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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, 1999
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 FIBER NETWORKS, INC.
IMPSAT S.A.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 52-1910372
ARGENTINA NOT APPLICABLE
(state or other jurisdiction of incorporation or organization) (IRS employer identification number)
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ALFEREZ PAREJA 256 (1107)
BUENOS AIRES, ARGENTINA
(5411) 4300-4007
(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
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: common
stock, par value $0.01 per share
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, 1999, IMPSAT Fiber Networks, Inc. had 56,688,078 shares
of common stock, $0.01 par value, outstanding.
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TABLE OF CONTENTS
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PART I....................................................................................................3
ITEM 1. BUSINESS.....................................................................................3
ITEM 2. PROPERTIES..................................................................................12
ITEM 3. LEGAL PROCEEDINGS...........................................................................13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.........................................13
PART II..................................................................................................14
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......................14
ITEM 6. SELECTED FINANCIAL DATA.....................................................................14
OUR COMPANY..........................................................................................15
IMPSAT ARGENTINA.....................................................................................17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......18
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK..................................31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................................31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE........31
PART III.................................................................................................31
ITEM 10. DIRECTORS AND OFFICERS.....................................................................31
ITEM 11. EXECUTIVE COMPENSATION.....................................................................36
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............................39
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................................41
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K...........................45
SIGNATURES...............................................................................................46
POWER OF ATTORNEY........................................................................................48
EXHIBIT INDEX.............................................................................................1
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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 Fiber Networks, Inc. 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 these forward-looking
statements.
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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 IMPSAT Fiber Networks, Inc. or its subsidiaries
that are registered or otherwise protected under the laws of various
jurisdictions. In this Report, "company," "IMPSAT," "we," "us" and "our" refer
to IMPSAT Fiber Networks, Inc. and its subsidiaries.
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PART I
ITEM 1. BUSINESS
GENERAL
We are a leading provider of private telecommunications network and
Internet services in Latin America. We offer tailor-made, integrated data, voice
and Internet solutions, with an increasing emphasis on broadband transmission,
for national and multinational companies, financial institutions, governmental
agencies and other business customers. We also offer Internet services to
Internet service and content providers.
We have operations in Argentina, Colombia, Venezuela, Ecuador, Mexico,
Brazil and the United States and also provide our services in other countries in
Latin America. We provide telecommunications and Internet services through our
networks, which consist of owned fiber optic and wireless links, teleports,
earth stations and leased fiber optic and satellite links. We own and operate 12
metropolitan area networks in some of the largest cities in Latin America,
including Buenos Aires, Bogota, Caracas and Sao Paulo.
We are building an extensive pan-Latin American broadband fiber optic
network, which will allow us to enhance the services we presently provide and
significantly increase our transmission speed and capacity. Our new network will
consist of long-haul, high capacity fiber optic backbones and metropolitan area
fiber optic and wireless links and will use advanced transmission technologies,
including dense wave division multiplexing, or DWDM, asynchronous transfer mode,
or ATM, and Internet protocol, or IP. We already own and operate a long-haul,
fiber optic network connecting the cities of Cali, Medellin and Bogota in
Colombia over a 698 route kilometers and we are constructing an additional 1,351
route kilometers to close the ring between Cali and Bogota and extend this
network to reach Barranquilla. By December 2000, we expect to have built out our
Broadband Network to connect major cities across Argentina and Brazil.
IMPSAT Fiber Networks, Inc. was organized in 1994 as a Delaware holding
company to combine the IMPSAT businesses in Argentina, Colombia and Venezuela.
Our operations started in Argentina in 1990 under the name IMPSAT S.A. (IMPSAT
Argentina). We began operations outside of Argentina with the establishment of
IMPSAT Colombia in 1991 and the establishment of IMPSAT Venezuela in 1992. New
operating subsidiaries were created in Ecuador (IMPSAT Ecuador) and Mexico
(IMPSAT Mexico) in 1994, in the United States (IMPSAT USA) in 1995 and in Brazil
(IMPSAT Brazil) in 1998. We have recently opened offices in Chile and Peru and
plan to commence commercial operations in those countries in the future.
In January 2000, we changed our company's name from IMPSAT Corporation to IMPSAT
Fiber Networks, Inc.
We recently completed the initial public offering of 11,500,000 shares of
our common stock, representing approximately 12.6% of our current total
outstanding common stock, for total proceeds after expenses and commissions of
approximately $180.8 million. In addition, we raised approximately $48.0 million
after expenses through the simultaneous sale, through a private placement, of
2,850,000 shares of common stock to British Telecommunications plc, one of our
existing stockholders. We refer to this transaction as the British
Telecommunications private placement. We also exchanged shares of our common
stock for the minority interests in some of our subsidiaries, and the holders of
our preferred stock converted the preferred stock into shares of our common
stock. On February 11, 2000, we completed the private placement of our
$300,000,000 12-3/4% Senior Notes due 2005 (the "Notes due 2005"), pursuant to
Rule 144A under the U.S. Securities Act of 1933.
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SERVICES
Our comprehensive telecommunications solutions consist of any combination
of our service offerings and will include services that we intend to offer
following the completion of the Broadband Network in Argentina and Brazil. We
classify these service offerings into five categories: network services,
Internet services, carrier's carrier services, telephony services and other
services.
Network Services. We offer our customers a broad range of end-to-end
network service combinations for their point-to-point and point-to-multipoint
telecommunications needs, ranging from simple connections to customized private
network solutions. We will offer our network services over our existing and
planned networks, which are comprised of metropolitan area fiber optic rings and
wireless networks, fiber optic and satellite links.
- Connection Services. Our customers can purchase leased lines, frame
relay services, ATM services and Internet protocol digital connection
services to support their specific transmission requirements. Leased
lines are typically purchased by customers that constantly transmit
large amounts of voice, data and video traffic. Frame relay and ATM
services are typically purchased by customers requiring reliable and
rapid transmission of variable amounts of voice, data and video
traffic. We typically offer our leased line connection service from 64
Kbps to 2 Mbps, and we intend to expand this offering to 155 Mbps of
capacity. Our frame relay services are typically offered from 64 Kbps
to 2 Mbps and we intend to offer our ATM services from 2 Mbps to 155
Mbps. In addition, we offer digital connections using Internet
protocol with interfaces of 10 Mbps to 100 Mbps as one of our options
for local data network solutions.
- Private Network Services. For customers that require significant
bandwidth and reliable data transmission between a number of sites, we
offer customized private networks that consist of various components
of our networks. We also provide them with a variety of other services
including network management services, trouble shooting reports,
quality control and value-added services. Our consultative sales
process ensures that each private network is designed to meet the
evolving specific business and systems requirements of each customer.
We also offer services such as video conferencing and remote learning
as part of our private network services.
Internet Services. We have offered Internet access services to corporate
and ISP customers since 1996. These services are offered through our satellite
connections and U.S.-based point of presence that link us to the U.S. Internet
backbone through MCI WorldCom, Sprint Corporation, Intermedia Corporation and
UUNet. During this year, we intend to expand the link of our Latin American
Internet backbone to the U.S. Internet, as part of the Broadband Network,
through our fiber optic links with Global Crossing. We offer both wholesale and
corporate Internet services:
- Wholesale Internet Services. We provide a complete Internet service
for ISPs, including managed line provisioning for domestic and
international backbone connections between points of presence, access
to our co-location sites and server services (e-mail and hosting
services), telephone lines associated with the pool of modems,
roaming, as well as the use of our network operation and help desk
services.
- Corporate Internet Services. As part of their total telecommunications
solution, we currently provide our corporate customers with Internet
access services including line provisioning, equipment provisioning
and installation, primary and secondary domain registration and
maintenance and technical support.
Carrier's Carrier Services.
During this year, we intend to offer dark fiber capacity,
"lit" fiber capacity and duct capacity to telecommunications carriers
and other service providers. Our fiber optic cable will provide
customers with reliable, broadband connections between and among our
metropolitan area networks at high speeds. Customers that choose to
purchase "lit" capacity will be able to purchase an initial amount of
capacity (typically 45
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Mbps) and increase that capacity on demand. We also plan to offer
co-location services including the rental of secure space, equipment
provisioning and operation and maintenance services.
Telephony Services. Following the completion of our Broadband Network in
Argentina and Brazil, we intend to offer domestic and international long
distance services to corporate customers and resellers. We plan to extend our
offering to include private branch exchange (PBX) and centrex connections, toll
free services and calling card services for our corporate customers. We have a
license to provide these services in Argentina starting in November 2000 and
expect to be able to provide these services in Brazil in 2004.
Other Services. We offer information technology solutions and transactional
services designed to facilitate our customer's e-business and e-commerce needs
and optimize our customers' business processes.
- Information Technology Solutions. As part of our end-to-end solutions,
we also offer a variety of information technology services, including
the design, installation and integration of intranets, extranets and
virtual private data networks, through which our customers can conduct
business in a secure environment as well as integrate these new
systems with their legacy telecommunications systems. In addition, we
offer an outsourcing solution for customers that do not have the
technical personnel or choose not to operate, manage and maintain
their telecommunications systems and networks.
- Transactional Services. Our transactional services are designed to
facilitate the e-commerce and e-business initiatives of our customers.
For example, we provide our Conexia service to customers in the
healthcare sector for HMO membership verification, and we intend to
expand our service to interconnect healthcare service providers (such
as doctors, pharmacies, hospitals) to allow online prescription
authorization for patients. We intend to provide additional
business-to-business e-commerce solutions, primarily to retail
businesses and financial institutions that conduct high volumes of
transactions with their suppliers and business customers and
increasingly want to establish on-line transaction capabilities.
The following table shows our company's revenue breakdown by service for
the years ended December 31, 1997, 1998 and 1999:
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YEAR ENDED DECEMBER 31,
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SERVICE 1997 1998 1999
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($ IN THOUSANDS)
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Satellite Based Network Services:
VSAT technology ............... $ 54,635 33.9% $ 57,739 27.7% $ 60,746 26.6%
SCPC technology ............... 59,850 37.2% 71,013 34.1% 78,325 34.3%
Terrestrial Based Network Services.. 20,387 12.7% 33,864 16.3% 33,407 14.6%
Internet ........................... 7,699 4.8% 20,586 9.9% 26,639 11.7%
Other (1) .......................... 18,494 11.4% 24,887 12.0% 29,334 12.8%
------- ---- ------- ---- ------- ----
Total .............................. $161,065 100% $208,089 100% $228,451 100%
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(1) The figure for "Other" includes network services revenues from Regional
Teleports, Global Fax, Conexia, Telecampus, and equipment sales.
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THE BROADBAND NETWORK
We are constructing our Broadband Network, which will enable us to provide
high capacity, high speed telecommunications services across Latin America. Our
Broadband Network will consist of:
- long-haul, high capacity fiber optic backbones linking major cities in
Latin America
- fiber optic local rings and wireless access points within major cities
in Latin America, including Buenos Aires, Sao Paulo, Rio de Janeiro,
Bogota and Caracas
- capacity on undersea cable systems to provide connections among major
Latin American cities, as well as global telecommunications
connections and Internet access
We believe that our Broadband Network will enable us to:
- cost-effectively offer more bandwidth-intensive services in the near
future, including intranet and extranet services
- substantially reduce our costs for leased satellite capacity and
leased telecommunications links as a percentage of our net revenues
- create a high capacity, pan-Latin American Internet backbone
- offer Latin American companies more efficient access to the U.S.
Internet backbone
- continue to provide consistent, high quality service by keeping our
customer traffic on our network
Upon completion, we expect that our Broadband Network will have the
capacity to transmit up to 5.7 terabits, or 5.7 trillion bits, of data per
second.
Nortel Agreements. In September 1999, we executed two agreements with
Nortel Networks Corporation to construct the Broadband Network in Argentina and
Brazil for approximately $265 million. On October 25, 1999, we signed agreements
with Nortel to borrow up to $297 million from Nortel to finance this project and
to purchase related equipment from Nortel. In the future, we may reduce our
commitments from Nortel under the financing agreements. We have completed the
installation of more than 90% of the necessary ducts between Buenos Aires and
Rosario in Argentina and are continuing the development of the long-haul and
metropolitan area rings in Argentina and Brazil. We had a total of 517 duct
kilometers installed during the fourth quarter of 1999, principally in
Argentina. At December 31, 1999, the total number of duct kilometers installed
was 715. Total fiber route kilometers (including buried and aerial) at December
31, 1999 were 922, all of which were in use. As of February 15, 2000, total duct
kilometers installed were 1,054 and fiber route kilometers had increased to
1,917.
Global Crossing Agreement. We have signed an agreement with Global Crossing
Development Co. for our purchase of at least $46 million in indefeasible rights
of use of capacity on Global Crossing's South American fiber optic network and
on other segments of its networks. These rights should enable us to interconnect
our networks in Argentina and Brazil and other Latin American markets, while
giving us global telecommunications access.
Following the completion of the Broadband Network in Argentina and Brazil,
we plan to expand our Broadband Network to Colombia and Venezuela.
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CUSTOMERS
Our 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. Our ten largest customers accounted for
approximately 17.1% of our revenues in 1999 and approximately 17.3% in 1998.
Our ten largest customers as of December 31, 1999 were:
- the Government of the Province of Buenos Aires
- Banco de la Nacion Argentina, or BNA, a state-owned bank and the
largest bank in Argentina, with over 500 branches throughout Argentina
- YPF/Repsol, an integrated oil company that is one of the largest
companies in Argentina
- Corporacion Nacional de Ahorro y Vivienda (or Conavi), one of
Colombia's largest financial institutions
- the Government of the Province of Mendoza
- Banco Cafetero Bancafe, a large Colombian state-owned financial
institution
- Perez Companc S.A., an Argentine energy conglomerate
- Banco de Galicia y Buenos Aires, a private bank with more than 180
branches in Argentina
- BanColombia S.A., a private bank headquartered in Bogota, Colombia and
the largest commercial bank in Colombia
- Banco Mercantil SAICA, one of Venezuela's largest commercial banks
The following table shows our customer concentration by country as of the
dates indicated. Totals presented do not include customers from our Internet
service and fax, store and forward service.
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COUNTRY AS OF DECEMBER 31,
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1998 1999
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(NUMBER OF CUSTOMERS AND PERCENTAGE OF TOTAL)
<S> <C> <C> <C> <C>
Argentina........................ 490 33.4% 687 39.3%
Colombia......................... 602 41.0 560 32.1
Venezuela........................ 140 9.5 191 10.9
Ecuador.......................... 134 9.1 149 8.5
Brazil........................... 48 3.4 90 5.2
Mexico........................... 28 1.9 31 1.8
USA.............................. 25 1.7 37 2.2
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Total.................. 1,467 100.0% 1,745 100.0%
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Customer Contracts. Our contracts with our customers typically range in
duration from six months to five years and contracts with our private
telecommunications network customers are generally for three years. Contracts
generally may be terminated by the customer without penalty. The private
telecommunications network customers generally pay a one-
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time installation fee and a fixed, monthly fee. We believe that as we
commercialize our Broadband Network, we will develop a more flexible pricing
structure, using both a usage-based billing and fixed fee-based billing model.
Except in Brazil, our contracts generally provide for payment in U.S.
dollars or for payment in local currency linked to the exchange rate at the time
of invoicing between the local currency and the U.S. dollar. The revenues of our
customers are generally denominated in local currencies. Although our customers
include some of the largest and most financially sound companies and financial
institutions in their markets, devaluation of such currencies relative to the
U.S. dollar could have a material adverse effect on the ability of our customers
to pay us for our services. A currency devaluation could also result in our
customers seeking to renegotiate their contracts with us or, alternatively,
defaulting on their contracts.
SALES, MARKETING AND CUSTOMER SERVICE
We apply an integrated approach to our sales, marketing and customer
service functions. We provide customer service 24 hours a day, 365 days a year.
We use customer service teams to develop and maintain long-term, cooperative
relationships with our customers. These relationships provide us with an
in-depth understanding of our customers' evolving telecommunications service
requirements and levels of service satisfaction. As a result of this approach,
we achieve high levels of customer satisfaction while being able to identify new
revenue generating opportunities, customer telecommunications solution
enhancements and product or service improvements previously overlooked or not
adequately addressed by the client.
Within each segment of our market, the respective service team is
responsible both for sales to new customers as well as for service to 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 for existing
customers. We will use this team-oriented approach to service our private
network, Internet and other customer groups.
For our private network customers, we designate a customer service team to
oversee all phases of initial customer contact, service planning, installation
and ongoing service. After we establish initial contact with a potential
customer, the service team conducts a thorough evaluation of the customer's
telecommunications needs. Following the completion of this evaluation, we create
a plan for these customers which describes our proposed tailor-made solution
using the appropriate components of our private telecommunications network
services. When we provide services to governmental agency customers, we often
submit these proposals in response to public bid solicitations and related
governmental bidding procedures that govern the contracting of services by
governmental agencies.
To market our new and enhanced services, we are developing several service
teams, each focusing on a particular type of services. For example, our
telephony services will be marketed to resellers by a team focused only on
telephony service.
In addition to salaried sales and marketing personnel, we often use the
services of third-party sales representatives to assist in generating sales and
managing the contract process between ourselves and our potential customers. We
typically pay these third parties a commission and royalties equal to a
percentage of the revenues we collect from any contract with those customers
obtained as a result of the efforts of the third-party sales representative.
We observe and measure the satisfaction of our customers through our
service teams' frequent customer interaction and, more formally, through a
comprehensive annual survey conducted by an outside consultant hired by us. We
use the results of these surveys to evaluate the performance of our service
teams, to formulate annual customer service plans and to implement improvements
to meet and exceed customer expectations.
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COMPETITION
Our competitors fall into three broad categories:
- PTOs in each country where we operate
- other companies that operate competing satellite and terrestrial data
transmission businesses, including newer entrants from more developed
telecommunications markets outside of Latin America
- large international telecommunications carriers
In the past, the PTOs and international telecommunications carriers have
focused on local and long-distance telephony services. In the future, however,
they may focus on the private telecommunications network systems segment of the
telecommunications market. These entities have significantly greater financial
and other resources than we do, including greater access to financing. These
competitors may also be able to subsidize their private telecommunications
network businesses with revenues from public telephony.
With the first group of competitors, our further expansion into the
telecommunications services market along with continued deregulation of the
telecommunications industry in Latin America, will bring us into more direct
competition with the PTOs. A number of PTOs in the countries where we operate
have established and marketed "large customer" or "grand user" business teams in
an attempt to provide dedicated services to the type of customer that represents
our most important target market.
We believe that by maintaining our position as a reliable, high quality
provider of telecommunications services, while strengthening the quality of our
network and the breadth of service offerings through the Broadband Network, we
will be able to maintain our current customers and successfully attract new
customers. We might consider strategic alliances and other cooperative ventures
with the PTOs in the area of private telecommunications network services to take
advantage of each partner's relative strengths.
In the second category, our competitors include international satellite
telecommunications providers such as COMSAT Corp. and local data transmission
providers. Many of these competitors also operate VSAT systems. We believe that
we are able to compete successfully in data transmission services because we
offer a broad array of services and provide high quality, custom-designed
services that are tailored to meet the specific needs of each customer. Among
our competitors in this category are a number of new market entrants, including:
- Diginet, a fixed wireless broadband services provider that is building
a network in metropolitan Buenos Aires and has announced plans to
enter the Brazilian telecommunications market
- MetroRED Telecommunications, a data transmission service operator in
Argentina that recently commenced offering local network services in
the cities of Sao Paulo and Rio de Janeiro in Brazil
- NetStream, an established fiber optic network service provider that
AT&T recently acquired and that earlier this year began providing
fiber optic cable local network services to businesses in Sao Paulo
and Rio de Janeiro, Brazil and plans to build fiber optic networks
in Belo Horizonte, Curitiba, Brasilia and Porto Alegre in 2000
- Engeredes S.A., an infrastructure and data services provider that will
use both fiber optic and wireless links to connect the cities of Belo
Horizonte, Rio de Janeiro and Sao Paulo in Brazil
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- NetUno, a local exchange carrier and provider of broadband local
access, Internet and private network services in Venezuela
In the third category, major telecommunications carriers have indicated
their intention to enter the market as deregulation in Latin America and
elsewhere opens new market opportunities. For example, Spain's Telefonica and
MCI WorldCom have announced the formation of an alliance to cooperate in Latin
America and elsewhere, through joint ventures and equity holdings in each
other's subsidiaries. Also, AT&T announced in November 1999 that it planned to
form a new company, AT&T Latin America, by merging the operations of U.S.
telecommunications company, FirstCom Corp. and Brazil-based Netstream, which
companies AT&T recently agreed to acquire, and by acquiring Keytech LD, a local
exchange carrier which is licensed to offer wireless, high-speed internet and
other telecommunications services in Argentina. AT&T Latin America will have
assets in Argentina, Brazil, Chile, Colombia and Peru and is expected to
expand into Venezuela. We believe that increasing competition will significantly
affect our pricing policies. We cannot assure you that competition from these
alliances will not adversely affect our financial condition or results of
operations.
Furthermore, we cannot assure you that competing technologies will not
become available that will negatively affect our position, although we believe
that we have the flexibility to act quickly to take advantage of any significant
technological development. For example, new technologies such as asynchronous
digital subscriber line (or ADSL) can significantly enhance the speed of
traditional copper lines. These technologies could enable our PTO competitors to
offer customers new high speed services without undergoing the expense of
replacing their existing twisted-pair copper networks. This, in turn, could
negate our last mile advantage. Our private telecommunications services could
also face future competition from entities using or proposing to use new or
emerging voice and data transmission services or technologies which are not
widely available in Latin America, such as space based systems dedicated to data
distribution services, generally known as little-LEOs and broadband systems.
Rates are not regulated in our countries of operation, and the prices for
our services are strongly influenced by market forces. We believe that
increasing competition will result in increased pricing pressures. We have faced
and expect to continue to face declining prices and may experience margin
pressure as the PTOs in the countries where we have operations modernize their
facilities, adapt to a competitive marketplace and place greater emphasis on
data telecommunications and as other companies enter the Latin American
telecommunications market. These price and margin declines may accelerate if new
competitors enter our markets.
The principal barriers to entry for prospective providers of private
telecommunications network services such as ours are the development of the
requisite understanding of customer needs and the technological and commercial
experience and know-how, infrastructure to provide quality services to meet
those needs and capital.
REGULATION
Domestic Service. We are subject to regulation by the national
telecommunications authorities of the countries where we operate, and our
operations require us to procure permits and licenses from these authorities.
While we believe that we have received all required authorizations from
regulatory authorities for us to offer our services in the countries in which we
operate, the conditions governing our service offerings may be altered by future
legislation or regulation which could affect our business and operations.
Cross-Border Service. We provide integrated data, voice and video
transmission services under the Interplus name between and among nineteen Latin
American and Caribbean countries and the United States. We currently are
prohibited by law from providing switched voice services to or from Argentina,
but we have received authorization to provide these services starting in
November 2000. International private line services such as Interplus are
traditionally provided by local carriers in each country acting as
correspondents and establishing dedicated telecommunications links between their
facilities. Due to our pan-Latin American presence, we are often able to offer
our Interplus service using our own facilities and personnel at both ends of the
private line circuit. As a result of this end-to-end control, we maintain
customer service and quality assurance at both ends of an Interplus link and
realize better margins than when we use a correspondent carrier.
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In countries where we do not maintain customer premises equipment or where
we are not authorized to operate in that fashion, our Interplus service uses our
facilities in the originating country to connect with a correspondent local
carrier in the destination country or vice-versa. To date, we have signed
Interplus correspondent agreements with carriers in seven Latin American and
Caribbean countries. We charge customers a monthly fee for Interplus which is
based on the capacity of the circuit provided.
Deregulation. 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, Brazil, Mexico and Venezuela.
Furthermore, some countries have scheduled the demonopolization of their
dominant telecommunications providers. For example, Argentina and Venezuela have
announced the demonopolization of public telephone services by their PTOs in
2000. We believe that this trend toward deregulation, while likely to increase
competition, will also present significant opportunities for us to expand our
private telecommunications network services to, from and within the region, as
well as to present opportunities for us in areas of telecommunications currently
permitted to be conducted only by the PTOs.
EMPLOYEES
As of December 31, 1999, we employed a total of 1,107 persons, of whom 308
were employed by IMPSAT Argentina and 220 were employed by IMPSAT Colombia. The
number of our employees has generally increased and is expected to continue to
increase as a result of our expansion in the countries in which we operate,
including as a result of our development of the Broadband Network. We do not
have any long-term employment contracts with any of our employees, including
management, and none of our employees are members of any union. We believe that
our relations with our employees are good.
SATELLITE CAPACITY
Our satellite transmissions use both C-band (4-7 GHz) and Ku-band (10-18
GHz) frequencies. As of December 31, 1999, we had a total available leased
capacity of 801 MHz, 760 MHz of which we are using in the following manner:
- a total of 396.7 MHz of leased capacity on seven Intelsat satellites,
various amounts of which are scheduled to expire between May 2000 and
April 2008 (our satellite capacity on the Intelsat satellites is
leased both directly by our operating subsidiaries and through
subleases with Intelsat participants, such as Argentina's Comision
Nacional de Comunicaciones)
- satellite capacity on the New Sky Satellite 806 satellite for 39.9
MHz, which expires in 2009
- 68.8 MHz of capacity on Brasilsat, which expires in 2002
- 115.2 MHz of capacity on Nahuelsat's Nahuel-1 satellite, which expires
between January 2002 and August 2003
- 64.4 MHz of capacity on PanAmSat's PAS-1 satellite until the end of
the useful life of the satellite (estimated to be December 31, 2001)
- 69.8 MHz of capacity on PanAmSat's PAS-5 satellite, which expires
between the end of 2003 and January 2009
- 5.2 MHz of capacity on Mexico's Solidaridad-II satellite, which
expires in December 2002
Our lease payments for satellite capacity totaled approximately $34.6
million in 1999.
11
<PAGE> 12
We will contract for additional leased satellite capacity as business
requires. A portion of our satellite capacity is leased by our wholly owned
subsidiary, International Satellite Capacity Holding, NG. This subsidiary's
principal function is to lease private satellite capacity from satellite
carriers and then sublease this capacity at market rates to our operating
subsidiaries. We believe that this method of centralizing our leasing of
satellite capacity provides us with better terms.
ITEM 2. PROPERTIES
Teleports. We own and operate teleports in Buenos Aires, Argentina; Sao
Paulo, Brazil; Bogota, Colombia; Caracas, Venezuela; Quito, Ecuador; Mexico
City, Mexico; and Florida, United States. In addition to the teleport in Fort
Lauderdale, Florida, which commenced operations in January 1999, IMPSAT USA
operates leased teleport facilities in New Jersey.
Regional Teleports. We own and operate regional teleports in Mendoza,
Cordoba, Rosario, Tucuman, Mar del Plata, La Plata and Neuquen in Argentina;
Medellin, Cali and Barranquilla in Colombia; Guayaquil, Ecuador; and Curitiba,
Brazil.
Teledatos Networks. We have fiber optic and microwave MANs in major cities
in which they operate for connection with the Teleport or Regional Teleport in
such cities. Our first metropolitan area network was established in Buenos
Aires, Argentina in 1990. Other metropolitan area networks now exist in Cordoba,
Mendoza, Rosario, Mar del Plata and Tucuman, Argentina; Bogota, Medellin and
Cali, Colombia; Caracas, Venezuela; and Curitiba and Sao Paulo, Brazil. In
addition, we manage and operate a fiber optic network covering 352 route
kilometers 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 region.
Undersea Fiber Optic Cable Networks. We are a member of the Americas-1 and
Columbus-II undersea fiber optic cable consortia, and have purchased an initial
total capacity of 2 Mbps on each system for use in our Interplus service.
Americas-1, which commenced commercial operation in December 1994, is a 4,960
mile fiber optic cable system connecting Vero Beach, Florida with the U.S.
Virgin Islands, Trinidad, Brazil and Venezuela. Columbus-II links Mexico, the
United States, the U.S. Virgin Islands, Spain, Portugal and Italy with about
7,440 miles of fiber optic cable.
As part of the Broadband Network, we intend to secure additional submarine
network capacity linking our metropolitan area networks to points
internationally. We expect to purchase indefeasible rights of use of capacity
valued at not less than $46 million on Global Crossing's undersea digital fiber
optic cable systems (and associated terrestrial capacity) worldwide, including
Global Crossing's South American network. Global Crossing's South American
network, which is currently under development, is an 18,000 km undersea and
terrestrial fiber optic network that will encircle that continent. We currently
are constructing the terrestrial portion of the South American network pursuant
to a turnkey construction agreement with Global Crossing.
While undersea capacity to Latin America is scarce at this time, a number
of cables are being developed to satisfy the increasing demand for broadband
capacity. In addition to Global Crossing, we have reserved up to 18 Mbps, 4 Mbps
and 24 Mbps of capacity on the Americas-II, Pan American and Arcos I undersea
fiber optic cable networks, respectively. The Americas-II submarine cable, which
is under development, will connect St. Croix, Puerto Rico, Curacao, Venezuela
and Brazil. Pan American began operations in mid-February 1999 and runs between
the U.S. Virgin Islands, Aruba, Venezuela, Colombia, Panama, Ecuador, Peru and
Chile. Arcos I, an 8,000 km cable system under construction with a planned
fourth quarter 2000 completion date, is expected to connect the United States
with numerous Caribbean and Latin American nations.
12
<PAGE> 13
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The annual meeting of our stockholders was held on January 11, 2000. Our
stockholders unanimously approved the amendment and restatement of our
certificate of incorporation in connection with our initial public offering to,
among other things:
- increase the authorized number of shares of our common stock and
authorize a common stock split;
- adopt non-cumulative voting in the election of directors;
- adopt of staggered terms for directors;
- empower a majority of directors to fill board of director vacancies
occurring between stockholder meetings;
- empower our board of directors to alter or amend our bylaws;
- increase the maximum number of our directors;
- preclude stockholder action by written consent without a meeting;
- preclude special meetings of stockholders without board of director
consent;
- provide for advance notice of nominations for the election of
directors and business to be transacted at any stockholders' meeting;
- provide for a super-majority stockholder vote of 80% for the
alteration of certain provisions of our certificate of incorporation
regarding management of our company and stockholder meetings;
- expand the provisions for the indemnity of directors by our company;
and
- change our name to IMPSAT Fiber Networks, Inc.
The annual meeting of our stockholders elected the following individuals to
our board of directors:
- Mr. John McElligott, Mr. Lucas Pescarmona and Ms. Sofia Pescarmona,
each of whom was elected to serve until the annual stockholder meeting
to be held in 2001
- Mr. Ricardo Verdaguer, Mr. Roberto Vivo, Mr. Alexander Rivelis and Mr.
Jeronimo Bosch, each of whom was elected to serve until the annual
stockholder meeting to be held in 2002
- Mr. Geoffrey Almeida, Mr. Stephen Munger and Mr. Enrique Pescarmona,
each of whom was elected to serve until the annual stockholder meeting
to be held in 2003
13
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock has been traded on the Nasdaq National Market under the
symbol "IMPT" since the effective date of our initial public offering on January
31, 2000. Prior to that time, including during the period covered by this
Report, there was no public market for our common stock. On March 28, 2000, the
last reported price of our common stock on the Nasdaq National Market was
$28.875 per share. Based upon information supplied to us by the registrar and
transfer agent for our common stock, the number of common stockholders of record
on March 15, 2000 was 28, not including beneficial owners in nominee or street
name. We believe that a significant number of shares of our common stock are
held in nominee name for beneficial owners.
The payment of dividends on our common stock is within the discretion of
our board of directors. Currently, we intend to retain earnings to finance the
growth of our business. We have not paid cash dividends on our common stock and
the board of directors does not expect to declare cash dividends on the common
stock in the near future.
IMPSAT's registration statement (registration no. 333-88389) under the
Securities Act of 1933, as amended, for its initial public offering became
effective on January 31, 2000. Our initial public offering commenced on January
31, 2000 and was completed, with all securities sold, on February 4, 2000. We
registered and sold 11,500,000 shares of our common stock for an aggregate
offering price of approximately $195.5 million. The net proceeds, after
deducting underwriting discounts and commissions of approximately $12.7 million,
and aggregate offering expenses estimated at $2.8 million, were approximately
$180.8 million. These payments were direct payments to persons other than
officers, directors, affiliates or persons owning 10%, or more, of the
securities of IMPSAT. The managing underwriters for our initial public offering
were Morgan Stanley Dean Witter, Goldman, Sachs & Co., and Salomon Smith Barney.
We used a portion of the net offering proceeds of the initial public
offering to redeem approximately $32.5 million of our preferred stock, and
expect to use the remaining net offering proceeds to make capital expenditures
relating to the Broadband Network, for potential acquisitions, and for working
capital and general corporate purposes, including to fund losses. Pending such
application, we will invest the net proceeds in short-term liquid securities. To
date, other than in connection with the redemption of our preferred stock, none
of the net proceeds from the initial public offering have been applied.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial and other data are for our company on a
consolidated basis and separately for IMPSAT Argentina, in each case in
accordance with U.S. GAAP. The Company's subsidiaries generally use the U.S.
dollar as their functional currency. The following financial data have been
derived from our company's audited consolidated financial statements and IMPSAT
Argentina's audited financial statements for the respective years. The selected
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and notes included at the back of this Report.
