of the Issuer at which
Directors will be elected, or in any written consent executed in lieu of such a
meeting of stockholders, and shall take all actions necessary, to ensure the
election to the Board of Directors of any Person designated pursuant to this
Section 5.2 as a nominee for such position. The Issuer may appoint up to four
Directors that are not related to, and are not Affiliates of, any Existing
Stockholder (as defined in the Securities Purchase Agreement), and are not
directors of or employed by the Issuer or any Affiliate of the Issuer.
So long as MSGEM shall own any Series A Stock or Series A
Common Shares, it shall have the following rights with respect to the Issuer:
(a) the right to routinely consult with the management of the Issuer on matters
relating to the Issuer; (b) the right to inspect the books and records of the
Issuer; (c) the right to inspect the properties and operations of the Issuer;
and (d) except for any period during which MSGEM, acting on its own, has the
right to elect a Director, the right to have its representative attend the
meetings of the Board of Directors and to participate in discussions (but not
vote) at such meetings; provided, however, that any such rights may only be
exercised during business hours and on the giving by MSGEM of advance notice to
the Issuer of the exercise thereof. The rights provided to MSGEM in this
Section 5.2 are intended to enable MSGEM to be operated as a "venture capital
operating company" within the meaning of the regulations of the Department of
Labor set forth in 29 CFR Section 2510.3-101(d), and this Section 5.2 shall be
interpreted accordingly.
(b) Each Director appointed by the Holders of Series A
Stock or Series A Common Shares shall be entitled to be reimbursed by the
Issuer in respect of any expenses incurred by such Director in such capacity.
SECTION 5.3. Special Trigger Event. Notwithstanding anything
to the contrary set forth herein, for so long as the Purchasers and their
Affiliates beneficially own a majority of the shares of Series A Stock issued
on the Closing Date, upon the occurrence of any Special Trigger Event the
Holders of a majority of the shares of the Series A Stock then outstanding
shall have the right to immediately appoint on that date, and thereafter,
one-half of the members of the Board of Directors (and to remove and replace
such Directors), until the Special Trigger Event has been cured and is no
longer of any force or effect.
SECTION 5.4. Mechanics. Any appointment, removal or
replacement referred to in Section 5.2 or Section 5.3 shall be effective
immediately upon the sending by the Agent of written notice to the Issuer;
provided, however, that any appointment, removal or replacement by MSGEM
pursuant to the first sentence of Section 5.2 shall be effective
<PAGE> 28
25
immediately upon the sending by MSGEM of written notice to the Issuer.
ARTICLE VI
THE AGENT
SECTION 6.1. Appointment and Authorization. Each Holder of
Series A Stock irrevocably appoints and authorizes the Agent to (x) receive all
notices required to be given to any Holder of Series A Stock or Series A Common
Shares and (y) except as with respect to MSGEM, take all such actions and
exercise all such rights and powers as agent on its behalf as are conferred
upon such Holder of Series A Stock or Series A Common Shares under this
Agreement, together with all such powers as are reasonably incidental thereto;
provided, further, that this Section 6.1 shall not apply with respect to any of
MSGEM's rights under Section 5.2. The Agent hereby acknowledges and confirms
its acceptance of such appointment. Such authority may be exercised by the
Agent in its absolute discretion.
SECTION 6.2. Reliance by the Issuer and Other Holders. The
Issuer shall be entitled to treat the Agent as attorney-in-fact of each Holder
of Series A Stock and Series A Common Shares with respect to all matters under
this Agreement and shall not seek to communicate with any Holder of Series A
Stock or Series A Common Shares as to matters under this Agreement except
through the Agent.
SECTION 6.3. Liability of the Agent. Neither the Agent nor
any of its Affiliates nor any of their respective directors, officers, agents
or employees shall be liable to the Holders of Series A Stock for any action
taken or not taken by it in connection herewith in the absence of bad faith on
the part of the Agent. Neither the Agent nor any of its Affiliates nor any of
their respective directors, officers, agents or employees shall be responsible
for or have any duty to the Holders of Series A Stock to ascertain, inquire
into or verify (i) any statement, warranty or representation made in connection
with this Agreement or the Securities Purchase Agreement; (ii) the performance
or observance of any of the covenants or agreements of any other party to this
Agreement; or (iii) the validity, effectiveness or genuineness of this
Agreement or any other instrument or writing furnished in connection herewith.
The Agent shall not incur any liability to the Holders of Series A Stock by
acting in reliance upon any notice, consent, certificate, statement, or other
writing believed by it to be genuine or to be signed by the proper party or
parties.
SECTION 6.4. Indemnification. Each Holder of Series A Stock
jointly and not severally shall indemnify, when and as suffered or incurred,
the Agent, its Affiliates and their respective directors, officers, agents and
employees (to the extent not reimbursed by the Issuer) against any cost,
expense (including the reasonable fees and expenses of counsel), claim, demand,
action, loss or liability (except such as result from such indemnitees' gross
negligence or willful misconduct) that such indemnitees may suffer or incur in
connection with this
<PAGE> 29
26
Agreement or any action taken or omitted by such indemnitees hereunder.
SECTION 6.5. Successor Agent. The Agent may resign at any
time by giving notice thereof to the Holders of Series A Stock and the Issuer.
Upon any such resignation, the Holders of Series A Stock shall have the right
to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Holders of Series A Stock and shall have accepted such
appointment within 30 days after the retiring Agent gives notice of
resignation, then the retiring Agent may, on behalf of the Holders of Series A
Stock, appoint a successor Agent. Upon the acceptance of its appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Headings. The headings in this Agreement are
for convenience of reference only and shall not control or affect the meaning
or construction of any provisions hereof.
SECTION 7.2. No Inconsistent Agreements. The Issuer is not a
party to and will not hereafter enter into any agreement with respect to its
securities which is inconsistent with, or otherwise conflicts with or grants
rights superior to, the rights granted to the Holders under this Agreement; and
each of the Issuer and the Holders represents that it is not and agrees that it
will not become a party to any other agreement relating to the voting or
transfer of Voting Securities, or the management of the Issuer, or granting any
registration rights to any Person with respect to any of the Issuer's equity
securities except as permitted by the terms of this Agreement.
SECTION 7.3. Entire Agreement. This Agreement, the
Securities Purchase Agreement, the Note Purchase Agreement and the Certificate
of Designations constitute the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein,
and there are no restrictions, promises, representations, warranties,
covenants, or undertakings with respect to the subject matter hereof, other
than those expressly set forth or referred to herein or therein. This
Agreement and the documents referred to in the preceding sentence supersede all
prior agreements and understandings between the parties hereto with respect to
the subject matter hereof.
SECTION 7.4. Notices. Any notice, request, instruction or
other document to
<PAGE> 30
27
be given hereunder by any party hereto to another party hereto shall be in
writing (including telex, telecopier or similar writing) and shall be given to
such party by certified first class mail at its address with a return receipt
requested, by Federal Express or similar overnight mail service with signature
required for receipt, or by telex or telecopy at the telex or telecopier number
set forth on its signature page or to such other address as the party to whom
notice is to be given may provide in a written notice to the party giving such
notice, a copy of which written notice shall be on file with the Secretary of
the Issuer. Each such notice, request or other communication shall be
effective (i) if given by telex or telecopy, which such telex or telecopy is
transmitted to the telex or telecopy number specified in its signature page and
the appropriate answerback or confirmation, as the case may be, is received,
and a copy of such notice is sent by overnight mail service or (ii) if given by
certified mail or overnight courier, 72 hours after such communication is
deposited in the mails with first class postage prepaid or given to overnight
courier service, addressed as aforesaid.
SECTION 7.5. Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.
SECTION 7.6. Severability. The invalidity or
unenforceability of any provisions of this Agreement in any jurisdiction shall
not affect the validity, legality or enforceability of the remainder of this
Agreement in such jurisdiction or the validity, legality or enforceability of
this Agreement, including any such provision, in any other jurisdiction, it
being intended that all rights and obligations of the parties hereunder shall
be enforceable to the fullest extent permitted by law.
SECTION 7.7. Termination. This Agreement shall terminate and
be of no further force or effect with respect to each Holder (except as to
matters preceding the Holder's disposition of Equity Securities) when such
Holder no longer owns any Equity Securities; provided that the provisions of
Article I, Section 2.1, Article III, Sections 4.3 and 4.7(a)(viii) and this
Section 7.7 shall survive any such termination.
SECTION 7.8. Successors, Assigns, Transferees. The
provisions of this Agreement shall be binding upon and accrue to the benefit of
the parties hereto and their respective heirs, successors their direct and
indirect transferees and assigns. Neither this Agreement nor any provision
hereof shall be construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective successors and
assigns; provided that any provision of this Agreement expressly granting any
right or benefit to the Purchasers and their Affiliates shall (unless otherwise
provided) not be constituted to confer such right or benefit upon a transferee
or assignee of any Purchaser or Affiliate of a Purchaser.
<PAGE> 31
28
SECTION 7.9. Amendments; Waivers.
(a) No failure or delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
(b) Neither this Agreement nor any term or provision
hereof may be amended or waived except by an instrument in writing signed, in
the case of an amendment, by the parties thereto or, in the case of a waiver,
by the party against whom the enforcement of such waiver is sought.
SECTION 7.10. Counterparts; Effectiveness. This Agreement
may be executed 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. This Agreement shall become effective when each party
hereto shall have received a counterpart hereof signed by the other party
hereto, and the closing under the Securities Purchase Agreement shall have
occurred (the "Effective Date").
SECTION 7.11. Recapitalization, Etc. If any capital stock or
other securities are issued in respect of, or in exchange or substitution for,
any Equity Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Common Stock or any other change
in capital structure of the Issuer, appropriate adjustments shall be made with
respect to the relevant provisions of this Agreement so as to fairly and
equitably preserve, as far as practicable, the original rights and obligations
of the parties hereto under this Agreement.
SECTION 7.12. Remedies. The parties hereby acknowledge that
money damages would not be adequate compensation for the damages that a party
would suffer by reason of a failure of any other party to perform any of the
obligations under this Agreement. Therefore, each party hereto agrees that
specific performance is the only appropriate remedy under this Agreement and
hereby waives the claim or defense that any other party has an adequate remedy
at law.
SECTION 7.13. Consent to Jurisdiction. Each Holder and each
of the Issuer, Corporacion IMPSA S.A., Nevasa, Militello and Rotling
irrevocably submit to the non-exclusive jurisdiction of any Court of Chancery
of Delaware or United States Federal Court sitting in Delaware over any suit,
action or proceeding arising out of or relating to this Agreement. Each of the
Holders of Series A Stock hereby irrevocably appoints the Agent as its
authorized agent to accept and acknowledge on its behalf service of any and all
process
<PAGE> 32
29
which may be served in any such suit, action or proceeding in any such court
and represents and warrants that such agent has accepted such appointment.
Each Holder of Series A Stock consents to process being served in any such
suit, action or proceeding by serving a copy thereof upon the agent for service
of process referred to above, provided that to the extent lawful and possible,
written notice of such service shall also be mailed to such Holder. Each
Holder of Series A Stock agrees that such service shall be deemed in every
respect effective service of process upon such Holder of Series A Stock in any
such suit, action or proceeding and shall be taken and held to be valid
personal service upon and personal delivery to such Holder. Nothing in this
paragraph shall affect or limit any right to serve process in any manner
permitted by law, to bring proceedings in the courts of any jurisdiction or to
enforce in any lawful manner a judgment obtained in one jurisdiction in any
other jurisdiction.
Each of Corporacion IMPSA, Nevasa, Militello and Rotling (i)
irrevocably appoints CT Corporation (together with any successor, the "Process
Agent"), as its authorized agent in the State of Delaware in the upon which
process may be served in any such suit, action or proceeding described in this
Section 7.13, acknowledges that the Process Agent has accepted such designation
and agrees that service of process upon the Process Agent, and written notice
of such service to each of Corporacion IMPSA S.A., Nevasa, Militello and
Rotling by the person serving the same to the addresses specified on the
signature pages hereof, shall be deemed in every respect effective service of
process upon each of Corporacion IMPSA S.A., Nevasa, Militello and Rotling in
any such suit, action or proceeding and (ii) agrees to take any and all action,
including the execution and filing of any and all such documents and
instruments as may be necessary to continue such designation and appointment of
the Process Agent in full force and effect for the term of this Agreement.
SECTION 7.14. Transferability. The Holders shall have the
right to Transfer the Series A Stock and the Series A Common Shares to any
Person; provided that each such transfer is made in compliance with the
Securities Act and the Issuer receives evidence of such compliance reasonably
satisfactory to it.
<PAGE> 33
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed, as of the day and year first above written.
IMPSAT CORPORATION(1)
By:
--------------------------------------
Name:
Title:
CORPORACION IMPSA S.A.(2)
By:
--------------------------------------
Name:
Title:
NEVASA HOLDINGS LTD.(3)
By:
--------------------------------------
Name:
Title:
MILITELLO LIMITED(4)
By:
--------------------------------------
Name:
Title:
ROTLING INTERNATIONAL CORPORATION(5)
By:
--------------------------------------
Name:
Title:
<PAGE> 34
PRINCES GATE INVESTORS II, L.P.(6)
By: PG Investors II, Inc.,
General Partner
By:
--------------------------------------
Name: Stephen R. Munger
Title: President
By:
--------------------------------------
Name: James M. Wilmott
Title: Vice-President
MORGAN STANLEY GLOBAL
EMERGING MARKETS PRIVATE
INVESTMENT FUND, L.P.(7)
By: Morgan Stanley Global Emerging
Markets, Inc., General Partner
By:
--------------------------------------
Name:
Title:
MORGAN STANLEY GLOBAL
EMERGING MARKETS PRIVATE
INVESTORS, L.P.(7)
By: Morgan Stanley Global Emerging
Markets, Inc., General Partner
By:
--------------------------------------
Name:
Title:
<PAGE> 35
PGI INVESTMENTS LIMITED(6)
By: PG Investors II, Inc., as Attorney in Fact
By:
-------------------------------
Name: Stephen R. Munger
Title: President
By:
-------------------------------
Name: James M. Wilmott
Title: Vice-President
GREGOR VON OPEL(6)
By: PG Investors II, Inc., as Attorney in Fact
By:
-------------------------------
Name: Stephen R. Munger
Title: President
By:
-------------------------------
Name: James M. Wilmott
Title: Vice-President
INVESTOR INVESTMENTS AB(4)
By: PG Investors II, Inc., as Attorney in Fact
By:
-------------------------------
Name: Stephen R. Munger
Title: President
By:
-------------------------------
<PAGE> 36
33
Name: James M. Wilmott
Title: Vice-President
PG INVESTORS II, INC.,
AS AGENT(4)
By:
--------------------------------
Name: Stephen R. Munger
Title: President
By:
--------------------------------
Name: James M. Wilmott
Title: Vice-President
<PAGE> 37
34
(1) Address: Alferez Pareja 256
1107 Buenos Aires
Argentina
Attention: Chief Executive Officer
Telecopier number: 011-541-307-1525
(2) Address: 940 Avenida Eduardo Madero
Piso 19
1106 Buenos Aires, Argentina
Telecopier number: (541) 316-8868
(3) Address: 940 Avenida Eduardo Madero
Piso 19
1106 Buenos Aires, Argentina
Telecopier number: (541) 316-8868
(4) Address: c/o Mr. Roberto Vivo Chaneton
940 Avenida Eduardo Madero
Piso 19
1106 Buenos Aires, Argentina
Telecopier number: (541) 316-8868
(5) Address: Mr. Ricardo Verdaguer
940 Avenida Eduardo Madero
Piso 19
1106 Buenos Aires, Argentina
Telecopier number: (541) 316-8868
(6) Address: 1585 Broadway, 36th Floor
New York, NY 10036
Attention: James M. Wilmott
Telephone number: (212) 761-7860
Telecopier number: (212) 761-0518
(7) Address: 1221 Avenue of the Americas, 33rd Floor
New York, NY 10020
Attention: Dimitri Goulandris
Telephone number: (212) 762-7023
Telecopier number: (212) 762-8204
<PAGE> 1
Exhibit 10.1
STOCK PURCHASE AND TERMINATION AGREEMENT
dated as of February 27, 1998
by and between
NEVASA HOLDINGS LTD.
CORPORACION IMPSA SA
MILITELLO LIMITED
ROTLING INTERNATIONAL CORPORATION
RICARDO ANIBAL VERDAGUER
ROBERTO ABEL VIVO CHANETON
IMPSAT CORPORATION
IMPSAT SA
and
STET INTERNATIONAL NETHERLANDS NV
<PAGE> 2
STOCK PURCHASE AND TERMINATION AGREEMENT
This Stock Purchase and Termination Agreement (this "Agreement") is dated
February 27, 1998
by and between
1. NEVASA HOLDINGS LTD., a corporation organized and existing under the laws of
the Republic of Ireland ("Nevasa"), having its registered office at First
Floor, 17 Dame Street, Dublin 2;
2. CORPORACION IMPSA SA, a corporation organized and existing under the laws of
the Republic of Argentina ("CORIM"), having its headquarters at Av. E. Madero
940, 19th Floor, Buenos Aires;
3. MILITELLO LIMITED, a corporation organized and existing under the laws of
Tortola, British Virgin Islands ("Militello"), having its registered office
at ATC Trustees (BVI) Limited, Road Town, Tortola, British Virgin Islands;
4. ROTLING INTERNATIONAL CORPORATION, a corporation organized and existing under
the laws of Tortola, British Virgin Islands ("Rotling"), having its
registered office at Sucre & Sucre Trust Limited, Chera Chambers, Road Town,
Tortola, British Virgin Islands;
5. MR RICARDO ANIBAL VERDAGUER, an individual ("Verdaguer"), residing at Alferez
Pareja 256, Buenos Aires, Argentina;
6. MR ROBERTO ABEL VIVO CHANETON, an individual ("Vivo"), residing at Alferez
Pareja 256, Buenos Aires, Argentina;
7. IMPSAT CORPORATION., a corporation organized and existing under the laws of
the State of Delaware, United States of America (the "Company"), having its
headquarters at Corporation Trust Center, 209 Orange Street, Wilmington,
Country of Newcastle, Delaware, United States of America; and
8. IMPSAT SA., a corporation organized and existing under the laws of the
Republic of Argentina ; ("IMPSAT Argentina"), having its headquarters at
Alferez Pareja 256, Buenos Aires.
1
<PAGE> 3
(CORIM, Militello, Rotling, Verdaguer and Vivo being hereinafter referred to
collectively as "Grupo A")
and
STET INTERNATIONAL NETHERLANDS NV, a corporation organized and existing under
the laws of The Netherlands ("STET"), having its registered office in 3111
Strawinskylaan, 'Atrium', 6th Floor, Amsterdam.
WITNESSETH:
- - WHEREAS, STET is the owner of 25,198,160 SHARES, par value U.S.$1.00 per
share, of the Class A voting common stock (the "Company Shares") of the
Company, and of 33 SHARES, par value P$ 0.01 per share, of the Class B voting
common stock (the "IMPSAT Shares") of IMPSAT S.A., (the Company Shares and the
IMPSAT Shares being referred to collectively as the "Shares");
- - WHEREAS, Nevasa wishes to purchase from STET, and STET wishes to sell to
Nevasa, the Shares for an aggregate purchase price of U.S.$ 125,000,000 (one
hundred and twenty five million Dollars) (the "Purchase Price"), in each case
in accordance with the terms and conditions set forth in this Agreement;
- - WHEREAS, Nevasa, Grupo A, and STET are parties to a Shareholders Agreement,
dated as of December 16, 1994, as amended (the "Shareholders Agreement")
annexed hereto as Exhibit 1 relating to the ownership of the capital stock of,
and certain management rights in respect of, the Company;
- - WHEREAS, Nevasa each Person in Grupo A and STET wish to terminate the
Shareholders Agreement with effect from the Closing Date; and
- - WHEREAS, Grupo A are parties to this Agreement for the purposes, inter alia,
of terminating the Shareholders' Agreement with effect from the Closing Date.
NOW THEREFORE, in consideration of the mutual covenants set forth herein and
for other good and valuable consideration, the adequacy, receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
2
<PAGE> 4
follows:
SECTION 1 - DEFINITIONS.
SECTION 1.1 DEFINITIONS. In addition to other terms defined elsewhere herein,
the following terms shall have the meanings assigned to them below (such terms
to be equally applicable to both singular and plural forms of the terms defined
or referred to):
"AFFILIATE" or "affiliate" shall mean, with respect to any specified Person,
any Person directly or indirectly controlling, controlled by, or under common
control with, such specified Person; provided that in the case of a Person who
is an individual, such terms shall also include members of such specified
Person's immediate family.
"ARGENTINA" shall mean the Republic of Argentina.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or legal
holiday on which banking institutions in New York City, United States of
America are open for the transaction of normal banking business.
"CLOSING" shall have the meaning ascribed to such term in Section 2.2 hereof.
"CLOSING DATE" shall have the meaning ascribed to such term in Section 2.2
hereof.
"CNV" shall mean the Comision Nacional de Valores of Argentina.
"CONTROL" or "control" when used with respect to any Person, shall mean the
power to direct the management and policies of such person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"U.S.$" and "DOLLARS" shall mean the lawful currency of the United States of
America.
"FCC" shall mean the United States Federal Communications Commission.
3
<PAGE> 5
3
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing, including,
without limitation, the CNV and the FCC.
"GOVERNMENTAL AUTHORIZATIONS" shall mean any approvals, authorizations,
permits, consents, exemptions and licenses and other actions of or by, and
notices to or filings or registrations with, any Governmental Authority.