14
<PAGE> 15
OUR COMPANY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------ ------------- ------------- ------------- ------------
(U.S. $ THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues from services........................ $ 105,641 $ 128,393 $ 161,065 $ 208,089 $ 228,451
Direct costs and expenses:
Contracted services............................ 5,917 11,411 16,774 20,466 26,769
Other direct costs............................. 9,733 10,375 12,541 14,619 28,322
Leased capacity................................ 10,973 13,925 19,230 28,660 44,750
Cost of sold equipment......................... -- -- 3,137 3,665 5,187
------------ ------------- ------------- ------------- ------------
Salaries and wages................................ 22,220 25,561 29,109 38,198 46,174
Selling, general and administrative............... 26,094 23,030 28,237 38,665 43,364
Depreciation and amortization..................... 20,653 26,318 28,673 36,946 130,071
------------ ------------- ------------- ------------- ------------
Operating income (loss)........................... 6,883 18,065 23,364 26,870 (96,186)
Other income (expenses):
Interest expense, net.......................... (15,677) (23,185) (24,272) (44,698) (55,561)
Net gain (loss) on foreign exchange............ 1,838 910 (276) 675 (8,042)
Other income (expenses), net................... 511 1,035 (151) 760 15,305
------------ ------------- ------------- ------------- ------------
Income (loss) before income taxes, cumulative
effect and minority interest................... (6,445) (3,175) (1,335) (16,393) (144,484)
Benefit from (provision for) income taxes......... 740 (3,542) (5,263) (3,805) 20,733
------------ ------------- ------------- ------------- ------------
(Loss) income before cumulative effect and
minority interest.............................. (5,705) (6,717) (6,598) (20,198) (123,751)
Cumulative effect of change in accounting
principle, net of tax.......................... -- -- -- (1,269) --
(Income) loss attributable to minority
interest........................................ (1,712) (1,766) (993) (2,502) 6,225
Dividends on redeemable preferred stock........... -- -- -- (10,018) (14,017)
------------ ------------- ------------- ------------- ------------
Net loss attributable to common stockholders...... $ (7,417) $ (8,483) $ (7,591) $ (33,987) $ (131,543)
============ ============= ============= ============= ============
Net loss per common share: basic and diluted..... $(0.16) $(0.18) $(0.14) $(0.71) $(2.31)
====== ====== ====== ====== ======
Weighted average number of common shares: basic
and diluted................................... 46,773 46,773 53,594 47,983 54,447
============ ============= ============= ============= ============
OTHER FINANCIAL DATA:
EBITDA (1)........................................ $ 27,536 $ 44,383 $ 52,037 $ 63,816 $ 33,885
Ratio of earnings to fixed charges (2)............ -- -- -- -- --
Ratio of EBITDA to interest expense(3)............ 1.67x 1.76x 2.04x 1.29x --
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------- ------------- -------------- -------------- -------------
(U.S. $ THOUSANDS, EXCEPT FOR OPERATING DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 6,216 $ 28,895 $ 10,439 $ 90,021 $ 97,507
Total current assets............................... 36,906 68,304 65,015 159,099 179,026
Net property, plant and equipment.................. 199,701 227,086 255,422 330,726 310,330
Investments........................................ -- -- 4,178 10,708 235,925
Total assets....................................... 249,095 315,230 339,916 527,218 828,332
Total current liabilities.......................... 128,813 78,125 103,438 97,910 243,150
Total short-term debt and current
portion of long-term debt........................ 97,510 42,874 60,375 40,400 38,677
Total long-term debt, net.......................... 30,200 156,230 159,677 379,292 399,415
Minority interest.................................. 28,476 30,242 10,398 13,071 4,985
Redeemable preferred stock......................... -- -- -- 135,018 149,035
Stockholders' equity (deficit)..................... 55,363 46,881 63,389 (101,519) 15,341
OPERATING DATA:
Customers............................................ 656 907 1,192 1,467 1,745
Satellite customer sites (VSAT and SCPC
technology only)................................... 3,336 5,558 5,825 6,886 7,875
</TABLE>
15
<PAGE> 16
IMPSAT ARGENTINA
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------
1995 1996 1997
------------ ------------ ------------
(U.S. $ THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues from services.......................... $ 82,160 $ 87,093 $ 91,641
Costs and expenses:
Contracted services............................... 2,970 6,097 7,232
Other direct costs................................ 8,953 10,981 10,885
Leased capacity................................... 8,358 9,503 9,614
Cost of sold equipment............................ 1,674
Salaries and wages................................ 15,735 15,799 15,823
Selling, general and administrative............... 20,110 10,784 15,720
Depreciation and amortization.....................
Depreciation and amortization..................... 16,117 18,970 18,033
Operating income (loss)............................. 9,917 14,959 12,660
Other income (expenses):
Interest expense, net............................ (10,404) (12,527) (12,617)
Other income, net................................ 506 624 9
------------ ------------ ------------
Income before income taxes and minority interest... 19 3,056 52
(Provision for) benefit from
income taxes........................................ (3,963) (3,247)
------------ ------------ ------------
Net income (loss)................................... $ 25 $ (904) $ (3,195)
============ ============ ============
OTHER FINANCIAL DATA:
EBITDA(1)........................................... 26,034 33,929 30,693
Ratio of earnings to fixed charges(2)............... -- 1.2x 1.03x
Ratio of EBITDA to interest expense(3).............. 2.6x 3.2x 2.3x
</TABLE>
<TABLE>
<CAPTION>
MONTH ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31,
----------- ----------------------------
1997 1998 1999
------------ ------------ ------------
(U.S. $ THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues from services.......................... $ 8,130 $ 100,541 $ 110,209
Costs and expenses:
Contracted services............................... 706 10,180 13,134
Other direct costs................................ 760 9,623 18,841
Leased capacity................................... 944 10,629 17,759
Cost of sold equipment............................ 391 1,556 4,673
Salaries and wages................................ 1,086 16,342 19,672
Selling, general and administrative............... 778 16,917 18,079
Depreciation and amortization.....................
Depreciation and amortization..................... 1,562 20,515 59,039
Operating income (loss)............................. 1,903 14,779 (40,988)
Other income (expenses):
Interest expense, net............................ (976) (12,801) (12,569)
Other income, net................................ 4 16 4,820
------------ ------------ ------------
Income before income taxes and minority interest... 931 1,994 (48,737)
(Provision for) benefit from
income taxes..................................... (311) 5,982
------------ ------------ ------------
Net income (loss)................................. $ 620 $ 1,994 $ (42,755)
============ ============= ============
OTHER FINANCIAL DATA:
EBITDA(1)........................................... 3,465 35,294 18,051
Ratio of earnings to fixed charges(2)............... 1.95x 1.05x --
Ratio of EBITDA to interest expense(3).............. 3.4x 2.4x --
</TABLE>
<TABLE>
<CAPTION>
AS OF NOVEMBER 30,
------------------------------------------------
1995 1996 1997
-------------- -------------- --------------
BALANCE SHEET DATA: (U.S. $ THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C>
Cash and cash equivalents............................ $ 1,712 $ 1,882 $ 5,843
Total current assets................................. 20,368 28,823 38,147
Net property, plant and equipment.................... 140,588 143,430 148,786
Total assets......................................... 167,747 174,239 196,850
Total current liabilities............................ 103,527 45,038 71,999
Total short-term debt, vendor financing and current
portion of long-term debt......................... 70,998 25,512 40,570
Total long-term debt, net............................ 14,949 4,270 63,338
Long-term advances from
parent company.................................... -- 69,719 --
Minority interest.................................... 3 -- --
Stockholders' equity................................. 49,268 51,457 60,017
OPERATING DATA:
Customers............................................ 319 358 436
Satellite customer sites (VSAT and SCPC
technology only)................................... -- 3,310 3,607
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------
1997 1998 1999
-------------- -------------- ------------
BALANCE SHEET DATA: (U.S. $ THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C>
Cash and cash equivalents............................ $ 6,169 $ 13,489 4,199
Total current assets................................. 40,475 50,810 58,805
Net property, plant and equipment.................... 147,431 167,653 155,045
Total assets......................................... 197,820 234,844 272,978
Total current liabilities............................ 72,771 168,015 175,266
Total short-term debt, vendor financing and current
portion of long-term debt......................... 43,644 77,694 40,827
Total long-term debt, net............................ 63,029 1,802 20,415
Long-term advances from
parent company.................................... -- -- --
Minority interest.................................... -- -- --
Stockholders' equity................................. 60,637 63,542 76,787
OPERATING DATA:
Customers............................................ 439 490 687
Satellite customer sites (VSAT and SCPC
technology only)................................... 3,636 3,721 4,072
</TABLE>
- -------------------------------
(1) "EBITDA" is defined as operating income plus depreciation and amortization
expense. We are presenting EBITDA because some investors use it as a
measure of a company's ability to service its debt and as a measure of
operating performance. However, EBITDA is not determined using generally
accepted accounting principles, and therefore our EBITDA is not
necessarily comparable to EBITDA of other companies. Investors should not
view EBITDA as an alternative to cash flows calculated under generally
accepted accounting principles, which we have also presented. EBITDA is
not "free cash flow," because it will be used to pay interest expense and
remaining amounts after we pay our interest expense will be used to pay
taxes and make capital expenditures.
(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
our company were insufficient to cover fixed charges by approximately $9.6
million, $7.1 million, $2.2 million, $22.5 million and $159.4 million, for
the years ended December 31, 1995, 1996,
16
<PAGE> 17
1997, 1998 and 1999, respectively. Earnings of IMPSAT Argentina were
insufficient to cover fixed charges by approximately $0.5 million and
$ 62.4 million, for the years ended November 30, 1995 and December 31,
1999, respectively.
(3) For the year ended December 31, 1999, EBITDA was insufficient to cover our
interest expense by approximately $29.3 million. EBITDA of IMPSAT
Argentina was insufficient to cover interest expense by approximately
$3.3 million.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Forward Looking Statements. Some of the statements in this Management's
Discussion and Analysis of Financial Condition and Results of Operations are
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements.
Forward-looking statements include but are not limited to:
- our expectations and estimates as to completion dates, construction
costs and subsequent maintenance and growth of the broadband network
we are building
- our ability to implement successfully our operating strategy and to
sell capacity on our planned broadband network
- future financial performance, including growth in sales and income
The following factors, among others, could cause our actual results to
differ materially from those expressed in any forward-looking statements we
make:
- the rate of expansion of our network and/or customer base
- inaccuracies in our forecasts of customer or market demand
- loss of a customer that provides us with significant revenues
- highly competitive market conditions
- changes in or developments under laws, regulations and licensing
requirements
- our success in completing the segments of the Broadband Network in
Argentina and Brazil by our projected December 2000 completion date
- our ability to obtain all material licenses and rights of way for the
Broadband Network
- changes in telecommunications technology
- currency fluctuations
- changes in economic conditions in the Latin American countries where
we operate
These factors should not be construed as exhaustive. We will not update or
revise any forward-looking statements.
17
<PAGE> 18
Revenues. We provide services to our customers under contracts which
typically range from six months to five years, but generally are for three
years. The customer generally pays an installation charge at the beginning of
the contract and a monthly fee based on the quantity and type of equipment
installed. Except in Brazil, the fees stipulated in the contracts are generally
denominated in U.S. dollar equivalents. Services (other than installation fees)
are billed on a monthly, predetermined basis, which coincide with the rendering
of the services. We report our revenues net of deductions for sales taxes.
We have experienced, and anticipate that we will continue to experience,
downward pressure on our prices as we continue to expand our customer base and
as competition for private telecommunications network services grows. When we
have renewed and/or expanded our contracts with existing customers, the prices
we charge have generally declined. As a result, our revenues per unit of
satellite capacity used have been decreasing. In addition, as our business in a
particular country matures, our rate of growth in that country tends to slow. In
particular, this has occurred in Argentina and in Colombia. To compensate for
slower growth in maturing markets, we will seek to provide new services through
our Broadband Network and to expand into new countries.
Although we believe that our geographic diversification provides some
protection against economic downturns in any particular country, our results of
operations and business prospects are influenced by the overall financial and
economic conditions in Latin America. Many of the countries in which we operate
have experienced political and economic volatility in recent years. With the
exception of the United States and Mexico (which account for only a small
portion of our consolidated revenues), each of the countries in which we operate
experienced economic recession during 1999. In particular, Argentina and
Colombia, our two largest markets in terms of revenues generated, experienced
significant recessions in 1999. These conditions may have material adverse
effects on our business, results of operation and financial condition and
ability to make payments on the notes.
Costs and Expenses. Our costs and expenses principally include:
- direct costs
- salaries and wages
- selling, general and administrative expenses
- depreciation and amortization
Our direct costs include payments for leased satellite transponder and
fiber optic capacity. Building the Broadband Network will decrease our payments
for leased capacity as a percentage of revenues. However, there will be some
delay in recognizing cost savings associated with shifting transmission from
leased satellite facilities to our Broadband Network because our satellite
contracts cannot be cancelled before they expire. The other principal items
comprising direct costs are contracted services costs and other direct costs.
Contracted services costs include costs of maintenance and installation (and
de-installation) services provided by outside contractors. Installation and
de-installation costs are the costs we incur when we install or remove earth
stations, microstations and other equipment from customer premises. Other direct
costs principally include:
- Licenses and other fees
- Sales commissions paid to third-party sales representatives
- Allowance for doubtful accounts
18
<PAGE> 19
Our selling, general and administrative expenses consist principally of:
- publicity and promotion costs
- fees and other remuneration
- travel and entertainment
- rent
- plant services and corporate telecommunication and energy expenses
In connection with the stock options granted on January 5, 2000 under the
1999 Stock Option Plan, we will record approximately $5.4 million in
stockholders' equity as deferred compensation. The deferred compensation will be
amortized to expense over the vesting period, which commences four years after
the date of grant.
Capacity Transactions. In September 1999, we sold indefeasible rights of
use of telecommunications capacity on segments of the Broadband Network to
Global Crossing for approximately $25 million. We expect to have other similar
transactions in the future. For these transactions, we expect to recognize
revenue and expenses ratably over the term of the indefeasible rights of use
from the date the fiber optic cables are placed in service for the term of the
indefeasible right of use.
Currency Risks. Except in Brazil, our contracts with customers generally
provide for payment in U.S. dollars or for payment in local currency linked to
the exchange rate between the local currency and the U.S. dollar at the time of
invoicing. Accordingly, inflationary pressures on local economies in the other
countries in which we operate did not have a material effect on our revenues
during 1999. Given that the exchange rate is generally set at the date of
invoicing and that we in some cases experience substantial delays in collecting
receivables, we are exposed to exchange rate risk. Furthermore, under Brazilian
law, our contracts with customers in Brazil cannot be linked to the exchange
rate between the Brazilian real and the U.S. dollar. Our expansion in Brazil
will increase our exposure to exchange rate risks.
Sale of Retail Internet Business. In August 1999, we entered into an
agreement in principle to sell our retail Internet businesses in Argentina,
Brazil and Colombia to El Sitio, Inc. for approximately $21.5 million. El Sitio
provides Internet content in Latin America. We also agreed to subscribe for
$21.5 million in convertible preferred stock of El Sitio and El Sitio has agreed
to enter into a telecommunications services agreement with us to provide
services to El Sitio, including access to the U.S. Internet backbone. We
determined that retail Internet access was not one of our top priorities and was
inconsistent with our emphasis on providing telecommunications services to
businesses and governmental customers, telecommunications carriers and ISPs. The
Brazil transaction contemplated by the El Sitio Framework Agreement was
consummated on October 6, 1999 and the Argentina transaction was concluded on
November 5, 1999. The Colombia transaction is expected to close during April
2000. Upon the consummation of El Sitio's initial public offering in December
1999, our shares of El Sitio's preferred stock were automatically converted into
15.4% of El Sitio's common stock.
The revenues and expenses associated with the retail Internet businesses
sold to El Sitio were as follows for the periods indicated:
19
<PAGE> 20
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------
1997 1998 1999
----------- ----------- ----------
(IN THOUSANDS)
Net revenues:
<S> <C> <C> <C>
Argentina.............................. $ 2,634 $ 2,982 $ 3,236
Colombia(1)............................ 1,817 2,131 1,968
Brazil................................. -- 6,159 5,766
--------- ---------- ---------
Total.......................... $ 4,451 $ 11,272 $ 10,970
========= ========== =========
Direct costs:
Argentina.............................. $ 1,957 $ 2,181 $ 2,416
Colombia(1)............................ 1,274 2,014 2,237
Brazil................................. -- 3,792 5,766
--------- ---------- ---------
Total.......................... $ 3,231 $ 7,987 $ 10,419
========= ========== ==========
</TABLE>
- -----------------------------------
(1) The Colombia transaction is expected to close during April 2000.
RESULTS OF OPERATIONS
The following financial table summarizes our results of operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1997 1998 1999
---------------------------- ---------------------------- --------------------------------
(IN THOUSANDS AND AS A PERCENTAGE OF CONSOLIDATED REVENUES)
<S> <C> <C> <C> <C> <C> <C>
Net revenues from services........... $161,065 100.0% $208,089 100.0% $228,451 100.0%
Contracted services costs............ 16,774 10.4 20,466 9.8 26,769 11.7
Other direct costs................... 12,541 7.8 14,619 7.0 28,322 12.4
Leased capacity...................... 19,230 11.9 28,660 13.8 44,750 19.6
Cost of sold equipment............... 3,137 1.9 3,665 1.8 5,187 2.3
Salaries and wages................... 29,109 18.1 38,198 18.4 46,174 20.2
Selling, general and administrative.. 28,237 17.5 38,665 18.6 43,364 19.0
Depreciation and amortization........ 28,673 17.8 36,946 17.8 130,071 56.9
Interest expense, net................ 24,272 15.1 44,698 21.5 55,561 24.3
Net gain (loss) on foreign exchange.. (276) (0.2) 675 0.3 (8,042) (3.5)
(Provision for) benefit from income
taxes................................ (5,263) (3.3) (3,805) (1.8) 20,733 9.1
Net loss attributable to common
stockholders......................... (7,591) (4.7) (33,987) (16.3) (131,543) (5.8)
</TABLE>
1999 COMPARED TO 1998
General. Our results of operations for 1999 were not as positive as prior
periods for the following principal reasons:
- the recession in Latin America during this period, which was the
region's most severe in decades
- higher leased fiber capacity expenses related to increased customer
demand for high bandwidth telecom links
- the fact that we purchased too much satellite capacity because we did
not anticipate the breadth of the recession in Latin America
- competitive pricing pressures in our more mature markets (especially
in Argentina and Colombia)
- expenses of developing the Broadband Network and our Brazilian
operations (which are in a relatively early stage of development)
20
<PAGE> 21
- an increase in our provision for doubtful accounts as a result of
changes in our provisioning policy, which we discuss further below
- a change in the depreciable life of some of our customer premises
telecommunications equipment in view of technological advances in our
industry
Revenues. Our net revenues for 1999 totaled $228.5 million, an increase of
$20.4 million, or 9.8%, from net revenues for the same period in 1998. Growth in
net revenues was achieved despite a significant economic recession, especially
in the countries where most of our operations are currently deployed (Argentina,
Colombia, Venezuela). In addition to its general adverse effect on revenue and
client growth, the recession in certain cases accelerated pricing pressures
existing in the Company's more mature markets. These conditions could also
affect future periods.
The following tables show our revenues by operating subsidiary and by
business lines (in each case, including intercompany transactions) for the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998 1999
--------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
IMPSAT Argentina..................... $ 100,541 $ 110,209
IMPSAT Colombia...................... 60,447 61,047
IMPSAT Venezuela..................... 15,437 23,232
IMPSAT Ecuador....................... 10,433 13,356
IMPSAT Mexico........................ 4,479 3,573
IMPSAT Brazil........................ 3,876 8,568
Mandic S.A........................... 8,246 6,690
IMPSAT USA........................... 14,594 17,243
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------
1998 1999
--------------- ---------------
<S> <C> <C>
Network services................... $ 162,616 $ 172,478
Internet........................... 20,586 26,639
Other.............................. 24,887 29,334
Total net revenues from services..... $ 208,089 $ 228,451
</TABLE>
Our revenue growth for 1999 was attributable to an overall increase in the
number of customers and services we provided to them offset, in part, by
decreasing prices. Excluding Internet and fax store and forward customers, we
had a total of 1,745 customers at December 31, 1999, compared to 1,467 customers
at year end 1998.
Revenue figures included $8.6 million from retail internet services in
Argentina and Brazil, which were sold to El Sitio, Inc. in the fourth quarter of
1999, and $ 2.0 million in retail internet services in Colombia that will be
transferred to El Sitio in April 2000.
The recessions in Argentina and Colombia and, to a lesser extent, increased
competition resulted in some of our customers canceling their contracts or
reducing the services we provide to them. For example, our contract in Argentina
with Banco Bansud S.A., one of Argentina's largest private commercial banks and
one of IMPSAT Argentina's top ten customers in 1998, was terminated due to
pricing competition in April 1999. In Colombia, our contracts with six customers
within the Suramericana group were renegotiated during the first quarter of
1999. This renegotiation resulted in an approximately 24% decrease in our prices
under these contracts. Our net revenues from these six companies totaled $2.0
million during 1998. The Suramericana group includes some of our largest
customers in Colombia.
21
<PAGE> 22
The Company's business in Colombia, its second oldest market, was adversely
affected by the severe economic recession experienced during 1999. Due to
continuing effects of the recession, we expect IMPSAT Colombia to continue to
experience declining prices and margin pressure in 2000.
In addition, revenue growth at IMPSAT Ecuador could decline in coming
periods due to the effects of the continuing economic and political crisis in
that country. Although IMPSAT Ecuador's revenues and revenue growth have not yet
been adversely affected to date by the recession in Ecuador, we cannot predict
the effect of these matters on our results for future periods.
We completed our first full year of operations in Brazil in 1999. Although
IMPSAT Brazil's expansion of its customer base (90 customers as of December 31,
1999 compared to 48 customers as of the same date in 1998) and operations
continued, adverse economic conditions in Brazil, including the devaluation of
the real against the U.S. dollar, caused IMPSAT Brazil's revenues in U.S. dollar
terms to be lower than expected. Revenues recorded by Mandic during 1999 as
compared to 1998 were also negatively affected by the devaluation of the
Brazilian real against the U.S. dollar during 1999. The real was at R$1.21 =
$1.00 on January 1, 1999 and R$2.10 = $1.00 on December 31, 1999.
On October 5, 1999, we merged Mandic into IMPSAT Brazil, and Mandic S.A.
ceased operations. On October 6, 1999, IMPSAT Brazil sold the retail internet
business acquired in the Mandic merger for $12.3 million to O Site
Entretenimentos Ltda., a subsidiary of El Sitio.
Direct Costs. Our direct costs for 1999 totaled $105.0 million, an increase
of $37.6 million, or 55.8%, compared to 1998. Of our total direct costs for
1999, $54.4 million related to the operations of IMPSAT Argentina and $20.3
million related to the operations of IMPSAT Colombia. This compares to $32.0
million at IMPSAT Argentina and $17.3 million at IMPSAT Colombia for 1998.
Direct costs for IMPSAT Brazil, which commenced operations towards the end of
the second quarter of 1998, totaled $8.8 million for 1999. Direct costs of our
subsidiaries are described prior to the elimination of intercompany
transactions.
(1) Contracted Services. Contracted services costs include costs
of maintenance and installation (and de-installation) services
provided by outside contractors. In 1999, our contracted services
costs totaled $26.8 million, compared to $20.5 million in 1998. Of
this amount, maintenance costs for our telecommunications network
infrastructure totaled $17.4 million, compared to $12.7 million for
1998. IMPSAT Argentina's maintenance costs totaled $7.8 million,
compared to $5.9 million in 1998. Our maintenance costs increased
because we had more infrastructure. In addition, our installation
costs totaled $9.4 million, compared to $7.6 million for 1998.
Installation costs at IMPSAT Argentina totaled $5.3 million for 1999
as compared to $4.3 million for 1998. The increase in these costs was
due in part to:
- private telecommunications network installations completed
in 1999 in connection with IMPSAT Argentina's contracts to
provide private telecommunications network services to the
Government of the Province of Buenos Aires and Banco de la
Provincia de Buenos Aires
- a higher number of de-installations of VSAT microstations
due to customer cancellations and customer upgrades to SCPC
technology
(2) Other Direct Costs. Other direct costs principally include
licenses and other fees; sales commissions paid to third-party sales
representatives; and our allowance for doubtful accounts.
Sales commissions paid to third-party sales representatives
totaled $8.0 million, compared to $6.8 million for 1998. Most of these
commissions related to customers of IMPSAT Argentina.
22
<PAGE> 23
We recorded a provision for doubtful accounts of $11.2 million
compared to $5.3 million for the same period in 1998. At December 31,
1999, excluding amounts owed by two large former customers (Empresa
Nacional de Correos y Telegrafos S.A., the former Argentine national
postal service known as ENCOTESA, and IBM de Argentina) that were the
subject of litigation at that date, approximately 19% of our gross
trade accounts receivable were past due more than six months but less
than one year and approximately 26% were past due more than one year.
During the third quarter of 1999, we amended our provisioning
policy to remove the discretion previously granted to the presidents
of our operating subsidiaries to override the provisioning of amounts
more than 180 days past due and to reserve 100% of our outstanding
receivables due from IBM de Argentina. During that quarter we
recognized a charge of approximately $1.1 million with respect to
receivables due from IBM de Argentina and additional charges of
approximately $4.1 million. In addition, at December 31, 1999, we also
estimated that the net realizable value on the ENCOTESA receivable to
be zero, and accordingly we recorded an adjustment of $5.1 million
relating to this receivable.
In addition, due to a general slowdown in the collection of
receivables in Argentina and some of the other countries in which we
operate commencing in the second quarter of 1999, which we believe is
due to economic difficulties experienced in those countries, we added
approximately $2.5 million to our allowance for doubtful accounts in
the third quarter of 1999. In particular, our collection of
receivables in Argentina was adversely affected by the recession in
that country during 1999. IMPSAT Argentina's average days outstanding
for net trade receivables due was 90 days at December 31, 1999. This
represents an improvement from IMPSAT Argentina's average days
outstanding for net trade receivables due of 97 days at June 30, 1999,
but a decline from 69 days at December 31, 1998.
In February, 2000, IMPSAT reached an agreement with IBM de
Argentina for the settlement of its receivables due from that company,
for which IMPSAT will receive approximately $2.0 million during the
first four months of 2000, representing a recovery of 89.7% of the
approximately $2.3 million amount reserved. We have received
approximately $1.2 million of this amount and the remainder is due in
April 2000.
(3) Leased Capacity. Our leased capacity cost totaled $44.8
million, which represented an increase of $16.1 million, or 56.1%,
from the corresponding period in 1998. We had approximately 801 MHz of
leased satellite capacity at December 31, 1999 and 650 MHz at December
31, 1998.
The expansion of our satellite capacity was primarily
attributable to contractually scheduled increases in satellite
capacity to match anticipated growth in customer demand. A portion of
this increase was related to the growth in our SCPC services compared
to our VSAT services. SCPC earth stations use larger amounts of
satellite capacity than do VSAT microstations. However, we have not
needed as much satellite capacity as we contracted for, due to adverse
economic conditions in Latin America. As a result, our satellite
capacity cost as a percentage of revenues has increased substantially
from prior periods.
In addition, to satisfy increasing customer demand for high
bandwidth telecommunications links, during 1999, we increased our
leased dedicated capacity on third-party fiber optic networks in
Argentina, spending $16.9 million compared to $10.0 million for 1998.
Due to this need for greater fiber optic bandwidth, we expect our
leased telecommunication links expense to increase until we implement
the Broadband Network. Leased fiber optic capacity in Argentina is
quite expensive due to the very limited number of providers.
(4) Costs of Equipment Sold. We incurred costs of equipment sold
of $5.2 million, compared to $3.7 million in 1998.
23
<PAGE> 24
Salaries and Wages. Salaries and wages totaled $46.2 million, an increase
of $8.0 million, or 20.9%, from the 1998. The increase resulted primarily from:
- an increase in the number of employees, from 1,029 at December 31,
1998 to 1,107 at December 31, 1999, particularly in connection with
the progression of our operations in Brazil, and the development of
the Broadband Network.
- increases in the salaries and wages of our personnel to match market
rates for personnel with the expertise we require and increases in
cost of living
IMPSAT Argentina incurred salaries and wages for 1999 of $19.7 million
compared to $16.3 million in 1998. Salaries and wages for 1999 relating to the
Broadband Network totaled $3.0 million. Salaries and wages for 1999 paid with
respect to IMPSAT Brazil and Mandic totaled $4.7 million. IMPSAT Brazil
increased its number of employees by 60 persons, or 50.4%, during 1999 in
connection with the Company's development of operations in that country.
Selling, General and Administrative Expenses. We incurred SG&A expenses of
$43.4 million for 1999. SG&A expenses increased $4.7 million, or 12.2%, from
1998. SG&A expenses at IMPSAT Argentina totaled $18.1 million, an increase of
$1.2 million, or 6.9%, from SG&A expenses incurred by IMPSAT Argentina for 1998.
The increase in SG&A expenses principally reflects increased SG&A expenses
incurred by our two newest subsidiaries, IMPSAT Brazil and Mandic, both of which
commenced operations around the end of the second quarter of 1998. SG&A expenses
incurred by IMPSAT Brazil totaled $5.9 million compared to $5.6 million in the
corresponding period in 1998.
Mandic's SG&A expenses totaled $1.6 million compared to $2.2 million in the
corresponding period in 1998.
The increased SG&A expenses also reflect growth in our operations and the
development and implementation of the Broadband Network. For example, the
increase in our expenses for legal, tax and consultancy advice to $8.5 million
compared to $7.1 million for 1998 is attributable to the expansion of our
operations, including the financing and development of the Broadband Network.
Depreciation and Amortization. Our depreciation and amortization expenses
for 1999 totaled $130.1 million, an increase of $93.1 million, or 252.1%, from
1998. The increase primarily reflected accelerated depreciation resulting from
our decision in the third quarter of 1999 to change the depreciable life of some
of our customer premises telecommunications equipment from 10 years to 5 years
in view of technological advances in our industry.
Interest Expense, Net. Our net interest expense totaled $55.6 million. This
consists of interest expense of $63.2 million and interest income of $7.4
million. Our net interest expense increased $10.9 million, or 24.3%, from net
interest expense for 1998. Our net interest expense for 1998 was $44.7 million.
The increase in our net interest expense reflects higher average
outstanding indebtedness in 1999 compared to 1998 as a result of our issuance in
June 1998 of $225 million principal amount of 12 3/8% Senior Notes due 2008. For
1999, the average interest rate on our indebtedness was 11.3%, compared to an
average interest rate of 12.1% for 1998. Our total indebtedness as of December
31, 1999 was $438.1 million, as compared to $419.7 million as of December 31,
1998. We anticipate that interest expense will increase in the future based on:
- expected increased levels of borrowing associated with our development
of the Broadband Network, including the two financing agreements that
we recently signed with Nortel for a total of up to $297.4 million to
construct the Broadband Network in Argentina and Brazil
24
<PAGE> 25
- our $300 million principal amount of Notes due 2005
See "-- Liquidity and Capital Resources."
Net Loss on Foreign Exchange. We recorded a net loss on foreign exchange of
$8.0 million, compared to a net gain of $0.7 million for 1998. The increase was
principally caused by the devaluation of the Brazilian real against the U.S.
dollar.
Benefit from (Provision for) Income Taxes. We recorded a benefit from
income taxes (all of which are for foreign taxes) of $20.7 million compared to a
provision for income taxes of $3.8 million for 1998. The increased benefit from
income taxes is attributable to the expected net loss carry-forwards that we
will be able to use in future periods as a result of the accelerated
depreciation expense taken beginning the third quarter of 1999 with respect to
some of our customer premises telecommunications equipment.
Net Loss Attributable to Common Stockholders. For 1999, we incurred a net
loss attributable to common stockholders of $131.5 million, compared to $34.0
million for 1998. In addition to other items described in the preceding
paragraphs, the principal reasons for the increase in our net loss attributable
to common stockholders as compared to prior periods related to:
- the accelerated depreciation in the third quarter of 1999
- the increase in our provision for doubtful accounts
- our foreign exchange losses caused by the devaluation of the Brazilian
real against the U.S. dollar
- accrued dividends of $14.0 million on our preferred stock, compared to
$10.0 million during 1998
1998 COMPARED TO 1997
Revenues. Revenues for 1998 totaled $208.1 million, compared to $161.1
million for 1997, a $47.0 million increase from revenues for 1997. The following
table shows our revenues by operating subsidiary, including intercompany
amounts) for 1998 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
IMPSAT Argentina.......................... $ 90,942 $ 100,541
IMPSAT Colombia........................... 50,099 60,447
IMPSAT Venezuela.......................... 9,242 15,436
IMPSAT Ecuador............................ 5,716 10,433
IMPSAT Mexico............................. 1,776 4,479
IMPSAT Brazil............................. -- 3,876
Mandic.................................... -- 8,246
IMPSAT USA................................ 7,912 14,594
</TABLE>
The increase in IMPSAT Argentina's revenues in 1998 was primarily
attributable to increased revenues from Internet services, as described below.
Excluding customers of our Internet and our fax store and forward services,
we had a total of 1,467 customers at December 31, 1998, compared to 1,192
customers at December 31, 1997. During 1998, we commenced our operations in
Brazil. At December 31, 1998, IMPSAT Brazil had a total of 48 customers,
compared to 21 customers at the end of the second quarter of 1998.