"IRS" shall mean the United States Internal Revenue Service or any successor,
agency, and, to the extent relevant, the United States Department of the
Treasury.
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation any conditional sale or other
title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller, or any agreement to
give any security interest).
"PERSON" shall mean an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture, or other
entity of whatever nature.
"P$" shall mean the lawful currency of Argentina.
"REPRESENTATIVE" shall mean, with respect to a particular Person, any director,
officer, employee, general partner, limited partner, co-owner, member, nominee,
managing director or controlling Person of such Person.
"SUBSIDIARY" shall mean, with respect to any Person, any Person directly or
indirectly controlled by such Person. For purposes of this definition,
"control" of a Person means the power, direct or indirect, to vote more than
fifty percent (50%) of the securities having voting power for the election of
directors of such Person or otherwise to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
4
<PAGE> 6
"TRANSFER" or "TRANSFER" shall mean any direct or indirect sale, assignment,
mortgage, transfer, pledge, gift, hypothecation or other disposition of or
transfer of capital stock. The term "Transfer" used as a verb has a
corresponding meaning.
SECTION 2 - TRANSFER OF SHARES AND CLOSING.
Section 2.1 Transfer of Shares
(a) At the Closing provided for in Section 2.2 STET shall transfer to Nevasa or
any designated asignee (as specified in Section 9.8 below), free and clear
of any Liens, the Shares along with all rights and privileges in the respect
of the Shares (including without limitation, any existing or future rights
to dividends, distribution, royalties, fees or other amounts payable or
owning to STET in respect of the Shares or the Shareholders' Agreement) and
Nevasa or any designated asignee shall purchase the Shares for the Purchase
Price.
(b) The Purchase Price shall be paid by Nevasa as follows. At the Closing,
Nevasa shall deliver to STET U.S.$125.000.000 in inmediately available funds
by wire transfer to an account designated by STET (the "STET Account") no
later than the third Business Day prior to the Closing Date at a bank in the
City of New York, State of New York, United States of America.
Section 2.2 Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at 10:00 a.m. on march 16, 1998, or 10 a.m. on
March 19, 1998, if any of the parties request so by giving writen notice of
suchto the other parties at least 3 (three) Business Days prior to March 16,
or such other date 8which shall be a Business Day) as shall be agreed to
between Nevasa and STET (the "Closing Date") at the offices of Arnold &
Poter, 399 Park Avenue, New York City, New York, United States of America.
At the Closing, the following events shall take place:
(a) STET shall deliver to Nevasa a copy of the minutes of a meeting of its board
of directors authorizing the execution and performance by STET of this
Agreement (including the termination of the Shareholders' Agreement) and any
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documents to be entered into at Closing to which it is a party together
with:
(i) a certificate issued by a civil law notary stating that the photocopy
of such minutes attached to such certificate is a true copy of the
original; and
(ii) a certificate issued by a civil law notary that the person who has
signed any powers of attorney on behalf of STET is duly authorized to
represent STET;
(b) Nevasa shall deliver to STET a copy of the minutes of a duly held meeting
of its board of directors authorizing the execution and performance by
Nevasa of this Agreement (including the termination of the Shareholders'
Agreement) and any documents to be entered into at Closing to which it is a
party, certified as correct by the secretary of Nevasa together with any
power of attorney granted thereunder, if any;
(c) CORIM shall deliver to STET a certified copy of the minutes of a duly held
meeting of its board of directors authorizing the execution and performance
by CORIM of this Agreement (including the termination of the Shareholders'
Agreement) and any documents to be entered into at Closing to which it is a
party, together with any power of attorney granted thereunder, if any;
(d) Militello shall deliver to STET a certified copy of the minutes of a duly
held meeting of its board of directors authorizing the execution and
performance by Militello of this Agreement (including the termination of
the Shareholders' Agreement) and any documents to be entered into at
Closing to which it is a party, together with any power of attorney granted
thereunder, if any;
(e) Rotling shall deliver to STET a certified copy of the minutes of a duly
held meeting of its board of directors authorizing the execution and
performance by Rotling of this Agreement (including the termination of the
Shareholders' Agreement) and any documents to be entered into at Closing to
which it is a party, together with any power of attorney granted
thereunder, if any;
(f) The Company shall deliver to STET a certified copy of the minutes of a duly
held meeting of its board of directors authorizing the execution and
performance by the Company of this Agreement and any documents to be
entered into at Closing to which it is a party, certified as correct by the
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secretary of the Company, together with any power of attorney granted
thereunder, if any;
(g) IMPSAT Argentina shall deliver to STET a certified copy of the minutes of a
duly held meeting of its board of directors authorizing the execution and
performance by IMPSAT Argentina of this Agreement and any documents to be
entered into at Closing to which it is a party, together with any power of
attorney granted thereunder, if any;
(h) Nevasa shall pay the Purchase Price to STET in inmediately available funds
by wire transfer to the STET Account designated in acordance with Section
2.1(b) hereof;
(i) STET, after having received confirmation from its bank that the Purchase
Price has been irrevocably credited to the STET Account, shall deliver to
Nevasa or its designated asignee certificates representing the Shares,
together with any endorsements or stock powers necessary for the
registration of the transfer of such Shares to Nevasa or its designated
asignee;
(j) In respect of the IMSAT Shares, STET shall deliver to IMPSAT Argentina
written notice of the transfer of such IMPSAT Shares, and, upon receipt
thereof Nevasa shall procure that a board meeting of IMPSAT Argentina be
held at which it shall be resolved that:
(i) the transfer be registered in the Stock Ledgers of IMPSAT Argentina
(the "Libro Registro de Acciones");
(ii) the resignations of the representatives of STET as directors of
IMPSAT Argentina (as referred to in Section 2.2 (k) below) be
tendered and accepted so as to take effect at Closing; and
(iii) a shareholders' meeting of IMPSAT Argentina be convened and held at
which it be resolved that :
(a) each of the persons nominated by Nevasa shall be appointed
directors of IMPSAT Argentina, as Nevasa shall direct; and
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(b) the action taken by each of the representatives of STET resigning as
directors of IMPSAT Argentina up to the Closing Date shall be
approved; and
(k) All representatives of STET shall resign effective at the Closing Date from
their positions as directors of the Company, IMPSAT Argentina or any other
Subsidiaries of the Company and STET shall deliver to Nevasa such
resignations letters, reflecting such resignations. The resignation letters
shall be substantially in the form of Exhibit 2 hereto.
Section 2.3 Termination of Shareholders Agreement.
Effective as of the Closing Date, and subject to the terms and conditions of
this Agreement, each of STET, Nevasa and Grupo A agree that the Shareholders
Agreement shall be terminated in its entirety and be of no further force and
effect. Not withstanding the provision made in Clause 19 (Survival) of the
Share Holders Agreemnet, the parties hereto acknowledge and agree that this
Agreement shall terminate whith regard to Clause 10 (Confidentiality) and
Clause 13 (Applicable Law) of the Shareholders' Agreement.
Section 2.4 Further Actions.
In addition to the matters set forth above in this Section 2, the parties
hereto prior to, at or after the Closing Date shall do and perform or cause to
be done and performed all such further reasonable acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents reasonably necessary, proper or advisable to give full legal effect
to the transactions specified in Section 2 and to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
SECTION 3 - CONDITIONS PRECEDENT
Section 3.1 Conditions to Obligations of Nevasa.
The obligations of Nevasa to consummate the transactions contemplated hereby
shall be subject to the satisfaction (or waiver by Nevasa in writing delivered
to
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STET), on or prior to the Closing Date, of each of the following conditions:
(a) the representations and warranties of STET contained herein shall have been
true and correct in all material respects when made and shall be repeated
and be true and correct in all material respects as of the Closing Date, and
STET shall have delivered a certificate from one of its duly authorized
officers certifying to the foregoing in the form of Exhibit 3 ;
(b) STET shall have performed and complied with in all material respects all
agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to or at the Closing Date; and
(c) all Governmental Authorizations and all approvals of, or filings with, any
other Person required to be obtained or made by STET in connection with the
execution, delivery and performance by STET of this Agreement shall have
been obtained or made by STET and shall be in full force and effect.
Section 3.2 Conditions to Obligations of STET.
The obligations of STET to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction (or waiver by STET in writing
delivered to Nevasa), on or prior to the Closing Date, of each of the following
conditions:
(a) the representations and warranties of Nevasa contained herein shall have
been true and correct in all material respects when made and shall be
repeated and be true and correct in all material respects as of the Closing
Date with respect to Nevasa and its designated asignee and Nevasa and its
designated asignee shall have delivered a certificate from one of its duly
authorized officers certifying to the foregoing in the form of Exhibit 3 for
Nevasa and in the for of Exhibit 4 for its designated asignee, if any ;
(b) Nevasa and its designated asignee shall have performed and complied with in
all material respects all agreements and conditions contained in this
Agreement required to be performed or complied with by it prior to or at the
Closing Date;
(c) All Governmental Authorizations and all approvals of, or filings with, any
other Person required to be obtained or made by Nevasa and its designated
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asignee in connection with the execution, delivery and performance by Nevasa
of this Agreement shall have been obtained or made by Nevasa and shall be in
full force and effect; and
(d) Nevasa shall procure that the Company shall execute a certificate in the
form of Exhibit 5 to this Agreement and mail the respective notice to the
IRS giving evidence to STET of such mailing.
Section 3.3 Conditions to Obligations of the Parties.
The obligations of Nevasa and STET to consummate the transactions contemplated
by this Agreement shall be subject to the condition that there shall be no
judgment, order or decree of any court and no order, notice or regulation of
any applicable Governmental Authority in effect and, no material or significant
third party litigation, proceeding, or investigation pending or threatened
before any court or Governmental Authority having jurisdiction over the matter
or any of the parties hereto in each case that would restrain, prohibit or seek
to restrain or prohibit the consummation of the transactions contemplated by
this Agreement in any material respect.
SECTION 4 - PAYMENTS
Section 4.1 No Set-Off, Etc.
Except as required by applicable law, all payments to be made pursuant to this
Agreement shall be made in the currency in which such amount is stated to be
due and payable without set-off or counterclaim. In the event of any
deduction or withholding for or on account of, or any other required payment of
any taxes, levies, imposts, duties, fees, assessments, restrictions, conditions
or other charges of whatever nature (including any registration, stamp,
documentary or similar taxes, fees or charges) (collectively "Taxes"), are due
and payable in respect of the payment of the Purchase Price and the transfer of
the Shares, STET shall be responsible for the payment of all such Taxes and all
interest, penalties or similar liabilities with respect thereto required by law
to be paid by the seller of the Shares and Nevasa shall be responsible for the
payment of all such Taxes and all interest, penalties or similar liabilities
with respect thereto, required by law to be paid by the buyer of the Shares.
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SECTION 5 - REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties of STET.
STET hereby represents and warrants to Nevasa as follows:
(a) STET is a corporation duly organized, validly existing under the laws of The
Netherlands, with full power and authority to execute, deliver and perform
its obligations under this Agreement, including all documents executed or to
be executed in connection herewith or therewith;
(b) This Agreement and all documents executed or to be executed in connection
herewith have been, or as of the date of such execution will be, duly and
validly authorized, executed and delivered by STET;
(c) Neither the execution, delivery and performance of this Agreement and all
documents executed or to be executed in connection herewith by STET
violates, has resulted or will result in a breach of any of, or constitutes
a default (or an event which with or without notice and/or lapse of time
would constitute a default) under, STET's organizational documents or
by-laws, or any agreement or instrument to which STET is a party or by which
STET or its assets or revenues are bound, or any statute, order, rule or
regulation of any court or other Governmental Authority applicable to STET;
(d) This Agreement and all documents executed or to be executed in connection
herewith are the legal, valid and binding obligations of STET, enforceable
against STET in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws affecting creditors' rights generally,
moratorium laws from time to time in effect, and by equitable principles
restricting the availability of equitable remedies; and
(e) The Shares are owned beneficially and legally by STET and will be
transferred to Nevasa or its designated asignee on the Closing Date free and
clear of any Liens.
Section 5.2 Representations and Warranties of Nevasa.
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Nevasa hereby represents and warrants to STET as follows:
(a) Nevasa is a corporation duly organized and, validly existing under the laws
of the Republic of Ireland, with full power and authority to execute,
deliver and perform its obligations under this Agreement, including all
documents executed or to be executed in connection herewith and therewith;
(b) This Agreement and all documents executed or to be executed in connection
herewith and therewith have been, or as of the date of such execution will
be, duly and validly authorized, executed and delivered by Nevasa;
(c) Neither the execution, delivery and performance of this Agreement and all
documents executed or to be executed in connection herewith by Nevasa
violates, has resulted or will result in a breach of any of, or constitutes
a default (or an event which with or without notice and/or lapse of time
would constitute a default) under, Nevasa's Memorandum of Incorporation and
Articles of Association, or any agreement or instrument to which Nevasa is a
party or by which Nevasa or its assets or revenues are bound, or any
statute, order, rule or regulation of any court or other Governmental
Authority applicable to Nevasa; and
(d) This Agreement and all documents executed or to be executed in connection
herewith are the legal, valid and binding obligations of Nevasa, enforceable
against Nevasa in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws affecting creditors' rights generally,
moratorium laws from time to time in effect, and by equitable principles
restricting the availability of equitable remedies.
SECTION 6 - COVENANTS
Section 6.1 Confidentiality of Information.
For a period of three years from the Closing Date, STET shall not, and shall
ensure that its directors, officers and employees shall not, use, disclose or
otherwise make public for any and all purposes, any information, facts or
discoveries (including, without limitation any business, financial and
technical
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information and data) (collectively "Information"), developed, gained or
obtained as a result of, or in the performance of, the Shareholders Agreement
or by virtue of STET's ownership interest in or representation on the Board of
Directors of the Company, IMPSAT Argentina and any other Subsidiary of the
Company (including for this purpose IMPSAT Comunicacoes Ltda. ("IMPSAT do
Brasil"), and STET shall ensure that all such Information shall be held
strictly confidential by STET and all of its directors, officers and employees.
The foregoing restrictions shall not apply to any Information that: (a) has
become or becomes publicly available other than as a result of any action or
omission by STET or any of its directors, officers or employees in violation of
this Agreement; (b) has been known or developed independently by STET or its
Affiliates or Representatives prior to the receipt of any such Information from
the Company, IMPSAT Argentina or any such other Subsidiary of the Company; or
(c) is required by law to be disclosed to any Governmental Authority or STET is
obliged to produce under order of a court of competent jurisdiction; provided,
however, that prior to making any such disclosure to any Governmental Authority
STET shall provide Nevasa with prior written notice and, where reasonably
practicable, provide Nevasa an opportunity so that Nevasa, the Company or
IMPSAT Argentina may seek (with STET's cooperation, if so requested by Nevasa)
a protective order or other appropriate remedy.
Section 6.2 Solicitation of Employees.
For a period of two years from the Closing Date, STET shall not and shall use
its reasonable efforts to ensure that its Affiliates and Representatives shall
not initiate or mantain contact with any present or former employee of the
Company or any of its Subsidiaries (including for this purpose IMPSAT do
Brasil) regarding any non-public information relating to the business,
prospects, operations or finances of the Company and its Subsidiaries, or hire
or seek to hire any such present or former employee (the latter having left the
Company or any of its Affiliates within the last two years of such hiring) in
any capacity, or induce or seek to induce any present employee to leave such
employment
Section 6.3 No Disparagement.
Nevasa and STET shall not, and shall use their reasonable efforts to ensure
that each of their respective Affiliates and Representatives shall not, make or
publish any disparaging statements, whether verbal or written, regarding any
other party
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hereto (or such other party's Affiliates, directors, officers, employees,
exclusive agents, products, services or business capabilities) which materially
adversely affects the goodwill or business of such other party ; however, any
truthful statement made, given or communicated to any Governmental Authority
shall not be deemed to be diparaging.
Section 6.4 Equitable Remedies.
STET acknowledges that the payment of the Purchase Price includes consideration
for the obligations of STET contained in Sections 6.1, 6.2 hereof, and the
parties agree that Sections 6.1, 6.2 hereof may be enforced by a mandatory
injunction or other form of equitable relief appropriate and applicable to
ensure its specific performance, but these rights shall not be construed as a
limitation of any other available remedies.
SECTION 7 - RELEASES AND INDEMNIFICATION
Section 7.1 Releases and Indemnities of the Nevasa Released Parties.
(a) Effective as of the Closing Date, STET and each of its Affiliates and
Representatives (the "STET Releasing Parties") shall hereby voluntarily,
knowingly, finally and irrevocably release, relinquish, waive and forever
discharge Nevasa, each Person in Grupo A., the Company, IMPSAT Argentina,
all other Subsidiaries of the Company and their respective Affiliates and
Representatives (the "Nevasa Released Parties") from any and all legal,
equitable or other claims, actions, proceedings, causes of action, suits,
debts, contracts, controversies, agreements, promises, damages, judgments,
executions, demands and liabilities of any nature whatsoever, whether known
or unknown, suspected or unsuspected, fixed or contingent (collectively,
"Claims"), that any of the STET Releasing Parties possesses or could possess
or has asserted or could have asserted against any of the Nevasa Released
Parties with respect to, in connection with, or in any way related to or
arising out of the Shareholders Agreement, any actions or omissions by any
of the Nevasa Released Parties with respect to the Company or IMPSAT
Argentina (including actions and omissions by any Affiliates of the Nevasa
Released Parties in any capacity as Representatives or agents of the
Company, IMPSAT Argentina or any other Subsidiary of the Company), and each
of the STET Releasing Parties agrees not to assert against any of the Nevasa
Released
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Parties any such Claims, excepting only any Claims arising by virtue of any
violation or threatened violation of this Agreement.
The parties acknowledge and agree that the releases described in the
foregoing sentence shall not apply in respect of the of U.S.$810,000 and
U.S.$60,000 due and payable under invoices dated February 11, 1998 and
numbered 3/71 and 4/71, by Resis Ingenieria S.A. to STET International
S.p.A. and /or STET with respect to certain Stet Representatives seconded to
the Company.
(b) Each of the Nevasa Released Parties hereby agrees to indemnify and hold
harmless each of the STET Released Parties (as defined below) and their
respective directors, officers, agents, and employees (each, a "STET
Indemnitee") from any losses, liability, loss, cost, expense (including all
reasonable attorneys' fees), penalties, assessments or fines (including all
actions or claims in respect thereof (collectively, "Losses") that may be
imposed on, incurred by or asserted against any STET Indemnitee arising out
or resulting from or by reason of any breach by Nevasa of any
representation, warranty, covenant or other provision contained in this
Agreement or any document to be delivered pursuant to this Agreement.
For the avoidance of doubt and notwithstanding the foregoing, each of the
Company Releasing Parties (as defined below) hereby accepts to indemnify and
hold harmless each of STET's Representatives who served as directors or officers
of the Company or any of its Affiliates to the extent that such directors or
officers were indemnified under Section 10 of Article 3 of the By-laws of the
Company
Section 7.2 Releases and Indemnities of STET.
(a) Effective as of the Closing Date, each of Nevasa, each Person in Grupo A,
the Company, IMPSAT Argentina and their respective Affiliates and
Representatives (the "Company Releasing Parties") shall hereby voluntarily,
knowingly, finally and irrevocably release, relinquish, waive and forever
discharge STET and its Affiliates and Representatives (the "STET Released
Parties") from any and all Claims that any of the Company Releasing Parties
possesses or could possess or has asserted or could have asserted against
any of the STET Released Parties with respect to, in connection with, or in
any way related to or arising out of, the Shareholders Agreement, any
actions or omissions by any of the STET Released
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Parties with respect to the Company, or any of its Affiliates (including
actions and omissions by any of the STET Released Parties in any capacities
as Representatives or agents of the Company, IMPSAT Argentina or any other
Subsidiary of the Company), and each of the Company Releasing Parties agrees
not to assert against any of the STET Released Parties any such Claim,
excepting only any Claim arising by virtue of any violation or threatened
violation of this Agreement.
(b) STET hereby agrees to indemnity and hold harmless each of the Nevasa
Released Parties and their respective directors, officers, agents, and
employees (each, a "Nevasa Indemnitee") from any Losses that may be imposed
on, incurred by or asserted against any Nevasa Indemnitee arising out or
resulting from or by reason of any breach by STET of any representation,
warranty, covenant or other agreement contained in this Agreement.
Section 7.3 Scope of Releases
The releases provided for in section 7.1 and 7.2 hereof shall not apply in
respect of any liability of a Nevasa Released Party or a STET Released Party
that arises out of or relates to any written agreement, contract, obligation,
promise, or undertaking between a Company Releasing Parties and a STET
Releasing Party for the purchase and sale of goods or services or any other
such commercial undertaking.
SECTION 8 - TERMINATION
Section 8.1 Grounds for Termination. This Agreement may be terminated at any
time on or before the Closing Date by;
(a) The written agreement of Nevasa and STET;
(b) Nevasa, upon ten (10) Business Days' prior written notice, upon the breach
by STET of any of its representations, warranties, covenants or agreements
contained in this Agreement or in the event that STET should fail to cause
to occur any condition that is a condition precedent to the obligations of
Nevasa hereunder or if satisfaction of such a condition is or becomes
unlikely to be attainable by STET before the Closing Date (other than
through the failure of Nevasa to comply with its obligations under this
Agreement) and Nevasa has
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not waived such condition or breach on or before the Closing Date; provided,
however, that STET shall have a period of ten (10) Business Days to cure or
correct any such breach or to cause to occur any such condition;
(c) STET, upon ten (10) Business Days' prior written notice, upon the breach by
Nevasa of any of its representations, warranties, covenants or agreements
contained in this Agreement or in the event that Nevasa should fail to cause
to occur any condition that is a condition precedent to the obligations of
Nevasa hereunder; or if satisfaction of such a condition is or becomes
unlikely to be attainable by Nevasa before the Closing Date (other than
through the failure of STET to comply with its obligations under this
Agreement) and STET has not waived such condition or breach on or before the
Closing Date; provided, however, that Nevasa shall have a period of ten (10)
Business Days to cure or correct any such breach or to cause to occur any
such condition.
SECTION 9 - MISCELLANEOUS
Section 9.1 Amendments; Waivers.
(a) No amendment of any provision of this Agreement shall be effective unless it
is in writing and signed by Nevasa and STET, and no waiver of any provision
of this Agreement, nor consent to any departure by any party hereto, shall
be effective unless it is in writing and signed by Nevasa and STET, and then
such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which it is given.
(b) No failure on the part of any party to exercise, and no delay in exercising,
any right, power or privilege hereunder or under any document referred to in
this Agreement shall operate as a waiver thereof by such party, nor shall
any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies of each party provided
herein and in the documents referred to in this Agreement (i) are cumulative
and are in addition to, and not exclusive of, any rights or remedies
provided by law, and (ii) are not conditional or contingent on any attempt
by such party to exercise any of its rights under any of the documents
referred to in this Agreement against the other party or any other entity.
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Section 9.2 Notices.
Except as expressly set forth herein, all demands, notices, requests, consents,
and communications hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered by courier service or messenger, or
sent by overnight delivery service or facsimile transmission, to the following
addresses, or such other addresses as may be furnished hereafter by notice in
writing, to the following parties:
(i) in the case of Nevasa:
NEVASA HOLDINGS LTD.
Address: Av. E. Madero 940-19th Floor
Buenos Aires - Argentina
Attention: Mr. Enrique Pescarmona
Telecopy No.: + 54 1 316 8868;
(ii) in the case of Grupo A
GRUPO A
Address: Av. E. Madero 940-19th Floor
Buenos Aires - Argentina
Attention: Mr. Enrique Pescarmona
Telecopy No.: + 54 1 316 8868;
(iii) in the case of STET:
STET INTERNATIONAL NETHERLANDS NV
Address: Strawiskylaan 6th Floor
'Atrium' 3111
ZX 1077 Amsterdam - the Netherlands
Attention: Chief Executive Officer
Telecopy No.:+ 31 20 3011101.
(iv) in case of the Company
IMPSAT CORPORATION
Address: Alferez Pareja 256
Buenos Aires - Argentina
Attention: Chief Executive Officer
Telecopy No: +54 1 362 5030
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(v) in case of IMPSAT Argentina
IMPSAT Argentina S.A.
Address: Alferez Pareja 256
Buenos Aires - Argentina
Attention: Chief Executive Officer
Telecopy No: +54 1 362 5030
All demands, requests, consents, notices and communication shall be deemed to
have been received if addressed in the manner described above, (i) at the time
of actual delivery thereof by hand, by courier service or by facsimile
transmission, or (ii) if sent by overnight delivery service, three (3) Business
Days after deposit thereof with such delivery service.
Section 9.3 Governing Law.
This Agreement shall be construed and the obligations of the parties
thereunder shall be determined in accordance with the Laws of the State of New
York, United States of America.
Section 9.4 Arbitration.
(a) In the event that any dispute, disagreement, controversy, question or claim
arises out of or in connection with this Agreement, including without
limitation any question relating to its existence, validity, application,
interpretation, performance, breach, termination and /or enforcement (a
"Dispute"), any party may give written notice to the other parties requiring
them to seek to reach an amicable settlement of the Dispute. If no amicable
settlement is reached within 3 business Days of such notice, the Dispute
shall be referred to and finally resolved by Arbitration under the
International Arbitration Rules of the American Arbitration Association (the
"Rules"), which Rules are deemed to be incorporated by reference into this
Section.
(b) The tribunal (the "Tribunal") shall consist of three arbitrators (the
"Arbitrators", and each an "Arbitrator"). If there are only two parties to
the Dispute, the claimant (the "Claimant") shall designate an Arbitrator in
the notice of arbitration which shall be sent to the respondent (the
"Respondent") and the Respondent shall designate an Arbitrator within 15
days of receipt of
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such notice of arbitration. The party designated Arbitrators shall designate
the third Arbitrator, who shall be the chairman of the Tribunal within 30
days of the Respondent's designation of its party Arbitrator. If a party or
the party - designated Arbitrators should fail to make a designation(s)
within the time limits set out above, the administrator shall make the
appropriate designation(s) on their behalf. If there is more than one
Claimant party and /or more than one Respondent party, the Claimant paries
shall together designate one Arbitrator in the notice of arbitration and the
Respondent parties shall together designate one Arbitrator within 15 days of
the receipt by the last of them , of the designation of the Claimant's party
Arbitrator. If the Claimant parties or the Respondent parties fail to make a
designation within the time limits set out above, the administrator shall
designate all three Arbitrators. However, if only the party - designated
Arbitrators fail to make a designation within the required time, the
parties' designations shall stand and the administration shall only
designate the chairman.
(c) If any Dispute raises issues which are substantially the same as or
connected with issues raised in a Dispute which has already been referred to
arbitration (an "Existing Dispute"), or arises out of substantially the same
facts as are subject of an Existing Dispute (a "Related Dispute"), the
Arbitrators appointed or to be appointed in respect of any such Existing
Dispute shall also be appointed as the Arbitrators in respect of any Related
Dispute.
(d) The Tribunal upon the request of one of the parties to a Dispute or a party
to this Agreement which itself wishes to be joined in any arbitration
proceedings in relation to a Dispute may join any party to this Agreement to
any arbitration proceedings in relation to such Dispute and may make a
single, final award determining the Dispute between them. Each of the
parties to this Agreement hereby consents to be joined to any arbitration
proceedings in relation to any Dispute at the request of a party to such
Dispute.
(e) Where pursuant to the above provisions, the same Arbitrators have been
appointed in relation to two or more Disputes, the Arbitrators may, with the
agreement of all the parties concerned or upon the application of one of the
parties, being a party to each of the Disputes order that the whole or part
of the matters at issue shall be heard together upon such terms or
conditions as the Arbitrators see fit. The Arbitrators shall have power to
make such directions and any provisional, interim or partial award as they
consider just and
20
<PAGE> 22
desirable.
(f) The parties agree that any Arbitrators chosen pursuant to this Section 9.4
will not in any manner be related to or affiliated with any of the parties
involved in such arbitration.
(g) Except as otherwise set out in this Section, the arbitration proceedings
shall be conducted in accordance with, and shall be subject to the Rules.
The location of any arbitration proceedings will be New York, United States
of America and any arbitration proceedings shall be conducted in English and
all arbitration awards hereunder shall be rendered and paid in Dollars.
(h) The determination of the Arbitrators shall be conclusive and binding upon
the parties to such arbitration proceedings.
(i) The expenses of each party, including legal and accounting fees, if any,
with respect to any arbitration proceeding shall be borne by such party,
except to the extent otherwise directed by the Arbitrators, who shall
endeavour to allocate them among the disputing parties based upon the
relative merits of their cases. The Arbitrators shall designate the party to
bear the expenses of the Arbitrators or the respective amounts of such
expenses to be borne by each party.
Section 9.5 Confidentiality.
Each party agrees that, without the prior written consent of the other parties
hereto, it shall not disclose the terms of this Agreement to any person or
entity, except (i) as may be required by law or regulation, or by an order,
judgment or decree of a court or other governmental authority of competent
jurisdiction, (ii) to such party's Affiliates, employees, partners, agents,
attorneys, representatives, officers, trustees, directors, accountants and
investment advisors who have legitimate business reason for such information
and are informed in writing of the confidential nature of such information or
(iii) as may be required to be disclosed to governmental, regulatory or other
official institutions, or to investment or commercial banks or other financial
institutions (and their advisors and representatives) in connection with any
contemplate financing transaction.
Section 9.6 Costs and Expenses.
21
<PAGE> 23
Except as otherwise specifically provided in this Agreement each party to this
Agreement shall bear its own costs and expenses (including but not limited to
attorneys' fees and expenses) in connection with the preparation, negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby.
In the event this Agreement is terminated by either of Nevasa or STET pursuant
to Section 8.1(b) or (c), as applicable, STET or Nevasa as the case may be,
shall reimburse the terminating party in respect of the costs and expenses
(including but not limited to attorneys' fees and expenses) incurred by such
terminating party up to the date of termination in connection with the
preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby.
Section 9.7 Counterpart Execution; Entire Agreement.
This Agreement may be executed in any number of counterparts, each of which,
when so executed and delivered, shall be deemed an original, and all of which
together shall constitute one agreement binding all of the parties hereto.
This Agreement (together with the documents refered to herein) contains the
entire understanding of the parties with respect to its subject matter. This
Agreement supersedes all prior negotiations, representations, agreements and
understandings, whether oral or written, between the parties hereto with
respect to its subject matter.
Section 9.8 Assignment.
Neither party may assign any of its rights under this Agreement without the
prior written consent of the other parties, except that Nevasa may assign any
of its rights under this Agreement, including its right to purchase Shares, to
any wholly owned joint stock company of Nevasa. In such case Nevasa shall
notify STET in writing of the permited assignement at least 7 (seven) days
before the Closing Date. Subject to the foregoing, this Agreement will apply
to, be binding in all respects upon, and injure to the benefit of the
successors and permited assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the
parties to this Agreement any legal or equitable
22
<PAGE> 24
right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their succesors and assigns. Obligations under this Agreement
shall not be assignable and, for the avoidance of doubt, no assignmet of this
Agreement or any of the rights thereunder shall release the assignor from its
obligation under this Agreement.
Section 9.9 Severability.
If any provision of this Agreement is held invalid or unforceable by any court
or other body of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid or unforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unforceable.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of each of the parties on the day and year first above
written.
<TABLE>
<S> <C>
NEVASA Holdings Ltd. STET International Netherlands NV
By:_________________________ By: _________________________
Name:ENRIQUE M. PESCARMONA Name: MASSIMO MASINI
Title: PRESIDENT Title: CEO
CORPORACION IMPSA, S.A. MILITELLO LIMITED
By:_________________________ By:_________________________
Name:ENRIQUE M. PESCARMONA Name:ROBERTO A. VIVO CHANETON
Title: PRESIDENT Title: DIRECTOR
ROTLING INTERNATIONAL ROBERTO A. VIVO CHANETON
CORPORATION
By: ________________________ By:___________________________
</TABLE>
23
<PAGE> 25
Name: RICARDO A. VEDAGUER
Title: PRESIDENT
Ricardo A. Verdaguer IMPSAT CORPORATION
By:_________________________ By:_________________________
Name:RICARDO A. VERDAGUER
Title: PRESIDENT
IMPSAT S.A.
By:_________________________
Name: RICARDO A. VERDAGUER
Title: PRESIDENT
24
<PAGE> 1
EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
dated as of
March 19, 1998
among
IMPSAT CORPORATION,
PRINCES GATE INVESTORS II, L.P.,
MORGAN STANLEY GLOBAL EMERGING MARKETS PRIVATE INVESTMENT
FUND, L.P.,
MORGAN STANLEY GLOBAL EMERGING MARKETS PRIVATE INVESTORS, L.P.,
PGI INVESTMENTS LIMITED,
GREGOR VON OPEL,
INVESTOR INVESTMENTS AB
and
JONESBORO FINANCIAL INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
DEFINITIONS
<S> <C>
SECTION 1.01. Definitions............................................. 2
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.01. Commitment to Purchase................................. 6
SECTION 2.02. The Closing............................................ 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
SECTION 3.01. Organization, Standing, Etc............................ 7
SECTION 3.02. Authorization; Non-Contravention....................... 7
SECTION 3.03. Binding Effect......................................... 8
SECTION 3.04. Capitalization and Voting Rights....................... 8
SECTION 3.05. Subsidiaries........................................... 9
SECTION 3.06. Related Party Transactions............................. 9
SECTION 3.07. Registration Rights.................................... 10
SECTION 3.08. Litigation, Proceedings; No Defaults................... 10
SECTION 3.09. Disclosure............................................. 10
SECTION 3.10. Offering............................................... 11
SECTION 3.11. Investment Company..................................... 11
SECTION 3.12. Governmental Regulation................................ 11
SECTION 3.13. Solicitation; Access to Information.................... 11
SECTION 3.14. Financial Information.................................. 11
SECTION 3.15. Compliance with ERISA.................................. 11
SECTION 3.16. Foreign Benefit Plans.................................. 13
SECTION 3.17. Taxes.................................................. 13
SECTION 3.18. Authorization to Do Business........................... 14
SECTION 3.19. Absence of Certain Changes............................. 14
SECTION 3.20. Properties............................................. 16
SECTION 3.21. Internal Controls...................................... 16
SECTION 3.22. Employees; Employee Compensation....................... 16
</TABLE>
1
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.23. No Undisclosed Material Liabilities.................... 17
SECTION 3.24. Material Contracts..................................... 17
SECTION 3.25. Intellectual Property.................................. 17
SECTION 3.26. Environmental Compliance............................... 18
SECTION 3.27. Insurance.............................................. 19
SECTION 3.28. Termination of STET Shareholders' Agreement............ 19
SECTION 3.29. Payments Outside of the Ordinary Course................ 19
SECTION 3.30. Compliance Program..................................... 19
SECTION 3.31. Nature of Operations................................... 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF NEWCO
SECTION 4.01. Organization........................................... 20
SECTION 4.02. Authority; No Other Action............................. 20
SECTION 4.03. No Contravention....................................... 20
SECTION 4.04. Binding Effect......................................... 20
SECTION 4.05. No Defaults............................................ 20
SECTION 4.06. Private Placement...................................... 21
SECTION 4.07. Title.................................................. 21
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 5.01. Organization........................................... 21
SECTION 5.02. Authority; No Other Action............................. 21
SECTION 5.03. No Contravention....................................... 22
SECTION 5.04. Binding Effect......................................... 22
SECTION 5.05. No Defaults............................................ 22
SECTION 5.06. Private Placement...................................... 22
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
SECTION 6.01. Conditions to Newco's Obligations...................... 23
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C>
SECTION 6.02. Conditions to the Issuer's Obligations................. 26
SECTION 6.03. Integration Services................................... 26
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Notices................................................ 26
SECTION 7.02. No Waivers; Amendments................................. 27
SECTION 7.03. Indemnification........................................ 28
SECTION 7.04. Survival of Provisions................................. 28
SECTION 7.05. Expenses; Documentary Taxes............................ 28
SECTION 7.06. Successors and Assigns................................. 29
SECTION 7.07. New York Law........................................... 29
SECTION 7.08. Counterparts; Effectiveness............................ 29
SECTION 7.09. Limitation on Issuance of Series A Stock............... 29
SECTION 7.10. Entire Agreement....................................... 29
SECTION 7.11. Remedies............................................... 29
SECTION 7.12. Jurisdiction........................................... 29
SCHEDULES
Schedule 3.02 Consents and Approvals
Schedule 3.04(a) Authorized and Outstanding Capital Stock
Schedule 3.04(b) Voting Agreements
Schedule 3.05 Subsidiaries
Schedule 3.06 Related Party Transactions
Schedule 3.08(a) Litigation and Proceedings
Schedule 3.19 Material Changes
Schedule 3.20 Liens
Schedule 3.21 Employees; Employee Compensation
Schedule 3.24 Material Contracts
</TABLE>
3
<PAGE> 5
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit A - Form of Securityholders Agreement
Exhibit B - Form of Opinion of United States Counsel to the Issuer and Newco
Exhibit C - Form of Opinion of United States Regulatory Counsel to the Issuer
and IMPSAT U.S.A., Inc.
Exhibit D - Form of Opinion of British Virgin Islands Counsel to Newco
Exhibit E - Form of Opinion of Irish Counsel to Nevasa Holdings Ltd.
Exhibit F - Form of Opinion of Argentine Counsel to the Issuer
Exhibit G - Form of Opinion of General Counsel to Corporacion IMPSA S.A.
Exhibit H - Form of Opinion of Colombian Counsel to the Issuer
Exhibit I - Form of Opinion of Ecuadorian Counsel to the Issuer
Exhibit J - Form of Opinion of Mexican Counsel to the Issuer
Exhibit K - Form of Opinion of Venezuelan Counsel to the Issuer
Exhibit L - Form of Opinion of Brazilian Counsel to the Issuer
Exhibit M - Charter
Exhibit N - Bylaws
Exhibit O - Certificate of Designations
Exhibit P - Form of Non-Competition and Non-Solicitation Agreement
Exhibit Q - Form of Letter Agreement
</TABLE>
4
<PAGE> 6
SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of March 19, 1998 among IMPSAT Corporation, a
Delaware corporation (the "Issuer"), Jonesboro Financial Inc., a wholly-owned
subsidiary of Nevasa Holdings Ltd. and a corporation incorporated under the laws
of the British Virgin Islands ("Newco"), and Princes Gate Investors II, L.P., a
Delaware limited partnership ("Princes Gate"), Morgan Stanley Global Emerging
Markets Private Investment Fund, L.P., a Delaware limited partnership ("MSGEM"),
and Morgan Stanley Global Emerging Markets Private Investors, L.P. ("Private
Investors"), and the other purchasers listed on the signature pages hereof (such
purchasers, together with Princes Gate, Private Investors and MSGEM, the
"Purchasers").
WHEREAS, pursuant to a Note Purchase Agreement (the "Note Purchase
Agreement") dated the date hereof among Newco, Nevasa Holdings Ltd. and Princes
Gate, Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), PGI Investments
Limited, Gregor von Opel and Investor Investments AB (together, the "Note
Purchasers"), Newco has issued, and the Note Purchasers have purchased, notes
(the "Notes") for an aggregate purchase price of $125 million;
WHEREAS, pursuant to the Note Purchase Agreement, Newco has used the
funds received from the sale of the Notes to purchase all of the shares of
capital stock owned by STET International Netherlands NV of the Issuer (the
"IMPSAT Common Stock") and of IMPSAT S.A. (the "IMPSAT S.A. Common Stock" and,
together with the IMPSAT Common Stock, the "STET Common Stock");
WHEREAS, immediately following the acquisition of the STET Common
Stock Newco shall contribute the IMPSAT S.A. Common Stock to the Issuer and
shall exchange the IMPSAT Common Stock for the Securities (as defined below);
and
WHEREAS, on the Closing Date, Newco shall (i) transfer Securities
having an aggregate liquidation preference of $25 million to MSGEM and Private
Investors for an aggregate purchase price of $25 million, (ii) transfer
Securities having an aggregate liquidation preference of $100 million to Princes
Gate, PGI Investments Limited, Gregor von Opel and Investor Investments AB in
satisfaction of its obligations to such Note Purchasers under such Note
Purchasers' Notes and (iii) repay MSDWD the amount of $25 million in
satisfaction of its obligations to MSDWD under its Note.
The parties hereto agree as follows:
<PAGE> 7
2
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"Affiliate" and "Affiliated" have the meanings assigned to such
terms in the Securityholders Agreement.
"Balance Sheet" means the audited consolidated balance sheet of the
Issuer and its Combined Subsidiaries as of December 31, 1997.
"Balance Sheet Date" means December 31, 1997.
"Bylaws" means the Bylaws of the Issuer in the form attached as
Exhibit N hereto.
"Certificate of Designations" means the Certificate of Designations
in the form of Exhibit O hereto relating to the Securities and to be filed with
the Secretary of State of Delaware.
"Charter" means the Certificate of Incorporation of the Issuer, as
amended as of the Closing Date, in the form attached as Exhibit M hereto.
"Combined Subsidiary" means, at any applicable date, any subsidiary
or other entity the accounts of which would be consolidated with those of the
Issuer in its consolidated financial statements if such statements were prepared
as of such date in accordance with generally accepted accounting principles in
the United States.
"Common Stock" means the Class A Common Stock, par value $1.00 per
share, of the Issuer.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute.
"Existing Stockholders" means (i) Mr. Enrique Pescarmona, Mr.
Roberto Vivo Chaneton and Mr. Ricardo Verdaguer, (ii) any Person that owns an
equity interest in Nevasa Holdings Ltd. or the Issuer and of which a majority of
the equity interests are owned, directly or indirectly, by any one or more of
the Persons named in clause (i) or any of their Affiliates, (iii) Nevasa
Holdings Ltd., (iv) Corporacion IMPSA, S.A., (v) Militello Limited and (vi)
<PAGE> 8
3
Rotling International Corporation.
"Indebtedness" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or representing the
deferred and unpaid balance of the purchase price of any property (including,
without limitation, pursuant to capital leases, but excluding trade payables due
within the succeeding 90 days) or representing any hedging obligations, if and
to the extent any of the foregoing indebtedness (other than hedging obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with generally accepted accounting principles in the United States,
and also includes, to the extent not otherwise included, the guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner (including, without
limitation, through letters of credit and keep-well and reimbursement agreements
in respect thereof) of any obligations of any other Person.