25
<PAGE> 26
Our net revenues in 1998 increased principally from growth in our network
services other than our VSAT based services. Revenues from VSAT services during
1998 totaled $56.7 million, a decrease of $0.7 million, or 1.2%, from 1997. As a
percentage of our net revenues, revenues from VSAT services declined to 27.3%
for 1998 from 35.7% in 1997, reflecting downward pressure on the prices for our
VSAT services. Revenues from Dataplus services for 1998 totaled $45.7 million,
an increase of $8.1 million, or 21.6%, from 1997. Revenues from Minidat services
for 1998 totaled $2.3 million compared to revenues of $17,000 in 1997. In
addition, our revenues from newer network service offerings such as Minidat,
increased significantly during 1998. At December 31, 1998, we had installed 763
Minidat microstations compared to installations of 119 Minidat microstations at
December 31, 1997.
In 1998, competitive pressures, including lower pricing, resulted in
relatively flat revenues from Argentina's network service offerings. IMPSAT
Argentina's revenues from VSAT and Dataplus services for 1998 totaled $37.6
million and $23.5 million, respectively, an increase of $1.7 million, or 4.7%,
and a decrease of $0.1 million, or 0.6%, from 1997.
Internet service revenues totaled $21.1 million in 1998, as compared to
$7.7 million for 1997. At December 31, 1998, we had in excess of 79,000 retail
Internet customers and 241 corporate Internet customers, compared to 19,000
retail Internet customers and 45 corporate Internet customers at December 31,
1997. Mandic's net revenues from Internet services in 1998 (after our
acquisition) totaled $8.3 million. IMPSAT Argentina's net revenues from Internet
services in 1998 totaled $6.1 million, an increase of $1.8 million, or 41.4%,
from 1997.
As part of net revenues, we recorded revenues of $4.7 million from certain
equipment sales in 1998 and $3.1 million in 1997.
Direct Costs. Our direct costs totaled $67.4 million, an increase of $15.7
million, or 27.4%, from 1997. Of total direct costs for 1998, $32.0 million
related to the operations of IMPSAT Argentina and $17.3 million related to
IMPSAT Colombia (compared to $32.2 million at IMPSAT Argentina and $13.6 million
at IMPSAT Colombia in 1997).
(1) Contracted Services. Our contracted services costs totaled
$20.5 million, compared to $16.8 million in 1997. Of this amount, our
maintenance costs totaled $12.7 million, an increase of $6.0 million
from 1997, and our installation costs totaled $7.6 million, compared
to $4.7 million in 1997.
(2) Other Direct Costs. Other direct costs were $14.6 million in
1998, compared to $12.5 million in 1997. Of this total, sales
commissions paid to third party sales representatives equaled $6.8
million, compared to $5.7 million in 1997. Sales commissions increased
in 1998 as a result of new private telecommunications network services
contracts that we obtained in 1998 through the use of third-party
sales representatives.
Other direct costs also reflected an increase in our provision
for doubtful accounts. On a company-wide basis, we recorded a
provision for doubtful accounts of $5.3 million, compared to $3.3
million in 1997, as a result of payment arrears experienced by certain
customers in Argentina, Colombia and Ecuador and our change in policy
for provisioning doubtful accounts. Of this amount, IMPSAT Argentina
recorded a provision for doubtful accounts of $3.5 million, in
comparison to a provision of $2.7 million in 1997.
(3) Leased Capacity. Our leased capacity payments totaled $28.7
million, an increase of $9.4 million, or 49.0%, from 1997. IMPSAT
Argentina's leased capacity payments totaled $10.6 million, an
increase of $1.0 million, or 10.6%, from 1997. We had approximately
650.0 MHz of leased satellite capacity at December 31, 1998 and
approximately 412.6 MHz at December 31, 1997. The expansion of our
satellite capacity was primarily attributable to contractually
scheduled increases in satellite capacity to match anticipated growth
in the total number of Dataplus earth stations which, because of their
greater transmission capacity and bandwidth requirements compared to
VSAT, use larger amounts of satellite capacity.
26
<PAGE> 27
(4) Cost of Equipment Sold. We incurred costs of equipment sold
of $3.7 million, compared to $3.1 million in 1997.
Salaries and Wages. Salaries and wages totaled $38.2 million, an increase
of $9.1 million, or 31.2%, from 1997. We increased the salaries and wages of our
personnel to match market rates and increases in costs of living. The increase
also reflects the acquisitions during the second quarter of 1998 of IMPSAT
Brazil and Mandic, which had 119 and 67 employees, respectively, at December 31,
1998. Salaries and wages paid with respect to IMPSAT Brazil and Mandic for 1998
totaled $3.6 million and $1.1 million, respectively. We maintained a total of
1,029 employees at December 31, 1998, compared to 669 employees at December 31,
1997. Of our total employees at December 31, 1998, 28 individuals were assigned
to the Broadband Network. Salaries and wages for 1998 relating to the Broadband
Network totaled $0.5 million.
Selling, General and Administrative Expenses. We incurred SG&A expenses of
$38.7 million, an increase of $10.4 million, or 36.9%, compared to 1997. This
increase was principally due to SG&A expenses incurred by our two new
subsidiaries, IMPSAT Brazil and Mandic.
SG&A expenses at IMPSAT Argentina totaled $16.9 million, an increase of
$1.2 million, or 7.6%, compared to 1997. SG&A expenses at IMPSAT Brazil and
Mandic for 1998 totaled $5.6 million and $2.2 million, respectively. We also
incurred SG&A expenses of $1.9 million in 1998 in connection with the Broadband
Network.
Compared to 1997, the increase in our SG&A expenses also reflected a 141%
increase in entertainment, advertising and promotion costs to $7.0 million
compared to $2.9 million in 1997 relating to:
- our expansion of operations into Brazil
- promotion campaigns for our newer services, including Internet,
Conexia (electronic HMO benefit verification) and Telecampus (video
conference distance learning)
- consultant fees relating to our exploration of a new public image
- related travel and entertainment expenses
In addition, the increase in our SG&A expenses reflected increased expenses for
legal, tax and consultancy advice ($7.1 million compared to $5.2 million for
1997) with respect to the financing and expansion of our operations, including
the acquisitions of IMPSAT Brazil and Mandic and the development of plans for
the Broadband Network.
Depreciation and Amortization. Our depreciation and amortization expense
totaled $36.9 million, representing an increase of $8.3 million, or 28.9%,
compared to 1997.
Interest Expense, Net. Our net interest expense totaled $44.7 million,
consisting of interest expense of $49.4 million and interest income of $4.7
million. Net interest expense for 1998 increased $20.4 million, or 84.2%, from
1997. The increase in net interest expense was primarily attributable to our
increased indebtedness, which increased from $220.1 million as of December 31,
1997 to $419.7 million as of December 31, 1998. This increased indebtedness
related primarily to our 12 3/8% note offering in June 1998. The average
interest rate on our indebtedness for 1998 was 14.0%, compared to 11.9% for
1997.
Provision for Income Taxes. We recorded a provision for income taxes of
$3.8 million, compared to $5.3 million for 1997. IMPSAT Argentina did not record
a provision for income taxes in 1998, compared to $3.2 million for 1997. This
reduction was attributable to carry-forward losses of Resis S.A., a wholly owned
subsidiary of the company that was
27
<PAGE> 28
merged into IMPSAT Argentina in November 1998, that IMPSAT Argentina used to
offset its income tax liability in 1998.
Net Loss Attributable to Common Stockholders. We incurred a net loss
attributable to common stockholders of $34.0 million, an increase of $26.4
million, compared to 1997. The principal reasons for the increase were:
- the increase in our provision for doubtful accounts
- increased interest expense attributable to our increased indebtedness
as a result of our 12 3/8% note offering
- the incurrence of a net loss of $7.6 million by IMPSAT Brazil in 1998
- the effect of accrued dividends of $10.0 million on the preferred
stock during 1998
LIQUIDITY AND CAPITAL RESOURCES
We will continue to make significant capital expenditures in the next
several years in connection with the Broadband Network, the further development
of our operations in Brazil and new customer accounts (for which we install our
equipment on customer premises). We also have, and will continue to have,
substantial interest expense.
At December 31, 1999, we had total cash and cash equivalents of $97.5
million. Our cash and cash equivalents relate principally to:
- unused proceeds from our 12 3/8% note offering in June 1998
- unused proceeds of our $125 million equity private placement to
British Telecommunications in April 1999
- advances from Global Crossing totaling approximately $23.2 million in
respect of our ongoing construction of a terrestrial portion of their
South American network
On February 4, 2000, we completed our initial public offering and the
British Telecommunications private placement. The net proceeds from these
offerings totaled approximately $228.8 million. On February 11, 2000, we
completed the private placement of our $300 million aggregate principal amount
of Notes due 2005, pursuant to Rule 144A under the Securities Act of 1933.
Our budget contemplates that we will need approximately $246.1 million
during 2000 (including amounts spent to date) for capital expenditures related
to the Broadband Network in Argentina and Brazil. In October 1999, we executed
definitive agreements with Nortel for long term vendor financing commitments of
up to approximately $297 million, which we can use to pay for Nortel's
construction of the segments of our Broadband Network in Argentina and Brazil.
In addition, we are negotiating a vendor financing agreement of approximately
$20 million with Lucent Technologies, Inc. as part of our agreement to purchase
Lucent fiber optic cable for the long-haul portions of the Broadband Network in
Argentina. In the future, we may reduce the commitments from Nortel under the
vendor financing agreements.
We do not have any other commitments regarding financing of future
expansion and development of the Broadband Network. As a result, any such
expansion and development will depend upon our ability to obtain additional
financing. If we are unable to obtain additional financing, we will not be able
to maintain our levels of growth and market position in any of the countries in
which we operate, which could have a material adverse effect on our results of
operations.
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<PAGE> 29
In addition, we anticipate that we will require approximately $148.2
million for other capital expenditures, including those related to our existing
telecommunications business, customer equipment, and general infrastructure
during 2000, and significant amounts thereafter.
In 1999, our operating activities generated $3.9 million, compared with
$16.7 million generated during 1998. Financing activities, principally our
issuance of common stock to a subsidiary of British Telecommunications in April
1999, provided $139.3 million in net cash for 1999, compared with $191.5 million
for 1998, principally related to our issuance of 12 3/8% notes in June 1998.
During the 1999, we used $134.0 million net cash for investing activities,
compared to $128.2 million for 1998. We had a cash balance of $97.5 million as
of December 31, 1999.
At December 31, 1999, we had leased satellite capacity with annual rental
commitments of approximately $28.5 million through the year 2003. In addition,
at December 31, 1999, we had commitments to purchase telecommunications
equipment amounting to approximately $9.5 million.
YEAR 2000
The year 2000 problem refers to the failure of installed computerized
systems and software products to recognize or accept four digit date entries. In
this case, systems that have date-sensitive features might, for example,
recognize a date using "00" as the year 1900 rather than the year 2000. This
problem could cause malfunctions in certain computer systems, software and
databases with respect to dates after 1999, unless corrected.
We continue to face risks to the extent that the business systems or
products of our suppliers, satellite providers, customers and others with whom
we transact business are not year 2000 compliant. In providing our services, our
systems are required to communicate electronically with customer-owned systems
with respect to a variety of functions. Failure of our customers' systems to be
year 2000 compliant, particularly satellite providers, could impair our ability
to perform these functions. Furthermore, if any of our suppliers cannot provide
us with products, services or systems that meet the year 2000 requirements, our
operating results could be materially adversely affected. We cannot assure you
that the systems of our customers and suppliers will continue to be year 2000
compliant. We could be adversely affected by the year 2000 problem if we or our
suppliers, customers and other businesses have not addressed this issue
successfully.
OUTLOOK
We believe that we have entered 2000 with strong business fundamentals, and
are positioned to build on our 1999 accomplishments. We have fully funded our
operations until 2002 with approximately $830 million in available capital from
our supplier financing agreement, recent initial public offering, and the
placement of our Notes due 2005.
During 2000, we will allocate our resources principally towards the
development and roll-out of the Broadband Network. In this respect, we are in
line with our projected schedule. As of February 15, 2000, we had already
installed 1,054 route kilometers of ducts and 1,917 route kilometers of fiber.
After the Broadband Network in Argentina and Brazil is completed, which we
expect to be by year-end 2000, we will begin migrating existing customers to our
new network. In addition, we estimate that our addressable market will expand
significantly after that point. Growth occurring in the Latin American corporate
data communications services market, as well as the ongoing liberalization of
the Argentine and Brazilian telecommunications markets, gives us the opportunity
to offer carrier's carrier and wholesale internet services to new market
entrants.
We expect our EBITDA margins during 2000 to decrease compared to prior
periods because of the costs associated with developing our broadband strategy
and the expansion of our operations in Brazil. In particular, such costs will
include salaries and wages related to our staffing of our Brazilian operations
and for our new broadband network, as well as leased links expenses driven by
the increasing demand for bandwidth from our customers. In addition, we expect
our
29
<PAGE> 30
network maintenance costs and SG&A expenses to increase significantly in future
periods as we grow our operations in Brazil and further develop and implement
the Broadband Network. We believe, however, that our increased emphasis on
terrestrial fiber links, coupled with strict cost controls and aggressive
pricing, will enable us to offset these projected margin pressures.
From the year 2001 on, we expect margins to increase as we start bringing
more customers to the Broadband Network and start enjoying increasing economies
of scale. Until then, we look forward to further development of the Broadband
Network and continued growth of our Brazilian operations.
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 Fiber Networks, Inc. currently has
ten members on its Board of Directors. In accordance with its Estatutos, IMPSAT
Argentina currently has six members on its Board of Directors. Our company's
board of directors are classified into three classes, which consist of, as
nearly as practicable, an equal number of directors. The members of each class
serve staggered three-year terms or until their earlier death, resignation or
removal. The directors of IMPSAT Argentina 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 officers of IMPSAT Fiber Networks, Inc. are appointed by 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.
No family relationship exists among any of our directors or executive
officers, except that Lucas Pescarmona and Sofia Pescarmona, both directors of
our company, are the children of Enrique M. Pescarmona, the Chairman of our
board of directors.
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<PAGE> 31
Set forth below are the names, ages and positions of directors and
executive officers of our company and IMPSAT Argentina as of December 31, 1999.
Executive officers of IMPSAT Fiber Networks, Inc. are employees of IMPSAT
Argentina.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ ----- -------------------------------------------------------
<S> <C> <C>
Directors
Enrique M. Pescarmona........................... 58 Chairman of the Board; Director of IMPSAT Argentina
Ricardo A. Verdaguer............................ 49 Director, President and Chief Executive Officer;
Chairman of the Board of Directors of IMPSAT Argentina
Roberto A. Vivo................................. 46 Director, Deputy Chief Executive Officer; Director of
IMPSAT Argentina
Alexander Rivelis............................... 59 Director and Vice President, Carrier's Carrier
Lucas Pescarmona................................ 30 Director
Sofia Pescarmona................................ 27 Director
Stephen R. Munger............................... 42 Director
Jeronimo Bosch.................................. 28 Director
Geoffrey Almeida................................ 47 Director
John McElligott................................. 48 Director
Executive Officers
Hector Alonso................................... 42 Chief Operating Officer
Guillermo Jofre................................. 44 Chief Financial Officer
Guillermo V. Pardo.............................. 49 Vice President, Planning and Secretary
Jose R. Torres.................................. 41 Vice President, Administration, Chief Accounting
Officer; Director of IMPSAT Argentina
Rafael Carchak Canes............................ 50 Vice President, Organizational Development
Alejandro Suarez del Cerro...................... 46 Vice President, Internet
Jaime Vinocur................................... 54 Vice President, Project Execution
Rodolfo Arroyo.................................. 41 Chief Information Officer
Marcelo Girotti................................. 35 President and Director of IMPSAT Argentina
Mariano Torre Gomez............................. 50 President of IMPSAT Colombia
Mauricio Ceballos............................... 35 President of IMPSAT Venezuela
Heliodoro Londono............................... 43 President of IMPSAT Mexico
Norberto D. Musante............................. 42 President of IMPSAT Ecuador
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ ----- -------------------------------------------------------
<S> <C> <C>
Mauricio G. Klau................................ 38 President of IMPSAT USA
Daniel V. Hourquescos........................... 48 President of IMPSAT Brazil
Pedro O. Mayol.................................. 60 Director of IMPSAT Argentina
</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 our board of directors 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. and
Industrias Metalurgicas Pescarmona S.A.I.C. y F. (IMPSA). He is a director of
Lagarde, S.A., Ingenieria y Computacion S.A., Mercantil Andina S.A., and TCA
S.A., and is Vice President of Henri Lagarde S.A.
Ricardo A. Verdaguer has been President, Chief Executive Officer and a
member of our board of directors since September 1994. Mr. Verdaguer also served
as President of IMPSAT Argentina from April 1988 until February 1990 and has
served as Chairman of the board of directors of IMPSAT Argentina since 1990. Mr.
Verdaguer served in a number of management positions with IMPSA from 1976 to
1988, including as manager of the contracts and construction department and
manager of the commercial department. Mr. Verdaguer is also a director of El
Sitio, Inc.
Roberto A. Vivo has been Deputy Chief Executive Officer, Vice President,
Marketing and a member of our board of directors since September 1994. Mr. Vivo
also served as Marketing Director of IMPSAT Argentina from April 1988 to
December 1994 and has been a member of the board of directors of IMPSAT
Argentina since 1988. Mr. Vivo also serves as Chairman of the board of directors
of El Sitio and of FAICSA, an Argentine company engaged in public construction
projects.
Alexander Rivelis has been Vice President of Carrier's Carrier and a member
of our board of directors 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 and President of IMPSAT Colombia from 1991
to 1993.
Lucas Pescarmona, a son of Enrique M. Pescarmona, has been a member of our
board of directors since February 1996. From 1993 to 1995, he held various
positions in the Buenos Aires, Argentina office of Arthur Andersen & Co. In
1995, he transferred to Tecnologica em Componentes Automotivos S.A., a Brazilian
manufacturer of automotive parts that is part of the Pescarmona group, as the
senior investment analyst in Brazil. Since 1997, Mr. Pescarmona has been
principally engaged in the insurance arm of the Pescarmona group, where he is
Manager of Business Development of Mercantil Andina.
Sofia Pescarmona, a daughter of Enrique M. Pescarmona, has been a member of
our board of directors since February 1996. Ms. Pescarmona is currently
assistant to the Chief Executive Officer of IMPSAT Fiber Networks, Inc. From
August 1994 to December 1997, Ms. Pescarmona held several positions in IMPSAT,
including in the Internet unit and marketing department, and in the sales
department of IMPSAT Argentina. Ms. Pescarmona has been a member of the board of
directors of El Sitio since October 1999.
Stephen R. Munger has been a member of our board of directors since March
1998. Mr. Munger is a Managing Director of Morgan Stanley Dean Witter and
co-head of Morgan Stanley's worldwide mergers, acquisitions and
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<PAGE> 33
restructuring department, as well as Co-Chairman of the investment committee of
Princes Gate Investors II L.P. He joined Morgan Stanley in 1988 as a Vice
President in the corporate finance department. He became a Principal in 1990 and
a Managing Director in 1993. Mr. Munger has been a member of the board of
directors of Destia Communications, Inc. since November 1997 and TVN
Entertainment Corp. since December 1997.
Jeronimo Bosch has been a member of our board of directors since September
1999. Mr. Bosch is an associate at Morgan Stanley Dean Witter Private Equity.
Mr. Bosch joined Morgan Stanley Dean Witter in August 1997. From 1994 to 1997,
he was employed by Salomon Brothers Inc. in its global mergers and acquisitions
and Latin American corporate finance departments.
Geoffrey Almeida has been a member of our board of directors since July
1999. Mr. Almeida is President of BT, Latin America. Mr. Almeida joined British
Telecommunications in 1991 as Director of BT Property Ltd. Mr. Almeida has also
served as Director of Business Planning and Director of Financial Planning and
Control for the BT Group. Prior to joining British Telecommunications, Mr.
Almeida was Group Finance Director at Parkdale Holdings PLC. Mr. Almeida serves
on the board of directors of Bharti Cellular Limited, Maxis Berhad, BT INTERKOM
Verwaltungs GmbH, BT Communications Services KK and Southgate Development
Limited.
John McElligott has been a member of our board of directors since July
1999. Mr. McElligott is Director of Corporate Finance and Financial Analysis at
British Telecommunications. Since he joined British Telecommunications in 1992,
Mr. McElligott has been head of group financial planning, Chief Financial
Officer of Concert Communications Company and Finance Director of BT Networks.
Mr. McElligott serves on the board of directors of Concert Communications
Company, LG TelecCom Ltd. (Korea), StarHub Pte., Ltd. (Singapore) and Clear
Communications Limited (New Zealand).
Hector Alonso has been our Chief Operating Officer since 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.
Guillermo Jofre has been our Chief Financial Officer since May 1995. Prior
to joining IMPSAT, Mr. Jofre was Executive Vice President of Banque Indosuez in
Argentina from 1993 to 1995 and had over ten years of experience in management
positions with companies in Argentina, Germany and Switzerland. Mr. Jofre also
serves as a member of the board of directors of the investment fund Bemberg
Inversiones S.A.
Guillermo V. Pardo joined our company in 1988 and has been our Vice
President, Planning 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 a member of the board of directors of FAICSA and the Fundacion Torcuato Di
Tella.
Jose R. Torres has been our Vice President, Administration and Chief
Accounting Officer 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.
Rafael Carchak Canes has served as Vice President, Organizational
Development since August 1998 and has been a director of IMPSAT Argentina since
May 1995. He was President of IMPSAT Argentina from May 1995 to August 1998.
Prior to joining IMPSAT, 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 president of Eveready Argentina from 1992 to
1995, in which position Mr. Carchak had responsibility for Eveready's operations
in Argentina, Paraguay and Chile.
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<PAGE> 34
Alejandro Suarez del Cerro has been our Vice President, Internet since
March 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 1996. Mr.
Suarez del Cerro was President of IMPSAT Brazil from 1996 to 1997.
Jaime Vinocur has been our Vice President, Project Execution since September
1998. Previously, Mr. Vinocur held several managerial positions, including
Senior Project Manager, at Techint, a leading Argentine construction company.
During his 26 year tenure at Techint, Mr. Vinocur acquired extensive experience
in the deployment of infrastructure for utility and telecommunications
companies.
Rodolfo Arroyo has been our Chief Information Officer since February 2000.
Before that, Mr. Arroyo was President of IMPSAT Ecuador since 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.
Marcelo Girotti has been President of IMPSAT Argentina since August 1998.
Mr. Girotti joined IMPSAT Argentina in 1992 where he has held several managerial
positions, including Business Manager of the Interior Unit from 1992 to 1996,
Manager of Special Accounts from 1996 to 1997 and Business Manager of the
value-added unit from 1997 to 1998.
Mariano Torre Gomez has been President of IMPSAT Colombia since July 1999.
Mr. Torre was President of IMPSAT Venezuela from April 1997 to July 1999. Mr.
Torre was President of IMPSAT Ecuador for two years prior to his transfer to
IMPSAT Venezuela. Before that, Mr. Torre served four years at IMPSAT Argentina
in the commercial and new licenses departments. 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.
Mauricio Ceballos has been President of IMPSAT Venezuela since July 1999.
Mr. Ceballos was Vice President of administration and finance of IMPSAT
Venezuela from 1997 to July 1999. Before joining IMPSAT in 1997, Mr. Ceballos
worked as Director of Planning and Marketing at Fiduciaria Bolsa de Medellin
S.A., a trust company, from 1991 to 1993 and as Vice President of International
and Special Business at Fiduciaria Suramericana y BIC S.A., another trust
company, from 1993 to 1997.
Heliodoro Londono has been President of IMPSAT Mexico since November 1998.
Mr. Londono held several managerial positions at IMPSAT Colombia commencing in
1992, including Business Manager of the Financial Sector Unit, and Manager of
Special Accounts.
Norberto D. Musante has been President of IMPSAT Ecuador since February
2000 after joining IMPSAT Ecuador as Operational General Manager in July 1997.
From February 1990 until July 1997, Mr Musante was employed in several different
capacities at IMPSAT Argentina including Operational Manager from 1994 until
1995 and Vice President, Operations from 1995 until 1997.
Mauricio Gabriel Klau has been President of IMPSAT USA since November 1998.
Mr. Klau was president of IMPSAT Mexico from June 1997 to November 1998. Mr.
Klau has also held several positions within IMPSAT Argentina and IMPSAT Mexico
since he first joined the company in 1990.
Daniel V. Hourquescos has been President of IMPSAT Brazil since March 1997.
Mr. Hourquescos joined IMPSAT in 1990 and has held several positions, including
General Manager of IMPSAT Argentina from March 1993 to April 1995.
Pedro O. 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,
Mercantil Andina S.A., CORIM and IMPSA. Mr. Mayol, who is a brother-in- law of
Enrique Pescarmona, is an architect.
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<PAGE> 35
COMMITTEES OF THE BOARD OF DIRECTORS
In January 2000, we established a compensation committee and an audit
committee. The compensation committee, composed of a majority of non-employee
directors, will establish salaries, incentives and other forms of compensation
for our directors and officers and recommend policies relating to our benefit
and stock option plans. The compensation committee is currently constituted by
Mr. Enrique Pescarmona, Mr. Stephen Munger and Mr. John McElligott. The audit
committee, composed of non-employee directors, oversees the engagement of our
independent auditors and, together with our independent auditors, will review
our accounting practices, internal accounting controls and financial results.
The audit committee is currently constituted by Mr. Geoffrey Almeida, Mr.
Stephen Munger and Mr. Jeronimo Bosch.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Board members do not receive any cash fees for their service on the Board
or any Board committee, but they are entitled to reimbursement of all reasonable
out-of-pocket expenses incurred in connection with their attendance at Board and
Board committee meetings.
SUMMARY COMPENSATION TABLE
The following tables set forth the compensation paid or accrued to the
chief executive officer and the four most highly compensated other executive
officers receiving over $100,000 per year for services rendered of each of the
Company and IMPSAT Argentina during 1999 (we refer to these individuals as the
named executive officers).
<TABLE>
<CAPTION>
NAME AND
PRINCIPAL POSITION ANNUAL COMPENSATION
------------------ ------------------------------------------------------------------------
SECURITIES
UNDERLYING OTHER ANNUAL
OUR COMPANY YEAR SALARY BONUS(1) OPTIONS COMPENSATION
----------- ---- ------ -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Enrique M. Pescarmona................................ 1999 353,745 $240,000 47,362 --
Chairman of the Board
Ricardo A. Verdaguer................................. 1999 449,800 300,000 47,362 --
President and Chief Executive Officer
Roberto Vivo......................................... 1999 360,100 240,000 37,890 --
Director, Deputy Chief Executive Officer and Vice
President, Marketing
Hector Alonso........................................ 1999 260,000 150,000 27,470 --
Chief Operating Officer
Daniel Hourquescos................................... 1999 242,291 74,100 15,156 $71,954(2)
President of IMPSAT Brazil
IMPSAT ARGENTINA
----------------
Marcelo Girotti...................................... 1999 189,000 42,500 -- --
President
</TABLE>
- ------------------------
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<PAGE> 36
(1) Amounts in this column represent bonuses paid to the named executive
officers in December 1999. This amounts relates to our 1998 operating results.
(2) Annual housing allowance.
The following table shows information regarding grants of options to
purchase our common stock made by us during 1999 to each of the executive
officers named in the summary compensation table above. We granted no stock
appreciation rights during 1999. No stock options were exercised by the
executive officers named in the summary compensation table above during 1999.
STOCK OPTION GRANTS
We computed potential realizable values by first multiplying the number of
shares of common stock subject to a given option by the option exercise price to
determine the initial aggregate stock value. We then assumed that the initial
aggregate stock value compounds at an annual 5% or 10% rate shown in the table
for the entire ten-year term of the option to determine the final aggregate
stock value. Finally, we subtracted from the final aggregate stock value the
initial aggregate stock value to determine the potential realizable value. The
5% and 10% assumed annual rates of stock appreciation are mandated by the rules
of the SEC and do not reflect our estimate or projection of future stock price
growth. Actual gains, if any, on stock option exercises depend upon the actual
future price of common stock and the continued employment of the option holders
throughout the vesting period. Accordingly, the potential realizable values
listed in this table may not be achieved.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED FOR OPTION TERM
UNDERLYING TO EXERCISE ---------------------
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(1) IN 1999 ($/SHARE) DATE(2) (5%) (10%)
- ----------------------------- ---------------- ------------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Enrique M. Pescarmona........ 47,362 12.0% $10.47 6/25/07 $ 238,022 $ 565,303
Ricardo A. Verdaguer......... 47,362 12.0 10.47 6/25/07 238,022 565,303
Roberto Vivo................. 37,890 9.6 10.47 6/25/07 190,420 452,247
Hector Alonso................ 27,470 7.0 10.47 6/25/07 138,053 327,876
Daniel Hourquescos........... 15,156 3.9 10.47 6/25/07 76,168 180,899
</TABLE>
- ----------
(1) Options granted in 1999 vest as to 10% on the first anniversary of the date
of grant and as to an additional 30% on each anniversary thereafter. All
options expire on December 31, 2007, unless sooner terminated under the
terms of the stock option plan.
(2) Subject to earlier expiration, upon the occurrence of certain events, as
provided in the stock option plan.
AGGREGATE OPTION EXERCISES DURING 1999 AND OPTION VALUES ON DECEMBER 31, 1999
We have not included information on option exercises in 1999 by the
executive officers named in the summary compensation table above or the value of
those officers' unexercised options as of December 31, 1999, because there was
no public market for our common stock in 1999.
STOCK OPTION PLANS
1998 Stock Option Plan. On December 21, 1998, IMPSAT's board of directors
and stockholders adopted the 1998 stock option plan, which provides for the
grant to our officers, key employees, consultants, advisors, directors or
affiliates
36
<PAGE> 37
of "incentive stock options" within the meaning of Section 422 of the U.S.
Internal Revenue Code of 1986, as amended, stock options that are non-qualified
for U.S. federal income tax purposes and stock appreciation rights. A copy of
the 1998 stock option plan is included as Exhibit 10.1 to our 1998 Annual Report
on Form 10-K filed with the SEC. The total number of shares of our common stock
for which options may be granted pursuant to the 1998 stock option plan is
4,776,016, subject to certain adjustments reflecting changes in our
capitalization. The 1998 stock option plan is currently administered by our
compensation committee. The compensation committee determines, among other
things, which of our officers, employees, consultants, advisors, affiliates and
directors will receive options under the plan, the time when options will be
granted, and the type of option (incentive stock options or non-qualified stock
options, or both) to be granted. Options granted under the 1998 stock option
plan are on such terms, including the number of shares subject to each option,
the time or times when the options will become exercisable, and the option price
and duration of the options, as determined by the compensation committee.
The exercise price of incentive and non-qualified stock options is
determined by the compensation committee, but may not be less than the fair
market value of the common stock on the date of grant and the term of any such
option may not exceed ten years from the date of grant.
Payment of the option price must be made by cash or, in the sole discretion
of the compensation committee, by promissory note, tender of shares of the
common stock then owned by the optionee or, subject to certain conditions, the
surrender to us of an exercisable option to purchase shares of common stock
under the 1998 stock option plan. Payment of the option price may also be made
by delivery to us, on a form prescribed by the compensation committee, of a
properly executed exercise notice and irrevocable instructions to a registered
securities broker approved by the compensation committee to sell the shares of
common stock held by the optionee and promptly deliver cash to us. Options
granted pursuant to the 1998 stock option plan are not transferable, except by
will or the laws of descent and distribution in the event of death. During an
optionee's lifetime, the option is exercisable only by the optionee or, in case
of disability, by the optionee's legal representative.
Pursuant to the terms of our stock options, if a change in control of our
company occurs, all outstanding stock options become vested and fully
exercisable.
Our board of directors has the right at any time and from time to time to
amend or modify the stock option plan, without the consent of our stockholders
(unless otherwise required by law) or optionees; provided, that no such action
may adversely affect options previously granted without the optionee's consent.
The expiration date of the 1998 stock option plan, after which no option may be
granted thereunder, is October 1, 2008.
1999 Stock Option Plan. On January 5, 2000, IMPSAT's board of directors
adopted the 1999 stock option plan, which provides for the grants to our key
officers and employees of stock options that are non-qualified for U.S. federal
income tax purposes. A copy of the 1999 stock option plan is filed as an exhibit
to the registration statement relating to the initial public offering of our
common stock. The terms of the 1999 stock option plan are otherwise identical to
those of the 1998 stock option plan except that:
- The total number of shares of our common stock for which options may
be and were granted pursuant to the stock option plan is 355,214
- The exercise price is $1.69 per share of common stock
- Ten percent, twenty percent, thirty percent and forty percent of the
options granted vest on the fourth, fifth, sixth and seventh
anniversaries, respectively, of the date of grant or upon a change of
control of our company
- The expiration date of the 1999 stock option plan is January 5, 2010
38
<PAGE> 38
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Stephen Munger, who is a member of our board of directors and a member
of our compensation committee and our audit committee, is the Co-Chairman of the
Investment Committee of Princes Gate Investors II L.P. Princes Gate is an
affiliate of Morgan Stanley & Co. Incorporated, the Placement Agent in this
offering. In 1999, we paid commissions of $4.0 million to Morgan Stanley in
connection with our private placement of shares of our common stock to Nunsgate
Limited. Princes Gate and certain other affiliates of Morgan Stanley Dean Witter
(whom we refer to as the Morgan Stanley investors) own 14,917,915 shares of our
common stock.