"Lien" means any mortgage, lien, pledge, charge, security interest,
claim or encumbrance of any kind. For the purposes of this Agreement, any Person
shall be deemed to own subject to any Lien any asset that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"Material Adverse Change" means a material adverse change, or any
event, occurrence, state of circumstances or facts or development involving a
prospective material adverse change, in the business, operations, assets,
condition (financial or otherwise), results of operations, properties, assets,
value or prospects of the Issuer and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect, or any
event, occurrence, state of circumstances or facts or development involving a
prospective material adverse effect, on the business, operations, assets,
condition (financial or otherwise), results of operations, properties, assets,
value or prospects of the Issuer and its Subsidiaries taken as a whole.
"Note Purchase Agreement" means the Note Purchase Agreement among
Newco, Nevasa Holdings Ltd. and the Note Purchasers dated the date hereof.
"Permitted Liens" means any Lien consisting of any one or more of
the following:
(i) Liens for current taxes not yet delinquent;
<PAGE> 9
4
(ii) Liens imposed by law and imposed in the ordinary course of
business for obligations not yet delinquent to carriers, warehousemen,
laborers, materialmen and the like;
(iii) Liens in respect of pledges or deposits made pursuant to
workers' compensation laws or similar legislation;
(iv) minor defects in title, none of which, individually or in
the aggregate, materially and adversely affects the Issuer's ability to
Transfer or use the subject asset or property;
(v) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature incurred in the ordinary course of
business; or
(vi) any Lien that replaces any of the preceding Liens; provided
that the maximum commitment in case of a credit or revolving loan, or
maximum principal amount in case of a term loan, of Indebtedness secured
by the replacing Lien does not exceed the maximum commitment or principal
amount of Indebtedness secured by such existing Lien at the time of
replacement unless any excess amount (as new Indebtedness or otherwise)
would not otherwise require the consent of, or is approved by, the holders
of the Securities pursuant to the Certificate of Designations.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, limited liability company, unincorporated
association, joint venture or any other entity or organization, whether or not a
legal entity, including, without limitation, a government or political
subdivision or an agency or instrumentality thereof.
"Regulation D" means Regulation D under the Securities Act, as
amended.
"Securities" means the Series A Stock.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor statute.
"Securityholders Agreement" means the Securityholders Agreement,
dated as of March 19, 1998 among the Issuer, the Purchasers, PG Investors II,
Inc., as agent, and the other parties signatory thereto, substantially in the
form attached as Exhibit A hereto.
"Series A Stock" means the Issuer's Convertible Preferred Stock,
Series A, having the rights, preferences and privileges set forth in the
Certificate of Designations.
"Subsidiary" means, with respect to any Person, any other Person of
which
<PAGE> 10
5
more than fifty percent (50%) of (i) the economic interest in the assets,
earnings or cash flow or (ii) the total voting power of shares of capital stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof, is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person or a combination thereof.
"Transfer" means any transfer, in whole or in part, by sale, pledge
assignment, grant or other means.
(b) Each of the following terms is defined in the Section
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Benefit Arrangement 3.15
Closing 2.02
Closing Date 2.02
Code 3.15
Damages 7.03
ERISA 3.15
ERISA Group 3.15
Hazardous Substance 3.26
Indemnified Person 7.03
Intellectual Property 3.25
Rights
Multiemployer Plan 3.15
Plan 3.15
Pre-Closing Tax Period 3.17
Returns 3.17
Tax 3.17
Taxing Authority 3.17
Transactions 2.01
</TABLE>
<PAGE> 11
6
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.01. Commitment to Purchase. Subject to the terms and
conditions hereinafter stated, upon the basis of the representations and
warranties of Newco, the Purchasers and the Issuer herein contained and subject
to the issuance of Notes to the Note Purchasers, each of the following parties
agrees to perform the following transactions (such transactions, including the
issuance of the Notes to the Note Purchasers, collectively referred to herein as
the "Transactions"):
(i) Newco agrees to use the funds received from the sale of the
Notes to purchase the STET Common Stock from STET International
Netherlands NV;
(ii) Newco agrees to transfer the IMPSAT Common Stock and to
contribute the IMPSAT S.A. Common Stock to the Issuer;
(iii) the Issuer agrees to issue the Securities to Newco;
(iv) Newco agrees to transfer Securities having an aggregate
liquidation preference of $25 million to MSGEM and Private Investors in
consideration of a cash payment of $25 million by MSGEM and Private
Investors;
(v) Newco agrees to repay $25 million to MSDWD in satisfaction of
Newco's obligations to MSDWD under its Note; and
(vi) Newco agrees to transfer Securities having an aggregate
liquidation preference of $100 million to Princes Gate, PGI Investments
Limited, Gregor von Opel and Investor Investments AB in satisfaction of
its obligations to such Note Purchasers under such Note Purchasers' Notes.
SECTION 2.02. The Closing. (a) The consummation of the Transactions
(the "Closing") shall take place at the offices of Shearman & Sterling at 10:00
a.m. on the date hereof or on such other date and at such other location as the
Issuer, Newco and the Purchasers shall agree. The date and time of the Closing
are referred to herein as the "Closing Date."
(b) At the Closing, the Issuer shall deliver to Newco, against
the transfer of the IMPSAT Common Stock described in subsection (c)(i) below,
certificate(s) evidencing 25,000 shares of Series A Stock, in definitive form
and registered in the name of the Purchasers.
<PAGE> 12
7
(c) At the Closing, Newco shall deliver to (i) the Issuer,
certificates evidencing the IMPSAT Common Stock and the IMPSAT S.A Common Stock
duly endorsed for transfer, (ii) MSGEM, a certificate evidencing shares of
Series A Stock having an aggregate liquidation preference of $25 million against
payment therefor in immediately available funds of $25 million, (iii) Princes
Gate, PGI Investments Limited, Gregor von Opel and Investor Investments AB, in
satisfaction of its obligations to such Note Purchasers under their Notes,
shares of Series A Stock having an aggregate liquidation preference of $100
million against delivery of evidence of cancellation of such Note Purchasers'
Notes and (iv) MSDWD, the amount of $25 million against delivery of evidence of
cancellation of its Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
The Issuer represents and warrants to each of Newco and the
Purchasers as follows:
SECTION 3.01. Organization, Standing, Etc. (a) The Issuer is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as conducted to date and as currently proposed to be conducted.
The Charter and Bylaws are true and complete copies of the certificate of
incorporation and bylaws of the Issuer that will be in effect immediately
following the Closing.
(b) Except for those Subsidiaries designated as inactive on
Schedule 3.05, each of the Issuer's Subsidiaries is a corporation duly
incorporated, validly existing and, if applicable, in good standing under the
laws of its jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted and as currently proposed to be
conducted. The Issuer has heretofore delivered to the Purchasers true and
complete copies of the certificate of incorporation and bylaws or similar
documents of each of its Subsidiaries designated as active on Schedule 3.05 as
in effect as of the Closing.
SECTION 3.02. Authorization; Non-Contravention. The execution,
delivery and performance by the Issuer of each of this Agreement, the
Certificate of Designations and the Securityholders Agreement, the issuance,
delivery and performance by the Issuer of the Securities and the amendment to
the Charter effected by the filing of the Certificate of Designations are within
the Issuer's corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
<PAGE> 13
8
governmental body, agency or official (other than the filing of the Certificate
of Designations with the Secretary of State of Delaware and as may be required
under federal or state securities laws in connection with the registration
obligations of the Issuer contained in the Securityholders Agreement) and do not
(i) contravene or constitute a default under any provision of applicable law or
regulation, judgment, injunction, order, decree, agreement or other instrument
binding upon or applicable to the Issuer or any of its Subsidiaries, (ii)
contravene or constitute a default under the Charter or Bylaws or the charter or
bylaws of any of the Issuer's Subsidiaries, (iii) except for such consent or
approval as has been obtained or as set forth on Schedule 3.02, require any
consent, approval or other action by any other Person (other than any securities
regulatory authority or securities exchange or inter-dealer quotation system in
connection with the registration obligations of the Issuer contained in the
Securityholder Agreement) or (iv) result in the creation or imposition of any
Lien on any asset of the Issuer or any of its Subsidiaries.
SECTION 3.03. Binding Effect. Except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally, each of this Agreement and the
Securityholders Agreement constitutes a valid and binding agreement of the
Issuer, enforceable against the Issuer in accordance with its terms, and each of
the Securities, when issued and delivered by the Issuer in accordance with this
Agreement, shall constitute a valid and binding obligation of the Issuer,
enforceable in accordance with its terms.
SECTION 3.04. Capitalization and Voting Rights. (a) As of the
Closing Date, the authorized capital stock and the issued and outstanding shares
of capital stock of the Issuer will each be as set forth on Schedule 3.04(a). As
of the Closing Date, all of such issued and outstanding shares of capital stock
of the Issuer (including the Series A Stock) will have been validly issued, will
be fully paid and nonassessable, and will be free of any Liens (other than such
Liens on the Series A Stock imposed as a result of any transaction entered into
by the Purchasers) or claims (contingent or otherwise) and are not the subject
of any pledge; the holders thereof will not be entitled to any preemptive or
other similar rights. As of the Closing Date, except as set forth on Schedule
3.05, all of the issued and outstanding shares of capital stock of each
Subsidiary of the Issuer will be owned by the Issuer free of any Liens. As of
the Closing Date, 68,000,000 shares of Common Stock will have been duly
authorized and reserved for issuance in connection with the conversion of the
Securities and no more than 4,000,000 shares of Common Stock will have been
reserved for issuance in connection with the exchange, conversion or exercise of
other securities of the Issuer. Correct and complete copies of the Issuer's
stock option or incentive plans, agreements or arrangements each of which has
been adopted by the Board of Directors of the Issuer prior to the date hereof,
and as in effect on the date hereof, have been delivered to the Purchasers prior
to the date hereof. All shares of Common Stock to be issued upon conversion of
the Securities will be duly authorized and validly issued, fully paid and
nonassessable and free of any Liens or encumbrances (other than any such Liens
imposed as a result of any transaction entered into
<PAGE> 14
9
by the Purchasers). Except as set forth on Schedule 3.05, upon the consummation
of the Closing, there will be outstanding no securities of the Issuer and no
securities convertible into or exchangeable for, or options or other rights to
acquire from the Issuer, or other obligations of the Issuer to issue, directly
or indirectly any shares of capital stock of the Issuer.
(b) Except as contemplated by the Transactions or as set forth on
Schedule 3.04(b) or any other schedule attached hereto, (y) neither the Issuer
nor any of its Subsidiaries is a party or subject to any agreement or
understanding that affects or relates to the voting or giving of consents with
respect to any security or the voting by any director of the Issuer or of its
Subsidiaries and (z) there are no agreements or other arrangements among any
persons or entities owning equity interests in the Issuer, Nevasa Holdings Ltd.
or Corporacion IMPSA S.A.
(c) The outstanding shares of Common Stock have been duly and
validly issued, and are fully paid and nonassessable and all outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal) or agreements for the purchase or acquisition from the Issuer
or any of its Affiliates of any shares of its capital stock have been granted in
accordance with the registration provisions of the Securities Act and any
relevant state securities laws or pursuant to valid exemptions therefrom.
SECTION 3.05. Subsidiaries. Except as set forth on Schedule 3.05,
the Issuer does not own or control, directly or indirectly, any interest in any
other Person, and the Issuer is not a direct or indirect participant in any
joint venture, partnership or similar arrangement.
SECTION 3.06. Related Party Transactions. (i) Except as set forth on
Schedule 3.06, no officer or director of the Issuer or any Subsidiary or
relative of any such officer or director is indebted to the Issuer or any
Subsidiary, nor is the Issuer or any Subsidiary indebted (or committed to make
loans or extend or guarantee credit) to any of them and none of the Issuer or
any Subsidiary is indebted (or committed to make loans or extend or guarantee
credit) to any shareholder of the Issuer or any family member of any shareholder
or any Affiliate of such a shareholder or family member, nor is any such
shareholder, family member or Affiliate indebted (or committed to make loans or
extend or guarantee credit) to the Issuer or any Subsidiary; (ii) except as set
forth on Schedule 3.06, except for investments in publicly traded equity
securities of Persons purchased for investment purposes only and which
investments represent less than 5% of the outstanding equity securities of such
Persons or as contemplated by Section 3.06, to the Issuer's knowledge, none of
such persons has any direct or indirect ownership interest in, or is employed by
or a consultant to or director or officer of, any Person with which the Issuer
is Affiliated or with which the Issuer has a business relationship, or any
Person that competes with the Issuer; and (iii) except as set forth on any
Schedule hereto, no officer or director of the Issuer or any Subsidiary or any
relative of any such officer or director is, directly or indirectly, interested
in any transaction or series of related transactions, or contracts or series of
related contracts, with the Issuer or any of its
<PAGE> 15
10
Subsidiaries that relate to, or have an annual value of, $50,000 or more.
SECTION 3.07. Registration Rights. Except as may be required
pursuant to the Securityholders Agreement, neither the Issuer nor any of its
Subsidiaries is obligated to register under the Securities Act or the Exchange
Act any of its currently outstanding securities or any of its securities that
may subsequently be issued.
SECTION 3.08. Litigation, Proceedings; No Defaults. (a) Except as
specified on Schedule 3.08(a), there is no action, suit or proceeding pending
or, to the knowledge of the Issuer, threatened against or affecting the Issuer
or any of its Subsidiaries or any of their respective assets before any court or
arbitrator or any governmental body, agency or official in which there is a
possibility of an adverse decision that could (individually or in the aggregate)
result in a Material Adverse Effect or result in any material change in the
current equity ownership of the Issuer or any Subsidiary, or which in any manner
draws into question the validity or enforceability of any portion of this
Agreement, the Securityholders Agreement, the Certificate of Designations, the
Charter, the Securities or any of the transactions contemplated hereby or
thereby. The foregoing includes, without limitation, any such action, suit,
proceeding, or investigation pending or currently threatened involving the prior
employment of any of the Issuer's or any Subsidiary's employees, such employees'
use in connection with the Issuer's or any Subsidiary's business of any
information or techniques allegedly proprietary to any of such employees' former
employers, the obligations of any of the Issuer's employees under any agreements
with the prior employers of such employees, or negotiations by the Issuer with
potential investors in the Issuer or any Subsidiary or its proposed business.
(b) Neither the Issuer nor any of its Subsidiaries is in
violation of their respective charters or bylaws (or similar organizational
document) nor in violation or contravention of or in default under any provision
of applicable law or regulation or of any judgment, injunction, order or decree
or of any agreement or other instrument binding upon it that could reasonably be
expected to result in a liability in excess of $25,000.
SECTION 3.09. Disclosure. (a) The Issuer has provided the Purchasers
with all the information available to it that the Purchasers have requested for
determining whether to purchase the Securities. Neither this Agreement nor any
other written statements or certificates made or delivered by the Issuer to the
Purchasers in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
and therein not misleading.
(b) The copy of the minute books of the Issuer provided to the
Purchasers' counsel prior to the Closing Date contains minutes of all meetings
of directors (and committees thereof) and stockholders minutes and all actions
by written consent without a meeting by the directors (and committees thereof)
and stockholders from January 1, 1996, to the date hereof and accurately
reflects in all material respects all actions by the directors (and any
committee
<PAGE> 16
11
of directors) and stockholders with respect to all transactions referred to in
such minutes and consents.
SECTION 3.10. Offerings. (a) Assuming the accuracy of the
representations set forth in Articles IV and V hereof, the offer, transfer and
issuance of the Securities to Newco as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act.
(b) Assuming the accuracy of the representations set forth in
Articles IV and V hereof, (i) the offer and transfer of the Securities to the
Purchasers as contemplated by this Agreement and (ii) the issuance of the Common
Stock to the holders of the Securities upon the conversion of such Securities in
accordance with the terms thereof are, and would be, exempt from the
registration requirements of the Securities Act.
SECTION 3.11. Investment Company. The Issuer is not, and after
giving effect to the sale and issuance of the Securities will not be, required
to register as an "investment company" under the Investment Company Act of 1940,
as amended.
SECTION 3.12. Governmental Regulation. Except for the Securities
Act, the Exchange Act and state securities laws, the Issuer is not subject to
any federal or state or foreign law or regulation limiting its ability to issue
the Securities or perform its obligations under the terms of the Securities,
this Agreement or the Securityholders Agreement.
SECTION 3.13. Solicitation; Access to Information. No form of
general solicitation or general advertising was used by the Issuer or, to its
knowledge, any other Person acting on its behalf, in respect of the Securities
or in connection with the offer and sale of the Securities. Neither the Issuer
nor any Person acting on behalf of the Issuer has, either directly or
indirectly, sold or offered for sale to any Person any of the Securities or any
other similar security of the Issuer except as contemplated by this Agreement.
SECTION 3.14. Financial Information. The balance sheet and the
related consolidated statements of operations, of stockholders' equity and cash
flows, as of and for the year ended December 31, 1997, fairly present, in
conformity with generally accepted accounting principles in the United States,
the consolidated financial position of the Issuer and its Combined Subsidiaries
as of December 31, 1997 and their consolidated results of operations and cash
flows for such fiscal year.
SECTION 3.15. Compliance with ERISA and the Code. (a) For the
purposes of this Section 3.15, the following terms shall have the following
meanings:
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income
Security
<PAGE> 17
12
Act of 1974, as amended from time to time ("ERISA") which is not a Plan or
a Multiemployer Plan and which is maintained or otherwise contributed to
by any member of the ERISA Group.
"ERISA Group" means the Issuer, Nevasa Holdings Ltd. and Newco and
all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which,
together with any of them, are treated as a single employer under Section
414 of the Code.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which (a) any
member of the ERISA Group is making or accruing an obligation to make
contributions or has within the preceding five plan years made
contributions, or (b) any former member of the ERISA Group made or accrued
any obligation to make contributions during the preceding five plan years
while a member of the ERISA Group.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code and
either (i) is maintained, or contributed to, by any member of the ERISA
Group for employees of any member of the ERISA Group or (ii) has at any
time within the preceding five years been maintained, or contributed to,
by any Person which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of the ERISA
Group.
(b) Each member of the ERISA Group has fulfilled its obligations
under the minimum funding standards of ERISA and the Internal Revenue Code (the
"Code") with respect to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Code in respect of any Plan, (ii)
failed to make any contribution or payment to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could reasonably be expected to
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Code or (iii) incurred any liability under Title IV of ERISA
that has not been satisfied in full other than a liability to the Pension
Benefit Guaranty Corporation for premiums under Section 4007 of ERISA, and no
event or condition has occurred or exists that could reasonably be expected to
result in the incurrence of any liability under Title IV of ERISA by any member
of the ERISA Group other than liability for premiums under Section 4007 of
ERISA. Neither the Issuer nor any of its Subsidiaries has made any contributions
to a Multiemployer Plan or a Plan. No member or former member of the ERISA Group
has, while a member of the ERISA
<PAGE> 18
13
Group and within the last five years, engaged in, or, with respect to any
current members of the ERISA Group, is a successor or parent corporation to an
entity that has engaged in, a transaction described in Section 4069 of ERISA.
Each Benefit Arrangement has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all applicable statutes,
orders, rules and regulations, including, but not limited to, ERISA and the
Code.
SECTION 3.16. Foreign Benefit Plans. In addition to Section 3.15
above, with respect to each scheme or arrangement mandated by a government other
than the United States (a "Foreign Government Scheme or Arrangement") and with
respect to each employee benefit plan maintained or contributed to by the Issuer
or Subsidiary or Affiliate that is not subject to United States law (a "Foreign
Benefit Plan"):
(i) Any employer and employee contributions required by law or by
the terms of any Foreign Government Scheme or Arrangement or any Foreign
Benefit Plan have been made, or, if applicable, accrued, in accordance
with generally accepted accounting practices in the applicable
jurisdiction.
(ii) The fair market value of the assets of each funded Foreign
Benefit Plan, the liability of each insurer for any Foreign Benefit Plan
funded through insurance or the book reserve established for any Foreign
Benefit Plan, together with any accrued contributions, is sufficient to
procure or provide for the accrued benefit obligations, as of the date of
this Agreement, with respect to all current and former participants in
such plan according to the actuarial assumptions and valuations most
recently used to account for such obligations in accordance with
applicable generally accepted accounting principles.
(iii) Each Foreign Benefit Plan required to be registered has been
registered and has been maintained in good standing with applicable
regulatory authorities.
SECTION 3.17. Taxes. The Issuer and each of its Subsidiaries: (i)
has filed in accordance with all applicable laws, all Tax (as defined below)
returns, statements, reports and forms (collectively, the "Returns") required to
be filed with any Taxing Authority (as defined below) on or before the Closing
Date with respect to any Tax period ending on or before the Closing Date
("Pre-Closing Tax Period"); (ii) will file all other Returns required to be
filed when due (taking into account any extension of a required filing date);
(iii) has timely paid all material Taxes shown as due and payable on the Returns
that have been filed; (iv) has not been a member of any Affiliated,
consolidated, combined or unitary group other than one of which the Issuer was
the common parent; and (v) is not currently under any contractual obligation to
pay any amounts of the type described in clause (ii) or (iii) of the definition
of "Tax." The Issuer represents further that (x) the charges, accruals and
reserves for Taxes reflected on its Balance Sheet (excluding any provision for
deferred income taxes) are adequate
<PAGE> 19
14
to cover the Tax liabilities accruing through the date thereof; and (y) there is
no material action, suit, proceeding, investigation, audit or claim pending or,
to the knowledge of the Issuer, threatened against or with respect to it in
respect of any Tax. "Tax" (and with correlative meaning, "Taxes") means (i) any
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding on amounts paid to or by the Issuer or any of its Subsidiaries,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount due from, or in
respect of the Issuer or any of its Subsidiaries, as the case may be, imposed by
any governmental authority (a "Taxing Authority") responsible for the imposition
of any such tax (domestic or foreign), (ii) liability of the Issuer or any of
its Subsidiaries for the payment of any amounts of the type described in (i) as
a result of being a member of an Affiliated, consolidated, combined or unitary
group, or being a party to any agreement or arrangement whereby liability of the
Issuer or any of its Subsidiaries for payment of such amounts was determined or
taken into account with reference to the liability of any other Person for any
Pre-Closing Tax Period, and (iii) liability of the Issuer or any of its
Subsidiaries for the payments of any amounts as a result of being party to any
tax sharing agreement or with respect to the payment of any amounts of the type
described in clause (i) or (ii) as a result of any express or implied obligation
to indemnify any other Person. The Issuer meets the 80-percent foreign business
requirement contained in Section 861(c) of the Internal Revenue Code of 1986, as
amended.
SECTION 3.18. Authorization to Do Business. The Issuer and its
Subsidiaries (i) possess all licenses, certificates, authorizations, approvals
and permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective businesses as
currently conducted, excepting any certificate, authorization, approval or
permit, the failure to possess which could not reasonably be expected to result
in a Material Adverse Change and (ii) have not received any notice of
proceedings relating to the revocation or modification of any such license,
certificate, authorization, approval or permit, nor is the Issuer or any of its
Subsidiaries in violation or contravention of, or in default under, any such
license, authorization, approval or permit or any decree, order or judgment
applicable to the Issuer or its Subsidiaries the effect of which, singly or in
the aggregate, could reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.19. Absence of Certain Changes. Except as set forth on
Schedule 3.19 or Schedule 3.20, since the Balance Sheet Date, the Issuer and its
Subsidiaries have conducted their businesses in the ordinary course consistent
with past practices and there has not been:
(a) any Material Adverse Change;
<PAGE> 20
15
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the
Issuer, or, other than as contemplated by the Transactions or by the
Certificate of Designations, any repurchase, redemption or other
acquisition by the Issuer or any of its Subsidiaries of any outstanding
shares of capital stock or other securities of, or other ownership
interests in, the Issuer or any of its Subsidiaries;
(c) any amendment of any material term of any outstanding
security of the Issuer or any of its Subsidiaries, other than as set forth
in their respective charters;
(d) any incurrence, assumption or guarantee by the Issuer or any
of its Subsidiaries of any Indebtedness in excess of $5 million;
(e) any creation or assumption by the Issuer or any of its
Subsidiaries of any Lien on any material asset;
(f) other than temporary investments of cash in the ordinary
course of business, any making by the Issuer or any of its Subsidiaries of
any loan, advance or capital contributions to or investment in any Person
other than the Issuer or any of its wholly owned Subsidiaries, in excess
of $5 million;
(g) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the Issuer
or any of its Subsidiaries which, individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse Effect;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Issuer or any of its Subsidiaries relating
to its assets, business or operations (including, without limitation, the
acquisition or disposition of any assets) or any relinquishment by the
Issuer or any of its Subsidiaries of any contract or other right, in
either case, material to the Issuer and its Subsidiaries; or
(i) any change in any method of accounting or accounting practice
by the Issuer or any of its Subsidiaries, except for any such change
required by reason of a concurrent change in generally accepted accounting
principles in the United States.
SECTION 3.20. Properties. The Issuer and its Subsidiaries have good
and marketable title to, or in the case of leased property have valid leasehold
interests in, all
<PAGE> 21
16
material property and assets (whether real or personal, tangible or intangible).
None of such properties or assets is subject to any Liens, except (i) Liens
disclosed or provided for on the Balance Sheet, (ii) Liens in existence on the
date hereof and listed in Schedule 3.20 hereto, or (iii) Permitted Liens.
SECTION 3.21. Internal Controls. The Issuer and 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 in the United States 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.
SECTION 3.22. Employees; Employee Compensation. Except as set forth
on Schedule 3.22, to the Issuer's knowledge, (i) there is no strike or material
labor dispute or union organization activities pending or threatened between it
or its Subsidiaries and their respective employees; (ii) none of the Issuer's or
its Subsidiaries' employees belongs to any union or collective bargaining unit;
(iii) the Issuer and its Subsidiaries are in compliance with all applicable
equal opportunity and other laws related to employment (except where such
noncompliance with such laws would not result in a Material Adverse Effect);
(iv) no employee of the Issuer or its Subsidiaries is or will be in violation in
any material respect of any judgment, decree, or order, or any term of any
employment contract, patent disclosure agreement, or other contract or agreement
relating to the relationship of any such employee with the Issuer or its
Subsidiaries or any other party because of the nature of the business conducted
or to be conducted by the Issuer or its Subsidiaries or to the use by the
employee of his best efforts with respect to such business; and (v) no officer
or key employee intends to terminate their employment with the Issuer or its
Subsidiaries, nor does the Issuer or any of its Subsidiaries have a present
intention to terminate the employment of any of the foregoing. Except as set
forth in Schedule 3.22, the Issuer and its Subsidiaries are not parties to or
bound by any currently effective employment contract, deferred compensation
agreement, bonus plan, incentive plan, profit sharing plan, retirement
agreement, or other employee compensation agreement any of which could
reasonably be expected to result in a material liability or commitment. Subject
to general principles related to wrongful termination of employees and the
requirements of applicable law, the employment of each officer and employee of
the Issuer or its Subsidiaries not covered by an employment contract is
terminable at the will of the Issuer or its Subsidiaries.
SECTION 3.23. No Undisclosed Material Liabilities. Except as set
forth in the Balance Sheet or on any Schedule hereto, there are no material
liabilities or commitments of the Issuer or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent,
<PAGE> 22
17
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a material liability or commitment.
SECTION 3.24. Material Contracts. (a) Except for agreements,
contracts, plans, leases, arrangements or commitments set forth on Schedule 3.24
and that have been provided to Princes Gate and MSGEM, neither the Issuer nor
any of its Subsidiaries is a party to or subject to any agreements, contracts,
indentures, plans, leases, arrangements or commitments that (i) accounted for
the 10 largest (for purposes of this Section 3.24 based on revenues to the
Issuer and its Subsidiaries) customer contracts with customers in Argentina; the
ten largest customer contracts with customers in Colombia, the five largest
customer contracts with customers in every other country (other than the United
States) in which the Issuer or its Subsidiaries conducts business and the
largest customer contract with customers in the United States, (ii) provide for
the purchase of materials, supplies, goods, services, equipment or other assets
that have an annual value in excess of $250,000, (iii) involve any partnership,
joint venture or other similar arrangement or (iv) restrict the Issuer or any
Subsidiary from engaging in or competing in any line of business or with any
Person or in any geographic area.
(b) Each agreement, contract, indenture plan, lease, arrangement
and commitment disclosed or required to be disclosed pursuant to clause (a)
above is a valid and binding agreement of the Issuer or a Subsidiary of the
Issuer and is in full force and effect, and neither the Issuer, any of its
Subsidiaries nor, to the knowledge of the Issuer, any other party thereto is in
default in any material respect under the terms of any such agreement, contract,
indenture, plan, lease, arrangement or commitment.
SECTION 3.25. Intellectual Property. (a) The Issuer and its
Subsidiaries own or have the right to use all material trademarks, service
marks, trade names, inventions, patents, trade secrets, know-how, copyrights, or
any other similar type of proprietary intellectual property right, registration
thereof, or application for registration therefor ("Intellectual Property
Rights") necessary to conduct the business of the Issuer and its Subsidiaries as
currently conducted or as expected to be conducted.
(b) The consummation of the transactions contemplated hereby will
not alter or impair any of the Intellectual Property Rights or the Issuer's or
any Subsidiary's interests therein. Except as set forth in Schedule 3.25, there
are no pending claims against the Issuer or any Subsidiary by any Person
relating to the use of any such Intellectual Property Rights or challenging or
questioning the validity or effectiveness of any license or agreement relating
to Intellectual Property Rights to which the Issuer or any Subsidiary is a
party, and the Issuer does not know of any valid basis for any such claim; and
the use of such Intellectual Property Rights by the Issuer or any Subsidiary to
the Issuer's knowledge does not infringe on the rights of any Person.
<PAGE> 23
18
(c) To the knowledge of the Issuer, none of the Issuer's or
Subsidiary's key employees is obligated under any contract or other agreement
(including, without limitation, licenses, covenants, or commitments of any
nature) or subject to any judgment, decree, or order of any court or
administrative agency, that could interfere with the use of such employee's best
efforts to promote the interests of the Issuer or that would conflict with the
Issuer's business as proposed to be conducted. Neither the execution, delivery
or performance of this Agreement, the Certificate of Designations or the
Securityholders Agreement nor the carrying on of the Issuer's business by the
key employees of the Issuer, nor the conduct of the Issuer's business will
conflict with or result in a breach of the terms, conditions, or provisions of,
or constitute a default under, any contract, covenant, or instrument under which
any of such key employees is now obligated.
SECTION 3.26. Environmental Compliance. (a) No notice or request for
information has been issued by, no complaint has been filed, no penalty has been
assessed and no investigation or review is pending, or to the Issuer's
knowledge, threatened by any governmental or other entity with respect to (i)
any alleged violation by the Issuer or any of its Subsidiaries of any
environmental law, regulation or order of any governmental entity in connection
with the conduct of their businesses or (ii) any alleged failure by the Issuer
or any of its Subsidiaries to have any environmental permit, license or approval
in connection with the conduct of their businesses.
(b) Other than in compliance in all material respects with all
applicable environmental laws, regulations or orders, (i) neither the Issuer nor
any of its Subsidiaries has generated, processed, treated, sold or transported
any toxic, caustic or otherwise hazardous substance, including, without
limitation, petroleum, its derivatives, by-products and other hydrocarbons, or
any substance having any constituent elements displaying any of the foregoing
characteristics whether or not regulated under Federal, state, local or foreign
environmental laws, regulations or orders ("Hazardous Substance") and (ii) no
generation, treatment, storage, recycling, transportation, disposal or Release
(as defined in 42 U.S.C. Section 9601(22)) of any Hazardous Substance has
occurred at or on any property now or previously owned or leased by the Issuer
or any of its Subsidiaries.
(c) To the knowledge of the Issuer, (i) each of the Issuer and
its Subsidiaries is in compliance in all material respects with all Federal,
state and local and foreign environmental laws, regulations and orders and (ii)
there are no liabilities of the Issuer or any of its Subsidiaries, whether
vested or unvested, contingent or fixed, actual or potential, known or unknown,
which (1) arise under or relate to matters covered by Federal, state and local
and foreign environmental laws, regulations and orders, (2) relate to actions
occurring or conditions existing on or prior to the Closing Date and (3) have
had or could reasonably be expected to have a Material Adverse Effect.
<PAGE> 24
19
SECTION 3.27. Insurance. The Issuer has in full force and effect
fire and casualty insurance policies, sufficient in amount (subject to
reasonable deductibles) in the Issuer's opinion to allow it to replace any of
its properties that might be damaged or destroyed. The Issuer has in full force
and effect insurance (including with respect to workers' compensation and
personal injury) in amounts that to its knowledge are customary for companies
similarly situated.
SECTION 3.28. Termination of STET Shareholders' Agreement. The
Shareholders' Agreement among Nevasa Holdings Ltd., Corporacion IMPSA S.A.,
Ricardo Anibal Verdaguer, Roberto Abel Vivo Chaneton and STET International
Netherlands NV dated December 16, 1994 has been terminated and is no longer of
any force or effect.
SECTION 3.29. Payments Outside of the Ordinary Course. (a) No
payments or inducements have been made or given, directly or indirectly, to any
federal or local officials in any jurisdiction by the Issuer or by any of its
Subsidiaries, to the best knowledge of the Issuer, by any of their officers,
directors, employees or agents or, by any other person in connection with any
opportunity, agreement, license, permit, certificate, consent, order, approval,
waiver or other authorization relating to the business of the Issuer or any of
its Subsidiaries, including without limitation, any telecommunications license,
except for such payments or inducements as were lawful under applicable written
laws, rules and regulations, and (b) neither the Issuer nor any of its
Subsidiaries, nor, to the best knowledge of the Issuer, any director, officer,
agent, employee or other person associated with or acting on behalf of the
Issuer or any of its Subsidiaries, (i) has used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating to
political activity; (ii) made any direct or indirect unlawful payment to any
government official or employee from corporate funds; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv)
made any bribe, unlawful rebate, payoff, influence payment, kickback or other
unlawful payment in connection with the business of the Issuer or any of its
Subsidiaries.
SECTION 3.30. Compliance Program. The Issuer has taken the advice of
its counsel and has adopted an ethics code pursuant to which both the Issuer and
its employees are subject and is in the process of implementing a set of
procedures and a policy statement regarding compliance by the Issuer and its
employees with the Foreign Corrupt Practices Act of 1977.
SECTION 3.31. Nature of Operations. Except as set forth on Schedule
3.05(b), the Issuer owns more than 50% of (i) the economic interest in the
assets, earnings or cash flow and (ii) the total voting power of shares of
capital stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof, of each of the
entities in which it owns an equity interest. Each such entity is primarily
engaged in the production or sale of a product or service other than the
investment
<PAGE> 25
20
of capital, and the Issuer is primarily engaged through such entities in the
production or sale of a product or service other than the investment of capital.
The aggregate revenues generated by entities listed on Schedule 3.05(b)
constituted no more than 5% of the consolidated revenues of the Issuer for the
year ended December 31, 1997; since December 31, 1997, there has not been any
material change in the percentage of revenues generated by entities.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF NEWCO
Newco represents and warrants to the Issuer and to each of the
Purchasers as follows:
SECTION 4.01. Organization. Newco is duly organized and existing
under the laws of the British Virgin Islands.
SECTION 4.02. Authority; No Other Action. (a) The execution,
delivery and performance of this Agreement and the Note Purchase Agreement are
within Newco's powers and have been duly authorized on its part by all requisite
corporate action.
(b) No action by or in respect of, or filing with, any
governmental authority, agency or official is required for the execution,
delivery and performance by Newco of this Agreement.
SECTION 4.03. No Contravention. The execution, delivery and
performance by Newco of this Agreement and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) violate Newco's
Memorandum or Articles of Association or (ii) violate any applicable law, rule,
regulation, judgment, injunction, order or decree, which violation would (a)
affect the validity of this Agreement or (b) individually or in the aggregate
impair the ability of Newco to perform in any material respect its obligations
under this Agreement.
SECTION 4.04. Binding Effect. This Agreement has been duly executed
by Newco and except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally, constitutes a valid and binding agreement of Newco.
SECTION 4.05. No Defaults. Newco is not in violation of its
Memorandum or Articles of Association or in default under any provision of
applicable law or regulation or of any agreement, judgment, injunction, order,
decree or other instrument binding upon it,
<PAGE> 26
21
which violation or default (i) would affect the validity of this Agreement or
(ii) would (individually or in the aggregate) impair the ability of Newco to
perform in any material respect its obligations under this Agreement.
SECTION 4.06. Private Placement. (a) Newco understands that (i) the
offering and sale of the Securities is intended to be exempt from registration
under the Securities Act pursuant to Section 4(2) of the Securities Act and (ii)
there is no existing public or other market for the Securities and there can be
no assurance that Newco will be able to sell or dispose of such Securities
purchased by Newco pursuant to this Agreement.
(b) Newco and its advisors and representatives have sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of its investment in the Securities and Newco
is capable of bearing the economic risks of such investment.
SECTION 4.07. Title. Newco will, on the Closing Date, have good and
marketable title to the Securities to be sold by Newco pursuant to this
Agreement, free and clear of any pledge, lien, security interest, charge, claim,
equity or encumbrance of any kind; Newco has full right, power and authority to
sell, transfer and deliver such Securities pursuant to this Agreement; and upon
delivery of such Securities and payment of the purchase price therefor as
contemplated in this Agreement, the Purchasers will receive good and marketable
title to the Securities purchased by them from Newco, free and clear of any
pledge, lien, security interest, charge, claim, equity or encumbrance of any
kind.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each of the Purchasers severally represents and warrants to the
Issuer as follows:
SECTION 5.01. Organization. Each of the Purchasers is duly organized
and existing under the laws of its jurisdiction of organization.
SECTION 5.02. Authority; No Other Action. (a) The execution,
delivery and performance of this Agreement and the Securityholders Agreement are
within each Purchaser's powers and have been duly authorized on such Purchaser's
parts by all requisite partnership or corporate action, as appropriate.
(b) No action by or in respect of, or filing with, any
governmental authority, agency or official is required for the execution,
delivery and performance by the
<PAGE> 27
22
Purchasers of this Agreement and the Securityholders Agreement.
SECTION 5.03. No Contravention. The execution, delivery and
performance by each of the Purchasers of this Agreement and the Securityholders
Agreement and the consummation of the transactions contemplated hereby and
thereby do not and will not (i) violate such Purchaser's charter, partnership
agreement, or similar document or (ii) violate any applicable law, rule,
regulation, judgment, injunction, order or decree, which violation would (a)
affect the validity of this Agreement or the Securityholders Agreement or (b)
individually or in the aggregate impair the ability of such Purchaser to perform
in any material respect the obligations which they have under this Agreement or
the Securityholders Agreement.
SECTION 5.04. Binding Effect. Except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally, this Agreement and the
Securityholders Agreement have been duly executed by each of the Purchasers and
constitute valid and binding agreements of each of the Purchasers.
SECTION 5.05. No Defaults. None of the Purchasers is in violation of
its charter or partnership agreement or in default under any provision of
applicable law or regulation or of any agreement, judgment, injunction, order,
decree or other instrument binding upon it, which violation or default (i) would
affect the validity of this Agreement or the Securityholders Agreement or (ii)
would (individually or in the aggregate) impair the ability of any of the
Purchasers to perform in any material respect the obligations which it has under
this Agreement or the Securityholders Agreement.
SECTION 5.06. Private Placement. (a) Each of the Purchasers
understands that (i) the offering and sale of the Securities is intended to be
exempt from registration under the Securities Act pursuant to Section 4(2) of
the Securities Act and (ii) there is no existing public or other market for the
Securities and there can be no assurance that any such Purchaser will be able to
sell or dispose of such Securities purchased by such Purchaser pursuant to this
Agreement.
(b) Each of the Purchasers is an "Accredited Investor" as such
term is defined in Regulation D.
(c) Each of the Purchasers has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in the Securities and each of the
Purchasers is capable of bearing the economic risks of such investment.
<PAGE> 28
23
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
SECTION 6.01. Conditions to Newco's Obligations. The obligation of
Newco to purchase and sell the Securities is subject to the satisfaction, on or
prior to the Closing Date, of the following conditions:
(a) each of the representations and warranties of the Issuer
contained herein shall be true and correct on and as of the Closing Date;
(b) the Issuer shall have performed and complied with all
covenants and agreements required by this Agreement to be performed or
complied with by it on or prior to the Closing Date and shall not be in
default under or in violation of any provisions of the Securityholders
Agreement, the Charter or the Certificate of Designations;
(c) the Securityholders Agreement shall have been executed and
delivered by the parties thereto other than the Purchasers, the conditions
to effectiveness to the Securityholders Agreement of each of the parties
thereto other than the Purchasers shall have been satisfied and, assuming
due execution and delivery by the Purchasers, the Securityholders
Agreement shall be in full force and effect and all events required to
occur thereunder on the Closing Date shall have occurred;
(d) each of Newco and the Purchasers shall have received a
certificate dated such Closing Date signed by an executive officer of the
Issuer to the effect set forth in subsections (a), (b), (e), (g) and (v)
of this Section 6.01;
(e) the Issuer shall have obtained any and all material consents,
waivers or permits necessary for the consummation of the transactions
contemplated hereby;
(f) the Purchasers' acquisition of the Securities as provided
herein shall not be prohibited by any applicable law, court order or
governmental regulation or any contract, agreement, document or other
instrument by which any of the Purchasers is bound;
(g) there shall not have occurred a Change of Control (as defined
in the Certificate of Designations);
(h) Newco shall have received one or more duly executed
certificates representing the Securities being acquired by Newco pursuant
hereto;
<PAGE> 29
24
(i) the Purchasers shall have received from Newco duly executed
certificates representing the Securities subsequently acquired by the
Purchasers, and such certificates shall have been registered in the name
of the Purchasers;
(j) the Purchasers shall have received an opinion from Arnold &
Porter, United States counsel to the Issuer and Newco, dated the Closing
Date substantially in the form of Exhibit B hereto;
(k) the Purchasers shall have received an opinion from Latham &
Watkins, United States regulatory counsel to the Issuer and IMPSAT U.S.A.,
Inc.;
(l) the Purchasers shall have received an opinion from Dancia
Penn & Co., British Virgin Islands counsel to Newco, dated the Closing
Date substantially in the form of Exhibit D hereto;
(m) the Purchasers shall have received an opinion from A&L
Goodbody, Irish counsel to Newco Holdings Ltd., dated the Closing Date
substantially in the form of Exhibit E hereto;
(n) the Purchasers shall have received an opinion from Nicholson
& Cano, Argentine counsel to the Issuer, dated the Closing Date
substantially in the form of Exhibit F hereto;
(o) the Purchasers shall have received an opinion of Nestor
Adrian Gonzalez, General Counsel to Corporacion IMPSA S.A., dated the
Closing Date substantially in the form of Exhibit G hereto;
(p) the Purchasers shall have received an opinion from [Estudio
Portocarrero & Rodriguez], Colombian counsel to the Issuer, dated the
Closing Date substantially in the form of Exhibit H hereto;
(q) the Purchasers shall have received an opinion from Estudio
Perez Bustamante & Perez, Ecuadorian counsel to the Issuer, dated the
Closing Date substantially in the form of Exhibit I hereto;
(r) the Purchasers shall have received an opinion from Estudio
Basham, Ringe & Correa, Mexican counsel to the Issuer, dated the Closing
Date substantially in the form of Exhibit J hereto;
(s) the Purchasers shall have received an opinion from Baumeister
& Brewer, Venezuelan counsel to the Issuer, dated the Closing Date
substantially in the
<PAGE> 30
25
form of Exhibit K hereto;
(t) the Purchasers shall have received an opinion from Pinheiro
Neto Advogados, Brazilian counsel to the Issuer, dated the Closing Date
substantially in the form of Exhibit L hereto;
(u) the Charter, including the Certificate of Designations, shall
have been duly adopted and filed with the Secretary of State of Delaware
and shall be in full force and effect;
(v) the Purchasers shall have received all documents reasonably
requested by their counsel relating to the existence of the Issuer, the
corporate authority for entering into, and the validity of, this Agreement
and any other matters relevant hereto and thereto, all in form and
substance satisfactory to such counsel;
(w) the Purchasers shall have completed their financial,
business, operational, tax, accounting and legal due diligence relating to
the Issuer and its Subsidiaries, and the results thereof shall have been
satisfactory to Princes Gate and MSGEM;
(x) in the judgment of Princes Gate (after consultation with
MSGEM) there shall not have occurred any Material Adverse Change;
(y) a purchase and sale agreement relating to the purchase by
Newco of the IMPSAT Common Stock and the IMPSAT S.A. Common Stock in form
and substance satisfactory to Princes Gate and MSGEM shall have been duly
executed by the parties thereto and such purchase and sale shall have been
consummated;
(z) the Issuer shall have complied with all of its obligations
contained in Section 7.05 of this Agreement;
(aa) each Existing Stockholder shall have entered into a
non-competition and non-solicitation agreement with the Issuer in the form
of Exhibit P hereto (each such agreement, a "Non-Competition Agreement");
each Existing Stockholder, Mrs. Silvia Monica Pescarmona de Baldini and
Mrs. Liliana Pescarmona de Mayo shall have entered into a letter agreement
in the form of Exhibit Q hereto; and
(bb) neither the Issuer nor any of its Subsidiaries shall be in
default, nor shall there have occurred any event that is, or after notice
or passage of time or both would be, an event of default, under this
Agreement or any agreement to which either the Issuer or any of its
Subsidiaries is a party that could reasonably be expected to result in a
liability in excess of $25,000 or that has a value in excess of $25,000.