Mr. Roberto Vivo, who is our Deputy Chief Executive Officer, is a member of
the compensation committee of the board of directors of El Sitio. We own an
approximately 15.3% equity interest in El Sitio.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Our company was privately held until January 31, 2000. Our compensation
committee, which is comprised of Mr. Enrique Pescarmona, Mr. Stephen Munger and
Mr. John McElligott, was not established until January, 2000, shortly before we
became a public corporation. Accordingly, no report of our compensation
committee on executive compensation was prepared for 1999 or is included in this
Report.
PERFORMANCE GRAPH
We have not included a stock price performance graph in this
document since there was no public market for our common stock during 1999.
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 Fiber Networks, Inc.'s
capital stock and IMPSAT Argentina's common stock as of March 15, 2000 by (i)
each person who owned of record, or was known to own beneficially, more than
five percent of any class of IMPSAT Fiber Networks, Inc.'s capital stock or
IMPSAT Argentina's common stock, (ii) each director, (iii) each named executive
officer and (iv) all directors and executive officers as a group. Except as
otherwise indicated, each person listed in the table has informed us 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>
SHARES BENEFICIALLY
OWNED
-----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- --------------------------------------------------------------------------- ---------- -------
<S> <C> <C>
IMPSAT FIBER NETWORKS, INC. COMMON STOCK
Beneficial Owners of more than 5%
Nevasa Holdings Ltd.(1) ................................................... 42,366,878 46.3%
Princes Gate Investors II, L.P.(2) ........................................ 11,934,332 13.1
Morgan Stanley Global Emerging Markets Private Investment Fund, L.P.(3) .. 2,983,583 3.3
Nunsgate Limited(4) ....................................................... 17,571,198 19.2
Suramericana Group(5) ..................................................... 4,624,714 5.1
Directors and Executive Officers(1)
Enrique M. Pescarmona(1)(6) ............................................... 42,378,598 46.4
Ricardo A. Verdaguer(1)(7) ................................................ 11,720 *
</TABLE>
39
<PAGE> 39
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
-----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- --------------------------------------------------------------------------- ---------- -------
<S> <C> <C>
Roberto A. Vivo(1)(8) ..................................................... 10,536 *
Alexander Rivelis(1)(9) ................................................... 93,073 *
Sofia Pescarmona .......................................................... 700 *
Geoffrey Almeida(4) ....................................................... 1,200 *
John McElligott(4) ........................................................ 1,200 *
Hector Alonso(10) ......................................................... 7,534 *
Daniel Hourquescos(11) .................................................... 3,494 *
All Directors and Officers as a Group
(25 persons)(1) ......................................................... 42,558,086 46.6
IMPSAT ARGENTINA COMMON STOCK
Beneficial Owners of more than 5%
IMPSAT Fiber Networks, Inc. ............................................... 14,755 100%
Directors and Executive Officers .......................................... 0 0
All Directors and Officers as a Group
(7 persons) ............................................................. 0 0
</TABLE>
- --------------------------------------
(*) Less than 1%
(1) Nevasa Holdings is owned by CORIM, Militello Ltd. and Rotling International
Corporation. The business address of Nevasa Holdings is Vanderpool Plaza,
Wickham Cay I, Road Town, Tortola, British Virgin Islands.
- - CORIM, an Argentine corporation that holds an 82.5% equity interest in
Nevasa Holdings through its wholly owned British Virgin Island
subsidiary, Telecommunication Worldwide Inc., is controlled by Mr.
Enrique Pescarmona, the Chairman of our board of directors, and other
members of the Pescarmona family. CORIM 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 and environmental services.
- - Militello Ltd., a British Virgin Islands corporation, holds an 11.6%
equity interest in Nevasa Holdings and is controlled by Mr. Roberto
Vivo, our Deputy Chief Executive Officer.
- - Rotling International Corporation, a British Virgin Islands
corporation, holds a 5.8% equity interest in Nevasa Holdings and is
controlled by Mr. Ricardo Verdaguer, our President and Chief Executive
Officer.
The business address of each of our executive officers and directors is c/o
IMPSAT Fiber Networks, Inc., Alferez Pareja 256 (1107), Buenos Aires,
Argentina, unless otherwise noted herein.
(2) These are shares of common stock owned by Princes Gate and affiliates of
Princes Gate over which Princes Gate has sole voting power. The business
address of Princes Gate is Princes Gate Investors II, L.P., 1585 Broadway,
36th Floor, New York, NY 10036. Mr. Stephen Munger, who is the Co-Chairman
of the Investment Committee of Princes Gate and a member of our board of
directors, disclaims voting or dispositive power over the shares of our
common stock owned by Princes Gate and its affiliates.
(3) These are shares of common stock owned by MSGEM and Morgan Stanley Global
Emerging Markets Private Investors, L.P. over which MSGEM has sole voting
power. The business address of each of these persons is c/o Morgan Stanley
Global Emerging Markets Private Investment Fund, L.P., 1221 Avenue of the
Americas, 33rd Floor, New York, NY 10020. Mr. Jeronimo Bosch, who is an
associate at Morgan Stanley Dean Witter Private Equity and a member of our
board of directors, disclaims voting or dispositive power over the shares
of our common stock owned by MSGEM.
(4) The business address of Nunsgate Limited is Queen Victoria Street, Queen
Victoria House, Douglas Im12lS, Isle of Man. Mr. John McElligott and Mr.
Geoffrey Almeida, each of whom is an officer of British Telecommunications
and a designee of
40
<PAGE> 40
Nunsgate Limited to our board of directors, disclaim voting or dispositive
power over the shares of our common stock owned by Nunsgate Limited.
(5) The Suramericana Group includes Portafolio de Inversiones Suramericana,
Compania Suramericana de Inversiones Inmobiliarias y Avaluos, Suramericana
de Inversiones and Compania Suramericana de Construcciones, the investment
and construction arms of the Sindicato Antioqueno, which was formed in
Medellin, Colombia in the mid-1970s, and is a group of over 100 companies
related through cross-ownerships and interlocking directorates. The
business address of the Suramericana Group is Carrera 64B # 49A30,
Medellin, Colombia.
(6) Includes 42,366,878 shares of common stock owned by Nevasa Holdings, of
which Mr. Pescarmona may be deemed to be the beneficial owner because he
controls CORIM, which owns 82.5% of the voting stock of Nevasa Holdings and
5,920 shares of common stock issuable under options that are presently
exercisable.
(7) Includes 5,920 shares of common stock issuable under options that are
presently exercisable.
(8) Includes 4,736 shares of common stock issuable under options that are
presently exercisable.
(9) Includes 1,894 shares of common stock issuable under options that are
presently exercisable.
(10) Includes 3,434 shares of common stock issuable under options that are
presently exercisable.
(11) Includes 1,894 shares of common stock issuable under options that are
presently exercisable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OVERVIEW
In the normal course of business, we provide private telecommunications
network services to companies in which the following persons have an interest:
- Corporacion IMPSA S.A. (CORIM), a corporation for which Mr. Enrique
Pescarmona serves as the Chairman of the board of directors
- members of the Pescarmona family (including Mr. Enrique Pescarmona,
Mr. Lucas Pescarmona and Ms. Sofia Pescarmona, members of our board of
directors)
- El Sitio, a corporation in which
- we have an approximately 15.3% equity interest
- affiliates of Mr. Roberto Vivo and Mr. Ricardo Verdaguer have
equity interests
- Mr. Roberto Vivo is Chairman of the board of directors and a
member of its compensation committee
- Mr. Ricardo Verdaguer and Ms. Sofia Pescarmona are directors
- affiliates of the Suramericana Group
Total telecommunications services provided by us during 1999 to:
41
<PAGE> 41
- companies in which CORIM or members of the Pescarmona family have an
interest totaled approximately $1.0 million
- El Sitio subsidiaries totaled approximately $281,000
- companies affiliated with the Suramericana Group totaled approximately
$9.7 million
The following is a description of our most significant transactions with
entities affiliated with CORIM, the Suramericana Group and El Sitio during 1999.
Although we believe that transactions with our affiliates are generally
conducted on an arm's length basis, conflicts of interest are inherent in these
transactions.
CORIM
Our company provides telecommunications services to:
- IMPSA, a company controlled by CORIM. IMPSA produces heavy steel
capital goods, including hydromechanical equipment and cranes and
engages in other businesses including auto parts manufacturing and
general environmental services. Telecommunications services provided
to IMPSA during 1999 totaled approximately $315,000. During the same
period, IMPSA provided services to IMPSAT Argentina totaling
approximately $56,000.
- TCA, a company controlled by CORIM and IMPSA. TCA produces wire
harnesses for automobile electrical systems and coil springs for
automobile suspension systems in Argentina and Brazil.
Telecommunications services provided to TCA during 1999 totaled
approximately $69,000.
- Mercantil Andina S.A., an insurance company owned by CORIM and members
of the Pescarmona family. Telecommunications services provided to
Mercantil Andina S.A. during 1999 totaled approximately $453,000. In
addition, Mercantil Andina acts from time to time as an insurance
broker and an insurer for IMPSAT Argentina. IMPSAT Argentina paid
premiums to Mercantil Andina totaling approximately $338,000.
- Puerto Seco, S.A., 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.
Telecommunications services provided to Puerto Seco during 1999
equaled $69,000.
- Lagarde S.A., a company owned by members of the Pescarmona family that
owns and operates a winery in the Mendoza area of Argentina.
Telecommunications services provided to Lagarde S.A. for 1999 equaled
$45,000. In addition, Lagarde S.A. provided wine products to IMPSAT
Argentina totaling approximately $115,000 during 1999.
SURAMERICANA GROUP
Representatives of the Suramericana Group serve as directors of IMPSAT
Colombia and IMPSAT Venezuela. During 1999, the total dollar amount of
telecommunications services rendered to the Suramericana Group totaled
approximately $9.7 million, the most significant of which were as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Suramericana de Seguros (insurance) ........ $ 555,000
Corporacion Financiera Nacional y
Suramericana S.A. (Corfinsura) (finance) ... 188,000
</TABLE>
42
<PAGE> 42
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Susalud (health services) .................. 82,000
Sufinanciamiento (finance) ................. 171,000
Proteccion (pension fund) .................. 332,000
Suleasing (finance) ........................ 89,000
Corporacion Nacional de Ahorro y
Vivienda (finance) ......................... 4,057,000
Suvalor (insurance) ........................ 124,000
Industrias Noel (food products) ............ 423,000
Acerias Paz del Rio (steel works) .......... 102,000
Almacenes Exito (food products) ............ 162,000
BanColombia (finance) ...................... 2,359,000
</TABLE>
During 1999, IMPSAT Venezuela provided telecommunications services to
Cadena de Tiendas Venezolanas S.A., which totaled approximately $827,000.
Corfinsura and BanColombia are creditors of IMPSAT Colombia. As of December
31, 1999, IMPSAT Colombia was indebted to Corfinsura in the amount of
approximately $7.0 million and to BanColombia in the amount of approximately
$2.8 million. The total interest paid for 1999 was approximately $12.1 million.
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 $409,000 in 1999.
Certain other companies within the Suramericana Group, including Suleasing,
provide financial leasing services to IMPSAT Colombia. Our total indebtedness to
Suleasing as of December 31, 1999 was approximately $8.4 million and the total
interest paid in 1999 was approximately $632,000.
Other payments made by IMPSAT Colombia to companies of Suramericana Group
in 1999 included: payments of approximately $352,000 to Proteccion for pension
fund services; total payments to Susalud of approximately $128,000 for health
benefit services, and payments of approximately $298,000 to Sodexho Pass for
employee luncheon services.
EL SITIO
We provide telecommunications services to El Sitio, Inc. During 1999, the
total value of telecommunications services we rendered to El Sitio was
approximately $281,000. During the same period, El Sitio charged us $164,928 for
advertising services on their Web pages.
On August 4, 1999, we entered into an agreement with El Sitio for the sale
of our retail Internet businesses in Argentina, Brazil and Colombia for
approximately $21.5 million and our purchase of shares of El Sitio's 8%
convertible redeemable preferred stock for $21.5 million. In connection with
these transactions, El Sitio has entered into telecommunications services
agreements under which our subsidiaries will provide El Sitio with
telecommunication networks to access the Internet backbone. El Sitio, a British
Virgin Islands corporation, is an Internet content and Internet service provider
headquartered in Argentina that has operations in Brazil, Mexico, Uruguay and
the United States. The Brazil transaction contemplated by the El Sitio Framework
Agreement was consummated on October 6, 1999 and the Argentina transaction was
concluded on November 5, 1999. We anticipate that the Colombia transaction will
close during April 2000. Upon the consummation of El Sitio's initial public
offering in December 1999, our shares of El Sitio's preferred stock were
automatically converted into 15.4% of El Sitio's common stock.
43
<PAGE> 43
MORGAN STANLEY INVESTORS
Series A Preferred Stock Issuance. Pursuant to a series of transactions, on
March 19, 1998, we issued and sold $125 million of our preferred stock to the
Morgan Stanley investors.
The Morgan Stanley investors exercised their rights to convert 19,848
shares of our preferred stock into 14,917,915 shares of our common stock upon
the closing of our initial public offering on February 4, 2000. No shares of our
preferred stock are outstanding. Some of the principal rights the Morgan Stanley
investors retain as holders of our common stock include the right to:
- request that we sell their shares of our common stock in a public
offering registered under the Securities Act, subject to certain
conditions
- include the common stock held by the Morgan Stanley investors in a
public offering by us registered under the Securities Act, subject to
certain conditions
We paid commissions to Morgan Stanley of $4.0 million in 1999 in connection
with the private placement of shares of our common stock to Nunsgate Limited.
See "-- British Telecommunications."
BRITISH TELECOMMUNICATIONS
On March 11, 1999, a share purchase agreement and related agreements were
entered into among IMPSAT, Nevasa Holdings and Nunsgate Limited, a wholly owned
subsidiary of British Telecommunications. Pursuant to the share purchase
agreement, we agreed to issue 11,934,332 newly issued shares of our common stock
to Nunsgate Limited for $125 million, and Nevasa Holdings agreed to sell
2,386,867 shares of our common stock to Nunsgate Limited for $25 million. These
transactions were consummated on April 19, 1999. On February 4, 2000, Nunsgate
Limited purchased from us an additional 2,850,000 shares of our common stock in
a private placement to maintain its approximate ownership share in us after our
initial public offering.
We are a party to a shareholders agreement with Nevasa Holdings and
Nunsgate Limited dated as of March 10, 1999, a copy of which has been filed as
an exhibit to the registration statement relating to the initial public offering
of our common stock. Pursuant to the terms of this shareholders agreement, as
long as Nunsgate Limited owns 15% of our outstanding common stock (as determined
on a fully-diluted basis) and subject to certain conditions, Nunsgate Limited
has the right to nominate two members of our board of directors. Nevasa Holdings
has agreed to vote for the two Nunsgate Limited nominees to our board of
directors so long as Nunsgate Limited owns 15% of our outstanding common stock.
As long as Nunsgate Limited owns 10% of our outstanding common stock (as
determined on a fully-diluted basis) and subject to certain conditions, Nunsgate
Limited has the right to:
- consult with management on matters relating to us
- inspect our books and records
- inspect our properties and operations
As long as Nunsgate Limited owns 5% of our outstanding common stock (as
determined on a fully-diluted basis), Nunsgate Limited has the right to:
44
<PAGE> 44
- request that we sell shares of common stock in a public offering
registered under the Securities Act, subject to certain conditions
- include common stock held by Nunsgate Limited in a public offering of
our common stock registered under the Securities Act, subject to
certain conditions
- nominate one member to our board of directors and to have Nevasa
Holdings vote for that nominee
Nunsgate Limited has agreed to vote for Nevasa Holdings' nominees to our
board of directors for so long as Nevasa Holdings is obligated to vote for
Nunsgate Limited's nominees to our board of directors.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) LIST OF FINANCIAL STATEMENTS
Consolidated Financial Statements of IMPSAT Fiber Networks, Inc. and
Subsidiaries
- Consolidated Balance Sheets as of December 31, 1999 and 1998
- Consolidated Statements of Operations and Comprehensive Loss for Each
of the Three Years in the Period Ended December 31, 1999
- Consolidated Statements of Stockholders' (Deficit) Equity for Each of
the Three Years in the Period Ended December 31, 1999
- Consolidated Statements of Cash Flows for Each of the Three Years in
the Period Ended December 31, 1999
Consolidated Financial Statements of IMPSAT S.A. and Subsidiaries
- Balance Sheets as of December 31, 1999 and 1998
- Statements of Income for Each of the Two Years in the Period Ended
December 31, 1999, the One Month Period Ended December 31, 1997, and
the Year Ended November 30, 1997
- Statements of Stockholders' Equity for Each of the Two Years in the
Period Ended December 31, 1999, the Year Ended December 31, 1997
(Period of One Month), and the Year Ended November 30, 1997
- Statements of Cash Flows for Each of the Two Years in the Period Ended
December 31, 1999, the One Month Period Ended December 31, 1997, and
the Year 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.
(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.
On March 15, 1999, a current report on Form 8-K was filed by the
registrants to disclose the public announcement on March 11, 1999 that IMPSAT
had entered into an agreement with British Telecommunications plc ("BT")
pursuant to which BT would acquire a 20% stake in IMPSAT.
45
<PAGE> 45
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, March 30, 1999.
IMPSAT Fiber Networks, Inc.
By: /s/ Ricardo A. Verdaguer
------------------------
Ricardo A. Verdaguer,
President and Chief
Executive Officer
Date: March 30, 2000
IMPSAT S.A.
By: /s/ Marcelo Girotti
-------------------
Marcelo Girotti
President
Date: March 30, 2000
46
<PAGE> 46
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 and Mauricio Gabriel Klau (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
Fiber Networks, Inc. March 30, 2000
/s/ Ricardo A. Verdagaer Director, President and Chief Executive Officer of
IMPSAT Fiber Networks, Inc. March 30, 2000
/s/ Guillermo Jofre Chief Financial Officer of IMPSAT Fiber
Networks, Inc. March 30, 2000
/s/ Jose R. Torres Vice President, Administration and Chief
Accounting Officer of IMPSAT Fiber Networks, Inc. March 30, 2000
/s/ Roberto Vivo Director and Deputy Chief Executive Officer of
IMPSAT Fiber Networks, Inc. March 30, 2000
/s/ Alexander Rivelis Director and Vice President, Carrier's Carrier of
IMPSAT Fiber Networks, Inc. March 30, 2000
/s/ Lucas Pescarmona Director of IMPSAT Fiber Networks, Inc. March 30, 2000
Sofia Pescarmona Director of IMPSAT Fiber Networks, Inc. March 30, 2000
/s/ Stephen R. Munger Director of IMPSAT Fiber Networks, Inc. March 30, 2000
/s/ Jeronimo Bosch Director of IMPSAT Fiber Networks, Inc. March 30, 2000
Geoffrey Almeida Director of IMPSAT Fiber Networks, Inc. March 30, 2000
John McElligott Director of IMPSAT Fiber Networks, Inc. March 30, 2000
/s/ Mauricio Gabriel Klau Attorney-in-Fact March 30, 2000
</TABLE>
47
<PAGE> 47
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 Mauricio Gabriel Klau (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 Directors of IMPSAT
Argentina March 30, 2000
/s/ Enrique M. Pescarmona Director of IMPSAT Argentina March 30, 2000
/s/ Roberto Vivo Director of IMPSAT Argentina March 30, 2000
/s/ Pedro Mayol Director of IMPSAT Argentina March 30, 2000
/s/ Marcelo Girotti Director of IMPSAT Argentina March 30, 2000
/s/ Jose R. Torres Director of IMPSAT Argentina (principal financial officer) March 30, 2000
/s/ Jorge I. Marine Manager, Administration of IMPSAT Argentina
(principal accounting officer) March 30, 2000
/s/ Mauricio Gabriel Klau Attorney-in-Fact March 30, 2000
</TABLE>
48
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- -------------------------------------------------------------------- --------
<S> <C> <C>
4.1 Indenture for the Notes due 2005, dated as of February 16, 2000,
between the Company, The Bank of New York, as Trustee, Registrar and
Paying Agent, and Banque Internationale a Luxembourg S.A., as Paying
Agent and Transfer Agent (including form of Note)
4.2 Registration Rights Agreement, dated February 16, 2000, between the
IMPSAT and Morgan Stanley & Co. Incorporated
10.1 Placement Agreement dated as of February 16, 2000 between IMPSAT and
Morgan Stanley & Co. Incorporated
24.1. Power of Attorney (included on the signature page hereto).
27.1. Financial Data Schedule
</TABLE>
<PAGE> 49
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of IMPSAT Fiber Networks, Inc.:
We have audited the accompanying consolidated balance sheets of IMPSAT Fiber
Networks, Inc. and its subsidiaries (the "Company") as of December 31, 1998 and
1999, and the related consolidated statements of operations, comprehensive
(loss) income, stockholders' equity (deficit) and of cash flows for each of the
three years in the period ended December 31, 1999. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
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
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 the Company at December 31, 1998
and 1999, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States of America.
As discussed in Note 3 to the consolidated financial statements, the Company
changed its method of accounting for license and permit costs in 1998.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
March 17, 2000
- F-1 -
<PAGE> 50
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
--------------------------
1998 1999
--------- ---------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ......................................... $ 90,021 $ 97,507
Trade accounts receivable, net .................................... 46,974 52,176
Other receivables ................................................. 20,110 27,640
Prepaid expenses .................................................. 1,994 1,703
--------- ---------
Total current assets ....................................... 159,099 179,026
--------- ---------
BROADBAND NETWORK, Net.;............................................. 71,868
---------
PROPERTY, PLANT AND EQUIPMENT, Net .................................. 330,726 310,330
--------- ---------
NON-CURRENT ASSETS:
Trade account receivables, net .................................... 5,143
Investments ....................................................... 10,708 235,925
Deferred financing costs, net ..................................... 10,329 8,985
Other non-current assets .......................................... 11,213 22,198
--------- ---------
Total non-current assets ................................... 37,393 267,108
--------- ---------
TOTAL ............................................................... $ 527,218 $ 828,332
========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade ......................................... $ 32,416 $ 53,678
Broadband network vendor financing ................................ 46,219
Short-term debt ................................................... 19,262 15,670
Current portion of long-term debt ................................. 21,138 23,007
Accrued liabilities ............................................... 12,628 11,425
Deferred income taxes, net ........................................ 120 51,870
Customer advances on broadband network ............................ -- 23,200
Other liabilities ................................................. 12,346 18,081
--------- ---------
Total current liabilities .................................. 97,910 243,150
--------- ---------
LONG-TERM DEBT, Net ................................................. 379,292 399,415
--------- ---------
OTHER LONG-TERM LIABILITIES ......................................... 3,446 16,406
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 15)
MINORITY INTEREST ................................................... 13,071 4,985
--------- ---------
REDEEMABLE PREFERRED STOCK, Convertible, Series A, 10%,
cumulative dividend; 25,000 shares authorized, issued and
outstanding; liquidation preference $5,961 per share .............. 135,018 149,035
--------- ---------
STOCKHOLDERS' (DEFICIT) EQUITY:
Common Stock $0.01 par value; 103,836,800 shares
authorized, 59,671,661 shares issued and
outstanding at December 31, 1998,
and 71,605,993 shares issued and outstanding at December 31, 1999 597 716
Additional paid in capital ........................................ 100,196 221,013
Accumulated deficit ............................................... (71,391) (202,934)
Treasury stock, 14,917,915 shares, at cost ........................ (125,000) (125,000)
Amount paid in excess of carrying value of assets acquired
from related party .............................................. (5,395) (4,827)
Accumulated other comprehensive (loss) income ..................... (526) 126,373
--------- ---------
Total stockholders' (deficit) equity ....................... (101,519) 15,341
--------- ---------
TOTAL ............................................................... $ 527,218 $ 828,332
========= =========
</TABLE>
See notes to consolidated financial statements.
-F-2-
<PAGE> 51
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR LOSS PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1997 1998 1999
--------- --------- ---------
NET REVENUES FROM SERVICES:
<S> <C> <C> <C>
Network services ........................ $ 134,872 $ 162,616 $ 172,478
Internet ................................ 7,699 20,586 26,639
Other ................................... 18,494 24,887 29,334
--------- --------- ---------
Total net revenues from services.. 161,065 208,089 228,451
--------- --------- ---------
COSTS AND EXPENSES:
Direct costs:
Contracted services .............. 16,774 20,466 26,769
Other direct costs ............... 12,541 14,619 28,322
Leased capacity .................. 19,230 28,660 44,750
Cost of sold equipment ........... 3,137 3,665 5,187
--------- --------- ---------
Total direct costs ........ 51,682 67,410 105,028
--------- --------- ---------
Salaries and wages ...................... 29,109 38,198 46,174
Selling, general and administrative ..... 28,237 38,665 43,364
Depreciation and amortization ........... 28,673 36,946 130,071
--------- --------- ---------
Total costs and expenses ........ 137,701 181,219 324,637
--------- --------- ---------
Operating income (loss) ................... 23,364 26,870 (96,186)
--------- --------- ---------
OTHER INCOME (EXPENSES):
Interest expense, net ................... (24,272) (44,698) (55,561)
Net (loss) gain on foreign exchange ..... (276) 675 (8,042)
Other (expense) income, net ............. (151) 760 15,305
--------- --------- ---------
Total other expense .............. (24,699) (43,263) (48,298)
--------- --------- ---------
LOSS BEFORE INCOME TAXES, CUMULATIVE EFFECT
AND MINORITY INTEREST ................... (1,335) (16,393) (144,484)
(PROVISION FOR) BENEFIT FROM INCOME TAXES.. (5,263) (3,805) 20,733
--------- --------- ---------
LOSS BEFORE CUMULATIVE EFFECT AND MINORITY
INTEREST ................................ (6,598) (20,198) (123,751)
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX ................... -- (1,269) --
(INCOME) LOSS ATTRIBUTABLE TO MINORITY
INTEREST ................................ (993) (2,502) 6,225
--------- --------- ---------
NET LOSS BEFORE DIVIDENDS ON REDEEMABLE
PREFERRED STOCK ......................... (7,591) (23,969) (117,526)
DIVIDENDS ON REDEEMABLE PREFERRED STOCK ... -- (10,018) (14,017)
--------- --------- ---------
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS ............................ $ (7,591) $ (33,987) $(131,543)
========= ========= =========
NET LOSS PER COMMON SHARE:
BASIC AND DILUTED ....................... $ (0.14) $ (0.71) $ (2.31)
========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
BASIC AND DILUTED ....................... 53,594 47,983 54,447
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
-F-3-
<PAGE> 52
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS ................................... $ (7,591) $ (33,987) $(131,543)
OTHER COMPREHENSIVE LOSS, net of tax:
Foreign currency translation adjustment ........ -- (526) (1,724)
Unrealized gain on available for sale investment -- -- 128,623
--------- --------- ---------
TOTAL ............................................ -- (526) 126,899
--------- --------- ---------
COMPREHENSIVE (LOSS) INCOME ...................... $ (7,591) $ (34,513) $ (4,644)
========= ========= =========
</TABLE>
See notes to consolidated financial statements
-F-4-
<PAGE> 53
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------------------ PAID IN ACCUMULATED
SHARES STOCK CAPITAL DEFICIT(*)
----------- ------------ ------- ----------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996...................... 46,030,457 $ 461 $ 77,290 $ (29,813)
IMPSAT Argentina exchange (43.5%) 13,641,204 136 22,906
Net loss for the year........................... (7,591)
----------- ---------- -------------- --------------
BALANCE AT DECEMBER 31, 1997...................... 59,671,661 597 100,196 (37,404)
Acquisition of treasury stock................... (14,917,915)
Dividends on redeemable preferred stock......... (10,018)
Amortization of amount paid in excess of
carrying value of net assets acquired
from related party............................
Foreign currency translation
adjustment....................................
Net loss for the year........................... (23,969)
----------- ---------- -------------- --------------
BALANCE AT DECEMBER 31, 1998...................... 44,753,746 597 100,196 (71,391)
Dividends on redeemable preferred
Stock......................................... (14,017)
Common stock issuance........................... 11,934,332 119 120,817
Amortization of amount paid in excess of
carrying value of net assets acquired
from related party............................
Unrealized gain on available for sale
investment
Foreign currency translation
adjustment....................................
Net loss for the year........................... (117,526)
----------- ---------- -------------- --------------
BALANCE AT DECEMBER 31, 1999...................... 56,688,078 $ 716 $ 221,013 $ (202,934)
=========== ========== ============== ==============
</TABLE>
-F-5-
<PAGE> 54
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMOUNT PAID
IN EXCESS OF
CARRYING
VALUE ACCUMULATED
OF NET ASSETS OTHER
TREASURY ACQUIRED FROM COMPREHENSIVE
STOCK RELATED PARTY (LOSS) INCOME TOTAL
----- ------------- ------------- -----
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996.............................. $ 47,938
IMPSAT Argentina exchange (43.5%) 23,042
Net loss for the year................................... (7,591)
-------------
BALANCE AT DECEMBER 31, 1997.............................. 63,389
Acquisition of treasury stock........................... $ (125,000) (125,000)
Acquisition of IMPSAT Brazil (Note 2)................... $ (5,679) (5,679)
Dividends on redeemable preferred stock................. (10,018)
Amortization of amount paid in excess of
carrying value of net assets acquired
from related party.................................... 284 284
Foreign currency translation adjustment................. $ (526) (526)
Net loss for the year................................... (23,969)
--------------- --------------- --------------- -------------
BALANCE AT DECEMBER 31, 1998.............................. (125,000) (5,395) (526) (101,519)
Dividends on redeemable preferred
stock................................................. (14,017)
Common stock issuance................................... 120,936
Amortization of amount paid in excess of
Carrying value of net assets acquired
from related party.................................... 568 568
Unrealized gain on available for sale
investment 128,623 128,623
Foreign currency translation
adjustment............................................ (1,724) (1,724)
Net loss for the year................................... (117,526)
--------------- --------------- --------------- -------------
BALANCE AT DECEMBER 31, 1999.............................. $ (125,000) $ (4,827) $ 126,373 $ 15,341
=============== =============== =============== =============
</TABLE>
- ----------
(*) Includes an appropriation of retained earnings amounting to $1,410,
$1,622 and $1,890 in 1997, 1998 and 1999, respectively, to comply with
legal reserve requirements in Argentina.
-F-6-
<PAGE> 55
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1997 1998 1999
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss ................................................ $ (7,591) $ (23,969) $(117,526)
Adjustments to reconcile net loss to net cash provided by
operating activities, net of acquisition:
Cumulative effect of a change in accounting principle . 1,269
Amortization and depreciation ......................... 28,673 36,946 130,071
Deferred income tax provision (benefit) ............... 4,964 (127) (23,790)
Change in minority interest ........................... 993 2,502 (8,086)
Changes in assets and liabilities:
Increase in trade accounts receivable, net .......... (13,627) (10,128) (5,202)
Decrease in prepaid expenses ........................ 1,671 75 291
Increase in other receivables and other
non-current assets ................................ (4,678) (1,443) (17,679)
Increase in accounts payable -- trade ............... 4,627 4,204 20,212
Increase in customer advances on broadband network .. 23,200
Increase in accrued and other liabilities ........... 1,526 6,979 4,532
Increase (decrease) in other long-term liabilities .. 581 432 (2,174)
--------- --------- ---------
Net cash provided by operating activities ......... 17,139 16,740 3,849
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of broadband network .......................... (11,833)
Purchases of property, plant and equipment .............. (55,028) (107,461) (97,388)
Cash paid in Mandic S.A. acquisition, net ............... (8,485) (3,700)
Cash paid in IMPSAT Brazil merger ....................... (5,679)
Purchases of available for sale investment .............. (21,527)
(Increase) decrease in investment ....................... (3,052) (6,530) 473
--------- --------- ---------
Net cash used in investing activities ............. (58,080) (128,155) (133,975)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments on) borrowings from short-term debt ....... 18,337 (31,358) (3,592)
Capital contribution from minority interest ............. 1,537
Proceeds from long-term debt, net of deferred financing
costs ................................................. 10,483 228,097 46,101
Repayments of long-term debt ............................ (7,872) (5,216) (24,109)
Proceeds from issuance of common stock, net ............. 120,936
Acquisition of treasury stock ........................... (125,000)
Proceeds from issuance of redeemable preferred stock .... 125,000
--------- --------- ---------
Net cash provided by financing activities ......... 22,485 191,523 139,336
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH
EQUIVALENTS ............................................. (526) (1,724)
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ...... (18,456) 79,582 7,486
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ............ 28,895 10,439 90,021
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR .................. $ 10,439 $ 90,021 $ 97,507
========= ========= =========
</TABLE>
(Continued)
-F-7-
<PAGE> 56
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1997 1998 1999
---------------- ------------ ------------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................................ $ 23,442 $ 45,967 $ 63,127
============= =========== ============
Foreign income taxes paid................................................ $ 1,375 $ 1,901 $ 1,751
============= =========== ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Increase in equipment in transit......................................... $ (1,412) $ (2,473) $ (1,050)
============= =========== ============
Common stock issued in exchange for an additional
44% of IMPSAT Argentina................................................ $ 23,043
=============
Accrued dividends on redeemable preferred stock.......................... $ 10,018 $ 14,017
=========== ============
Fair value of net assets acquired in Mandic S.A.
acquisition............................................................ $ 1,794
===========
Rights of way agreements................................................. $ 15,134
============
Unrealized gain on available for sale investment, net of tax............. $ 128,623
============
Broadband network vendor financing....................................... $ 46,219
============
</TABLE>
(Concluded)
See notes to consolidated financial statements.