<PAGE> 31
26
SECTION 6.02. Conditions to the Issuer's Obligations. The
obligations of the Issuer to issue and sell the Securities to Newco pursuant to
this Agreement are subject to the satisfaction, at or prior to the Closing Date,
of the following conditions:
(a) the representations and warranties of Newco and each of the
Purchasers contained herein shall be true and correct on and as of the
Closing Date;
(b) each of the Purchasers shall have performed and complied with
all agreements required by this Agreement to be performed or complied with
by each of the Purchasers on or prior to the Closing Date; and
(c) the Purchasers' acquisition of the Securities shall not be
prohibited by any applicable law, court order or governmental regulation
or any contract, agreement, document or other instrument by which any of
the Purchasers is bound.
SECTION 6.03. Integration Services. The Issuer shall cause all of
the properties, licenses, rights and other assets (collectively, the "ISI
Assets") of Integration Services International Ltd. ("ISI") to be acquired
(whether through the acquisition of all of the stock of ISI or otherwise) by
either the Issuer or IMPSAT U.S.A., Inc. within four months after the Closing
Date in exchange for payment by the Issuer to ISI of an amount not to exceed the
lesser of (x) the fair market value of the ISI Assets so acquired and (y) the
amount (based on book value) of capital, property and assets contributed to ISI
as an equity contribution or in exchange for stock of ISI prior to the time such
assets and properties are acquired. The ISI Assets shall be acquired by the
Issuer or IMPSAT U.S.A., Inc. free and clear of any Indebtedness, liabilities
(contingent or otherwise), liens, claims, charges or encumbrances.
SECTION 6.04. IMPSAT Comunicacoes Ltda. The Issuer shall cause
99.925% of the properties, licenses, rights and other assets (collectively, the
"Brazil Assets") of IMPSAT Comunicacoes Ltda. ("IMPSAT Brazil") to be acquired
(whether through the acquisition of 99.925% of the equity interests of IMPSAT
Brazil or otherwise) by the Issuer within nine months after the Closing Date in
exchange for a cash payment by the Issuer to the current stockholders of IMPSAT
Brazil of an aggregate of $5,121,500. The Brazil Assets shall be acquired by the
Issuer free and clear of any Indebtedness, liabilities (contingent or
otherwise), liens, claims, charges or encumbrances. The Brazil Assets acquired
must consist of all Brazil Assets existing on the Closing Date plus any
properties, licenses, rights and other assets acquired or received by IMPSAT
Brazil after the Closing Date.
<PAGE> 32
27
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including, without
limitation, telecopier or similar writing) and shall be given to such party by
certified first class mail at its address with a return receipt requested, by
Federal Express or similar overnight mail service with signature required for
receipt, or by telecopy at the telecopier number set forth below or such other
address or telecopier number as such party may hereinafter specify in writing
for the purpose to the party giving such notice. For so long as Princes Gate and
MSGEM in the aggregate own a majority of the Securities, all notices, requests
and other communications delivered in writing by the Issuer to Princes Gate and
MSGEM shall be deemed effective as having been given to all Purchasers and shall
be provided to all other Purchasers by Princes Gate and MSGEM. Each such notice,
request or other communication shall be effective (i) if given by telecopy, when
such telecopy is transmitted to the telecopy number specified in this Section
and the appropriate electronic confirmation is received and a copy of such
notice is sent by overnight mail service or (ii) if given by certified mail or
overnight courier, 72 hours after such communication is deposited in the mails
with first class postage prepaid or given to overnight courier service,
addressed as aforesaid.
Issuer: IMPSAT Corporation
Alferez Pareja 256
1107 Buenos Aires, Argentina
Attn: Chief Executive Officer
Fax: 011-541-307-1525
Newco: Jonesboro Financial Inc.
940 Avenida Eduardo Madero
Piso 19
Buenos Aires, Argentina
Attn: Enrique Pescarmona/Victor Formica
Fax: (541) 316-8868
Purchasers: Princes Gate Investors II, L.P.
1585 Broadway, 36th Floor
New York, NY 10036
Attn: James M. Wilmott
Tel.: (212) 761-7860
Fax: (212) 761-0518
<PAGE> 33
28
Morgan Stanley
Global Emerging Markets
Private Investment Fund, L.P.
1221 Avenue of the Americas, 33rd Floor
New York, NY 10020
Attn: Dimitri Goulandris
Tel: (212) 762-7023
Fax: (212) 762-8204
SECTION 7.02. No Waivers; Amendments. (a) No failure or delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
(b) Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by all parties
hereto.
SECTION 7.03. Indemnification. The Issuer hereby agrees to indemnify
and hold harmless the Purchasers and their partners and Affiliates and each
other Person, if any, who controls any of the Purchasers within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, and
their respective directors, officers, agents and employees (each, an
"Indemnified Person") from and against and to pay any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) ("Damages") to which
such Indemnified Person may become subject as the result of any
misrepresentation, breach of representation, warranty or covenant made or to be
performed on the part of the Issuer under this Agreement, the Securityholders
Agreement or otherwise resulting from any third-party action, claim or
proceeding arising out of or relating to the matters or transactions which are
the subject of or contemplated by this Agreement or any instrument or agreement
referred to herein (including, without limitation, (i) the execution, delivery
and performance of this Agreement, the Securityholders Agreement, the
Certificate of Designations and the Securities and (ii) any use made or proposed
to be made by the Issuer of the proceeds from the sale of the Securities) and
will reimburse any Indemnified Person for all reasonable expenses (including,
without limitation, reasonable counsel and expert fees) as they are incurred by
any such Indemnified Person in connection with any such misrepresentation or
breach of representation, warranty or covenant or investigating, preparing or
defending any such action or proceeding, whether pending or threatened, and
whether or not such Indemnified Person is a party hereto. The Issuer will not be
responsible for any Damages or expenses to the extent that a court of competent
jurisdiction shall have finally determined that such Damages or expenses
resulted primarily from such Indemnified Person's bad faith or gross negligence
or material breach of this Agreement or the Securityholders Agreement. The
agreement of the
<PAGE> 34
29
Issuer in this Section shall be in addition to any liability the Issuer may
otherwise have.
SECTION 7.04. Survival of Provisions. The representations and
warranties, covenants and agreements contained in this Agreement shall survive
so long as any of the Common Stock remains outstanding.
SECTION 7.05. Expenses; Documentary Taxes. The Issuer shall pay all
reasonable out-of-pocket expenses of the Purchasers of up to $600,000,
including, without limitation, fees and disbursements of Shearman & Sterling, in
connection with the preparation of this Agreement, the Securities, the
Securityholders Agreement, the Note Purchase Agreement, the Certificate of
Designations, any amendments thereto and the transactions contemplated hereby
and all matters (including due diligence) related thereto. In addition, the
Issuer shall pay (x) the fees and disbursements of U.S. and foreign counsel for
the Issuer, Newco and any Existing Stockholder and (y) any and all stamp,
transfer and other similar taxes payable or determined to be payable in
connection with the execution and delivery of this Agreement, or the issuance of
the Securities or the shares of Common Stock issuable upon the conversion of the
Securities (other than any such taxes payable in connection with the transfer of
any outstanding securities and the issuance by the Issuer of new certificates
representing such securities in the name of the transferee at the request of the
transferor).
SECTION 7.06. Successors and Assigns. The Purchasers may assign
their rights and obligations hereunder with the prior written consent of the
Issuer. The Issuer may not delegate its obligations hereunder. This Agreement
shall be binding upon the Issuer and the Purchasers and their respective
successors and assigns.
SECTION 7.07. New York Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York.
SECTION 7.08. Counterparts; Effectiveness. This Agreement may be
executed 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. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other hereto.
SECTION 7.09. Limitation on Issuance of Series A Stock. No Series A
Stock shall be issued except as provided for in this Agreement and the
Securityholders Agreement.
SECTION 7.10. Entire Agreement. This Agreement, the Securityholders
Agreement, the Note Purchase Agreement and the Certificate of Designations,
taken as a whole, constitute the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein,
and there are no restrictions, promises, representations, warranties,
covenants, or undertakings with respect to the subject matter
<PAGE> 35
30
hereof, other than those expressly set forth or referred to herein or therein.
This Agreement and the documents referred to in the preceding sentence
supersede all prior agreements and understandings between the parties hereto
with respect to the subject matter hereof.
SECTION 7.11. Remedies. The parties hereby acknowledge that money
damages would not be adequate compensation for the damages that a party would
suffer by reason of a failure of any other party to perform any of the
obligations under this Agreement. Therefore, each party hereto agrees that
specific performance is the only appropriate remedy under this Agreement and
hereby waives the claim or defense that any other party has an adequate remedy
at law. No party shall be liable for consequential damages as a result of any
breach hereof.
SECTION 7.12. Jurisdiction. Each of the parties hereto agrees that
any legal suit, action or proceeding arising out of or relating to this
Agreement or the transactions contemplated herein may be instituted in any U.S.
federal or New York State court in the Borough of Manhattan in the City of New
York (each a "New York court") or in the court of the corporate domicile of each
of the parties hereto, with respect to actions brought against that party as a
defendant, and each of the parties hereto hereby waives any objection which it
may now or hereafter have to the laying of venue of any such proceeding, and
irrevocably submits to the jurisdiction of such courts and to the courts of its
corporate domicile, with respect to actions brought against it as defendant, in
any suit, action or proceeding.
The Issuer (i) irrevocably appoints CT Corporation (together with
any successor, the "Process Agent"), as its authorized agent in the Borough of
Manhattan in the City of New York upon which process may be served in any such
suit, action or proceeding described in the first sentence of this Section 7.12,
acknowledges that the Process Agent has accepted such designation and agrees
that service of process upon the Process Agent, and written notice of such
service to the Issuer, by the person serving the same to the address provided in
Section 7.01, shall be deemed in every respect effective service of process upon
the Issuer in any such suit, action or proceeding and (ii) agrees to take any
and all action, including the execution and filing of any and all such documents
and instruments as may be necessary to continue such designation and appointment
of the Process Agent in full force and effect so long as any of the Series A
Stock shall be outstanding.
SECTION 7.13. Judgment Currency. If for purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder into any
currency other than United States dollars, the parties hereto agree, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be the rate at which in accordance with normal banking procedures Princes
Gate or MSGEM could purchase United States dollars with such other currency in
the City of New York on the business day preceding that on which final judgment
is given. The obligation of Newco in respect of any sum due from it to any other
party hereunder (the "Recipient Party") shall, notwithstanding any judgment in a
currency other than
<PAGE> 36
31
United States dollars, not be discharged until the first business day, following
receipt by such Recipient Party of any sum adjudged to be so due in such other
currency, on which (and only to the extent that) such Recipient Party may in
accordance with normal banking procedures purchase United States dollars with
such other currency; if the United States dollars so purchased are less than the
sum originally due to such Recipient Party hereunder, Newco agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Recipient Party against such loss. If the United States dollars so purchased are
greater than the sum originally due to such Recipient Party hereunder, such
Recipient Party agrees to pay to Newco an aggregate amount equal to the excess
of the dollars so purchased and the sum originally due to such Recipient Party
hereunder.
<PAGE> 37
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed, as of the day and year first above written.
IMPSAT CORPORATION
By:
---------------------------------------
Name:
Title:
JONESBORO FINANCIAL INC.
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
PURCHASERS: PRINCES GATE INVESTORS II, L.P.
By: PG Investors II, Inc., General Partner
By:
------------------------------------
Name: Stephen R. Munger
Title: President
By:
---------------------------------------
- --------------------------------------
Name: James M. Wilmott
Title: Vice-President
<PAGE> 38
MORGAN STANLEY
GLOBAL EMERGING MARKETS PRIVATE INVESTMENT FUND, L.P.
By: Morgan Stanley Global Emerging
Markets, Inc., General Partner
By:
---------------------------------------
Name:
Title:
MORGAN STANLEY GLOBAL
EMERGING MARKETS PRIVATE
INVESTORS, L.P.
By: Morgan Stanley Global Emerging
Markets Inc., General Partner
By:
---------------------------------------
Name:
Title:
PGI INVESTMENTS LIMITED
By: PG Investors II, Inc., as Attorney in Fact
By:
------------------------------------
Name: Stephen R. Munger
Title: President
By:
---------------------------------------
- ---------------------------------
Name: James M. Wilmott
Title: Vice-President
<PAGE> 39
GREGOR VON OPEL
By: PG Investors II, Inc., as Attorney in Fact
By:
-----------------------------------
Name: Stephen R. Munger
Title: President
By:
---------------------------------------
- ---------------------------------
Name: James M. Wilmott
Title: Vice-President
INVESTOR INVESTMENTS AB
By: PG Investors II, Inc., as Attorney in Fact
By:
-----------------------------------
Name: Stephen R. Munger
Title: President
By:
---------------------------------------
- ---------------------------------
Name: James M. Wilmott
Title: Vice-President
<PAGE> 40
SCHEDULE 3.02
Consents and Approvals
<PAGE> 41
SCHEDULE 3.04(a)
Authorized and Outstanding Capital Stock
<PAGE> 42
SCHEDULE 3.04(b)
Voting Agreements
<PAGE> 43
SCHEDULE 3.05
Subsidiaries
<PAGE> 44
SCHEDULE 3.06
Related Party Transactions
<PAGE> 45
SCHEDULE 3.08(a)
Litigation and Proceedings
<PAGE> 46
SCHEDULE 3.19
Material Changes
<PAGE> 47
SCHEDULE 3.20
Liens
<PAGE> 48
SCHEDULE 3.21
Employees; Employee Compensation
<PAGE> 49
SCHEDULE 3.24
Material Contracts
<PAGE> 50
EXHIBIT A
Form of Securityholders Agreement
<PAGE> 51
EXHIBIT B
Form of Opinion of United States Counsel to the Issuer and Newco
1. The Issuer is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all
corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as conducted to date and as currently proposed to be
conducted.
2. The execution, delivery and performance by the Issuer of each of the
Securities Purchase Agreement, the Certificate of Designations, the
Non-Competition Agreement and the Securityholders Agreement, the
issuance, delivery and performance by the Issuer of the Securities
and the amendment to the Charter effected by the filing of the
Certificate of Designations are within the Issuer's corporate powers,
have been duly authorized by all necessary corporate action, require
no action by or in respect of, or filing with, any governmental body,
agency or official (other than the filing of the Certificate of
Designations with the Secretary of State of Delaware and as may be
required under federal or state securities laws in connection with
the registration obligations of the Issuer contained in the
Securityholders Agreement) and do not (i) contravene or constitute a
default under any provision of applicable law or regulation of
general application in the United States of America, the State of New
York or the State of Delaware or any judgment, injunction, order or
decree of any United States Federal court located in New York, New
York or Delaware or any state court located in New York, New York or
any Court of Chancery of Delaware, or any agreement listed on the
schedules attached to the Securities Purchase Agreement and that is
governed by U.S. law, (ii) contravene or constitute a default under
the Charter or Bylaws or the charter or bylaws of IMPSAT U.S.A., Inc.
or (iii) result in the creation or imposition of any Lien on any
asset of the Issuer.
3. The execution, delivery and performance by Newco of the Securities
Purchase Agreement requires no action by or in respect of, or filing
with, any governmental body, agency or official and does not (i)
contravene or constitute a default under any provision of applicable
law or regulation of general application in the United States of
America, the State of New York or the State of Delaware, or any
judgment, injunction, order or decree of any United States Federal
court located in New York, New York or Delaware or any state court
located in New York, New York or any Court of Chancery of Delaware,
or any agreement or other instrument binding upon or applicable to
Newco and that is governed by U.S. law or (ii) result in the creation
or imposition of any Lien on any asset of Newco.
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4. Each of the Securities Purchase Agreement, the Non-Competition
Agreement and the Securityholders Agreement has been duly authorized,
executed and delivered by the Issuer and each of the Securities
Purchase Agreement and the Securityholders Agreement constitutes a
valid and binding agreement of the Issuer, enforceable against the
Issuer in accordance with its terms, and each of the Securities, when
issued and delivered by the Issuer in accordance with the Securities
Purchase Agreement, shall constitute a valid and binding obligation
of the Issuer, enforceable in accordance with its terms.
5. Assuming due authorization, execution and delivery thereof by Newco,
the Securities Purchase Agreement constitutes a valid and binding
agreement of Newco, enforceable against Newco in accordance with its
terms.
6. Assuming due authorization, execution and delivery thereof by each of
Nevasa Holdings Ltd. ("Nevasa"), Corporacion IMPSA S.A. ("CORIM"),
each other Existing Stockholder, Mrs. Silvia Monica Pescarmona de
Baldini, Mrs. Liliana Pescarmona de Mayo, Militello Limited
("Militello") and Rotling International Corporation ("Rotling") of
the letter agreement dated the date hereof and addressed to the
Purchasers (the "Letter Agreement"), the Letter Agreement constitutes
a valid and binding agreement of each of Nevasa, CORIM, each other
Existing Stockholder, Militello and Rotling, enforceable against each
of them in accordance with its terms.
8. All of the issued and outstanding shares of capital stock of the
Issuer (including the Securities) have been validly issued, are fully
paid and nonassessable; the holders thereof are not entitled to any
preemptive or other similar rights. All shares of Common Stock to be
issued upon conversion of the Securities will be duly authorized and
validly issued, fully paid and nonassessable, free of any Liens or
encumbrances and will not be subject to any preemptive or other
similar rights.
9. Newco has good and marketable title to the Securities to be sold by
Newco pursuant to the Securities Purchase Agreement, free and clear
of any pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind; and upon delivery of such Securities and
payment of the purchase price therefor as contemplated in the
Securities Purchase Agreement, the Purchasers will receive good and
marketable title to the Securities purchased by them from Newco, free
and clear of any pledge, lien, security interest, charge, claim,
equity or encumbrance of any kind.
10. To the best of such counsel's knowledge and except as specified in
the Securities Purchase Agreement, there is no action, suit or
proceeding pending or threatened
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against or affecting the Issuer or Newco or any of their respective
assets before any United States Federal or state court located in New
York, New York or arbitrator or any governmental body, agency or
official in which there is a possibility of an adverse decision that
could (individually or in the aggregate) result in a Material Adverse
Effect or result in any material change in the current equity
ownership of the Issuer or Newco, or which in any manner draws into
question the validity or enforceability of any portion of the
Securities Purchase Agreement, the Securityholders Agreement, the
Certificate of Designations, the Charter, the Securities or any of
the transactions contemplated thereby.
11. The certificates representing the Securities are in due and proper
form and have been duly and validly executed by the officers of the
Issuer named thereon. The Securities will be entitled to the benefits
provided for under the Certificate of Designations.
12. Assuming the accuracy of the representations set forth in the
Securities Purchase Agreement, (i) the offer, transfer and issuance
of the Securities to Newco and the initial resale of such Securities
to the Purchasers as contemplated by the Securities Purchase
Agreement and (ii) the issuance of the Common Stock to the holders
thereof upon conversion of the Securities in accordance with the
terms of the Securities are, and would be, exempt from the
registration requirements of the Securities Act.
13. Neither the Issuer nor Newco is, and after giving effect to the
issuance and sale, in the case of the Issuer, and the initial resale,
in the case of Newco, of the Securities, will not be, required to
register as an "investment company" under the Investment Company Act
of 1940, as amended.
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EXHIBIT C
Form of Opinion of United States Regulatory Counsel
to the Issuer and IMPSAT U.S.A., Inc.
1. Each of the Issuer and IMPSAT U.S.A., Inc. (i) possesses all
licenses, certificates, authorizations, approvals and permits issued
by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct its business, excepting any
certificate, authorization, approval or permit, the failure to
possess which could not reasonably be expected to result in a
Material Adverse Change and (ii) has not received any notice of
proceedings relating to the revocation or modification of any such
license, certificate, authorization, approval or permit, nor is
either the Issuer or IMPSAT U.S.A., Inc. in violation or
contravention of, or in default under, any such license,
authorization, approval or permit or any decree, order or judgment
applicable to the Issuer or IMPSAT U.S.A., Inc., the effect of which,
singly or in the aggregate, could reasonably be expected to result in
a Material Adverse Effect.
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EXHIBIT D
Form of Opinion of British Virgin Islands Counsel to Newco
1. Each of Newco, Militello Limited ("Militello") and Rotling
International Corporation ("Rotling") is a corporation duly
incorporated, validly existing and in good standing under the laws of
the British Virgin Islands.
2. The execution, delivery and performance (x) by Newco of the
Securities Purchase Agreement, (y) by each of Militello and Rotling
of the Securityholders Agreement, the letter agreement dated the date
hereof and addressed to the Purchasers (the "Letter Agreement") and
the Non-Competition Agreement and (z) the consummation of the
transactions contemplated by the Securities Purchase Agreement are
within each of Newco's, Militello's and Rotling powers, have been
duly authorized on their respective parts by all requisite corporate
action, require no action by or in respect of, or filing with, any
governmental body, agency or official and do not (i) violate any of
Newco's, Militello's or Rotling articles of incorporation or other
constating documents, or (ii) violate any applicable law, rule,
regulation, judgment, injunction, order or decree, which violation
would (a) affect the validity of the Securities Purchase Agreement
or, in the case of Militello or Rotling, the Securityholders
Agreement, the Non-Competition Agreement or the Letter Agreement or
(b) individually or in the aggregate impair the ability of Newco or
Militello and Rotling to perform in any material respect their
respective obligations under the Securities Purchase Agreement (with
respect to Newco) and the Securityholders Agreement, the
Non-Competition Agreement and the Letter Agreement (with respect to
Militello and Rotling), respectively.
3. The Securities Purchase Agreement has been duly authorized, executed
and delivered by Newco.
4. Each of the Securityholders Agreement, the Non-Competition Agreement
and the Letter Agreement has been duly authorized, executed and
delivered by each of Militello and Rotling.
5. Newco has good and marketable title to the Securities to be sold by
Newco pursuant to the Securities Purchase Agreement, free and clear
of any pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind; and upon delivery of such Securities and
payment of the purchase price therefor as contemplated in the
Securities Purchase Agreement, the Purchasers will receive good and
marketable title to the Securities
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purchased by them from Newco, free and clear of any pledge, lien,
security interest, charge, claim, equity or encumbrance of any kind.
6. The provisions in the Securities Purchase Agreement, the
Securityholders Agreement and the Letter Agreement as to the
submission of Newco (with respect to the Securities Purchase
Agreement) and Militello and Rotling (with respect to the
Securityholders Agreement and the Letter Agreement) (x) to the
jurisdiction of any federal or state court in the State of New York
in any action under the Securities Purchase Agreement or
Securityholders Agreement and the Letter Agreement, respectively, and
(y) to the jurisdiction of any federal or state court in Buenos Aires
in any action under the Non-Competition Agreement are valid, binding
and enforceable under the laws of the British Virgin Islands, and
service of process effected personally on the Process Agent under the
Securities Purchase Agreement, the Securityholders Agreement, the
Non-Competition Agreement and the Letter Agreement will be effective
to confer jurisdiction with respect to Newco (with respect to the
Securities Purchase Agreement) and Militello and Rotling (with
respect to the Securityholders Agreement, the Non-Competition
Agreement and the Letter Agreement); any judgment obtained against
Newco under the Securities Purchase Agreement or Militello or Rotling
under the Securityholders Agreement, the Non-Competition Agreement or
the Letter Agreement in any such court would be enforceable against
Newco, Militello and Rotling in the courts of the British Virgin
Islands without further review of the merits.
7. Each of the Securities Purchase Agreement, the Non-Competition
Agreement, the Securityholders Agreement and the Letter Agreement is
in proper legal form under the laws of the British Virgin Islands for
the enforcement thereof in the British Virgin Islands.
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EXHIBIT E
Form of Opinion of Irish Counsel to Nevasa Holdings Ltd.
1. Nevasa Holdings Ltd. ("Nevasa") is a corporation duly incorporated,
validly existing and in good standing under the laws of the Ireland.
2. The execution, delivery and performance by Nevasa of each of the
letter agreement addressed to the Purchasers and dated the date
hereof (the "Letter Agreement"), the Non-Competition Agreement and
the Securityholders Agreement are within Nevasa's powers, have been
duly authorized on its part by all requisite corporate action,
require no action by or in respect of, or filing with, any
governmental body, agency or official and do not (i) violate Nevasa's
articles of incorporation or other constating documents, or (ii)
violate any applicable law, rule, regulation, judgment, injunction,
order or decree, which violation would (a) affect the validity of
either of the Letter Agreement, the Non-Competition Agreement or the
Securityholders Agreement or (b) individually or in the aggregate
impair the ability of Nevasa to perform in any material respect the
obligations which it has under the Letter Agreement, the
Non-Competition Agreement or the Securityholders Agreement.
3. Each of the Letter Agreement, the Non-Competition Agreement and the
Securityholders Agreement has been duly authorized, executed and
delivered by Nevasa.
4. The provisions in each of the Letter Agreement, the Non-Competition
Agreement and the Securityholders Agreement as to the submission of
Nevasa (x) to the jurisdiction of any federal or state court in the
State of New York in any action under the Letter Agreement, the
Non-Competition Agreement or the Securityholders Agreement and (y) to
the jurisdiction of any federal or state court in Buenos Aires in any
action under the Non-Competition Agreement are valid, binding and
enforceable under the laws of Ireland, and service of process
effected personally on the Process Agent under the Letter Agreement,
the Non-Competition Agreement or the Securityholders Agreement will
be effective to confer jurisdiction with respect to Nevasa; any
judgment obtained against Nevasa under the Letter Agreement, the
Non-Competition Agreement or the Securityholders Agreement in any
such court would be enforceable against Nevasa in the courts of
Ireland without further review of the merits.
5. Each of the Letter Agreement, the Non-Competition Agreement and the
Securityholders Agreement is in proper legal form under the laws of
Ireland for the
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enforcement thereof in Ireland.
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EXHIBIT F
Form of Opinion of Argentine Counsel to the Issuer
1. IMPSAT S.A. (the "Company") has been duly incorporated, is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and all
material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and as
currently proposed to be conducted 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.
2. The Company has all necessary certificates, orders, permits,
licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all governmental authorities,
courts and tribunals necessary to own, lease, license and use its
properties and assets and to conduct its business as now conducted
and as currently proposed to be conducted, and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is the Company in
violation or contravention of, or in default under, any such
certificate, order, permit, license, authorization, consent or
approval or any federal, state, local, foreign supranational,
national or regional law, regulation, rule, decree, order or judgment
applicable to the Company the effect of which, singly or in the
aggregate, could reasonably be expected to have a material adverse
effect on the prospects, condition, financial or otherwise, or in the
earnings, business or operation of the Company.
3. There are no restrictions (legal, contractual or otherwise) on the
ability of the Company to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders except
for 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.
4. The execution, delivery and performance by IMPSAT Corporation of each
of the Securities Purchase Agreement, the Non-Competition Agreement,
the Certificate of Designations and the Securityholders Agreement,
the issuance, delivery and performance by IMPSAT Corporation of the
Securities, and the consummation of the Transactions require no
action by or in respect of, or filing with, any governmental
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body, agency or official and do not (i) contravene or constitute a
default under any provision of applicable law or regulation,
judgment, injunction, order, decree, any agreement or other
instrument binding upon or applicable to the Company, (ii) contravene
or constitute a default under the charter or bylaws of any of the
Company, (iii) require any consent, approval or other action by any
Person or (iv) result in the creation or imposition of any Lien on
any asset of any of the Company.
5. Each of the Letter Agreement, the Non-Competition Agreement and the
Securityholders Agreement is in proper legal form under the laws of
Argentina for the enforcement thereof in Argentina.
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EXHIBIT G
Form of Opinion of General Counsel to Corporacion IMPSA S.A.
1. Corporacion IMPSA S.A. ("CORIM") has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, has all corporate powers and all
material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and as
currently proposed to be conducted 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 CORIM.
2. The execution, delivery and performance (x) by each of CORIM, each
other Existing Stockholder (other than Nevasa Holdings Ltd.,
Militello Limited and Rotling International Corporation), Mrs. Silvia
Monica Pescarmona de Baldini and Mrs. Liliana Pescarmona de Mayo of
the letter agreement dated the date hereof and addressed to the
Purchasers (the "Letter Agreement") (y) by each of Mr. Enrique
Pescarmona, Mr. Roberto Vivo Chaneton, Mr. Ricardo Verdaguer and
CORIM of the Non-Competition Agreement and (z) by CORIM of the
Securityholders Agreement, require no action by or in respect of, or
filing with, any governmental body, agency or official and do not (i)
contravene or constitute a default under any provision of applicable
law or regulation, judgment, injunction, order, decree, any agreement
or other instrument binding upon or applicable to any of CORIM, Mr.
Enrique Pescarmona, Mrs. Sylvia Monica Pescarmona de Baldini or Mrs.
Liliana Pescarmona de Mayo, (ii) contravene or constitute a default
under the charter or bylaws or any of CORIM, (iii) require any
consent, approval or other action by any Person or (iv) result in the
creation or imposition of any Lien on any asset of any of CORIM, Mr.
Enrique Pescarmona, Mr. Roberto Vivo Chaneton, Mr. Ricardo Verdaguer,
Mrs. Sylvia Monica Pescarmona de Baldini or Mrs. Liliana Pescarmona
de Mayo.
3. The Letter Agreement has been duly authorized (in the case of CORIM),
executed and delivered by each of CORIM, Mr. Enrique Pescarmona, Mrs.
Sylvia Monica Pescarmona de Baldini and Mrs. Liliana Pescarmona de
Mayo.
4. The Non-Competition Agreement has been duly authorized (in the case
of CORIM), executed and delivered by each of CORIM, Mr. Enrique
Pescarmona, Mr. Roberto Vivo Chaneton and Mr. Ricardo Verdaguer.
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5. The Securityholders Agreement has been duly authorized, executed and
delivered by CORIM.
6. The provisions in the Letter Agreement, the Non-Competition Agreement
and the Securityholders Agreement as to the submission of each of (x)
CORIM, Mr. Enrique Pescarmona, Mrs. Sylvia Monica Pescarmona de
Baldini and Mrs. Liliana Pescarmona de Mayo to the jurisdiction of
any federal or state court in the state of New York, in any action
under the Letter Agreement, and to the jurisdiction of any federal or
Court of Chancery of Delaware, in any action under the
Securityholders Agreement, and (y) CORIM, Mr. Enrique Pescarmona, Mr.
Roberto Vivo Chaneton and Mr. Ricardo Verdaguer to the jurisdiction
of any federal or state court in Buenos Aires or the state of New
York are valid, binding and enforceable under the laws of Argentina,
and service of process effected personally on the Process Agent under
each of the Letter Agreement, the Non-Competition Agreement and the
Securityholders Agreement will be effective to confer jurisdiction
with respect to CORIM (in respect of the Letter Agreement, the
Non-Competition Agreement and the Securityholders Agreement), each of
Mrs. Sylvia Monica Pescarmona de Baldini and Mrs. Liliana Pescarmona
de Mayo (in respect of the Letter Agreement), Mr. Enrique Pescarmona
(in respect of the Letter Agreement and the Non-Competition
Agreement) and each of Mr. Roberto Vivo Chaneton and Mr. Ricardo
Verdaguer (in respect of the Non-Competition Agreement); any judgment
obtained against any of CORIM, Mr. Enrique Pescarmona, Mrs. Sylvia
Monica Pescarmona de Baldini or Mrs. Liliana Pescarmona de Mayo under
the Letter Agreement, against CORIM under the Securityholders
Agreement or against any of CORIM, Mr. Roberto Vivo Chaneton, Mr.
Ricardo Verdaguer or Mr. Enrique Pescarmona under the Non-Competition
Agreement in any such court would be enforceable against each of
CORIM, Mr. Enrique Pescarmona, Mr. Roberto Vivo Chaneton, Mr. Ricardo
Verdaguer, Mrs. Sylvia Monica Pescarmona de Baldini and Mrs. Liliana
Pescarmona de Mayo, as applicable, in the courts of Argentina without
further review of the merits.
7. Each of the Letter Agreement, the Non-Competition Agreement and the
Securityholders Agreement is in proper legal form under the laws of
Argentina for the enforcement thereof in Argentina.
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EXHIBIT H
Form of Opinion of Colombian Counsel to the Issuer
1. IMPSAT S.A. (the "Company") has been duly incorporated, is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and all
material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and as
currently proposed to be conducted 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.
2. The Company has all necessary certificates, orders, permits,
licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all governmental authorities,
courts and tribunals necessary to own, lease, license and use its
properties and assets and to conduct its business as now conducted
and as currently proposed to be conducted, and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is the Company in
violation or contravention of, or in default under, any such
certificate, order, permit, license, authorization, consent or
approval or any federal, state, local, foreign supranational,
national or regional law, regulation, rule, decree, order or judgment
applicable to the Company the effect of which, singly or in the
aggregate, could reasonably be expected to have a material adverse
effect on the prospects, condition, financial or otherwise, or in the
earnings, business or operation of the Company.
3. There are no restrictions (legal, contractual or otherwise) on the
ability of the Company to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders except
for 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.
4. The execution, delivery and performance by IMPSAT Corporation of each
of the Securities Purchase Agreement, the Non-Competition Agreement,
the Certificate of Designations and the Securityholders Agreement,
the issuance, delivery and performance by IMPSAT Corporation of the
Securities, and the consummation of the Transactions require no
action by or in respect of, or filing with, any governmental
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body, agency or official and do not (i) contravene or constitute a
default under any provision of applicable law or regulation,
judgment, injunction, order, decree, any agreement or other
instrument binding upon or applicable to the Company, (ii) contravene
or constitute a default under the charter or bylaws of the Company,
(iii) require any consent, approval or other action by any Person or
(iv) result in the creation or imposition of any Lien on any asset of
the Company.
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EXHIBIT I
Form of Opinion of Ecuadorian Counsel to the Issuer
1. IMPSATEL del Ecuador S.A. (the "Company") has been duly incorporated,
is validly existing as a corporation in good standing under the laws
of its jurisdiction of incorporation, has all corporate powers and
all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and as
currently proposed to be conducted 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.
2. The Company has all necessary certificates, orders, permits,
licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all governmental authorities,
courts and tribunals necessary to own, lease, license and use its
properties and assets and to conduct its business as now conducted
and as currently proposed to be conducted, and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is the Company in
violation or contravention of, or in default under, any such
certificate, order, permit, license, authorization, consent or
approval or any federal, state, local, foreign supranational,
national or regional law, regulation, rule, decree, order or judgment
applicable to the Company the effect of which, singly or in the
aggregate, could reasonably be expected to have a material adverse
effect on the prospects, condition, financial or otherwise, or in the
earnings, business or operation of the Company.
3. There are no restrictions (legal, contractual or otherwise) on the
ability of the Company to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders except
for 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.
4. The execution, delivery and performance by IMPSAT Corporation of each
of the Securities Purchase Agreement, the Non-Competition Agreement,
the Certificate of Designations and the Securityholders Agreement,
the issuance, delivery and performance by IMPSAT Corporation of the
Securities, and the consummation of the Transactions require no
action by or in respect of, or filing with, any governmental
I-1
<PAGE> 66
body, agency or official and do not (i) contravene or constitute a
default under any provision of applicable law or regulation,
judgment, injunction, order, decree, any agreement or other
instrument binding upon or applicable to the Company, (ii) contravene
or constitute a default under the charter or bylaws of the Company,
(iii) require any consent, approval or other action by any Person or
(iv) result in the creation or imposition of any Lien on any asset of
the Company.
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EXHIBIT J
Form of Opinion of Mexican Counsel to the Issuer
1. IMPSAT, S.A. de C.V. (the "Company") has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, has all corporate powers and all
material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and as
currently proposed to be conducted 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.
2. The Company has all necessary certificates, orders, permits,
licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all governmental authorities,
courts and tribunals necessary to own, lease, license and use its
properties and assets and to conduct its business as now conducted
and as currently proposed to be conducted, and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is the Company in
violation or contravention of, or in default under, any such
certificate, order, permit, license, authorization, consent or
approval or any federal, state, local, foreign supranational,
national or regional law, regulation, rule, decree, order or judgment
applicable to the Company the effect of which, singly or in the
aggregate, could reasonably be expected to have a material adverse
effect on the prospects, condition, financial or otherwise, or in the
earnings, business or operation of the Company.
3. There are no restrictions (legal, contractual or otherwise) on the
ability of the Company to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders except
for 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.
4. The execution, delivery and performance by IMPSAT Corporation of each
of the Securities Purchase Agreement, the Non-Competition Agreement,
the Certificate of Designations and the Securityholders Agreement,
the issuance, delivery and performance by IMPSAT Corporation of the
Securities, and the consummation of the Transactions require no
action by or in respect of, or filing with, any governmental
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body, agency or official and do not (i) contravene or constitute a
default under any provision of applicable law or regulation,
judgment, injunction, order, decree, any agreement or other
instrument binding upon or applicable to the Company, (ii) contravene
or constitute a default under the charter or bylaws of the Company,
(iii) require any consent, approval or other action by any Person or
(iv) result in the creation or imposition of any Lien on any asset of
the Company.
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EXHIBIT K
Form of Opinion of Venezuelan Counsel to the Issuer
1. Telecomunicaciones IMPSAT S.A. (the "Company") has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, has all
corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted and as currently proposed to be conducted
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.
2. The Company has all necessary certificates, orders, permits,
licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all governmental authorities,
courts and tribunals necessary to own, lease, license and use its
properties and assets and to conduct its business as now conducted
and as currently proposed to be conducted, and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is the Company in
violation or contravention of, or in default under, any such
certificate, order, permit, license, authorization, consent or
approval or any federal, state, local, foreign supranational,
national or regional law, regulation, rule, decree, order or judgment
applicable to the Company the effect of which, singly or in the
aggregate, could reasonably be expected to have a material adverse
effect on the prospects, condition, financial or otherwise, or in the
earnings, business or operation of the Company.
3. There are no restrictions (legal, contractual or otherwise) on the
ability of the Company to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders except
for 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.
4. The execution, delivery and performance by IMPSAT Corporation of each
of the Securities Purchase Agreement, the Non-Competition Agreement,
the Certificate of Designations and the Securityholders Agreement,
the issuance, delivery and performance by IMPSAT Corporation of the
Securities, and the consummation of the Transactions require no
action by or in respect of, or filing with, any governmental
K-1
<PAGE> 70
body, agency or official and do not (i) contravene or constitute a
default under any provision of applicable law or regulation,
judgment, injunction, order, decree, any agreement or other
instrument binding upon or applicable to the Company, (ii) contravene
or constitute a default under the charter or bylaws of the Company,
(iii) require any consent, approval or other action by any Person or
(iv) result in the creation or imposition of any Lien on any asset of
the Company.
K-2
<PAGE> 71
EXHIBIT L
Form of Opinion of Brazilian Counsel to the Issuer
1. IMPSAT Comunicacoes Ltda. (the "Company") has been duly incorporated,
is validly existing as a corporation in good standing under the laws
of its jurisdiction of incorporation, has all corporate powers and
all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and as
currently proposed to be conducted 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.
2. The Company has all necessary certificates, orders, permits,
licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all governmental authorities,
courts and tribunals necessary to own, lease, license and use its
properties and assets and to conduct its business as now conducted
and as currently proposed to be conducted, and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is the Company in
violation or contravention of, or in default under, any such
certificate, order, permit, license, authorization, consent or
approval or any federal, state, local, foreign supranational,
national or regional law, regulation, rule, decree, order or judgment
applicable to the Company the effect of which, singly or in the
aggregate, could reasonably be expected to have a material adverse
effect on the prospects, condition, financial or otherwise, or in the
earnings, business or operation of the Company.
3. There are no restrictions (legal, contractual or otherwise) on the
ability of the Company to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders except
for 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.
4. The execution, delivery and performance by IMPSAT Corporation of each
of the Securities Purchase Agreement, the Non-Competition Agreement,
the Certificate of Designations and the Securityholders Agreement,
the issuance, delivery and performance by IMPSAT Corporation of the
Securities, and the consummation of the Transactions require no
action by or in respect of, or filing with, any governmental
L-1
<PAGE> 72
body, agency or official and do not (i) contravene or constitute a
default under any provision of applicable law or regulation,
judgment, injunction, order, decree, any agreement or other
instrument binding upon or applicable to the Company, (ii) contravene
or constitute a default under the charter or bylaws of the Company,
(iii) require any consent, approval or other action by any Person or
(iv) result in the creation or imposition of any Lien on any asset of
the Company.