-F-8-
<PAGE> 57
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS)
1. GENERAL
IMPSAT Fiber Networks, Inc., a Delaware holding company (the "Company"),
is a leading provider of private telecommunications network services in Latin
America. The Company offers tailor-made, integrated telecommunications
solutions, with an emphasis on data transmission, for national and multinational
companies, financial institutions, governmental agencies and other business
customers. In addition, the Company is building an extensive pan-Latin American
high capacity fiber optic network (the "Broadband Network"). The Company expects
that the first phase of the Broadband Network (see Note 6), which will connect
points across Argentina and Brazil, will be completed by December 2000.
The Company currently provides telecommunications and data services
through its advanced fiber optic, satellite and microwave telecommunications
networks. These networks consist of owned teleports, earth stations, fiber optic
and microwave links, and leased satellite and fiber optic links. The Company
operates 12 metropolitan area networks in some of the largest cities in Latin
America, including: Buenos Aires, Sao Paulo, Bogota and Caracas.
The Company was formed in August 1994 for the purpose of combining
operating entities in Argentina, Colombia, and Venezuela, which were previously
controlled by common ownership. The original operating entity was established in
Argentina in 1990 under the name of IMPSAT S.A. ("IMPSAT Argentina").
Thereafter, operating entities were established in Colombia in 1992 ("IMPSAT
Colombia") and in Venezuela in 1993 ("IMPSAT Venezuela"). Other operating
subsidiaries have been created or acquired in Brazil, Chile, Ecuador, Mexico,
Peru, and the United States.
The Company's operating subsidiaries and percentages owned by the
Company after the minority interest transactions described in Note 12 are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Argentina Impsat S.A. 100.0%
Argentina Red Alternativa S.A. 67.0
Brazil Impsat Comunicacoes Ltda. 99.9
Chile Impsat Chile S.A. 100.0
Colombia Impsat S.A. 100.0
Ecuador Impsatel del Ecuador S.A. 100.0
Mexico Impsat S.A. de C.V. 99.9
Peru Impsat S.A. 100.0
USA Impsat USA, Inc. 100.0
Venezuela Telecomunicaciones Impsat S.A. 100.0
</TABLE>
In addition, the Company owns International Satellite Capacity Holdings,
NG (Liechtenstein) and Filcrown International Corporation (BVI), which serve
intermediary functions to the Company and its operating subsidiaries.
2. MERGERS AND ACQUISITIONS
Impsat Brazil - On June 1, 1998, the Company acquired from Nevasa
Holdings Limited ("Nevasa"), the Company's parent, 99.9% of the capital stock of
IMPSAT Comunicacoes Ltda. ("IMPSAT Brazil"), a Brazilian company, for
approximately $5.7 million. The purchase price for IMPSAT Brazil represented the
total amount of pre-operating and development costs and expenses incurred for
IMPSAT Brazil by Nevasa. IMPSAT Brazil was established by Nevasa and operates
under a value added telecommunications license permitting IMPSAT Brazil to lease
satellite capacity directly from EMBRATEL, Brazil's long-distance carrier, and
sell corporate private telecommunications network services (data, voice and
video) using terrestrial and satellite links to third parties. The acquisition,
as is the case for transactions among companies under common control, has been
accounted for in a manner similar to the pooling of interests method of
accounting, whereby all assets and liabilities have been recorded at their
historical carrying amounts and the acquisition was recorded as if the
transaction occurred on January 1, 1998. IMPSAT Brazil did not have material
operations in 1997 as it was in the pre-operating phase.
-F-9-
<PAGE> 58
Amounts paid in excess of carrying value of the underlying net assets acquired
were recorded as a reduction of stockholders' deficit and are being amortized on
a straight-line basis over a period of 10 years.
Mandic S.A. - On April 20, 1998, the Company signed a definitive
agreement to purchase a 75.1% interest in Mandic BBS Planejamento e Informatica
S.A. ("Mandic S.A."), a Brazilian Internet access provider, for approximately
$9.8 million. The initial stage of the acquisition of Mandic S.A., pursuant to
which the Company acquired a 58.5% interest, was consummated on May 29, 1998,
and the remaining 16.6% interest was acquired during November 1998. The
acquisition was accounted for as a purchase. On July 28, 1999, the Company
acquired the remaining 24.9% interest in Mandic S.A. for $3.7 million. The
Company merged Mandic S.A. into Impsat Brazil on October 5, 1999 and Mandic S.A.
ceased operations.
Framework Agreement with El Sitio - On August 4, 1999, the Company
entered into a Framework Agreement with El Sitio, Inc. ("El Sitio") for the sale
of the Company's retail Internet businesses in Argentina, Brazil and Colombia
for approximately $21.5 million and the purchase of shares of El Sitio's 8%
convertible redeemable preferred stock for $21.5 million. In connection with
these transactions, El Sitio will enter into telecommunications services
agreements with IMPSAT Argentina, IMPSAT Brazil and IMPSAT Colombia under which
these entities will provide El Sitio with telecommunication networks to access
the Internet backbone. El Sitio, a British Virgin Islands corporation, is an
Internet content and Internet service provider headquartered in Argentina that
has other offices in Brazil, Mexico, Uruguay and the United States.
On October 6, 1999, IMPSAT Brazil sold its retail Internet business for $12.3
million to O Site Entretenimentos Ltda., a subsidiary of El Sitio. In addition,
on the same date, the Company acquired 1,756,677 shares of El Sitio's 8%
convertible redeemable preferred stock for $12.3 million. IMPSAT Brazil recorded
a net gain on the sale of its retail Internet business of approximately $8.9
million, which is included in other (expense) income, net, in the accompanying
1999 statement of operations.
On November 5, 1999, IMPSAT Argentina consummated the sale of its retail
Internet business to El Sitio for $6.2 million, of which $5.3 million was
received on that date with the remainder due in 24 equal monthly installments.
Simultaneously, the Company purchased 885,480 shares of El Sitio's 8%
convertible redeemable preferred stock for $6.2 million. On November 12, 1999,
the Company acquired an additional 428,458 shares of El Sitio's 8% convertible
redeemable preferred stock for $3.0 million. IMPSAT Argentina recorded a net
gain on the sale of its retail Internet business of approximately $5.0 million,
which is included in other (expense) income, net in the accompanying 1999
statement of operations. The Company and El Sitio expect to consummate the sale
of the Company's retail Internet business in Colombia to El Sitio during
April of 2000.
Upon the consummation of El Sitio's initial public offering in December 1999,
the shares of El Sitio's preferred stock were automatically converted into 15.4%
of El Sitio's outstanding common stock.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The financial statements are presented on a
consolidated basis and include the accounts of the Company and its subsidiaries.
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 fair 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 a monthly fee based on the
quantity and type of equipment installed. The fees stipulated in the contracts
are generally denominated in U.S. dollars equivalents. Services are billed on a
monthly, predetermined basis, which coincides with when the services
-F-10-
<PAGE> 59
are rendered. No single customer accounted for greater than 10% of total net
revenue from services for the years ended December 31, 1997, 1998 and 1999.
In connection with the Company's build out of the Broadband Network, the Company
has granted Global Crossing Development Co., a subsidiary of Global Crossings
Ltd. ("Global Crossing"), for a fixed advanced payment, an indefeasible right of
use ("IRU") to a portion of its broadband network capacity (see Note 6) when the
Broadband Network is completed. The Company will recognize the revenue from the
IRU ratably over the life of the IRU.
Broadband Network -- The Broadband Network is under construction. Costs
in connection with the construction, installation and expansion of the Broadband
Network are capitalized. Depreciation will be computed using the straight-line
method over the life of the rights of way for the related network. Rights of way
agreements represent the fees paid and the net present value of fees to be paid
per signed agreements entered into for obtaining rights of way and other permits
for the Broadband Network. These capitalized agreements are being amortized over
the term of the rights of way, which range from 5 to 20 years.
Property, Plant and Equipment Costs -- Property, plant and equipment are
recorded at cost and depreciated using the straight-line method over the
following estimated useful lives:
Buildings and improvements......................... 10-25 years
Operating communications equipment................. 5-10 years
Furniture, fixtures and other equipment............ 2-10 years
The operating communications equipment owned by the Company is subject
to rapid technological obsolescence. In view of these developments, the Company
decided to change the depreciable life of certain customer premises
telecommunications equipment from 10 years to 5 years effective September 30,
1999. The effect of this change in estimate totaled approximately $52.1 million
and was included in depreciation expense for 1999.
Investments -- Investments covered under the scope of Statement of
Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain
Investments in Debt and Equity Securities, are classified as "available for
sale" and are carried at fair value with any unrealized gain or loss, net of
tax, being included in accumulated other comprehensive income (loss) within
stockholders' equity. All other investments are carried at cost.
The Company's investments consist of the following at December 31, 1998 and
1999:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Investment, at cost $ 10,708 $ 10,235
Investment, at fair value ($21,527 at cost) 225,690
-------- --------
Total $ 10,708 $235,925
======== ========
</TABLE>
The Company's cost basis investment represents a less than 1% ownership in
unaffiliated entities established for the purchase and leasing of satellite
capacity time and the fair value basis investment represents the 15.4% stake in
El Sitio's outstanding common stock, see Note 2. The Company's investment in El
Sitio's common stock is subject to equity price risk. The Company has not taken
any actions to hedge this market risk exposure.
Deferred Financing Costs -- Debt issuance costs and transaction fees,
which are associated with the issuance of the Company's 12 1/8% Senior
Guaranteed Notes due 2003 (the "Senior Guaranteed Notes") and the 12 3/8% Senior
Notes due 2008 (the "Senior Notes") are being amortized (and charged to interest
expense) over the term of the related notes on a method which approximates the
level yield method.
Intangible Assets -- Goodwill, representing the excess of the purchase
price over the estimated fair value of the net assets acquired of Mandic S.A.
(see Note 2) of approximately $11.7 million and other acquisitions of $0.9
million are being amortized on a straight-line basis of over a period of 15
years. In connection with the early adoption of the American Institute of
Certified Public Accountants' Statement of Position 98-5, Reporting on the Costs
of Start-Up Activities, as of January 1, 1998, the Company expensed the
unamortized license and permit costs as a cumulative effect of a change in
accounting principles. The Company reviews the carrying value of goodwill 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.
-F-11-
<PAGE> 60
In connection with the merger of Mandic S.A. with IMPSAT Brazil and the
subsequent sale of its retail Internet business as described in Note 2, the
Company expensed the unamortized balance of the Mandic S.A.'s goodwill of
approximately $7.4 million. Goodwill, net is included in other non-current
assets in the accompanying consolidated balance sheets.
Long-Lived Assets -- Long-lived assets are reviewed on an ongoing basis
for impairment based on comparison of carrying value against undiscounted future
cash flows. If an impairment is identified, the assets carrying amount is
adjusted to fair value. No such adjustments were recorded for the years ended
December 31, 1997, 1998, and 1999.
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 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.
Foreign Currency Translation -- The Company's subsidiaries generally 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 or loss on foreign
exchange, except for IMPSAT Brazil which uses the local currency as the
functional currency and its effects are included in the stockholders' equity.
Fair Value of Financial Instruments -- The Company's financial
instruments include receivables, investment, payables, short- and long-term
debt. The Company's Senior Guaranteed Notes, Senior Notes and available for sale
investment, were valued at market closing prices at December 31, 1998 and 1999.
The fair value of all other financial instruments have been determined using
available market information and interest rates as of December 31, 1998 and
1999.
At December 31, 1998 and 1999, the fair value of the Senior Guaranteed Notes and
Senior Notes was approximately $299 million and $324 million, respectively,
compared to the carrying value of $350 million. At December 31, 1999, the fair
value and carrying value of the Company's investment in El Sitio's common stock
was approximately $225.7 million. The fair value of all other financial
instruments were not materially different from their carrying value.
Stock-Based Compensation -- SFAS No. 123, Accounting for Stock-Based
Compensation, encourages, but does not require, companies to record compensation
cost for stock-based employee and non-employee members of the Board of Directors
(the "Board") compensation plans at fair value. The Company has chosen to
continue to account for stock-based compensation to employees and non-employee
members of the Board using the intrinsic value method as prescribed by
Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued
to Employees, and related interpretations. Accordingly, compensation cost for
stock options issued to employees and non-employee members of the Board are
measured as the excess, if any, of the fair value of the Company's stock at the
date of grant over the amount an employee or non-employee member of the Board
must pay for the stock.
Stock Split -- On January 11, 2000, the Company's Board approved a .592
to 1 reverse common stock split (see Note 12). Retroactive restatement has been
made to all share amounts to reflect the stock split.
Net Loss Per Common Share -- Basic earnings per share is computed based
on the average number of common shares outstanding and diluted earnings per
share is computed based on the average number of common and potential common
shares outstanding under the treasury stock method.
Reclassifications -- Certain amounts in the 1997 and 1998 consolidated
financial statements have been reclassified to conform with the 1999
presentation.
New Accounting Pronouncement - In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. Among other provisions, SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It also requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In June 1999, the FASB
issued SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133, an
amendment to
-F-12-
<PAGE> 61
SFAS No. 133. SFAS No. 137 deferred the effective date of adoption of SFAS No.
133 to fiscal years beginning after June 15, 2000. Management has not determined
what effects, if any, the adoption of SFAS No. 133 will have on the Company's
consolidated financial statements.
4. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable, by operating subsidiaries, at December 31 are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1998 1999
-------------------- --------------------
<S> <C> <C>
IMPSAT Argentina............................... $ 36,378 $ 49,989
IMPSAT Colombia................................ 8,480 6,655
IMPSAT Venezuela............................... 4,293 7,074
IMPSAT Ecuador................................. 1,559 1,943
IMPSAT USA..................................... 2,836 2,807
IMPSAT Brasil.................................. 2,963 1,791
Others......................................... 574 1,737
----------------- -----------------
Total................................ 57,083 71,996
Less: allowance for doubtful accounts.......... (10,109) (19,820)
----------------- -----------------
Trade accounts receivable, net................. $ 46,974 $ 52,176
================= =================
</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 for the years ended
December 31, 1997, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------
1997 1998 1999
------------------ ------------------ -----------------
<S> <C> <C> <C>
Beginning balance......................... $ 2,803 $ 5,933 $ 10,109
Provision for doubtful accounts........... 3,269 5,312 11,232
Write-offs, net of recoveries............. (139) (1,136) (1,521)
-------------- ----------------- -----------------
Ending balance............................ $ 5,933 $ 10,109 $ 19,820
============== ================= =================
</TABLE>
5. OTHER RECEIVABLES
Other receivables consist primarily of refunds or credits pending from
local governments for taxes other than income, advances to suppliers, and other
miscellaneous amounts due to the Company and its operating subsidiaries as
follows at December 31:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1998 1999
-------------------- --------------------
<S> <C> <C>
IMPSAT Argentina.............................. $ 6,439 $ 13,606
IMPSAT Colombia............................... 5,064 5,269
IMPSAT Venezuela.............................. 2,527 1,757
IMPSAT Ecuador................................ 835 314
IMPSAT Mexico................................. 1,078 2,662
IMPSAT Brazil and Mandic S.A.................. 1,124 1,122
Others........................................ 3,043 2,910
---------------- ----------------
Total............................... $ 20,110 $ 27,640
================ ================
</TABLE>
-F-13-
<PAGE> 62
6. BROADBAND NETWORK AND AGREEMENTS
Broadband network and related equipment consists of the following at December
31, 1999:
<TABLE>
<CAPTION>
1999
--------------------
<S> <C>
Equipment and materials $ 4,018
Right of ways 15,134
--------------------
Total 19,152
Less: accumulated depreciation (1,318)
--------------------
Total 17,834
Under construction - Broadband Network 51,966
Under construction - Global Crossing ducts 2,068
--------------------
Total $ 71,868
====================
</TABLE>
NORTEL NETWORKS AGREEMENTS - On September 6, 1999, the Company executed two
turnkey agreements with Nortel Networks Inc. ("Nortel") relating to Nortel's
design and construction of segments of the Broadband Network in Argentina and
Brazil for approximately $265 million. Pursuant to these agreements, Nortel will
construct:
- long-haul, high capacity fiber optic backbones linking major
cities in Argentina and Brazil;
- fiber optic and wireless radio local rings and access points
within major cities in Argentina and Brazil; and
- connections in Argentina and Brazil that will integrate the
Company's networks with other providers' facilities, including
submarine cable systems, and provide the Company with access to
global telecommunications links.
In addition, Nortel will provide, as part of the turnkey agreements:
- required equipment and components;
- civil infrastructure design and engineering;
- civil works supervision;
- network infrastructure and configuration planning and
engineering;
- formulation of network quality and performance specifications;
- compilation of network testing procedures and protocols; and
- preparation of network maintenance and operations plans and
procedures.
On October 25, 1999, each of IMPSAT Argentina and IMPSAT Brazil signed
definitive agreements with affiliates of Nortel to borrow an aggregate of up to
approximately $149.1 million and $148.3 million, respectively, of long term
vendor financing. The financing, which will be disbursed over a two year period
with final maturity in 2006, will be used to finance Nortel's construction of
the segments of the Broadband Network in each of Argentina and Brazil. The
Company has agreed to guarantee the obligations of each of IMPSAT Argentina and
IMPSAT Brazil under the Nortel financing agreements.
FRAMEWORK AGREEMENT WITH GLOBAL CROSSING - On July 27, 1999, the Company entered
into an agreement with Global Crossing Development Co., a subsidiary of Global
Crossings Ltd. ("Global Crossing") that contemplates the Company entering into a
series of definitive agreements. As part of these arrangements, the Company will
purchase from Global Crossing indefeasible rights of use of capacity valued at
not less than $46 million on any of Global Crossing's fiber optic cable networks
worldwide. These rights should enable the Company to interconnect the Company's
networks in Argentina and Brazil and give the Company global international
access.
On September 22, 1999, the Company entered into a definitive agreement with
Global Crossing to construct the terrestrial portion of the Global Crossing's
South American network between Las Toninas, Argentina on the Atlantic Ocean and
Valparaiso, Chile on the Pacific Ocean (the "Trans-Andean Crossing System"). The
Company commenced construction of the Trans-Andean Crossing System in September
1999. Global Crossing will pay the Company $64 million for the Company's turnkey
construction of the Trans-Andean Crossing System, as follows:
-F-14-
<PAGE> 63
- construction of three ducts (the "Global Crossing Ducts") and
related facilities over 230 route miles between Las Toninas and
Buenos Aires, Argentina and over 290 route miles between
Mendoza, Argentina and Valparaiso, Chile for approximately $39
million.
- licensing to Global Crossing of one duct on our Broadband
Network between the cities of Buenos Aires and Mendoza in
Argentina for approximately $25 million.
During 1999, Global Crossing paid the Company $23.2 million in respect of the
ongoing construction of the Global Crossing Ducts. The Company will accumulate
all construction costs for the Global Crossing Ducts in projects under
construction and will defer all payment received from Global Crossing until
completion and deliver of the respective ducts.
In addition to the Trans-Andean Crossing System, the Company will:
- construct fiber optic terrestrial backhauls that will connect
Global Crossing's submarine cable landing points in Brazil,
Colombia, Peru and Venezuela to major cities in these countries
- sell co-location space in our telehouses in Rio de Janeiro and
Sao Paulo, Brazil; Bogota, Colombia; Lima, Peru; and Caracas,
Venezuela
The Company's telehouses will contain switching, routing and other network
co-location equipment owned by the Company or lessees of space in the
telehouses. The Company will lease space in the telehouses in Buenos Aires,
Argentina and Santiago, Chile to Global Crossing for its network operations. The
Company will also expect to enter into agreements with Global Crossing to
provide maintenance of the Global Crossing's Trans-Andean Crossing System.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1998 1999
--------------------- --------------------
<S> <C> <C>
Land............................................. $ 1,750 $ 3,985
Building and improvements........................ 29,760 31,102
Operating communications equipment............... 398,577 486,528
Furniture, fixtures and other equipment.......... 20,271 21,337
-------------------- --------------------
Total.................................. 450,358 542,952
Less: accumulated depreciation................... (126,728) (242,706)
-------------------- --------------------
Total.................................. 323,630 300,246
Equipment in transit............................. 4,289 5,339
Works in process................................. 2,807 4,745
-------------------- --------------------
Property, plant and equipment, net............... $ 330,726 $ 310,330
==================== ====================
</TABLE>
The recap of accumulated depreciation for the years ended December 31,
1997, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------
1997 1998 1999
----------------- ------------------- ------------------
<S> <C> <C> <C>
Beginning balance........................ $ 64,250 $ 92,255 $ 126,728
Depreciation expense..................... 29,665 36,027 118,834
Disposals and retirements................ (1,660) (1,554) (2,856)
---------------- ------------------ ------------------
Ending balance........................... $ 92,255 $ 126,728 $ 242,706
================ ================== ==================
</TABLE>
-F-15-
<PAGE> 64
8. SHORT-TERM DEBT
The Company's short-term debt at December 31, is detailed as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1999
-------------------- ------------------
<S> <C> <C>
Short-term credit facilities, denominated in U.S.
dollars; interest rates ranging from 5.72% to
15.00%;
IMPSAT Argentina............................................. $ 11,000 $ 10,707
IMPSAT Colombia.............................................. 5,859 4,756
Others....................................................... 203
Short-term credit facilities, denominated in local
currencies; local interest rates ranging from
12.0% to 25.0%;
IMPSAT Argentina............................................. 2,000
IMPSAT Ecuador............................................... 200 207
------------------ ------------------
Total short-term debt................................ $ 19,262 $ 15,670
================ ================
</TABLE>
The Company has historically refinanced its short term credit facilities
on an annual basis.
9. LONG-TERM DEBT
The Company's long-term debt at December 31, is detailed as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1998 1999
--------------------- --------------------
<S> <C> <C>
12.125% Senior Guaranteed Notes due 2003................................. $ 125,000 $ 125,000
12.375% Senior Notes due 2008............................................ 225,000 225,000
Term notes payable:
IMPSAT Colombia; with maturities through 2002
collateralized by equipment with a carrying value of
approximately $14,400 and the assignment of customer
contracts totalling approximately $4,800
Denominated in:
U.S. dollars (interest rates 8.50% -- 13.13%)....................... 32,204 23,175
Local currency (interest rates 20% -- 41%).......................... 6,156 15,509
IMPSAT Argentina (6.56% -- 6.75%), maturing
Semiannually through 2003, collateralized by
investment.......................................................... 4,802 24,826
IMPSAT USA (8.25% -- 8.75%), mortgage and other
Collateralized debts................................................ 2,066 1,731
IMPSAT Venezuela (9.00% -- 10.75%), maturing during
2001................................................................ 3,508 2,383
IMPSAT Brazil (13%), maturing during 2004.............................. 4,718
Eximbank notes payable (7.00%), maturing semiannually
through 1999........................................................... 1,694
Other.................................................................... 80
----------------- -----------------
Total long-term debt........................................... 400,430 422,422
Less: current portion.................................................... (21,138) (23,007)
----------------- -----------------
Long-term debt, net...................................................... $ 379,292 $ 399,415
================= =================
</TABLE>
The scheduled maturities of long-term debt at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------------------------------
<S> <C>
2000................................ $ 23,007
2001................................ 13,296
2002................................ 12,666
2003................................ 134,372
2004 and thereafter 239,081
------------------
Total..................... $ 422,422
==================
</TABLE>
-F-16-
<PAGE> 65
The Senior Guaranteed Notes, Senior Notes and some of the term notes
payable for IMPSAT Argentina, IMPSAT Brazil, 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.
On February 16, 2000, the Company issued $300 million in 13.75% Senior Notes due
2005. The Senior Notes due 2005 contain similar covenants as the Senior
Guaranteed Notes due 2003 and the Senior Notes due 2008.
10. INCOME TAXES
The composition of the (provision for) benefit from income taxes, all of
which are for foreign taxes, for the years ended December 31, 1997, 1998 and
1999 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current ....... $ (299) $ (3,932) $ (3,765)
Deferred ...... (4,964) 127 24,498
-------- -------- --------
Total $ (5,263) $ (3,805) $ 20,733
======== ======== ========
</TABLE>
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, as
the Company has net operating loss carryforwards in the amount of approximately
$35.0 million, which begin to expire in the year 2010. Deferred taxes result
from temporary differences in the capitalization policies of preoperating costs,
depreciation methods and net operating loss carryforwards. The composition of
net deferred tax (liability) asset at December 31 is as follows:
<TABLE>
<CAPTION>
1998 1999
------------------- ------------------
Deferred tax assets:
<S> <C> <C>
Preoperating costs: $ 2,852 $ 1,429
Net operating loss carryforwards:
Domestic...................................... 9,249 18,127
Foreign....................................... 9,549 13,889
Allowance for doubtful accounts 4,263
Property, plant and equipment.................... 11,919
Other............................................ 86 289
----------------- -----------------
Gross deferred tax assets.......................... 21,736 49,916
----------------- -----------------
Deferred tax liabilities:
Property, plant and equipment.................... (4,301)
Other............................................ (197) (580)
----------------- ------------------
Gross deferred tax liabilities..................... (4,498) (580)
----------------- -----------------
Less: valuation allowance.......................... (17,358) (25,666)
----------------- -----------------
Net deferred tax (liability) asset................. (120) 23,670
Available for sale investment (75,540)
----------------- -----------------
Net deferred tax liability......................... $ (120) $ (51,870)
================= =================
</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.
11. REDEEMABLE PREFERRED STOCK
On March 19, 1998, the Company redeemed 25% of its outstanding common
stock previously held by STET International Netherlands NV (the "STET Shares")
with the proceeds of a substantially concurrent issuance and sale of $125,000 of
the Company's Series A Convertible Preferred Stock (the "Series A Preferred
Stock"). The Series A Preferred Stock was offered and sold to Princes Gate
Investors II, L.P. ("Princes Gate") and Morgan Stanley Global Emerging Markets
Private Investment Fund, L.P. ("MSGEM"), two private equity funds that are
affiliates of
-F-17-
<PAGE> 66
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 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.
As part of the Company's initial public offering (see Note 12), the
Company redeemed approximately $32.5 million of the redeemable preferred stock
and the Purchasers converted their remaining preferred shares into 14,917,915
shares of common stock.
12. STOCKHOLDERS' EQUITY
SHARE PURCHASE AGREEMENT - On March 11, 1999, a Share Purchase Agreement
was entered into among the Company, Nevasa and Nunsgate Limited, a wholly owned
subsidiary of British Telecommunications plc ("BT"), in which the Company agreed
to issue, sell and deliver 11,934,332 newly issued shares of common stock to BT
and Nevasa agreed to sell 2,386,867 currently owned shares of common stock to BT
for $125.0 million and $25.0 million, respectively. These transactions were
consummated on April 19, 1999.
STOCK OPTION PLANS - In December 1998, the Company adopted the 1998
Stock Option Plan (the "1998 Plan"), pursuant to which 4,776,016 shares of
Company's Common Stock were reserved for issuance upon exercise of options. The
1998 Plan is designed as a means to retain and motivate key employees and
directors. The Company's compensation committee, or in the absence thereof, the
Board, administers and interprets the 1998 Plan and is authorized to grant
options thereunder to all eligible employees of the Company, including executive
officers and directors (whether or not they are employees) of the Company or
affiliated companies. Options granted under the 1998 Plan are on such terms and
at such prices as determined by the stock option committee, except that the per
share exercise price of incentive stock options cannot be less than the fair
market value of the Common Stock on the date of grant. The 1998 Plan will
terminate on December 1, 2008, unless sooner terminated by the Company's Board.
The Company granted options for 441,650 shares at an exercise price of
$8.38 during the year ended December 31, 1998 and options for 393,340 at an
exercise price of $10.47 during the year ended December 31, 1999. These options
vest on each of the first, second and third anniversaries of the date of grant,
as to 10%, 30%, and 30%, respectively, of the granted shares. On the fourth
anniversary of the date of grant, the option vests as to the remainder of the
granted shares.
The Company applies APB No. 25 and related interpretations in accounting
for its stock options plan to employees and non-employee members of the Board as
described in Note 3. Accordingly, no compensation expense has been recognized in
the years ended December 31, 1998 and 1999 related to this plan.
For purposes of the following pro forma disclosures, the fair value of
the options granted in 1998 and 1999 was estimated using the minimum value
method prescribed by SFAS No. 123 for nonpublic entities with the following
assumptions: no dividend yields; no volatility; risk-free interest rate of 7.0%;
and an expected term of four years. Had compensation cost been determined based
on the fair value at the date of grant consistent with the requirement of SFAS
123, the Company's net loss and comprehensive loss would have increased by
approximately $0.2 million and $0.3 million for the years ended December 31,
1998 and 1999, respectively.
On January 5, 2000, the Company's board of directors adopted the 1999
Stock Option Plan (the "1999 Plan"), which provides for the grants to its key
officers and employees of stock options that are non- qualified for U.S.
-F-18-
<PAGE> 67
federal income tax purposes. The terms of the 1999 Plan are otherwise identical
to those of the 1998 Plan except that:
- The total number of shares of our common stock for which options may
be and were granted pursuant to the 1999 Plan is 355,214;
- The exercise price is $1.69 per share of common stock; and
- Ten percent, twenty percent, thirty percent and forty percent of the
options granted vest on each of the fourth, fifth, sixth and seventh
anniversaries, respectively, of the date of grant or upon a change
of control of the Company.
The expiration date of the 1999 Plan is January 5, 2010
In connection with the stock options granted under the 1999 Plan, the
Company will record approximately $5.4 million in stockholders' equity as
deferred compensation during January 2000. The deferred compensation will be
amortized to expense over the vesting period, which commences four years after
the date of grant.
INITIAL PUBLIC OFFERING -- The Company's completed an initial public
offering ("IPO") of 11,500,000 shares of common stock on February 4, 2000. On
the same date, BT purchased 2,050,000 shares of the Company's common stock
simultaneously with this offering to maintain its approximate current ownership
share in the Company. In anticipation of the IPO, on January 11, 2000, the Board
amended and restated the articles of incorporation of the Company to change the
name of the Company to IMPSAT Fiber Networks, Inc. and authorized 300,000,000
shares of common stock, $0.01 par value, and 5,000,000 shares of "blank check"
preferred stock, $0.01 par value. In addition, the Board approved a .592 for 1
reverse common stock split (see Note 3), adopted a stockholders rights plan and
approved the issuance of 5,472,579 shares of common stock to the minority
shareholders in IMPSAT Argentina, IMPSAT Venezuela and IMPSAT Colombia in
exchange for their minority interests in those subsidiaries. The acquisition of
these minority interests will be accounted for under the purchase method.
-F-19-
<PAGE> 68
13. OPERATING SEGMENT INFORMATION
The Company's operating segment information, by subsidiary, is as
follows for the years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------
1997 1998 1999
------------------- ------------------- -------------------
TOTAL ASSETS
<S> <C> <C> <C>
IMPSAT Argentina................................. $197,820 $234,844 $269,356
IMPSAT Colombia.................................. 85,709 105,187 83,691
IMPSAT Venezuela................................. 27,478 36,269 40,407
IMPSAT Mexico.................................... 6,199 8,640 10,991
IMPSAT Ecuador................................... 12,991 21,262 18,951
IMPSAT USA....................................... 5,931 15,095 17,917
IMPSAT Brazil.................................... 27,348 79,064
Parent Company, Others
and eliminations............................... 3,788 78,573 307,955
------------------ ------------------ ------------------
CONSOLIDATED TOTAL....................... $ 339,916 $ 527,218 $ 828,332
================== ================== ==================
NET REVENUES FROM SERVICES
NETWORK SERVICES
IMPSAT Argentina................................. $ 72,287 $ 80,925 $ 83,547
IMPSAT Colombia.................................. 45,453 51,930 50,920
IMPSAT Venezuela................................. 8,739 12,699 19,769
IMPSAT Ecuador................................... 4,845 8,251 9,964
IMPSAT USA....................................... 5,362 8,478 8,147
IMPSAT Brazil.................................... 1,535 4,536
Other............................................ 1,568 2,969 2,785
Eliminations..................................... (3,382) (4,171) (7,190)
------------------- ------------------- -------------------
CONSOLIDATED TOTAL....................... $ 134,872 $ 162,616 $ 172,478
================== ================== ==================
INTERNET
IMPSAT Argentina................................. $ 4,284 $ 6,084 $ 9,130
IMPSAT Colombia.................................. 2,067 2,949 2,879
IMPSAT Venezuela................................. 134 421 1,491
IMPSAT Ecuador................................... 721 1,836 2,986
IMPSAT USA....................................... 1,090 4,312 6,029
IMPSAT Brazil.................................... 142 1,703
Others........................................... 7,557 6,028
Eliminations..................................... (597) (2,715) (3,607)
------------------- ------------------- -------------------
CONSOLIDATED TOTAL....................... $ 7,699 $ 20,586 $ 26,639
================== ================== ==================
OTHER
IMPSAT Argentina................................. $ 14,371 $ 13,532 $ 17,532
IMPSAT Colombia.................................. 2,579 5,568 7,248
IMPSAT Venezuela................................. 369 2,316 1,972
IMPSAT Ecuador................................... 150 346 406
IMPSAT USA....................................... 1,460 1,804 3,067
IMPSAT Brazil.................................... 2,199 2,329
Others........................................... 208 2,199 1,450
Eliminations..................................... (643) (3,077) (4,670)
------------------- ------------------- -------------------
CONSOLIDATED TOTAL....................... $ 18,494 $ 24,887 $ 29,334
================== ================== ==================
TOTAL NET REVENUE FROM SERVICES
IMPSAT Argentina................................. $ 90,942 $ 100,541 $ 110,209
IMPSAT Colombia.................................. 50,099 60,447 61,047
IMPSAT Venezuela................................. 9,242 15,436 23,232
</TABLE>
-F-20-
<PAGE> 69
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------
1997 1998 1999
------------------- ------------------- -------------------
<S> <C> <C> <C>
IMPSAT Ecuador................................... 5,716 10,433 13,356
IMPSAT USA....................................... 7,912 14,594 17,243
IMPSAT Brazil.................................... 3,876 8,568
Others............................................ 1,776 12,725 10,263
Eliminations..................................... (4,622) (9,963) (15,467)
------------------- ------------------- -------------------
CONSOLIDATED TOTAL....................... $ 161,065 $ 208,089 $ 228,451
================== ================== ==================
OPERATING INCOME (LOSS)
IMPSAT Argentina................................. 13,299 $ 14,779 $ (40,988)
IMPSAT Colombia.................................. 20,213 21,458 (10,120)
IMPSAT Venezuela................................. (811) 366 (2,786)
IMPSAT Mexico.................................... (1,809) (2,333) (3,222)
IMPSAT Ecuador................................... 1,651 1,535 (2,030)
IMPSAT USA....................................... 297 1,057 (9,710)
IMPSAT Brazil.................................... -- (7,611) (16,213)
Eliminations..................................... (9,476) (2,381) (11,117)
------------------ ------------------ ------------------
CONSOLIDATED TOTAL....................... $ 23,364 $ 26,870 $ (96,186)
================== ================== ===================
</TABLE>
14. RELATED PARTY TRANSACTIONS
The Company in the normal course of its business provides
telecommunications network services to affiliates of its majority stockholder
and to affiliates of the minority stockholders of certain of its subsidiaries.
During the years ended December 31, 1997, 1998 and 1999, such services totaled
approximately $6.7 million, $10.1 million and $11.0 million, respectively. In
addition, the Company also enters into transactions with such affiliates, which
primarily include financial (borrowings), insurance, and employee benefits
services. During the years ended December 31, 1997, 1998 and 1999, such
transactions totaled approximately $3.8 million, $4.3 million and $9.1 million,
respectively.
Investment banking fees amounting to $5.9 million and $4.1 million,
respectively were paid to representative affiliates of the redeemable preferred
stock shareholders during 1998 and 1999.
15. COMMITMENTS AND CONTINGENCIES
COMMITMENTS - The Company leases satellite capacity with average annual
rental commitments of approximately $9.5 million, through the year 2003. In
addition, the Company has commitments to purchase communications equipment
amounting to approximately $28.5 million at December 31, 1999, and was not
obligated under any letters of credits at December 31, 1999.
GUARANTEES - The Company is a third party guarantor of up to 75% of a
$6.0 million credit facility provided to IMPSAT Venezuela by a regional
development fund. At December 31, 1999, the balance outstanding on the credit
facility amounted to approximately $2.4 million.
IMPSAT Brazil has entered into a $5.3 million term note with El Camino
Resources, which is guaranteed by the Company and IMPSAT Argentina. At December
31, 1999, the balance outstanding was approximately $4.7 million.
LITIGATION - The Company is involved in or subject to various litigation
and legal proceedings incidental to the normal conduct of its business. Whenever
justified, the Company expects to vigorously prosecute or defend such claims,
although there can be no assurance that the Company will ultimately prevail with
respect to any such matters.
In November 1996, IMPSAT Argentina filed suit against one of its
customers, ENCOTESA, for amounts due and arising under IMPSAT Argentina's
contracts with ENCOTESA, the Argentine national postal service for $7.3 million.
The Company had reclassified the trade account receivables from ENCOTESA to
non-current assets at the estimated net realizable value of $5.1 million as
determined by the Company's management based on the advice of local legal
counsel. Although this matter continues to be negotiated for settlement, the
Company during September 1999 estimated the net realizable value to be zero and,
accordingly, recorded an adjustment of
-F-21-
<PAGE> 70
$5.1 million, which is included within selling, general and administrative
expenses in the accompanying consolidated statement of operations.
16. DEVALUATION
During 1999, the Brazilian real experienced a significant
decline in value in relation to the U.S. dollar, if compared with the prevailing
exchange rates of December 31, 1998. As a result of this devaluation, the
Company recognized approximately $8.9 million in foreign exchange losses during
the year ended December 31, 1999, which are reflected in net gain (loss) on
foreign exchange in the accompanying 1999 statement of operations.
* * * * * *
-F-22-
<PAGE> 71
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of IMPSAT S.A.:
We have audited the accompanying balance sheets of IMPSAT S.A. (the "Company")
as of December 31, 1998 and 1999, and the related statements of operations, of
stockholders' equity and of cash flow for the year ended November 30, 1997, for
the one month period ended December 31, 1997 and for each of the two years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements 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 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 the Company at December 31, 1998 and 1999,
and the results of its operations and its cash flows for the year ended November
30, 1997, for the one month period ended December 31, 1997, and for each of the
two years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles in the United States of America.
DELOITTE & TOUCHE
Buenos Aires, Argentina
March 3, 2000
-F-23-
<PAGE> 72
IMPSAT S.A.
BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
--------------------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 13,849 $ 4,199
Trade accounts receivable, net 28,068 36,046
Receivable from affiliated companies 2,092 4,130
Other receivables 6,439 13,605
Prepaid expenses 362 825
--------- ---------
Total current assets 50,810 58,805
--------- ---------
BROADBAND NETWORK, Net 28,944
---------
PROPERTY, PLANT AND EQUIPMENT, Net 167,653 155,045
--------- ---------
NON-CURRENT ASSETS:
Trade accounts receivable, net 5,143
Investment 10,708 10,235
Deferred income taxes, net 3,622
Other non-current assets 530 16,327
--------- ---------
Total non-current assets 16,381 30,184
--------- ---------
TOTAL $ 234,844 $ 272,978
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 18,242 $ 32,732
Broadband network vendor financing 25,709
Short-term debt 13,000 10,707
Advances from affiliated companies 62,721 68,959
Current portion of long-term debt 64,694 4,411
Accrued liabilities 655 765
Deferred income taxes, net 4,301
Customer advances on broadband network 23,200
Other liabilities 4,402 8,783
--------- ---------
Total current liabilities 168,015 175,266
--------- ---------
LONG-TERM DEBT, Net 1,802 20,415
--------- ---------
OTHER LONG-TERM LIABILITIES 1,485 510
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY:
Common stock, 5,123 shares issued and outstanding at December 31, 1998;
and 14,755 shares issued and outstanding at December 31, 1999 3 3
Paid in capital 26,442 82,442
Retained earnings (accumulated deficit) 37,097 (5,658)
--------- ---------
Total stockholders' equity 63,542 76,787
--------- ---------
TOTAL $ 234,844 $ 272,978
========= =========
See notes to financial statements.
</TABLE>
-F-24-
<PAGE> 73
IMPSAT S.A.
STATEMENTS OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ONE MONTH
YEAR ENDED ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31, DECEMBER 31,
------------------------------------------------------------
1997 1997 1998 1999
--------- --------- --------- ---------
NET REVENUES FROM SERVICES:
<S> <C> <C> <C> <C>
Network services ............................ $ 72,680 $ 5,666 $ 80,925 $ 83,547
Internet .................................... 4,051 504 6,084 9,130
Other ....................................... 14,910 1,960 13,532 17,532
--------- --------- --------- ---------
Total net revenues from services ..... 91,641 8,130 100,541 110,209
--------- --------- --------- ---------
COSTS AND EXPENSES:
Direct Costs:
Contracted services ................... 7,232 706 10,180 13,134
Other direct costs .................... 10,885 760 9,623 18,841
Leased capacity ....................... 9,614 944 10,629 17,759
Cost of sold equipment ................ 1,674 391 1,556 4,673
--------- --------- --------- ---------
Total direct costs ................. 29,405 2,801 31,988 54,407
--------- --------- --------- ---------
Salaries and wages .......................... 15,823 1,086 16,342 19,672
Selling, general and administrative ......... 15,720 778 16,917 18,079
Depreciation and amortization ............... 18,033 1,562 20,515 59,039
--------- --------- --------- ---------
Total costs and expenses ............. 78,981 6,227 85,762 151,197
--------- --------- --------- ---------
Operating income (loss) ....................... 12,660 1,903 14,779 (40,988)
--------- --------- --------- ---------
OTHER INCOME (EXPENSES):
Interest expense, net (12,617) (976) (12,801) (12,569)
Other income, net 9 4 16 4,820
--------- --------- --------- ---------
Total other expense (12,608) (972) (12,785) (7,749)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 52 931 1,994 (48,737)
(PROVISION FOR) BENEFIT FROM INCOME TAXES (3,247) (311) --- 5,982
--------- --------- --------- ---------
NET (LOSS) INCOME $ (3,195) $ 620 $ 1,994 $ (42,755)
========= ========= ========= =========
See notes to financial statements.
</TABLE>
-F-25-
<PAGE> 74
IMPSAT S.A.
STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS OF U.S. DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS(*) TOTAL
<S> <C> <C> <C> <C>
BALANCE AT NOVEMBER 30, 1996 $ 3 $ 37,814 $ 16,890 $ 54,707
Resis Ingenieria increased paid in capital 8,505 8,505
Net loss (3,195) (3,195)
--------- ----------- ----------- ----------
BALANCE AT NOVEMBER 30, 1997 $ 3 $ 46,319 $ 13,695 $ 60,017
Net income 620 620
--------- ----------- ----------- ----------
BALANCE AT DECEMBER 31, 1997 $ 3 $ 46,319 $ 14,315 $ 60,637
Resis Ingenieria S.A. increased paid in capital 911 911
Resis Ingenieria S.A. loss absortion (20,788) 20,788
Net income 1,994 1,994
--------- ----------- ----------- ----------
BALANCE AT DECEMBER 31, 1998 $ 3 $ 26,442 $ 37,097 $ 63,542
Shareholders' contribution 56,000 56,000
Net loss (42,755) (42,755)
--------- ----------- ----------- ----------
BALANCE AT DECEMBER 31, 1999 $ 3 $ 82,442 $ (5,658) $ 76,787
========= =========== =========== ===========
</TABLE>
(*) Includes an appropriation of retained earnings, amounting to $1,410, $1,622
and $1,890 in 1997, 1998 and 1999, respectively, to comply with legal reserve
requirements in Argentina.
See notes to financial statements.
-F-26-
<PAGE> 75
IMPSAT S.A.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ONE MONTH
YEAR ENDED ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31, DECEMBER 31,
---------------------------------------------------
1997 1997 1998 1999
---------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net (loss) income $ (3,195) $ 620 $ 1,994 $(42,755)
Adjustment to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Amortization and depreciation 18,033 1,562 20,515 59,039
Deferred income tax provision (benefit) 3,247 311 (7,923)
Changes in assets and liabilities:
Increase in trade accounts receivable, net (4,214) (2,574) (6,034) (7,978)
Decrease (increase) in prepaid expenses 781 263 427 (463)
(Increase) decrease in other receivables and other non-current
assets (4,391) 342 3,016 (19,858)
Increase (decrease) in accounts payable - trade 1,394 (2,711) (2,535) 13,629
Increase (decrease) in accrued and other liabilities 575 98 (104) 4,491
Increase in customer advances on construction project 23,200
(Decrease) increase in other long-term liabilities (2,259) (113) 102 (975)
-------- -------- -------- --------
Net cash provided by (used in) operating activities 9,971 (2,232) 17,381 20,407
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (16,601) (207) (34,288) (45,570)
Purchases of broadband network (3,235)
(Increase) decrease in investment (2,995) (6,530) 473
-------- -------- -------- --------
Net cash used in investing activities (19,596) (207) (40,818) (48,332)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments of) borrowings from short-term debt 17,414 3,109 (27,850) (2,293)
Changes in advances from \ to affiliates (69,719) 57,383 6,238
(Repayment of) borrowings from long-term debt (6,385) (344) (4,513) (48,955)
Proceeds from long-term debt 63,098 5,186 7,285
Capital contribution 8,505 911 56,000
-------- -------- -------- --------
Net cash provided by financing activities 12,913 2,765 31,117 18,275
-------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 3,288 326 7,680 (9,650)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 2,555 5,843 6,169 13,849
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 5,843 $ 6,169 $ 13,849 $ 4,199
======== ======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 10,448 $ 98 $ 9,066 $ 12,639
======== ======== ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Equipment in transit $ 236 $ 236 $ 1,488 $ 861
======== ======== ======== ========
Broadband network vendor financing $ 25,709
========
</TABLE>
See notes to financial statements.
-F-27-
<PAGE> 76
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 the Company's fiscal year end to December 31,
1997, to conform with the Parent Company's fiscal year end.
2. BACKGROUND
The Company provides and operates private networks of integrated
data and voice telecommunications systems in Argentina. The
Company's principal line of business comprises the provision of data
transmission services for large national and multinational
companies, financial institutions, governmental agencies and other
business customers in Argentina. It provides its services through
its advanced telecommunications networks comprised of owned
teleports, earth stations, fiber optic and microwave links and
leased satellite capacity. The Company is a 98.3% owned subsidiary
of IMPSAT Fiber Networks, Inc., a Delaware holding company
(the "Parent Company").
On October 20, 1998, the company and Resis Ingenieria S.A., a wholly
owned subsidiary of the Parent Company, merged and Resis Ingenieria
S.A. ceased operations. The merger as is the case for transactions
among companies under common control, has been accounted for in a
manner similar to the pooling of interests method of accounting,
whereby all assets and liabilities have been recorded at their
historical carrying amounts and the merger was recorded as if the
transaction occurred at the beginning of each period presented.
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 fair 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 a monthly
fee based on the quantity and type of equipment installed. The fees
stipulated in the contracts are generally 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 year ended November 30, 1997, for the one - month
period ended December 1997, and for the years ended December 31,
1998 and 1999.
In connection with the Company's build out of the Broadband Network,
the Company has granted Global Crossing Development Co., a
subsidiary of Global Crossings Ltd. ("Global Crossing"), for a fixed
advanced payment, an indefeasible right of use ("IRU") to a portion
of its broadband network
-F-28-
<PAGE> 77
capacity (see Note 7) when the Broadband Network is completed. The
Company will recognize the revenue from the IRU ratably over the
life of the IRU.
Broadband Network -- The broadband network is under construction.
Costs in connection with the construction, installation and
expansion of the network are capitalized.
Property, Plant and Equipment Costs - Property, plant and equipment
are recorded at cost and depreciated using the straight-line method
over the following estimated useful lives:
Building and improvement 10-25 years
Operating communications equipment 5-10 years
Furniture, fixtures and other equipment 2-10 years
The operating communications equipment owned by the Company is
subject to rapid technological obsolescence. In view of these
developments, the Company decided to change the depreciable life of
certain customer premises telecommunications equipment from 10 years
to 5 years. The effect of this change in estimate totaled
approximately $30.0 million and was included in depreciation expense
for 1999.
Investment - Investment represents a less than 1.0% ownership
interest (at December 31, 1998 and 1999) by the Company in
unaffiliated entities established for the purchase and leasing of
satellite capacity time and are accounted for under the cost method.
Long-Lived Assets - Long-lived assets are reviewed on an ongoing
basis for impairment based on comparison of carrying value against
undiscounted future cash flows. If an impairment is identified, the
assets carrying amount is adjusted to fair value. No such
adjustments were recorded for the year ended November 30, 1997, for
the one-month period ended December 31, 1997, and for the years
ended December 31, 1998 and 1999.
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
Statements 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.
Foreign Currencies Translation - The translation of these 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 -- The Company's financial
instruments include receivables, payables, short- and long-term
debt. The fair value of such financial instruments have been
determined using interest rates as of December 31, 1998 and 1999.
The fair values were not materially different than their carrying
(or contract) values.
-F-29-
<PAGE> 78
Reclassifications - Certain amounts in the 1997 and 1998 financial
statements have been reclassified to conform with the 1999
presentation.
New Accounting Pronouncement - In June 1998, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. Among other
provisions, SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities. It
also requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and
measure those instruments at fair value. In June 1999, the FASB
issued SFAS No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133, an amendment to SFAS No. 133. SFAS No. 137
deferred the effective date of adoption of SFAS No. 133 to fiscal
years beginning after June 15, 2000. Management has not determined
what effects, if any, the adoption of SFAS No. 133 will have on the
Company's financial statements.
4. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable at December 31 are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
-----------------------------------------------------
<S> <C> <C>
Trade accounts receivable $ 36,378 $ 49,989
Less: allowance for doubtful accounts (8,310) (13,943)
----------- -----------
Trade accounts receivable, net $ 28,068 $ 36,046
----------- -----------
</TABLE>
The Company 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 accounts for the year
ended November 30, 1997, for the one - month period ended December
31, 1997 and for the years ended December 31, 1998 and 1999 is as
follows:
<TABLE>
<CAPTION>
ONE MONTH
YEAR ENDED ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31 DECEMBER 31,
1997 1997 1998 1999
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning balance $ 2,712 $ 5,282 $ 5,497 $ 8,310
Provision for doubtful accounts 2,654 215 3,453 6,280
Write-offs, net of recoveries (84) (640) (647)
----------- ----------- ----------- -----------
Ending balance $ 5,282 $ 5,497 $ 8,310 $ 13,943
=========== =========== =========== ===========
</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, and other miscellaneous
amounts due to the Company.
-F-30-
<PAGE> 79
7. BROADBAND NETWORK AND AGREEMENTS
Broadband network and related equipment consists of the following at
December 31, 1999:
<TABLE>
<CAPTION>
1999
--------------------
<S> <C>
Under construction - Broadband Network $ 26,967
Under construction - Global Crossing
ducts 1,977
--------------------
Total $ 28,944
====================
</TABLE>
NORTEL NETWORKS AGREEMENTS - On September 6, 1999, the Company executed
a turnkey agreement with Nortel Networks Inc. ("Nortel") relating to
Nortel's design and construction of segments of the Broadband Network in
Argentina for approximately $133.1 million. Pursuant to this agreement,
Nortel will construct:
- long-haul, high capacity fiber optic backbones linking
major cities in Argentina;
- fiber optic and wireless radio local rings and access
points within major cities in Argentina; and
- connections in Argentina that will integrate the
Company's networks with other providers' facilities,
including submarine cable systems, and provide the
Company with access to global telecommunications links.
In addition, Nortel will provide, as part of the turnkey agreement:
- required equipment and components;
- civil infrastructure design and engineering;
- civil works supervision;
- network infrastructure and configuration planning and
engineering;
- formulation of network quality and performance
specifications;
- compilation of network testing procedures and protocols;
and
- preparation of network maintenance and operations plans
and procedures.
On October 25, 1999, the Company signed a definitive agreement with an
affiliate of Nortel Networks to borrow an aggregate of up to
approximately $149.1 million of long term vendor financing. The
financing, which will be disbursed over a two year period with final
maturity in 2006, will be used to finance Nortel's construction of the
segments of the Broadband Network in Argentina and the purchase of
additional equipment to be used by the Company in connection with the
operation of the Broadband Network. The Parent Company has agreed to
guarantee the obligations of the Company under the Nortel financing
agreements.
FRAMEWORK AGREEMENT WITH GLOBAL CROSSING - On July 27, 1999, the Parent
Company entered into an agreement with Global Crossing that contemplates
the Parent Company or its affiliates entering into a series of
definitive agreements. As part of these arrangements, Parent Company or
its affiliates will purchase from Global Crossing indefeasible rights of
use of capacity valued at not less than $46 million on any of Global
Crossing's fiber optic cable networks worldwide.
On September 22, 1999, the Company entered into a definitive agreement
with Global Crossing to construct the terrestrial portion of the Global
Crossing's South American network between Las Toninas, Argentina on the
Atlantic Ocean and Valparaiso, Chile on the Pacific Ocean (the
"Trans-Andean Crossing System"). Construction of the Trans-Andean
Crossing System commenced in September 1999. Global Crossing will pay
the Company $50.7 million a for the turnkey construction of the
Trans-Andean Crossing System, which includes:
-F-31-
<PAGE> 80
- construction of three ducts and related facilities over
230 route miles between Las Toninas and Buenos Aires,
Argentina and over 290 route miles between Mendoza,
Argentina and Valparaiso, Chile, for approximately $26
million.
- licensing to Global Crossing of one duct on our
Broadband Network between the cities of Buenos Aires and
Mendoza in Argentina, for approximately $25 million.
During September 1999, Global Crossing paid the Company $23.2 million in
respect of the ongoing construction of the Trans-Andean Crossing System.
The Company will accumulate all construction costs for the Global
Crossing Ducts in projects under construction and will defer all payment
received from Global Crossing until completion and deliver of the
respective ducts.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, consists of:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
--------------------------
<S> <C> <C>
Land $ 1,538
Building, installations and improvements $ 16,671 19,536
Operating communications equipment 226,480 265,276
Furniture, fixtures and other equipment 8,399 10,403
--------- ---------
Total 251,550 296,753
Less: accumulated depreciation (87,641) (145,564)
--------- ---------
Total 163,909 151,189
Equipment in transit 1,825 2,686
Projects in process 1,919 1,170
--------- ---------
Property, plant and equipment, net $ 167,653 $ 155,045
========= =========
</TABLE>
The recap of accumulated depreciation for the year ended November
30, 1997, for the one - month period ended December 31, 1997 and for the years
ended December 31, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
ONE MONTH
YEAR ENDED ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------
1997 1997 1998 1999
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning balance $ 50,682 $ 67,212 $ 68,654 $ 87,641
Depreciation expense 18,033 1,562 20,515 59,039
Disposals and retirements (1,503) (120) (1,528) (1,116)
--------- --------- --------- ---------
Ending balance $ 67,212 $ 68,654 $ 87,641 $ 145,564
========= ========= ========= =========
</TABLE>
-F-32-
<PAGE> 81
8. SHORT-TERM DEBT
The Company's short-term debt at December 31, is detailed as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1998 1999
------------------------------------
<S> <C> <C>
Short-term credit facilities, denominated in
U.S. dollars, interest rates ranging from 8% to 12.75% $11,000 $10,707
Pesos, interest rate from 12 to 12.75% 2,000 --
------- -------
Total short-term debt $13,000 $10,707
======= =======
</TABLE>
The Company has historically refinanced its short-term credit
facilities on an annual basis.
9. LONG-TERM DEBT
The Company long-term debt is detailed as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
--------------------------------
<S> <C> <C>
Term notes payable (6.63% - 12.63%) maturing
semiannually through 1999, collateralized by certain assets $ 64,802 $ 17,541
Eximbank notes payable (7%), maturing semiannually
through 1999 1,694
Eximbank notes payable (8%), maturing
semiannually through 2003 and 2004 - 7,285
-------- --------
Total long-term debt 66,496 24,826
Less: current portion (64,694) (4,411)
-------- --------
Long-term debt, net $ 1,802 $ 20,415
======== ========
</TABLE>
The scheduled maturities of debt and credit facilities at December
31, 1999 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR: AMOUNT
---------- --------
<S> <C> <C>
2000 $ 4,411
2001 1,931
2002 4,302
2003 4,117
2004 and thereafter 10,065
------
Total $ 24,826
========
</TABLE>
10. INCOME TAXES
The components of the (provision for) benefit from income taxes,
for the year ended November 30, 1997, for the one month period ended December
31, 1997, and for the years ended December 31, 1998 and 1999 is as follows:
-F-33-
<PAGE> 82
<TABLE>
<CAPTION>
YEAR ENDED ONE MONTH ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1997 1998 1999
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current $(1,941)
Deferred $(3,247) $ (311) $ 0 7,923
------- ------- ------- -------
Total $(3,247) $ (311) $ 0 $ 5,982
======= ======= ======= =======
</TABLE>
The statutory tax rate in Argentina was 33% in 1997 and 35% in
1998 and 1999.
10. EL SITIO FRAMEWORK AGREEMENT
On August 4, 1999, the Parent Company entered into a Framework Agreement
with El Sitio, Inc. for, among other things, the sale of the Company
retail Internet business for approximately $6.2 million and the Parent
Company's purchase of shares of El Sitio's 8% convertible redeemable
preferred stock for $6.2 million. In connection with these transactions,
El Sitio will enter into telecommunications services agreements with the
Company under which the Company will provide El Sitio with
telecommunication networks to access the Internet backbone. El Sitio, a
British Virgin islands corporation, is an Internet content and Internet
service provider headquartered in Argentina that has other offices in
Brazil, Mexico, Uruguay and the United States. These transactions were
consummated on November 5, 1999.
11. COMMITMENTS AND CONTINGENCIES
Commitments - The Company leases leased telecommunications link with
annual rental commitments of approximately $9.3 million through the
year 2001. In addition, the company has commitments to purchase
communications equipment amounting to approximately $54.0 million at
December 31, 1999.
Guarantees - The Company is guarantor on the $125 million 12 1/8% Senior
Guaranteed Notes Due 2003 issued on July 30, 1996 by the Parent Company.
IMPSAT Brazil has entered into a $5.3 million term note with El Camino
Resources, which is guaranteed by the Company and Impsat Fiber Networks,
Inc. At December 31, 1999, the balance outstanding was approximately
$4.7 million.
Litigation - The Company is involved in or subject to various litigation
and legal proceedings incidental to the normal conduct of its business.
Whenever justified, the Company expects to vigorously prosecute or
defend such claims, although there can be no assurance that the Company
will ultimately prevail with respect to any such matters.
In November 1996, the Company filed suit against one of its customers,
ENCOTESA, for amounts due and arising under the Company's contracts with
ENCOTESA, the former Argentine national postal service for $7.3 million.
The Company had reclassified the trade account receivables from ENCOTESA
to non-current assets at the estimated net realizable value of $5.1
million as determined by the Company based on the advice of local legal
counsel. Although this matter continues to be negotiated for settlement,
the Company during September 30, 1999 estimated the net realizable value
to be zero and, accordingly, recorded an adjustment of $5.1 million,
which is included within selling, general and administrative expenses in
the accompanying statement of operations.
-F-34-
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
================================================================================
IMPSAT FIBER NETWORKS, INC.,
as Issuer
and
THE BANK OF NEW YORK,
as Trustee, Registrar and Paying Agent
and
BANQUE INTERNATIONALE A LUXEMBOURG S.A.,
as Paying Agent and Transfer Agent
Senior Notes Indenture
Dated as of February 16, 2000
13 3/4% Senior Notes due 2005
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- ------------ ------------------
<S> <C>
Section 310(a)(1)............................................................... 7.10
(a)(2).................................................................. 7.10
(b)..................................................................... 7.08
Section 313(c).................................................................. 7.06; 10.02
Section 314(a).................................................................. 4.19; 10.02
(a)(4).................................................................. 4.18; 10.02
(c)(1).................................................................. 10.03
(c)(2).................................................................. 10.03
(e)..................................................................... 10.04
Section 315(b).................................................................. 7.05; 10.02
Section 316(a)(1)(A)............................................................ 6.05
(a)(1)(B)............................................................... 6.04
(b)..................................................................... 6.07
Section 317(a)(1)............................................................... 6.08
(a)(2).................................................................. 6.09
Section 318(a).................................................................. 10.01
(c)..................................................................... 10.01
</TABLE>
Note: The Cross-Reference Table shall not for any purpose be deemed to be a part
of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
RECITALS OF THE COMPANY.........................................................................................1
ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions......................................................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act...............................................20
SECTION 1.03. Rules of Construction...........................................................................20
ARTICLE TWO THE SECURITIES
SECTION 2.01. Form and Dating.................................................................................21
SECTION 2.02. Restrictive Legends.............................................................................22
SECTION 2.03. Execution, Authentication and Denominations.....................................................24
SECTION 2.04. Registrar and Paying Agent......................................................................25
SECTION 2.05. Paying Agent to Hold Money in Trust.............................................................26
SECTION 2.06. Transfer and Exchange...........................................................................27
SECTION 2.07. Book-Entry Provisions for Global Securities.....................................................27
SECTION 2.08. Special Transfer Provisions.....................................................................29
SECTION 2.09. Replacement Securities..........................................................................32
SECTION 2.10. Outstanding Securities..........................................................................32
SECTION 2.11. Temporary Securities............................................................................33
SECTION 2.12. Cancellation....................................................................................33
SECTION 2.13. CUSIP, CINS and ISIN Numbers....................................................................33
</TABLE>
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of the Indenture.
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 2.14. Defaulted Interest..............................................................................33
SECTION 2.15. Issuance of Additional Securities...............................................................34
ARTICLE THREE REDEMPTION
SECTION 3.01. Right of Redemption.............................................................................34
SECTION 3.02. Notices to Trustee..............................................................................35
SECTION 3.03. Selection of Securities to Be Redeemed..........................................................36
SECTION 3.04. Notice of Redemption............................................................................36
SECTION 3.05. Effect of Notice of Redemption..................................................................37
SECTION 3.06. Deposit of Redemption Price.....................................................................37
SECTION 3.07. Payment of Securities Called for Redemption.....................................................37
SECTION 3.08. Securities Redeemed in Part.....................................................................38
ARTICLE FOUR COVENANTS
SECTION 4.01. Payment of Securities...........................................................................38
SECTION 4.02. Maintenance of Offices or Agencies..............................................................38
SECTION 4.03. Limitation on Indebtedness......................................................................39
SECTION 4.04. Limitation on Restricted Payments...............................................................41
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.......................................................................44
SECTION 4.06. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries.................................................................................45
SECTION 4.07. Limitation on Issuances of Guarantees
by Restricted Subsidiaries..............................................................................45
SECTION 4.08. Limitation on Transactions with Shareholders and Affiliates.....................................46
</TABLE>
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of the Indenture.
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 4.09. Limitation on Liens.............................................................................46
SECTION 4.10. Limitation on Sale-Leaseback Transactions.......................................................47
SECTION 4.11. Limitation on Asset Sales.......................................................................47
SECTION 4.12. Repurchase of Securities upon a Change of Control...............................................48
SECTION 4.13. Existence.......................................................................................49
SECTION 4.14. Payment of Taxes and Other Claims...............................................................49
SECTION 4.15. Maintenance of Properties and Insurance.........................................................49
SECTION 4.16. Notice of Defaults..............................................................................50
SECTION 4.17. Compliance Certificates.........................................................................50
SECTION 4.18. Commission Reports and Reports to Holders.......................................................50
SECTION 4.19. Waiver of Stay, Extension or Usury Laws.........................................................51
ARTICLE FIVE SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc.....................................................................51
SECTION 5.02. Successor Substituted...........................................................................52
ARTICLE SIX DEFAULT AND REMEDIES
SECTION 6.01. Events of Default...............................................................................52
SECTION 6.02. Acceleration....................................................................................54
SECTION 6.03. Other Remedies..................................................................................54
SECTION 6.04. Waiver of Past Defaults.........................................................................55
SECTION 6.05. Control by Majority.............................................................................55
SECTION 6.06. Limitation on Suits.............................................................................55
</TABLE>
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of the Indenture.
<PAGE> 6
<TABLE>
<S> <C> <C>
SECTION 6.07. Rights of Holders to Receive Payment............................................................56
SECTION 6.08. Collection Suit by Trustee......................................................................56
SECTION 6.09. Trustee May File Proofs of Claim................................................................56
SECTION 6.10. Priorities......................................................................................56
SECTION 6.11. Undertaking for Costs...........................................................................57
SECTION 6.12. Restoration of Rights and Remedies..............................................................57
SECTION 6.13. Rights and Remedies Cumulative..................................................................57
SECTION 6.14. Delay or Omission Not Waiver....................................................................57
ARTICLE SEVEN TRUSTEE AND AGENTS
SECTION 7.01. General.........................................................................................58
SECTION 7.02. Certain Rights..................................................................................58
SECTION 7.03. Individual Rights of Trustee....................................................................59
SECTION 7.04. Trustee's Disclaimer............................................................................59
SECTION 7.05. Notice of Default...............................................................................59
SECTION 7.06. Reports by Trustee to Holders...................................................................60
SECTION 7.07. Compensation and Indemnity......................................................................60
SECTION 7.08. Replacement of Trustee..........................................................................60
SECTION 7.09. Successor Trustee by Merger, Etc................................................................61
SECTION 7.10. Eligibility.....................................................................................62
SECTION 7.11. Money Held in Trust.............................................................................62
SECTION 7.12. Withholding Taxes...............................................................................62
</TABLE>
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of the Indenture.
<PAGE> 7
<TABLE>
<S> <C> <C>
ARTICLE EIGHT DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations............................................................62
SECTION 8.02. Defeasance and Discharge of Indenture...........................................................63
SECTION 8.03. Defeasance of Certain Obligations...............................................................65
SECTION 8.04. Application of Trust Money......................................................................67
SECTION 8.05. Repayment to Company............................................................................67
SECTION 8.06. Reinstatement...................................................................................67
SECTION 8.07. Insiders........................................................................................68
ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders......................................................................68
SECTION 9.02. With Consent of Holders.........................................................................68
SECTION 9.03. Revocation and Effect of Consent................................................................69
SECTION 9.04. Notation on or Exchange of Securities...........................................................70
SECTION 9.05. Trustee to Sign Amendments, Etc.................................................................70
SECTION 9.06. Conformity with Trust Indenture Act.............................................................70
ARTICLE TEN MISCELLANEOUS
SECTION 10.01. Trust Indenture Act of 1939....................................................................71
SECTION 10.02. Notices........................................................................................71
SECTION 10.03. Certificate and Opinion as to Conditions Precedent.............................................72
SECTION 10.04. Statements Required in Certificate or Opinion..................................................72
SECTION 10.05. Rules by Trustee, Paying Agent or Registrar....................................................73
</TABLE>
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of the Indenture.
<PAGE> 8
<TABLE>
<S> <C> <C>
SECTION 10.06. Payment Date Other Than a Business Day.........................................................73
SECTION 10.07. Governing Law..................................................................................73
SECTION 10.08. No Adverse Interpretation of Other Agreements..................................................73
SECTION 10.09. No Recourse Against Others.....................................................................73
SECTION 10.10. Successors.....................................................................................74
SECTION 10.11. Duplicate Originals............................................................................74
SECTION 10.12. Currency Indemnity. ..........................................................................74
SECTION 10.13. Currency Translations..........................................................................74
SECTION 10.14. Table of Contents, Headings, Etc...............................................................74
</TABLE>
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of the Indenture.
<PAGE> 9
<TABLE>
<S> <C>
EXHIBIT A Form of Security.........................................................................................A-1
EXHIBIT B Form of Certificate......................................................................................B-1
EXHIBIT C Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S.....................................................................C-1
EXHIBIT D Form of Certificate to be Delivered in Connection with
Transfers to Non-QIB Accredited Investors..............................................................D-1
</TABLE>
<PAGE> 10
INDENTURE, dated as of February 16, 2000, among IMPSAT FIBER
NETWORKS, INC., a Delaware corporation, as issuer (the "Company"), THE BANK OF
NEW YORK, as trustee, registrar and paying agent (the "Trustee") and BANQUE
INTERNATIONALE A LUXEMBOURG S.A., as paying agent and transfer agent.
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance initially of up to $300,000,000 aggregate
principal amount of the Company's 13 3/4% Senior Notes due 2005 (the
"Securities") issuable as provided herein. All things necessary to make this
Indenture a valid agreement of the Company, in accordance with its terms, have
been done, and the Company has done all things necessary to make the Securities,
when executed by the Company and authenticated and delivered by the Trustee
hereunder and duly issued by the Company, the valid obligations of the Company
as hereinafter provided.
This Indenture is subject to, and shall be governed by, the
provisions of the Trust Indenture Act of 1939, as amended, that are required to
be a part of and to govern indentures qualified under the Trust Indenture Act of
1939, as amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person existing at
the time such Person becomes a Restricted Subsidiary or assumed in connection
with an Asset Acquisition by a Restricted Subsidiary and not Incurred in
connection with, or in anticipation of, such Person becoming a Restricted
Subsidiary or such Asset Acquisition.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined in conformity with GAAP; provided that the following
items shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income (or loss) of any Person that is not a
Restricted Subsidiary, except (x) with respect to net income, to the extent of
the amount of dividends or other distributions actually paid to the Company or
any of its Restricted Subsidiaries by such Person during such period and (y)
with respect to net losses, to the extent of the amount of Investments made by
the Company or any Restricted Subsidiary in such Person during such period; (ii)
solely for the purposes of calculating the amount of Restricted Payments that
may be made pursuant to clause (C) of the first paragraph of Section
<PAGE> 11
2
4.04 (and in such case, except to the extent includable pursuant to clause (i)
above), the net income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or any of its Restricted Subsidiaries or all or substantially all of the
property and assets of such Person are acquired by the Company or any of its
Restricted Subsidiaries; (iii) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by such Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such Restricted Subsidiary; (iv) any gains or losses (on an after-tax basis)
attributable to Asset Sales; (v) except for purposes of calculating the amount
of Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of Section 4.04, any amount paid or accrued as dividends on Preferred
Stock of the Company or any Restricted Subsidiary owned by Persons other than
the Company and any of its Restricted Subsidiaries; (vi) all extraordinary gains
and extraordinary losses; and (vii) any compensation expense paid or payable
solely with Capital Stock (other than Disqualified Stock) of the Company or any
options, warrants or other rights to acquire Capital Stock (other than
Disqualified Stock) of the Company.
"Adjusted Consolidated Net Tangible Assets" means the total amount
of assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission or provided to
the Trustee pursuant to Section 4.18.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent, authenticating agent or
co-Registrar.
"Agent Members" has the meaning provided in Section 2.07(a).
"Asset Acquisition" means (i) an investment by the Company or any
of its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged into or consolidated
with the Company or any of its Restricted Subsidiaries; provided that such
Person's primary business is related, ancillary or
<PAGE> 12
3
complementary to the businesses of the Company and its Restricted Subsidiaries
on the date of such investment or (ii) an acquisition by the Company or any of
its Restricted Subsidiaries of the property and assets of any Person other than
the Company or any of its Restricted Subsidiaries that constitute substantially
all of a division or line of business of such Person; provided that the property
and assets acquired are related, ancillary or complementary to the businesses of
the Company and its Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary) of (i) all or substantially all of the Capital
Stock of any Restricted Subsidiary or (ii) all or substantially all of the
assets that constitute a division or line of business of the Company or any of
its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transaction) in one
transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person other than the Company or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets (other than the Capital Stock of, or
other Investment in, an Unrestricted Subsidiary) of the Company or any of its
Restricted Subsidiaries outside the ordinary course of business of the Company
or such Restricted Subsidiary and, in each case, that is not governed by the
provisions of Article Five; provided that "Asset Sale" shall not include (a)
sales or other dispositions of equipment that has become obsolete or no longer
useful in the business of the Company or its Restricted Subsidiaries or
inventory, receivables and other current assets, (b) sales, transfers or other
dispositions of assets constituting a Restricted Payment permitted to be made
under Section 4.04, (c) sales, transfers or other dispositions of assets with a
fair market value (as certified in an Officers' Certificate) not in excess of $1
million in any transaction or series of related transactions, (d) sales or other
dispositions of assets for consideration at least equal to the fair market value
of the assets sold or disposed of, to the extent that the consideration received
would constitute property or assets of the kind described in clause (B) of
Section 4.11 or (e) issuances and sales of Common Stock of Restricted
Subsidiaries in accordance with clauses (i), (iii) or (v) of the second
paragraph of Section 4.06.
"Average Life" means, at any date of determination with respect to
any debt security, the quotient obtained by dividing (i) the sum of the products
of (a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Bank" means Banco Rio de la Plata S.A. and any other party that
the Board of Directors has determined does not present any material credit risk.
<PAGE> 13
4
"Board of Directors" means, with respect to any Person, the Board
of Directors of such Person or any committee of such Board of Directors duly
authorized to act with respect to this Indenture.
"Board Resolution" means, with respect to any Person, a copy of a
resolution, certified by the Secretary or Assistant Secretary of such Person to
have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in The City of New York, or in the city of the
Corporate Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether outstanding on
the Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value
of the rental obligations under a Capitalized Lease.
"Certificates of Deposit" has the meaning provided in the
definition of Intermediary Documents.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes
the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of Voting Stock representing more than 30% of the total voting power of the
Voting Stock of the Company on a fully diluted basis and such ownership
represents a greater percentage of the total voting power of the Voting Stock of
the Company, on a fully diluted basis, than is held by the Existing Stockholders
on such date; or (ii) individuals who on the Closing Date constitute the Board
of Directors (together with any new directors whose election by the Board of
Directors or whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the Board of
Directors then in office who either were members of the Board of Directors on
the Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
Board of Directors then in office.
"Closing Date" means the date on which the Securities are
originally issued under this Indenture.
<PAGE> 14
5
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all series and classes of such common stock.
"Company" means the party named as such in the first paragraph of
this Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in the
name of the Company (i) by its Chairman, a Vice Chairman, its President or a
Vice President and (ii) by its Chief Financial Officer, Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee;
provided, however, that such written request or order may be signed by any two
of the officers or directors listed in clause (i) above in lieu of being signed
by one of such officers or directors listed in such clause (i) and one of the
officers listed in clause (ii) above.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated
Net Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) income taxes (other than income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
sales of assets) and the portion of any other tax payable as a result of
generating income before taxes, (iii) depreciation expense, (iv) amortization
expense and (v) all other non-cash items reducing Adjusted Consolidated Net
Income (other than items that will require cash payments and for which an
accrual or reserve is, or is required by GAAP to be, made), less all non-cash
items increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for the Company and its Restricted Subsidiaries in conformity
with GAAP; provided that, if any Restricted Subsidiary is not a Wholly-Owned
Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not
otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount
of the Adjusted Consolidated Net Income attributable to such Restricted
Subsidiary multiplied by (B) the percentage ownership interest in the income of
such Restricted Subsidiary not owned on the last day of such period by the
Company or any of its Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness (including, without
limitation, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Agreements;
and interest paid or
<PAGE> 15
6
accrued (by any Person) on Indebtedness that is Guaranteed or secured by the
Company or any of its Restricted Subsidiaries) and all but the principal
component of rentals in respect of Capitalized Lease Obligations paid, accrued
or scheduled to be paid or to be accrued by the Company and its Restricted
Subsidiaries during such period; excluding, however, (i) any amount of such
interest of any Restricted Subsidiary if the net income of such Restricted
Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income
pursuant to clause (iii) of the definition thereof (but only in the same
proportion as the net income of such Restricted Subsidiary is excluded from the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof) and (ii) any premiums, fees and expenses (and any
amortization thereof) payable in connection with the offering of the Securities,
the offering of the 12_% Senior Guaranteed Notes due 2003, and the offering of
the 12_% Senior Notes due 2008 all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with GAAP.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the quarterly or annual consolidated
balance sheet of the Company and its Restricted Subsidiaries most recently filed
with the Commission or provided to the Trustee pursuant to Section 4.18, less
the amount of stockholders' equity attributable to Unrestricted Subsidiaries and
any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Corporate Trust Office" means the office of the Trustee at which
the corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date hereof, located at 101
Barclay Street, Floor 21 West, New York, New York 10286.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees, and
their respective successors.
"Disqualified Stock" means any class or series of Capital Stock of
any Person that by its terms or otherwise is (i) required to be redeemed prior
to the Stated Maturity of the Securities, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Securities or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Securities; provided that any
Capital Stock that would not
<PAGE> 16
7
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require such Person to repurchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of control" occurring prior to the
Stated Maturity of the Securities shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are no more favorable to the holders of such Capital Stock than the provisions
in favor of Holders that are contained in Section 4.11 and Section 4.12 and such
Capital Stock, or the agreements or instruments governing the redemption rights
thereof, specifically provides that such Person will not repurchase or redeem
any such stock pursuant to such provision prior to the Company's repurchase of
such Securities as are required to be repurchased pursuant to Section 4.11 and
Section 4.12.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.11.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Securities" means any securities of the Company
containing terms identical to the Securities (except that such Exchange
Securities (i) shall be registered under the Securities Act, (ii) will not
provide for an increase in the rate of interest (other than with respect to
overdue amounts) and (iii) will not contain terms with respect to transfer
restrictions) that are issued and exchanged for the Securities pursuant to the
Registration Rights Agreement and this Indenture.
"Existing Stockholders" means (i) Mr. Enrique Pescarmona, Mrs.
Silvia Monica Pescarmona de Baldini, Mrs. Liliana Pescarmona de Mayol, Mr.
Roberto Vivo and Mr. Ricardo Verdaguer, (ii) a parent, brother or sister of any
of the individuals named in clause (i), (iii) the spouse of any individual named
in clause (i) or (ii), (iv) the lineal descendants of any person named in
clauses (i) through (iii), (v) the estate or any guardian, custodian or other
legal representative of any individual named in clauses (i) through (iv), (vi)
any trust established solely for the benefit of any one or more of the
individuals named in clauses (i) through (v), (vii) any Person in which all of
the equity interests are owned, directly or indirectly, by any one or more of
the Persons named in clauses (i) through (vi) or clauses (viii), (ix) or (xii),
(viii) Nevasa Holdings Ltd., (ix) Corporacion IMPSA, S.A., (x) Princes Gate
Investors II, L.P., (xi) Morgan Stanley Global Emerging Markets Private
Investment Fund, L.P., (xii) British Telecommunications plc and (xiii) any
Affiliate of either of the Persons named in clauses (x), (xi) or (xii).
"fair market value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to buy,
as determined in good faith by the Board of Directors, whose determination shall
be conclusive if evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of determination,
including, without limitation, those set forth
<PAGE> 17
8
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to
herein shall be computed in conformity with GAAP applied on a consistent basis,
except that calculations made for purposes of determining compliance with the
terms of the covenants and with other provisions of this Indenture shall be made
without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the Securities, the offering of the 12_% Senior
Guaranteed Notes due 2003 and the offering of the 12_% Senior Notes due 2008,
(ii) except as otherwise provided, the amortization of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17 and (iii) any
nonrecurring charges associated with the adoption, after the Closing Date, of
Financial Accounting Standard Nos. 106 and 109.
"Global Securities" has the meaning provided in Section 2.01.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services (unless such purchase arrangements are on
arm's-length terms and are entered into in the ordinary course of business), to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for purposes of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guaranteed Indebtedness" has the meaning provided in Section
4.07.
"Holder" or "Securityholder" means the then registered holder of
any Security.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including, with respect to the Company and its Restricted
Subsidiaries, an "Incurrence" of Acquired Indebtedness; provided that neither
the accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
<PAGE> 18
9
reimbursement obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following such drawing), (iv) all obligations of such Person to pay the deferred
and unpaid purchase price of property or services, which purchase price is due
more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services, except
Trade Payables, (v) all Capitalized Lease Obligations of such Person, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; provided that the
amount of such Indebtedness shall be the lesser of (A) the fair market value of
such asset at such date of determination and (B) the amount of such
Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such Person
to the extent such Indebtedness is Guaranteed by such Person and (viii) to the
extent not otherwise included in this definition, obligations under Currency
Agreements and Interest Rate Agreements. The amount of Indebtedness of any
Person at any date shall be (without duplication) the outstanding balance at
such date of all unconditional obligations as described above and, with respect
to contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation (unless the underlying contingency has
not occurred and the occurrence of the underlying contingency is entirely within
the control of the Company or its Restricted Subsidiaries), provided (A) that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the original issue price of such Indebtedness, (B) that money
borrowed and set aside at the time of the Incurrence of any Indebtedness in
order to prefund the payment of the interest on such Indebtedness shall not be
deemed to be "Indebtedness" and (C) that Indebtedness shall not include any
liability for federal, state, local or other taxes.
"Indebtedness to EBITDA Ratio" means, on any Transaction Date, the
ratio of (i) the aggregate amount of Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis outstanding on such Transaction
Date to (ii) the aggregate amount of Consolidated EBITDA for the then most
recent four fiscal quarters for which financial statements of the Company have
been filed with the Commission or provided to the Trustee pursuant to Section
4.18 (such four fiscal quarter period being the "Four Quarter Period"); provided
that, in making the foregoing calculation, (A) pro forma effect shall be given
to any Indebtedness to be Incurred or repaid on the Transaction Date; (B) pro
forma effect shall be given to Asset Dispositions and Asset Acquisitions
(including giving pro forma effect to the application of proceeds of any Asset
Disposition) that occur from the beginning of the Four Quarter Period through
the Transaction Date (the "Reference Period"), as if they had occurred and such
proceeds had been applied on the first day of such Reference Period; and (C) pro
forma effect shall be given to asset dispositions and asset acquisitions
(including giving pro forma effect to the application of proceeds of any asset
disposition) that have been made by any Person that has become a Restricted
Subsidiary or has been merged with or into the Company or any Restricted
Subsidiary during such Reference Period and that would have constituted Asset
Dispositions or Asset Acquisitions had such transactions occurred when such
Person was a Restricted Subsidiary as if such asset dispositions or asset
acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the
first day of such Reference Period; provided that to
<PAGE> 19
10
the extent that clause (B) or (C) of this sentence requires that pro forma
effect be given to an Asset Acquisition or Asset Disposition, such pro forma
calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business of
the Person, that is acquired or disposed of for which financial information is
available.
"Indenture" means this Indenture as originally executed or as it
may be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Institutional Accredited Investor" means an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act.
"Intelsat" has the meaning provided in the definition of Permitted
Investment.
"Interest Payment Date" means each semiannual interest payment
date on February 15 and August 15 of each year, commencing August 15, 2000.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement, option or future contract or other
similar agreement or arrangement.
"Intermediary Documents" means documents relating to the issuance
of one or more Certificates of Deposit (the "Certificates of Deposit") by the
Issuer to the Company, the issuance of one or more promissory notes (having a
principal amount equal to the principal amount of the Certificate of Deposit
(the "Promissory Notes")) by any Restricted Subsidiary to the Bank and the
Guarantees of the Promissory Notes by the Company.
"Investment" in any Person means any direct or indirect advance,
loan or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers (other
than Unrestricted Subsidiaries of the Company) and accounts payable to suppliers
in the ordinary course of business that are, in conformity with GAAP, recorded
as accounts receivable or accounts payable, as the case may be, on the balance
sheet of the Company or its Restricted Subsidiaries and Trade Payables) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall include
(i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and
(ii) the fair market value of the Capital Stock (or any other Investment), held
by the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary, including without limitation, by
reason of any transaction permitted by clause (iii) of Section 4.06. For
purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i)
"Investment" shall include the fair market value of the assets (net of
liabilities, other than liabilities to the Company
<PAGE> 20
11
or any of its Restricted Subsidiaries) of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii)
the fair market value of the assets (net of liabilities, other than liabilities
to the Company or any of its Restricted Subsidiaries) of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary shall be considered a reduction in outstanding Investments
and (iii) any property transferred to or from an Unrestricted Subsidiary shall
be valued at its fair market value at the time of such transfer.
"Issuer" means the Cayman Islands branch of the Bank or any other
party that the Board of Directors has determined does not present any material
credit risk.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller, or any agreement to
give any security interest), but excluding any right of first refusal.
"Moody's" means Moody's Investor Service, Inc. and its successors.
"Net Cash Proceeds" means (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent corresponding
to the principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are financed
or sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness
outstanding at the time of such Asset Sale that either (A) is secured by a Lien
on the property or assets sold or (B) is required to be paid as a result of such
sale and (iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary as a reserve against any liabilities associated with such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale, all as determined in conformity with GAAP and (b) with respect to any
issuance or sale of Capital Stock, the proceeds of such issuance or sale, in the
form of cash or cash equivalents, including payments in respect of deferred
payment obligations (to the extent corresponding to the principal, but not
interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorney's fees, accountants' fees, underwriters' or
placement agent fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
<PAGE> 21
12
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Offer to Purchase" means an offer to purchase Securities by the
Company from the Holders commenced by mailing a notice to the Trustee and each
Holder stating: (i) the covenant pursuant to which the offer is being made and
that all such Securities validly tendered will be accepted for payment on a pro
rata basis; (ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed) (the "Payment Date"); (iii) that any such Security not
tendered will continue to accrue interest pursuant to its terms; (iv) that,
unless the Company defaults in the payment of the purchase price, any Security
accepted for payment pursuant to the Offer to Purchase shall cease to accrue
interest on and after the Payment Date; (v) that Holders electing to have such
Security purchased pursuant to the Offer to Purchase will be required to
surrender the Security, together with the form entitled "Option of the Holder to
Elect Purchase" on the reverse side of the Security completed, to the Paying
Agent at the address specified in the notice prior to the close of business on
the Business Day immediately preceding the Payment Date; (vi) that Holders will
be entitled to withdraw their election if the Paying Agent receives, not later
than the close of business on the third Business Day immediately preceding the
Payment Date, a telegram, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Securities delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Securities purchased; and (vii) that Holders whose Securities are being
purchased only in part will be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered; provided that each
Security purchased and each new Security issued shall be in a principal amount
of $1,000 or an integral multiple thereof. On the Payment Date, the Company
shall (i) accept for payment on a pro rata basis Securities or portions thereof
tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Securities or portions thereof
so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all
Securities or portions thereof so accepted together with an Officers'
Certificate specifying the Securities or portions thereof accepted for payment
by the Company. The Paying Agent shall promptly mail to the Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Security
equal in principal amount to any unpurchased portion of the Security
surrendered; provided that each Security purchased and each new Security issued
shall be in a principal amount of $1,000 or an integral multiple thereof. The
Company will publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying Agent
for an Offer to Purchase. The Company will comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that the Company
is required to repurchase Securities pursuant to an Offer to Purchase.
"Officer" means with respect to any Person, (i) the Chairman of
the Board, the Vice Chairman of the Board, the President, any Vice President,
the Chief Financial Officer, and (ii) the Treasurer or any Assistant Treasurer,
or the Secretary or any Assistant Secretary.
<PAGE> 22
13
"Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof; provided, however, that any such certificate may
be signed by any two of the Officers listed in clause (i) of the definition
thereof in lieu of being signed by one Officer listed in clause (i) of the
definition thereof and one Officer listed in clause (ii) of the definition
thereof. Each Officers' Certificate (other than certificates provided pursuant
to TIA Section 314(a)(4)) shall include the statements provided for in TIA
Section 314(e).
"Offshore Global Security" has the meaning provided in Section
2.01.
"Offshore Physical Securities" has the meaning provided in Section
2.01.
"Opinion of Counsel" means a written opinion signed by legal
counsel who may be an employee of or counsel to the Company. Each such Opinion
of Counsel shall include the statements provided for in TIA Section 314(e).
"Paying Agent" has the meaning provided in Section 2.04, except
that, for the purposes of Article Eight, the Paying Agent shall not be the
Company or a Subsidiary of the Company or an Affiliate of any of them. The term
"Paying Agent" includes any additional Paying Agent.
"Payment Date" has the meaning provided in the definition of
"Offer to Purchase."
"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such Person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; (iv) loans or advances to employees made in the
ordinary course of business in accordance with past practice of the Company or
its Restricted Subsidiaries and that do not in the aggregate exceed $1 million
at any time outstanding; (v) stock, obligations or securities received in
satisfaction of judgments, work-outs or similar arrangements; (vi) Investments,
in an aggregate amount at any one time outstanding not to exceed $30 million in
Common Stock of the International Telecommunications Satellite Organization
("Intelsat"); (vii) participations in Indebtedness of any Restricted Subsidiary
permitted to be Incurred by clause (xii) of the second paragraph of Section
4.03; and (viii) Investments consisting of one or more Certificates of Deposit,
having an aggregate principal amount not to exceed the aggregate principal
amount of the Promissory Notes then outstanding; provided that (1) upon making
any such Investment after the Closing Date, 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 Closing Date, (2) the
Stated Maturity of each such Certificate of Deposit shall be the same as a
Promissory Note of equal
<PAGE> 23
14
principal amount and (3) at the time that any Investment in any Certificate of
Deposit is made the Company shall deliver an Officer's Certificate to the
Trustee to the effect that (A) the Bank and the Issuer are not under
intervention, receivership or any similar arrangement or proceeding and (B) the
Company does not have any reason to believe there is a material possibility that
the Bank or the Issuer may be subject to intervention, receivership or any
similar arrangement or proceeding.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (ii) statutory and common law
Liens of landlords and carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen or other similar Liens arising in the ordinary course of
business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate legal proceedings promptly instituted and diligently
conducted and for which a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made; (iii) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, bankers'
acceptances, surety and appeal bonds, contracts (other than for Indebtedness),
performance and return-of-money bonds and other obligations of a similar nature
incurred in the ordinary course of business (exclusive of obligations for the
payment of borrowed money) and any bank's unexercised right of setoff with
respect to deposits made in the ordinary course of business of the Company or
any Restricted Subsidiary; (v) easements, rights-of-way, municipal and zoning
ordinances and similar charges, encumbrances, title defects or other
irregularities that do not materially interfere with the ordinary course of
business of the Company or any of its Restricted Subsidiaries; (vi) Liens
(including extensions and renewals thereof) upon real or personal property
acquired after the Closing Date; provided that (a) such Lien is created solely
for the purpose of securing Indebtedness Incurred, in accordance with Section
4.03, (1) to finance the cost (including the cost of design, development,
acquisition, construction, installation, improvement, transportation or
integration) of the item of property or assets subject thereto and such Lien is
created prior to, at the time of or within six months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (2) to refinance any Indebtedness previously so
secured, (b) the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost and (c) any such Lien shall not extend to or cover
any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property
or assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Subsidiaries relating to such property
or assets; (ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (x) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xi) Liens on property
of, or on shares of Capital Stock or Indebtedness of, any Person existing at the
time such Person becomes, or becomes a part of, any Restricted Subsidiary;
provided that such Liens do not extend to or cover any property or assets
<PAGE> 24
15
of the Company or any Restricted Subsidiary other than the property or assets
acquired; (xii) Liens in favor of the Company or any Restricted Subsidiary;
(xiii) Liens arising from the rendering of a final judgment or order against the
Company or any Restricted Subsidiary that does not give rise to an Event of
Default; (xiv) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (xv) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (xvi) Liens encumbering
customary initial deposits and margin deposits, and other Liens that are within
the general parameters customary in the industry and incurred in the ordinary
course of business, in each case, securing Indebtedness under Interest Rate
Agreements, Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed solely
to protect the Company or any of its Restricted Subsidiaries from fluctuations
in interest rates, currencies or the price of commodities; (xvii) Liens arising
out of conditional sale, title retention, consignment or similar arrangements
for the sale of goods entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business in accordance with the past
practices of the Company and its Restricted Subsidiaries prior to the Closing
Date; (xviii) Liens on or sales of receivables; and (xix) Liens that secure
Indebtedness with an aggregate principal amount not in excess of $5 million at
any time outstanding.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Physical Securities" has the meaning provided in Section 2.01.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
whether now outstanding or issued after the date of this Indenture, including,
without limitation, all series and classes of such preferred or preference
stock.
"principal" of a debt security, including the Securities, means
the principal amount due on the Stated Maturity as shown on such debt security.
"Private Placement Legend" means the legend initially set forth on
the Securities in the form set forth in Section 2.02(a).
"Promissory Notes" has the meaning provided for in the definition
of Intermediary Documents.
"Public Equity Offering" means an underwritten primary public
offering of Common Stock of the Company pursuant to an effective registration
statement under the Securities Act.
<PAGE> 25
16
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Redemption Date" means, when used with respect to any Security to
be redeemed, the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price" means, when used with respect to any Security
to be redeemed, the price at which such Security is to be redeemed pursuant to
this Indenture.
"Registrar" has the meaning provided in Section 2.04.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of February 16, 2000, between the Company and Morgan Stanley
& Co. Incorporated.
"Registration Statement" means the Registration Statement as
defined and described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the February 1 or August 1(whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee,
means any vice president, any assistant vice president, any assistant secretary,
any assistant treasurer, and any trust officer or assistant trust officer
employed in the conduct of the Trustee's corporate trust business, or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his or her knowledge of and familiarity with the particular
subject.
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" means any of the securities, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered under
this Indenture. For all purposes of this Indenture, the term "Securities" shall
include any Exchange Securities to be issued and exchanged for any Securities
pursuant to the Registration Rights Agreement and this Indenture and, for
purposes of this Indenture, all Securities and Exchange Securities shall vote
together as one series of Securities under this Indenture.
"Securities Act" means the Securities Act of 1933.
<PAGE> 26
17
"Security Register" has the meaning provided in Section 2.04.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined and described in the Registration Rights Agreement.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the consolidated financial statements of the Company for the fiscal
year most recently filed pursuant to Section 4.18.
"S&P" means Standard & Poor's Ratings Services and its successors.
"Stated Maturity" means (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Strategic Subordinated Indebtedness" means Indebtedness of the
Company Incurred to finance the acquisition of a Person engaged in a business
that is related, ancillary or complementary to the business conducted by the
Company or any of its Restricted Subsidiaries, which Indebtedness by its terms,
or by the terms of any agreement or instrument pursuant to which such
Indebtedness is Incurred, (i) is expressly made subordinate in right of payment
to the Securities and (ii) provides that no payment in cash or assets of the
Company or any Restricted Subsidiaries of principal, premium or interest on, or
any other payment with respect to, such Indebtedness may be made prior to the
payment in full of all of the Company's obligations under the Securities;
provided that such Indebtedness may provide for and be repaid at any time from
the proceeds of a capital contribution or the sale of Capital Stock (other than
Disqualified Stock) of the Company after the Incurrence of such Indebtedness.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which Voting Stock representing more
than 50% of the total voting power of the outstanding Voting Stock is owned,
directly or indirectly, by such Person and one or more other Subsidiaries of
such Person.
"Subsidiary Guarantee" has the meaning provided in Section 4.07.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within one year of the date of
<PAGE> 27
18
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America, and which bank or trust
company has capital, surplus and undivided profits aggregating in excess of $50
million (or the foreign currency equivalent thereof) and has outstanding debt
which is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act) or any money market fund sponsored by a registered
broker dealer or mutual fund distributor, (iii) repurchase obligations with a
term of not more than 30 days for underlying securities of the types described
in clause (i) above entered into with a bank meeting the qualifications
described in clause (ii) above, (iv) commercial paper, maturing not more than
one year after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P, (v) securities with maturities of six months or
less from the date of acquisition issued or fully and unconditionally guaranteed
by any state, commonwealth or territory of the United States of America, or by
any political subdivision or taxing authority thereof, and rated at least "A" by
S&P or Moody's, (vi) certificates of deposit maturing not more than one year
after the acquisition thereof by a Restricted Subsidiary and issued by any of
the ten largest banks (based on assets as of the last December 31) organized
under the laws of the country in which the Restricted Subsidiary that acquires
such certificates of deposit is organized, provided that such bank is not under
intervention, receivership or any similar arrangement at the time of the
acquisition of such certificates of deposit and (vii) direct obligations of the
government of Japan made to facilitate a reduction in withholding taxes;
provided that the Company takes adequate steps in the opinion of its chief
financial officer to hedge any currency risk associated therewith.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb), as in effect on the date
this Indenture was executed, except as provided in Section 9.06.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services and required to be paid within one year.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Trustee" means the party named as such in the first paragraph of
this Indenture until a successor replaces it in accordance with the provisions
of Article Seven of this Indenture and thereafter means such successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in
<PAGE> 28
19
the manner provided below; and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Restricted Subsidiary
(including any newly acquired or newly formed Subsidiary of the Company) to be
an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, the Company or any Restricted
Subsidiary; provided that (A) any Guarantee by the Company or any Restricted
Subsidiary of any Indebtedness of the Subsidiary being so designated shall be
deemed an "Incurrence" of such Indebtedness by the Company or such Restricted
Subsidiary (or both, if applicable) at the time of such designation; (B) either
(I) the Subsidiary to be so designated has total assets of $1,000 or less or
(II) if such Subsidiary has assets greater than $1,000, such designation would
be permitted under Section 4.04; and (C) if applicable, the Incurrence of
Indebtedness would be permitted under this Indenture. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that immediately after giving effect to such designation (x) the Company could
Incur $1.00 of additional Indebtedness under the first paragraph of Section 4.03
and (y) no Default or Event of Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"United States Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as amended and as codified in Title 11 of the United States Code, as
amended from time to time hereafter, or any successor federal bankruptcy law.
"U.S. Global Security" has the meaning provided in Section 2.01.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Securities, and shall also include a depository
receipt issued by a bank or trust company as custodian with respect to any such
U.S. Government Obligation or a specific payment of interest on or principal of
any such U.S. Government Obligation held by such custodian for the account of
the holder of a depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of interest on or principal of the U.S. Government Obligation evidenced by such
depository receipt.
"U.S. Person" has the meaning ascribed thereto in Rule 902 under
the Securities Act.
"U.S. Physical Securities" has the meaning provided in Section
2.01.
<PAGE> 29
20
"Voting Stock" means with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Wholly-Owned" means, with respect to any Subsidiary of any
Person, the ownership of all of the outstanding Capital Stock of such Subsidiary
(other than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly-Owned
Subsidiaries of such Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used herein have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used herein that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein", "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other subdivision; and
<PAGE> 30
21
(vii) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating. The Securities and the Trustee's
certificate of authentication shall be substantially in the form annexed hereto
as Exhibit A. The Securities may have notations, legends or endorsements
required by law, stock exchange agreements to which the Company is subject or
usage. The Company shall approve the form of the Securities and any notation,
legend or endorsement on the Securities. Each Security shall be dated the date
of its authentication.
The terms and provisions contained in the form of the Securities
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. Each of the Company and the Trustee, by its execution
and delivery of this Indenture, expressly agrees to the terms and provisions of
the Securities applicable to it and to be bound thereby.
Securities offered and sold in reliance on Rule 144A shall be
issued in the form of one or more permanent global Securities in registered
form, substantially in the form set forth in Exhibit A (collectively, the "U.S.
Global Security"), deposited with the Trustee, as custodian for the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the U.S. Global Security may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Securities offered and sold in offshore transactions in reliance
on Regulation S shall be issued in the form of one or more global Securities in
registered form substantially in the form set forth in Exhibit A (collectively,
the "Offshore Global Security") deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Offshore Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Securities offered and sold to Institutional Accredited Investors
which are not QIBs (excluding Non-U.S. Persons) shall be issued in the form of
permanent certificated Securities in registered form in substantially the form
set forth in Exhibit A (the "U.S. Physical Securities"). Securities issued
pursuant to Section 2.07 in exchange for interests in the Offshore Global
Security shall be in the form of permanent certificated Securities in registered
form substantially in the form set forth in Exhibit A (the "Offshore Physical
Securities").
The Offshore Physical Securities and U.S. Physical Securities are
sometimes collectively herein referred to as the "Physical Securities". The U.S.
Global Security and the Offshore Global Security are sometimes referred to as
the "Global Securities".
<PAGE> 31
22
The definitive Securities shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Securities may be listed, all as determined by the Officers executing such
Securities, as evidenced by their execution of such Securities.
SECTION 2.02. Restrictive Legends. (a) Unless and until a Security
is exchanged for an Exchange Security or sold in connection with an effective
Registration Statement pursuant to the Registration Rights Agreement, (i) the
U.S. Global Security and each U.S. Physical Security shall bear the legend set
forth below on the face thereof and (ii) the Offshore Physical Securities and
the Offshore Global Security shall bear the legend set forth below on the face
thereof until at least 41 days after the Closing Date and receipt by the Company
and the Trustee of a certificate substantially in the form of Exhibit B hereto:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT,
WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES
ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES AT THE
TIME OF TRANSFER OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
<PAGE> 32
23
TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE
AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
(b) Each Global Security, whether or not an Exchange
Security, shall also bear the following legend on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
<PAGE> 33
24
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO THE DEPOSITORY TRUST COMPANY OR
NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE
WITH THE RESTRICTIONS SET FORTH IN SECTION 2.08 OF THE INDENTURE.
SECTION 2.03. Execution, Authentication and Denominations. Subject
to Article Four and applicable law, the aggregate principal amount of Securities
which may be authenticated and delivered under this Indenture is unlimited. The
Securities shall be executed by two Officers of the Company. The signature of
these Officers on the Notes may be by facsimile or manual signature in the name
and on behalf of the Company.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee or authenticating agent authenticates the
Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee or authenticating agent manually signs the certificate of authentication
on the Security. The signature shall be conclusive evidence that the Security
has been authenticated under this Indenture.
At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Securities in the aggregate
principal amount specified in such Company Order; provided that the Trustee
shall receive an Officers' Certificate and an Opinion of Counsel of the Company
in connection with such authentication of Securities. The Opinion of Counsel
shall be to the effect that:
(a) the form and terms of such Securities have been established
by or pursuant to a Board Resolution or, if applicable, an indenture
supplemental hereto in conformity with the provisions of this Indenture;
(b) such supplemental indenture, if any, when executed and
delivered by the Company and the Trustee, will constitute a valid and
binding obligation of the Company;
(c) such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and binding obligations of the Company in accordance with their terms and
will be entitled to the benefits of this Indenture, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar
<PAGE> 34
25
laws of general applicability relating to or affecting creditors' rights
and to general equitable principles; and
(d) the Company has been duly incorporated in, and is a validly
existing corporation in good standing under the laws of, the State of
Delaware.
Such Company Order shall specify the amount of Securities to be authenticated
and the date on which the original issue of Securities is to be authenticated
and, in the case of an issuance of Securities pursuant to Section 2.15, shall
certify that such issuance is in compliance with Article Four.
The Trustee may appoint an authenticating agent to authenticate
Securities. An authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such authenticating agent. An authenticating
agent has the same rights as an Agent to deal with the Company or an Affiliate
of the Company.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 in principal amount and any integral
multiple of $1,000 in excess thereof.
SECTION 2.04. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar"), an office or agency where
Securities may be presented for payment (the "Paying Agent") and an office or
agency where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served, which shall be in the Borough of
Manhattan, The City of New York. In addition, so long as the Securities are
listed on the Luxembourg Stock Exchange and the Luxembourg Stock Exchange so
requires, there will be a Paying Agent and transfer agent in Luxembourg where
Securities may be presented for registration of transfer or for exchange and
where Securities may be presented for payment. The Company initially appoints
Banque Internationale a Luxembourg as such Paying Agent and transfer agent in
Luxembourg. The Company shall cause the Registrar to keep a register of the
Securities and of their transfer and exchange (the "Security Register"). The
Company may have one or more co-Registrars and one or more additional Paying
Agents.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Company fails to maintain a
Registrar, Paying Agent and/or agent for service of notices and demands, the
Trustee shall act as such Registrar, Paying Agent and/or agent for service of
notices and demands for so long as such failure shall continue and shall be
entitled to compensation therefor pursuant to Section 7.07. The Company may
remove any Agent upon written notice to such Agent and the Trustee; provided
that no such removal shall become effective until (i) the acceptance of an
appointment by a successor Agent to such Agent as evidenced by an appropriate
agency
<PAGE> 35
26
agreement entered into by the Company and such successor Agent and delivered to
the Trustee or (ii) notification to the Trustee that the Trustee shall serve as
such Agent until the appointment of a successor Agent in accordance with clause
(i) of this proviso. The Company, any Subsidiary of the Company, or any
Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar,
and/or agent for service of notice and demands; provided, however, that neither
the Company, a Subsidiary of the Company nor an Affiliate of any of them shall
act as Paying Agent in connection with the defeasance of the Securities or the
discharge of this Indenture under Article Eight.
The Company initially appoints the Trustee as Registrar, Paying
Agent, authenticating agent and agent for service of notice and demands. If, at
any time, the Trustee is not the Registrar, the Registrar shall make available
to the Trustee before each Interest Payment Date and at such other times as the
Trustee may reasonably request, the names and addresses of the Holders as they
appear in the Security Register.
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later than
11:00 a.m. New York City time on each due date of the principal, premium, if
any, and interest on any Securities, the Company shall deposit with the Trustee
money in immediately available funds sufficient to pay such principal, premium,
if any, and interest so becoming due. The Company shall require each Paying
Agent, if any, other than the Trustee to agree in writing that such Paying Agent
shall hold in trust for the benefit of the Holders or the Trustee all money held
by the Paying Agent for the payment of principal of, premium, if any, and
interest on the Securities (whether such money has been paid to it by the
Company or any other obligor on the Securities), and that such Paying Agent
shall promptly notify the Trustee in writing of any default by the Company (or
any other obligor on the Securities) in making any such payment. The Company at
any time may require a Paying Agent to pay all money held by it to the Trustee
and account for any funds disbursed, and the Trustee may at any time during the
continuance of any payment default, upon written request to a Paying Agent,
require such Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed. Upon doing so, the Paying Agent shall have no
further liability for the money so paid over to the Trustee. If the Company or
any Subsidiary of the Company or any Affiliate of any of them acts as Paying
Agent, it will, on or before each due date of any principal of, premium, if any,
or interest on the Securities, segregate and hold in a separate trust fund for
the benefit of the Holders a sum of money sufficient to pay such principal,
premium, if any, or interest so becoming due until such sum of money shall be
paid to such Holders or otherwise disposed of as provided in this Indenture, and
will promptly notify the Trustee in writing of its action or failure to act as
required by this Section 2.05. The Trustee shall arrange with all Paying Agents
for the payment, from funds furnished by the Company to the Trustee pursuant to
this Indenture, of principal and interest on the Securities and of the
compensation of the Paying Agents for their services as such from funds
furnished by the Company to the Trustee.
SECTION 2.06. Transfer and Exchange. The Securities are issuable
only in registered form. A Holder may transfer a Security by written application
to the Registrar stating the name of the proposed transferee and otherwise
complying with the terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a
<PAGE> 36
27
Holder only upon, registration of the transfer by the Registrar in the Security
Register. Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Trustee, and any agent of the Company or the Trustee
shall treat the person in whose name the Security is registered as the owner
thereof for all purposes whether or not the Security shall be overdue, and
neither the Company, the Trustee, nor any such agent shall be affected by notice
to the contrary. Furthermore, any Holder of or beneficial owner of an interest
in a Global Security shall, by acceptance of such Global Security, be deemed to
have agreed that transfers of beneficial interests in such Global Security may
be effected only through a book-entry system maintained by the Depositary (or
its agent), and that ownership of a beneficial interest in the Security shall be
required to be reflected in a book entry. When Securities are presented to the
Registrar or a co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Securities of other authorized
denominations (including on exchange of Securities for Exchange Securities), the
Registrar shall register the transfer or make the exchange as requested if its
requirements for such transactions are met; provided that no exchanges of
Securities for Exchange Securities shall occur until a Registration Statement
shall have been declared effective by the Commission and that any Securities
that are exchanged for Exchange Securities shall be canceled by the Trustee. To
permit registrations of transfers and exchanges in accordance with the terms,
conditions and restrictions hereof, the Company shall execute and the Trustee
shall authenticate Securities at the Registrar's request. No service charge
shall be made to any Holder for any registration of transfer or exchange or
redemption of the Securities, but the Company may require payment by the Holder
of a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or other
similar governmental charge payable upon transfers, exchanges or redemptions
pursuant to Section 2.11, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 3.03 or Section 3.08 and ending
at the close of business on the day of such mailing, or (ii) to register the
transfer of or exchange any Security so selected for redemption in whole or in
part, except the unredeemed portion of any Security being redeemed in part.
SECTION 2.07. Book-Entry Provisions for Global Securities. (a) The
U.S. Global Security and Offshore Global Security initially shall (i) be
registered in the name of the Depositary for such Global Securities or the
nominee of such Depositary, (ii) be delivered to the Trustee as custodian for
such Depositary and (iii) bear legends as set forth in Section 2.02.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under any Global Security, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the
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operation of customary practices governing the exercise of the rights of a
beneficial owner of any Security.
(b) Transfers of a Global Security shall be limited to
transfers of such Global Security in whole, but not in part, to the Depositary,
its successors or their respective nominees. Interests of beneficial owners in a
Global Security may be transferred in accordance with the applicable rules and
procedures of the Depositary and the provisions of Section 2.08. In addition,
Physical Securities shall be transferred to all beneficial owners in exchange
for their beneficial interests in the U.S. Global Security or the Offshore
Global Security, respectively, if (i) the Depositary notifies the Company that
it is unwilling or unable to continue as Depositary for the U.S. Global Security
or the Offshore Global Security, as the case may be, and a successor depositary
is not appointed by the Company within 90 days of such notice or (ii) an Event
of Default has occurred and is continuing and the Registrar has received a
request to the foregoing effect from the Depositary.
(c) Any beneficial interest in one of the Global Securities
that is transferred to a person who takes delivery in the form of an interest in
the other Global Security will, upon transfer, cease to be an interest in such
Global Security and become an interest in the other Global Security and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Security for as long as it remains such an interest.
(d) In connection with any transfer pursuant to paragraph (b)
of this Section 2.07 of a portion of the beneficial interests in a Global
Security to beneficial owners who are required to hold Physical Securities, the
Registrar shall reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more Physical Securities of like tenor and amount.
(e) In connection with the transfer of an entire Global
Security to beneficial owners pursuant to paragraph (b) of this Section 2.07,
the Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the Global Security an equal aggregate principal
amount of Physical Securities of authorized denominations.
(f) Any Physical Security delivered in exchange for an interest
in the U.S. Global Security pursuant to paragraph (b) or (d) of this Section
2.07 shall, except as otherwise provided by paragraph (f)(i)(A) or paragraph (d)
of Section 2.08, bear the legend regarding transfer restrictions applicable to
the U.S. Physical Security set forth in Section 2.02.
(g) The registered holder of a Global Security may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Securities.
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(h) QIBs that are beneficial owners of interests in a Global
Security may receive Physical Securities (which shall bear the Private Placement
Legend if required by Section 2.02) in accordance with the procedures of the
Depositary. In connection with the execution, authentication and delivery of
such Physical Securities, the Registrar shall reflect on its books and records a
decrease in the principal amount of the relevant Global Security equal to the
principal amount of such Physical Securities and the Company shall execute and
the Trustee shall authenticate and deliver one or more Physical Securities
having an equal aggregate principal amount.
SECTION 2.08. Special Transfer Provisions. Unless and until a
Security is exchanged for an Exchange Security or sold in connection with an
effective Registration Statement pursuant to the Registration Rights Agreement,
transfers of a Security or of Securities shall only be permitted as specified
below:
(a) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a U.S. Physical
Security or an interest in the U.S. Global Security to a QIB (excluding Non-U.S.
Persons):
(i) If the Security to be transferred consists of (A) U.S.
Physical Securities, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Security stating, or has otherwise advised
the Company and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Security stating, or
has otherwise advised the Company and the Registrar in writing, that it
is purchasing the Security for its own account or an account with respect
to which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from
registration provided by Rule 144A or (B) an interest in the U.S. Global
Security, the transfer of such interest may be effected only through the
book entry system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and the
Security to be transferred consists of U.S. Physical Securities, upon
receipt by the Registrar of the documents referred to in clause (i) and
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the U.S.
Global Security in an amount equal to the principal amount of the U.S.
Physical Securities to be transferred, and the Trustee shall cancel the
U.S. Physical Securities so transferred.
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(b) Transfers of Interests in the Offshore Global Security or
Offshore Physical Securities to U.S. Persons. The following provisions shall
apply with respect to any transfer of interests in the Offshore Global Security
or Offshore Physical Securities to U.S. Persons:
(i) prior to the removal of the Private Placement Legend from
the Offshore Global Security or Offshore Physical Securities pursuant to
Section 2.02, the Registrar shall refuse to register such transfer unless
the Registrar receives with respect to such transfer the documents and
instruments required by Section 2.08(a) or Section 2.08(c), as the case
may be; and
(ii) after such removal, the Registrar shall register the
transfer of any such Security without requiring any additional
certification.
(c) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of a Security to a Non-U.S.
Person:
(i) The Registrar shall register any proposed transfer to any
Non-U.S. Person if the Security to be transferred is a U.S. Physical
Security only upon receipt of a certificate substantially in the form of
Exhibit C from the proposed transferor.
(ii) (A) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (1) the documents required by paragraph (i) and (2)
instructions in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of the U.S. Global Security in an
amount equal to the principal amount of the beneficial interest in the
U.S. Global Security to be transferred, and (B) if the proposed
transferee is an Agent Member, upon receipt by the Registrar of
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Offshore
Global Security in an amount equal to the principal amount of the U.S.
Physical Securities or the U.S. Global Security, as the case may be, to
be transferred, and the Trustee shall cancel the Physical Security, if
any, so transferred or decrease the amount of the U.S. Global Security.
(d) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless (i) the Private Placement Legend is no
longer required by Section 2.02, (ii) the circumstances contemplated by
paragraph (f)(i)(A) of this Section 2.08 exist or (iii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
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(e) General. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of, or beneficial owner of an interest in,
such Security acknowledges the restrictions on transfer of such Security set
forth in this Indenture and in the Private Placement Legend and agrees that it
will transfer such Security only as provided in this Indenture. The Registrar
shall not register a transfer of any Security unless such transfer complies with
the restrictions on transfer of such Security set forth in this Indenture. In
connection with any transfer of Securities to an Institutional Accredited
Investor, each such Holder or beneficial owner agrees by its acceptance of
Securities to furnish to the Registrar and the Company such certifications,
legal opinions or other information as the Company may reasonably require to
confirm that such transfer is being made pursuant to an exemption from, or a
transaction not subject to, the registration requirements of the Securities Act;
provided that the Registrar shall not be required to determine (but may rely on
a determination made by the Company with respect to) the sufficiency of any such
certifications, legal opinions or other information.
(f) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration of any
proposed transfer of a Security to any Institutional Accredited Investor which
is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Security,
whether or not such Security bears the Private Placement Legend, if (A)
the requested transfer is after the time period referred to in Rule
144(k) under the Securities Act or any successor provision at the time of
such transfer or (B) the proposed transferee has delivered to the
Registrar (1) a certificate substantially in the form of Exhibit D hereto
and (2) if such transfer is in respect of an aggregate principal amount
of Securities at the time of transfer of less than $250,000, an Opinion
of Counsel acceptable to the Company that such transfer is in compliance
with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (A) the documents, if any, required by paragraph (i) and (B)
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the U.S.
Global Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and
deliver, one or more U.S. Physical Securities of like tenor and amount.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.07 or this Section
2.08. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
SECTION 2.09. Replacement Securities. If a mutilated Security is
surrendered to the Trustee or if the Holder claims that the Security has been
lost, destroyed or wrongfully taken, the Company shall issue and the Trustee
shall authenticate a replacement Security of like tenor and principal amount and
bearing a number not contemporaneously outstanding; provided
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that the requirements of the second paragraph of Section 2.10 are met. If
required by the Trustee or the Company, an indemnity bond must be furnished that
is sufficient in the judgment of both the Trustee and the Company to protect the
Company, the Trustee or any Agent from any loss that any of them may suffer if a
Security is replaced. The Company may charge such Holder for its expenses and
the expenses of the Trustee in replacing a Security. In case any such mutilated,
lost, destroyed or wrongfully taken Security has become or is about to become
due and payable, the Company in its discretion may pay the principal of,
premium, if any, and interest accrued on such Security instead of issuing a new
Security in replacement thereof.
Every replacement Security is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
SECTION 2.10. Outstanding Securities. Securities outstanding at
any time are all Securities that have been authenticated by the Trustee except
for those canceled by it, those delivered to it for cancellation and those
described in this Section 2.10 as not outstanding.
If a Security is replaced pursuant to Section 2.09, it ceases to
be outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Security is held by a bona fide
purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on the maturity date money sufficient to pay the principal of,
premium, if any, and interest accrued on Securities payable on that date, then
on and after that date such Securities cease to be outstanding and interest on
them shall cease to accrue.
A Security does not cease to be outstanding because the Company or
one of its Affiliates holds such Security, provided, however, that, in
determining whether the Holders of the requisite principal amount of the
outstanding Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Securities owned by the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor shall be disregarded and deemed not to be outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.
SECTION 2.11. Temporary Securities. Until definitive Securities
are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have insertions, substitutions,
omissions and other variations determined to be appropriate by the Officers
executing the temporary Securities, as evidenced by their execution of such
temporary Securities. If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the
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temporary Securities shall be exchangeable for definitive Securities upon
surrender of the temporary Securities at the office or agency of the Company
designated for such purpose pursuant to Section 4.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities
the Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Securities of authorized
denominations. Until so exchanged, the temporary Securities shall be entitled to
the same benefits under this Indenture as definitive Securities.
SECTION 2.12. Cancellation. The Company at any time may deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold.
The Registrar and the Paying Agent shall forward to the Trustee any Securities
surrendered to them for transfer, exchange or payment. The Trustee shall cancel
all Securities surrendered for transfer, exchange, payment or cancellation and
shall dispose of them in accordance with its normal procedure. The Company shall
not issue new Securities to replace Securities it has paid in full or delivered
to the Trustee for cancellation.
SECTION 2.13. CUSIP, CINS and ISIN Numbers. The Company in issuing
the Securities may use "CUSIP", "CINS", "ISIN" or other identification numbers
(if then generally in use), and, if so, the Trustee shall use CUSIP numbers,
CINS numbers, ISIN numbers or other identification numbers, as the case may be,
in notices of redemption or exchange as a convenience to Holders; provided that
any such notice shall state that no representation is made as to the correctness
of such numbers either as printed on the Securities or as contained in any
notice of redemption or exchange and that reliance may be placed only on the
other identification numbers printed on the Securities; provided further, that
failure to use "CUSIP", "CINS", "ISIN" or other identification numbers in any
notice of redemption or exchange shall not effect the validity or sufficiency of
such notice.
SECTION 2.14. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, it shall pay, or shall deposit with the
Paying Agent money in immediately available funds sufficient to pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest, to the Persons who are Holders on a subsequent special
record date. A special record date, as used in this Section 2.14 with respect to
the payment of any defaulted interest, shall mean the 15th day next preceding
the date fixed by the Company for the payment of defaulted interest, whether or
not such day is a Business Day. At least 15 days before the subsequent special
record date, the Company shall mail to each Holder and to the Trustee a notice
that states the subsequent special record date, the payment date and the amount
of defaulted interest to be paid.
SECTION 2.15. Issuance of Additional Securities. The Company may,
subject to Article Four of this Indenture and applicable law, issue additional
Securities under this Indenture. The Securities issued on the Closing Date and
any additional Securities subsequently issued shall be treated as a single class
for all purposes under this Indenture.
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption. The Securities are redeemable,
in whole or in part, at any time at the Company's option at a redemption price
(the "Make-Whole Price") equal to the greater of (i) 100% of the principal
amount thereof or (ii) as determined by an Independent Investment Banker, the
sum of the present values of the Remaining Scheduled Payments discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued
and unpaid interest (including Additional Interest, as provided for in the
Registration Rights Agreement), if any, to the date of redemption.
"Adjusted Treasury Rate" means with respect to any redemption
date, the rate per annum equal to the semiannual equivalent yield to maturity of
the Comparable Treasury Issue, assuming a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date, plus 0.50%.
"Comparable Treasury Issue" means the United States Treasury
Security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the Securities that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Securities.
"Comparable Treasury Price" means, the respect to any redemption
date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third Business Day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the
Reference Treasury Dealer Quotations for such redemption date, after excluding
the highest and lowest of such Reference Treasury Dealer Quotations, or (B) if
the Trustee obtains fewer than three such Reference Treasury Dealer Quotations,
the average of all such Quotations.
"Independent Investment Banker" means any Reference Treasury
Dealer appointed by the Trustee after consultation with the Company.
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, Chase Securities Inc., First Union Capital Markets, a division of
Wheat First Securities, Inc., NationsBanc Montgomery Securities LLC and TD
Securities (USA) Inc. and their respective successors; provided, however, that
if any of the foregoing shall case to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), the Company shall
substitute another Primary Treasury Dealer and shall deliver written notice of
such substitution to the Trustee.
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"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average as determined by
the Trustee, of the bid and asked prices of the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
"Remaining Scheduled Payments" means, with respect to each
Security to be redeemed, the remaining scheduled payments of the principal
thereof and interest thereon that would be due after the related redemption date
but for such redemption; provided, however, that, if such redemption date is not
an interest payment date with respect to such Security, the amount of the next
succeeding scheduled interest payment thereon will be reduced by the amount of
interest accrued and unpaid thereon to such redemption date.
In addition, at any time prior to February 16, 2003, the Company
may redeem up to 35% of the principal amount of the Securities originally issued
with the Net Cash Proceeds (other than proceeds from the exercise of the
over-allotment option by the underwriters in connection with the Company's
initial public offering) of one or more public or private issuances of Capital
Stock (other than Disqualified Stock) at any time or from time to time in part,
at a Redemption Price of 113.750%of the principal amount thereof on the
Redemption Date, together with accrued and unpaid interest, if any, thereon;
provided that (i) at least 65% of the principal amount of the Securities remain
outstanding after each such redemption and (ii) notice of such redemption is
mailed within 60 days of such issuance.
SECTION 3.02. Notices to Trustee. If the Company elects to redeem
Securities pursuant to Section 3.01, it shall notify the Trustee in writing of
the Redemption Date and the principal amount of Securities to be redeemed.
The Company shall give each notice provided for in this Section
3.02 in an Officers' Certificate at least ten days before mailing the notice to
Holders required pursuant to Section 3.04 (unless a shorter period shall be
satisfactory to the Trustee).
SECTION 3.03. Selection of Securities to Be Redeemed. In the case
of any partial redemption, selection of the Securities for redemption will be
made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Securities are listed or, if
the Securities are not listed on a national securities exchange, by lot or by
such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate; provided that no Security of $1,000 in principal amount or less
shall be redeemed in part.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption. Securities in
denominations of $1,000 in principal amount may only be redeemed in whole. The
Trustee may select for redemption portions (equal to $1,000 in principal amount
or any integral multiple thereof) of Securities that have denominations larger
than $1,000 in principal amount. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption. The
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Trustee shall notify the Company and the Registrar promptly in writing of the
Securities or portions of Securities to be called for redemption.
SECTION 3.04. Notice of Redemption. With respect to any redemption
of Securities pursuant to Section 3.01, at least 30 days but not more than 60
days before a Redemption Date, the Company shall mail a notice of redemption by
first class mail to each Holder whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be surrendered
to the Paying Agent in order to collect the Redemption Price;
(e) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the Holders
is to receive payment of the Redemption Price plus accrued interest to
the Redemption Date upon surrender of the Securities to the Paying Agent;
(f) that, if any Security is being redeemed in part, the
portion of the principal amount (equal to $1,000 in principal amount or
any integral multiple thereof) of such Security to be redeemed and that,
on and after the Redemption Date, upon surrender of such Security, a new
Security or Securities in principal amount equal to the unredeemed
portion thereof will be reissued; and
(g) that, if any Security contains a CUSIP, CINS, ISIN or other
identification number as provided in Section 2.13, no representation is
being made as to the correctness of the CUSIP, CINS, ISIN or other
identification number either as printed on the Securities or as contained
in the notice of redemption and that reliance may be placed only on the
other identification numbers printed on the Securities.
At the Company's request (which request may be revoked by the
Company at any time prior to the time at which the Trustee shall have given such
notice to the Holders), made in writing to the Trustee at least ten days before
it is required to mail the notice to Holders required by this Section 3.04, the
Trustee shall give such notice of redemption in the name and at the expense of
the Company. If, however, the Company gives such notice to the Holders, the
Company shall concurrently deliver to the Trustee an Officers' Certificate
stating that such notice has been given.
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SECTION 3.05. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the Redemption Date and at the Redemption Price. Upon surrender of any
Securities to the Paying Agent, such Securities shall be paid at the Redemption
Price, plus accrued interest, if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed,
whether or not the Holder receives the notice. In any event, failure to give
such notice, or any defect therein, shall not affect the validity of the
proceedings for the redemption of Securities held by Holders to whom such notice
was properly given.
SECTION 3.06. Deposit of Redemption Price. On or prior to 10:00
A.M. on any Redemption Date, the Company shall deposit with the Paying Agent
(or, if the Company is acting as its own Paying Agent, shall segregate and hold
in trust as provided in Section 2.05) money sufficient to pay the Redemption
Price of and accrued interest on all Securities to be redeemed on that date
other than Securities or portions thereof called for redemption on that date
that have been delivered by the Company to the Trustee for cancellation.
SECTION 3.07. Payment of Securities Called for Redemption. If
notice of redemption has been given in the manner provided above, the Securities
or portion of Securities specified in such notice to be redeemed shall become
due and payable on the Redemption Date at the Redemption Price stated therein,
together with accrued interest to such Redemption Date, and on and after such
date (unless the Company shall default in the payment of such Securities at the
Redemption Price and accrued interest to the Redemption Date, in which case the
principal, until paid, shall bear interest from the Redemption Date at the rate
prescribed in the Securities), such Securities shall cease to accrue interest.
Upon surrender of any Security for redemption in accordance with a notice of
redemption, such Security shall be paid and redeemed by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided that installments of interest shall be payable to the Holders
registered as such at the close of business on the relevant Regular Record Date
that is on or prior to the Redemption Date.
SECTION 3.08. Securities Redeemed in Part. Upon surrender of any
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder a new Security equal in principal
amount to the unredeemed portion of such surrendered Security.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities. The Company shall pay the
principal of, premium, if any, and interest on the Securities on the dates and
in the manner provided in the Securities and this Indenture. An installment of
principal, premium, if any, or interest shall be considered paid on the date due
if the Trustee or Paying Agent (other than the Company, a Subsidiary of the
Company, or any Affiliate of any of them) holds on that date money designated
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for and sufficient to pay the installment. If the Company or any Subsidiary of
the Company or any Affiliate of any of them, acts as Paying Agent, an
installment of principal, premium, if any, or interest shall be considered paid
on the due date if the entity acting as Paying Agent complies with the last
sentence of Section 2.05. As provided in Section 6.09, upon any bankruptcy or
reorganization procedure relative to the Company, the Trustee shall serve as the
Paying Agent for the Securities.
The Company shall pay interest on overdue principal, premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
the rate per annum specified in the Securities.
SECTION 4.02. Maintenance of Offices or Agencies. The Company will
maintain in the Borough of Manhattan, The City of New York, an office or agency
(which may be an office of the Trustee, Registrar or co-Registrar or any
Affiliate of any of them) where Securities may be surrendered for registration
of transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. In addition, so long as the Securities are listed on the
Luxembourg Stock Exchange and the Luxembourg Stock Exchange so requires, there
will be a Paying Agent and transfer agent in Luxembourg where Securities may be
presented for registration of transfer or for exchange and where Securities may
be presented for payment. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such offices or
agencies. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 10.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
The Company hereby initially designates the Corporate Trust Office
of the Trustee, located in the Borough of Manhattan, The City of New York, and
the office of Banque Internationale a Luxembourg, located at 69 route d'Esch,
L-1470 Luxembourg, Luxembourg, as such offices of the Company in accordance with
Section 2.04.
SECTION 4.03. Limitation on Indebtedness.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, Incur any Indebtedness (other than the Securities
and Indebtedness existing on the Closing Date); provided that the Company may
Incur Indebtedness if, after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the
Indebtedness to EBITDA Ratio would be greater than zero and less than 4:1.
<PAGE> 48
39
Notwithstanding the foregoing, the Company and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following:
(i) Indebtedness outstanding at any time in an aggregate principal amount not to
exceed the greater of (A) $200 million or (B) the Consolidated EBITDA for the
four preceding quarters for which financial statements of the Company have been
filed with the Commission or provided to the Trustee pursuant to Section 4.18,
in each case less any amount of Indebtedness permanently repaid as provided
under Section 4.11 (other than any Securities permanently repaid); provided that
no more than 25% of the Indebtedness Incurred under this clause (i) may be used
for purposes other than capital expenditures; (ii) Indebtedness owed (A) to the
Company evidenced by a promissory note or (B) to any Restricted Subsidiary;
provided that any event which results in any such Restricted Subsidiary ceasing
to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness
(other than to the Company or another Restricted Subsidiary) shall be deemed, in
each case, to constitute an Incurrence of such Indebtedness not permitted by
this clause (ii); (iii) Indebtedness issued in exchange for, or the net proceeds
of which are used to refinance or refund, then outstanding Indebtedness (other
than Indebtedness Incurred under clause (ii), (vi), (viii) or (x) of this
paragraph) and any refinancings thereof in an amount not to exceed the amount so
refinanced or refunded (plus premiums, accrued interest, fees and expenses);
provided that Indebtedness the proceeds of which are used to refinance or refund
the Securities or Indebtedness that is pari passu with, or subordinated in right
of payment to, the Securities shall only be permitted under this clause (iii) if
(A) in case the Securities are refinanced in part or the Indebtedness to be
refinanced is pari passu with the Securities, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such new
Indebtedness is outstanding, is expressly made pari passu with, or subordinate
in right of payment to, the remaining Securities, (B) in case the Indebtedness
to be refinanced is subordinated in right of payment to the Securities, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding, is
expressly made subordinate in right of payment to the Securities at least to the
extent that the Indebtedness to be refinanced is subordinated to the Securities
and (C) such new Indebtedness, determined as of the date of Incurrence of such
new Indebtedness, does not mature prior to the Stated Maturity of the
Indebtedness to be refinanced or refunded, and the Average Life of such new
Indebtedness is at least equal to the remaining Average Life of the Indebtedness
to be refinanced or refunded; and provided further that in no event may
Indebtedness of the Company be refinanced by means of any Indebtedness of any
Restricted Subsidiary pursuant to this clause (iii); (iv) Indebtedness (A) in
respect of performance, surety or appeal bonds provided in the ordinary course
of business, (B) under Currency Agreements and Interest Rate Agreements;
provided that such agreements (a) are designed solely to protect the Company or
its Restricted Subsidiaries against fluctuations in foreign currency exchange
rates or interest rates and (b) do not increase the Indebtedness of the obligor
outstanding at any time other than as a result of fluctuations in foreign
currency exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder; and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Restricted Subsidiaries pursuant to
such agreements, in any case Incurred in connection with the disposition of any
business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness
Incurred by any Person acquiring all or any portion of such business,
<PAGE> 49
40
assets or Restricted Subsidiary for the purpose of financing such acquisition),
in a principal amount not to exceed the gross proceeds actually received by the
Company or any Restricted Subsidiary in connection with such disposition; (v)
Indebtedness of the Company, to the extent the net proceeds thereof are promptly
(A) used to purchase Securities tendered in an Offer to Purchase made as a
result of a Change in Control or (B) deposited to defease the Securities as
described below under Article Eight; (vi) Guarantees of the Securities and
Guarantees of Indebtedness of the Company by any Restricted Subsidiary provided
the Guarantee of such Indebtedness is permitted by and made in accordance with
Section 4.07; (vii) Indebtedness (including Guarantees) Incurred to finance the
cost (including the cost of design, development, acquisition, construction,
installation, improvement, transportation or integration) to acquire equipment,
inventory or network assets (including acquisitions by way of Capitalized Lease
and acquisitions of the Capital Stock of a Person that becomes a Restricted
Subsidiary to the extent of the fair market value of the equipment, inventory or
network assets so acquired) by the Company or a Restricted Subsidiary after the
Closing Date; (viii) Indebtedness of the Company not to exceed, at any one time
outstanding, two times the sum of (A) the Net Cash Proceeds received by the
Company after June 17, 1998 as a capital contribution or from the issuance and
sale of its Capital Stock (other than Disqualified Stock) to a Person that is
not a Subsidiary of the Company, to the extent (I) such capital contribution or
Net Cash Proceeds are not, at the Company's option, added to the amount
calculated pursuant to clause (C)(2) of the first paragraph of Section 4.04 or
used to make a Restricted Payment pursuant to clause (iii), (iv) or (viii) of
the second paragraph of Section 4.04 and (II) if such capital contribution or
Net Cash Proceeds are used to consummate a transaction pursuant to which the
Company Incurs Acquired Indebtedness, the amount of such Net Cash Proceeds
exceeds one-half of the amount of Acquired Indebtedness so Incurred and (B) 80%
of the fair market value of property (other than cash and cash equivalents)
received by the Company after the Closing Date from the sale of its Capital
Stock (other than Disqualified Stock) to a Person that is not a Subsidiary of
the Company, to the extent (I) such capital contribution or sale of Capital
Stock has not been used to make a Restricted Payment pursuant to clause (iii),
(iv) or (viii) of the second paragraph of Section 4.04 and (II) if such capital
contribution or Capital Stock is used to consummate a transaction pursuant to
which the Company Incurs Acquired