L-2
<PAGE> 73
EXHIBIT M
Charter
M-1
<PAGE> 74
EXHIBIT N
Bylaws
N-1
<PAGE> 75
EXHIBIT O
Certificate of Designations
O-1
<PAGE> 76
EXHIBIT P
FORM OF NON-COMPETITION AND NON-SOLICITATION AGREEMENT
AGREEMENT, dated as of March 19, 1998 (this "Agreement"), by and
between IMPSAT Corporation, a Delaware corporation ("IMPSAT"), and [ ]
(the "Stockholder").
W I T N E S S E T H:
WHEREAS, IMPSAT, as issuer, Jonesboro Financial Inc. ("Newco"),
Princes Gate Investors II, L.P., Morgan Stanley Global Emerging Markets Private
Investment Fund, L.P. ("MSGEM"), Morgan Stanley Global Emerging Markets Private
Investors, L.P. ("Private Investors") and certain other parties signatory
thereto (the "Purchasers"), will enter into a Securities Purchase Agreement (the
"Securities Purchase Agreement") pursuant to which Newco will acquire
Convertible Preferred Stock, Series A of IMPSAT (the "Securities") in exchange
for the contribution to IMPSAT of common stock of IMPSAT and common stock of
IMPSAT S.A.; and
WHEREAS, immediately following the execution of the Securities
Purchase Agreement Newco (i) shall transfer Securities having an aggregate
liquidation preference of $25 million to MSGEM and Private Investors for an
aggregate purchase price of $25 million, (ii) shall transfer Securities having
an aggregate liquidation preference of $100 million to Princes Gate, PGI
Investments Limited, Gregor von Opel and Investor Investments AB in satisfaction
of its obligations to such Note Purchasers (as defined in the Note Purchase
Agreement among Newco, Princes Gate and the other parties signatory thereto
dated March 19, 1998, the "Note Purchase Agreement") and (iii) shall repay
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD") the amount of $25 million
in satisfaction of its obligations to MSDWD under its Note (as defined in the
Note Purchase Agreement) after Newco receives the purchase price described in
clause (i); and
WHEREAS, the Stockholder believes that it is in its best interests
that the transaction contemplated by the Securities Purchase Agreement be
consummated; and
WHEREAS, as a condition to entering into the Securities Purchase
Agreement, IMPSAT must execute this Agreement with the Stockholder;
NOW, THEREFORE, in consideration of the covenants and agreements
herein
P-1
<PAGE> 77
contained, the parties hereto agree as follows:
1. Non-Competition and Non-Solicitation. The Stockholder
covenants that, during the Restricted Period (as defined below), the Stockholder
shall not, directly or indirectly, individually or through any natural person,
trust, estate, partnership, corporation or other entity:
(a) manage, operate, own an interest in (other than up to 5% of
an outstanding class of securities that are publicly traded and that are
purchased for investment purposes only), join, control, lend money to or
render financial or other assistance to, participate in or be connected
with (as an officer, employee, partner, stockholder (except as described
above), principal, agent, consultant or otherwise) (other than on behalf
of IMPSAT or its affiliates), any partnership, firm, corporation or any
other business organization, person or other entity that directly or
indirectly competes with IMPSAT or in any similar, related or ancillary
business in which IMPSAT is engaged directly or indirectly anywhere in
North America, Central America or South America; provided, however, that
the management, operation and ownership of any partnership, firm,
corporation or other business organization that is engaged in the business
of Internet web page publishing (including the provision of Internet
advertising and marketing services) and/or Internet site design and
construction and maintenance of content on web sites will be deemed not to
be directly or indirectly competitive with IMPSAT or any similar, related
or ancillary business in which IMPSAT is engaged directly or indirectly
anywhere in North America, Central America or South America];
(b) solicit business from, entice business clients away from,
accept orders involving or otherwise interfere with the relationship of
IMPSAT with any client or prospective client (including any person or
entity who, at any time during the twelve-month period prior to the date
of this Agreement, was a client of IMPSAT); or
(c) solicit the services of any individual who is employed by
IMPSAT (or who was employed by IMPSAT at any time during the most recent
twelve-month period) or who is retained by IMPSAT as an independent
contractor or consultant (or who was retained by IMPSAT in such capacity
at any time during the twelve-month period prior to the date of this
Agreement), or take any action that results, or might reasonably result,
in any individual performing services for IMPSAT to cease performing such
services except that any such individual may serve on the Board of
Directors of, and any such individual (other than Mr. Ricardo Verdaguer,
Mr. Roberto Vivo Chaneton, Mr. Hector Alonso and Mr. Guillermo Jofre) may
be employed by or perform services for, any entity controlled by
Corporacion IMPSA S.A.
P-2
<PAGE> 78
For purposes of this Section 1, except as otherwise provided herein,
the parties hereto expressly agree that the Stockholder shall be conclusively
presumed to be violating the restrictions contained herein if any of the
Stockholder's spouse, [{for Enrique Pescarmona only siblings}] or children
engage in activities that would be prohibited by this Section 1 if conducted
directly by the Stockholder; provided, however, that [{for Lucas Enrique
Pescarmona and Sofia Pescarmona only} commencing on the date two years after the
termination of such person's service as an employee, officer or director of
IMPSAT,] any child of the Stockholder may be employed by or may, with such
person's own resources and without any direct or indirect assistance, financial
or otherwise, by the Stockholder, manage, operate, own an interest in or join or
control any such partnership, firm, corporation or such other business
organization, person or other entity.
For purposes of this Section 1, "Restricted Period" means the period
beginning on the date of this Agreement and continuing until the earlier of (i)
the tenth anniversary thereof, (ii) a Change of Control (as defined in the
Certificate of Designations relating to the Securities) occurs, (iii) the
Purchasers and their affiliates collectively own less than 5% of the common
stock of IMPSAT (determined on a fully-diluted, as converted basis) [insert the
following for Mr. Roberto Vivo Chaneton and Mr. Ricardo Verdaguer], (iv) with
respect to [Mr. Ricardo Verdaguer and Rotling International Corporation] [Mr.
Roberto Vivo Chaneton and Militello Limited], three years after such person is
no longer employed by IMPSAT if such person's employment was terminated by
IMPSAT for Cause (as defined below), (v) upon termination of such person's
employment by IMPSAT if such termination was made by IMPSAT without Cause and
(vi) if such person voluntarily terminates his employment by IMPSAT and IMPSAT
would not have been able to terminate such person's employment for Cause, three
years after such termination. "Cause" means (i) an act of dishonesty made by a
person in connection with such person's responsibilities as an employee and
intended to result in such person's substantial personal enrichment, (ii) a
person's conviction of a felony, (iii) a willful act by a person which
constitutes gross misconduct and which results in material injury to IMPSAT, or
(iv) a person's continued substantial violations of his employment duties which
are demonstrably willful and deliberate on such person's part after such person
has received one or more written demands for performance from IMPSAT which
specifically sets forth the factual basis for IMPSAT's claim that such person
has not substantially performed his duties, and such person has had a reasonable
time period in which to cure such defaults to the reasonable satisfaction of the
independent members of the Board of Directors of IMPSAT. The activities
described in this Section 1 shall be prohibited regardless of whether undertaken
by the Stockholder in an individual or representative capacity, and regardless
of whether performed for the Stockholder's own account or for the account of any
other individual, partnership, firm, corporation or other business organization
(other than IMPSAT).
P-3
<PAGE> 79
2. Reasonable Limitations. The parties hereto acknowledge and
agree that, given the important nature of the position held by the Stockholder
with respect to IMPSAT, and its strategic affiliation with entities involved in
the telecommunications business in North America, Central America and South
America, the limitations set forth in Section 1 hereof, including but not
limited to, the scope of activities prohibited, the geographic area covered and
the time limitation, are reasonable.
3. Replacement of Invalid Terms. It is the desire and intent of
the parties that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular term
or provision of this Agreement shall be adjudicated to be invalid or
unenforceable, the invalid or unenforceable term or provision shall be deemed
replaced by a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision. Any such replacement shall apply only with respect to the operation
of this Agreement in the particular jurisdiction in which such adjudication is
made. The remaining terms and provisions hereof shall remain unimpaired.
4. Relief. (a) Without limiting the remedies available to
IMPSAT, the Stockholder acknowledges that a breach of any of the covenants
contained in Section 1 hereof may result in material irreparable injury to
IMPSAT 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 such a breach or threat thereof, IMPSAT shall be entitled to obtain a
temporary restraining order or a preliminary or permanent injunction restraining
the Stockholder from engaging in activities prohibited by Section 1 or such
other relief as may be required to specifically enforce any of the covenants in
Section 1.
(b) Jurisdiction and Venue for Injunctive Relief. With respect to
any action brought pursuant to Section 4(a) above, the parties each irrevocably
consents and submits to the personal jurisdiction of the State and Federal
courts sitting in New York City or Buenos Aires, and agrees that any action,
suit or proceeding shall be brought in such courts to the exclusion of all other
courts, other than actions to enforce judgments or orders entered in such courts
sitting in New York City or Buenos Aires.
(c) Liquidated Damages. In the event that it is determined that
the Stockholder or other person covered by Section 1 has breached any of the
covenants set forth in Section 1 hereof during the Restricted Period, the
Stockholder shall be liable to pay IMPSAT liquidated damages in the amount of
$10 million. The parties acknowledge and agree that such liquidated damage award
is a reasonable estimate of the actual negative economic impact any such breach
would have upon IMPSAT and that such amount is fair and
P-4
<PAGE> 80
just.
5. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, including, but not limited to, any claim relating to
the validity, interpretation, enforceability or breach of this Agreement, which
is not settled by agreement between the parties, shall be settled by arbitration
in Buenos Aires, Argentina, before a panel of three arbitrators, one to be
selected by the Purchasers, one by the Stockholder and the other by the two
persons so selected, all in accordance with the rules of the International
Chamber of Commerce then in effect. In consideration of the parties' agreement
to submit to arbitration disputes with regard to this Agreement, and in
consideration of the anticipated expedition and minimization of expense of this
arbitration remedy, each party agrees that the arbitration provisions of this
Agreement shall provide it with the exclusive remedy, except for the remedy of
injunctive relief provided in Section 4(a) above, and each party expressly
waives any right it might have to seek redress in any other form except as
provided herein. Any decision or order of the majority of arbitrators shall be
binding upon the parties hereto and judgment thereon may be entered in any court
having jurisdiction. The parties hereby agree that the arbitrators shall be
empowered to enter an equitable decree mandating specific enforcement of the
terms of this Agreement.
6. Successors. The rights and obligations of IMPSAT and the
Stockholder under this Agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of IMPSAT and the Stockholder (including
estates, trusts for the benefit of the Stockholder and heirs), respectively.
7. Entire Agreement. This instrument contains the entire
agreement of the parties with respect to the matters set forth herein, and may
not be changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
8. Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute a single agreement, and all
of which shall constitute an original for all purposes.
9. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
applicable to contracts executed and fully performed in such state.
10. Acknowledgments. (a) The Stockholder understands that the
covenants contained herein are designed to protect IMPSAT's interests and will
prohibit the Stockholder from engaging in certain competitive activities. The
Stockholder acknowledges that it has
P-5
<PAGE> 81
carefully reviewed this Agreement and has been provided the opportunity to
consult with a legal or other advisor prior to signing this Agreement.
(b) The parties hereto acknowledge that this Agreement has been
entered into in part for the benefit of the Purchasers, and this Agreement can
therefore be enforced by Princes Gate or MSGEM on behalf of IMPSAT.
11. Judgment Currency. If for purposes of obtaining judgment in
any court it is necessary to convert a sum due hereunder into any currency other
than United States dollars, the parties hereto agree, to the fullest extent that
they may effectively do so, that the rate of exchange used shall be the rate at
which in accordance with normal banking procedures Morgan Stanley & Co.
Incorporated could purchase United States dollars with such other currency in
the City of New York on the business day preceding that on which final judgment
is given. The obligation of the Stockholder in respect of any sum due from it to
IMPSAT shall, notwithstanding any judgment in a currency other than United
States dollars, not be discharged until the first business day, following
receipt by IMPSAT of any sum adjudged to be so due in such other currency, on
which (and only to the extent that) IMPSAT may in accordance with normal banking
procedures purchase United States dollars with such other currency; if the
United States dollars so purchased are less than the sum originally due to
IMPSAT hereunder, the Stockholder agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify IMPSAT against such loss. If the
United States dollars so purchased are greater than the sum originally due to
IMPSAT hereunder, IMPSAT agrees to pay to the Stockholder an aggregate amount
equal to the excess of the dollars so purchased and the sum originally due to
IMPSAT hereunder.
12. Service of Process. The Stockholder (i) irrevocably appoints
CT Corporation (together with any successor, the "Process Agent"), as its
authorized agent in the Borough of Manhattan in the City of New York upon which
process may be served in any such suit, action or proceeding described in
Section 4(a), acknowledges that the Process Agent has accepted such designation
and agrees that service of process upon the Process Agent, and written notice of
such service to such person, by the person serving the same to the address
provided for IMPSAT in the Securities Purchase Agreement, shall be deemed in
every respect effective service of process upon such person in any such suit,
action or proceeding and (ii) agrees to take any and all action, including the
execution and filing of any and all such documents and instruments as may be
necessary to continue such designation and appointment of the Process Agent in
full force and effect.
P-6
<PAGE> 82
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day first written above.
IMPSAT CORPORATION
By:
----------------------------
Name:
Title:
[ ]
By:
----------------------------
Name:
Title:
P-7
<PAGE> 83
EXHIBIT Q
Form of Letter Agreement
March 19, 1998
Princes Gate Investors II, L.P.
Morgan Stanley Global Emerging Markets
Private Investment Fund, L.P.
Morgan Stanley Global Emerging Markets Private
Investors, L.P.
PGI Investments Limited
Gregor von Opel
and
Investor Investments AB
c/o Princes Gate Investors II, L.P.
1585 Broadway, 36th Floor
New York, NY 10036
Nevasa Holdings Ltd. and Corporacion IMPSA S.A.
Ladies and Gentlemen:
This letter is being provided to you pursuant to Section 6.01(bb) of
a Securities Purchase Agreement among IMPSAT Corporation, Jonesboro Financial
Inc. and you dated the date hereof (the "Securities Purchase Agreement"). All
capitalized terms not otherwise defined herein shall have the meanings ascribed
to such terms in the Securities Purchase Agreement.
1. Representation and Warranty. Nevasa Holdings Ltd. ("Nevasa")
and Corporacion IMPSA S.A. ("CORIM") each represents and warrants to each of you
that all of the issued and outstanding shares of Nevasa and CORIM have been
validly issued, are fully paid and nonassessable and are free of any Liens
(contingent or otherwise) and that all of the equity interests (x) in Nevasa are
owned by CORIM, Militello Limited ("Militello") and Rotling International
Corporation ("Rotling") and (y) in CORIM are owned by Mr. Enrique Pescarmona,
Mrs. Silvia Monica Pescarmona de Baldini, Mrs. Liliana Pescarmona de Mayol and Q
Overseas Participations Ltd.
2. Negative Covenant. During the term of this Agreement, none of
Q-1
<PAGE> 84
Nevasa, CORIM, Militello or Rotling shall, and each of them shall cause any
other person or entity owning equity interests in IMPSAT Corporation (other than
(i) any such person or entity that has acquired an equity interest in IMPSAT
Corporation in an Initial Public Offering (as defined in the Securityholders
Agreement) or through the facilities of the New York Stock Exchange, the
American Stock Exchange or NASDAQ National Market, (ii) any holder of Series A
Stock or Series A Common Shares (as each such term is defined in the
Securityholders Agreement) or (iii) any person or entity that together with the
affiliates of such person or entity own less than 10% of the capital stock of
IMPSAT Corporation) or Nevasa to agree not to, create, incur, assume or suffer
to exist (in one or more transactions) any Lien or Liens (contingent or
otherwise) that in the aggregate relate to more than 25% of the equity interests
of IMPSAT Corporation or Nevasa or any other persons or entities owning equity
interests in IMPSAT Corporation. For purposes of Sections 2 and 3 of this
Agreement, in determining whether more than 25% of the equity interests of
IMPSAT Corporation are subject to a Lien, any Lien on equity interests of Nevasa
or any other person or entity owning equity interests in IMPSAT Corporation
shall be treated as a Lien on the percentage of equity interests in IMPSAT
Corporation equal to the percentage of equity interests of Nevasa or such other
person or entity that are subject to such Lien multiplied by a fraction, the
numerator of which is the percentage of the equity interests of IMPSAT
Corporation owned by Nevasa or such other person or entity and the denominator
of which is 100%.
3. Notification. If during the term of this Agreement any
persons or entities that own equity interests in (x) CORIM (or any other person
or entity that owns equity interests in Nevasa) creates, incurs, assumes or
suffers to exist any Lien or Liens (contingent or otherwise) (in one or more
transactions) that in the aggregate relate to more than 25% of the equity
interests of CORIM (or any such other person or entity), such person or entity
shall within 30 days thereafter and within 30 days after the imposition of any
subsequent Lien (contingent or otherwise) give written notice thereof to the
Purchasers or (y) IMPSAT Corporation or Nevasa (or any other person or entity
that owns equity interests in IMPSAT Corporation), creates incurs, assumes or
suffers to exist any Lien or Liens (contingent or otherwise) (in one or more
transactions) that in the aggregate relate to more than 5% of the equity
interests of IMPSAT Corporation or Nevasa, such person or entity shall within 30
days thereafter and within 30 days after the imposition of any subsequent Lien
(contingent or otherwise) give written notice thereof to the Purchasers. This
paragraph 3 shall not apply to any person or entity that together with its
affiliates own less than 10% of the capital stock of IMPSAT Corporation.
4. Notices. Any notices given to any party hereunder shall be
delivered to such party at its address specified in the Securities Purchase
Agreement. Each such notice shall be effective (i) if given by telecopy, when
such telecopy is transmitted to such party's telecopy number and the appropriate
electronic confirmation is received and a copy of such
Q-2
<PAGE> 85
notice is sent by overnight mail service or (ii) if given by certified prepaid
first class mail or overnight courier, 72 hours after such communication is
deposited in the mails with first class postage prepaid or given to overnight
courier service, addressed as aforesaid.
5. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York.
6. Jurisdiction. Each of the undersigned agrees that any legal
suit, action or proceeding arising out of or relating to this Agreement may be
instituted in any U.S. federal or New York State court in the Borough of
Manhattan in the City of New York (each a "New York court") or in the court of
its corporate domicile, with respect to actions brought against that party as a
defendant, and each of the undersigned hereby waives any objection which it may
now or hereafter have to the laying of venue of any such proceeding, and
irrevocably submits to the jurisdiction of such courts and to the courts of its
corporate domicile, with respect to actions brought against it as defendant, in
any suit, action or proceeding.
Each of the signatories hereto (i) irrevocably appoints CT
Corporation (together with any successor, the "Process Agent"), as its
authorized agent in the Borough of Manhattan in the City of New York upon which
process may be served in any such suit, action or proceeding described in the
first sentence of this Section 6, acknowledges that the Process Agent has
accepted such designation and agrees that service of process upon the Process
Agent, and written notice of such service to such person, by the person serving
the same to the address provided for [IMPSAT Corporation] in the Securities
Purchase Agreement, shall be deemed in every respect effective service of
process upon such person in any such suit, action or proceeding and (ii) agrees
to take any and all action, including the execution and filing of any and all
such documents and instruments as may be necessary to continue such designation
and appointment of the Process Agent in full force and effect.
Q-3
<PAGE> 86
7. Term. This Agreement shall terminate and shall no longer be
of any force or effect at the earlier of (x) ten years following the Closing
Date and (y) such time as the Purchasers are not entitled to elect a director of
IMPSAT Corporation.
NEVASA HOLDINGS LTD.
By:
----------------------------------
CORPORACION IMPSA S.A.
By:
----------------------------------
MILITELLO LIMITED
By:
----------------------------------
ROTLING INTERNATIONAL CORPORATION
By:
----------------------------------
-------------------------------------
Mr. Enrique Pescarmona
-------------------------------------
Mrs. Silvia Monica Pescarmona de Baldini
Q-4
<PAGE> 87
-------------------------------------
Mrs. Liliana Pescarmona de Mayol
Q-5
<PAGE> 88
-------------------------------------
Mr. Roberto Vivo Chaneton
-------------------------------------
Mr. Ricardo Verdaguer
Q-6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
AUDITED FINANCIAL STATEMENT OF IMPSAT CORPORATION AND ITS CONSOLIDATED
SUBSIDIARIES AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1997. AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 10,439
<SECURITIES> 0
<RECEIVABLES> 36,596
<ALLOWANCES> 5,933
<INVENTORY> 0
<CURRENT-ASSETS> 65,015
<PP&E> 255,422
<DEPRECIATION> 101,051
<TOTAL-ASSETS> 339,916
<CURRENT-LIABILITIES> 103,438
<BONDS> 159,677
<COMMON> 100,793
0
0
<OTHER-SE> (37,404)
<TOTAL-LIABILITY-AND-EQUITY> 339,916
<SALES> 0
<TOTAL-REVENUES> 160,236
<CGS> 0
<TOTAL-COSTS> 136,997
<OTHER-EXPENSES> 25,177
<LOSS-PROVISION> 3,269
<INTEREST-EXPENSE> 24,743
<INCOME-PRETAX> (1,938)
<INCOME-TAX> 5,047
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,966)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
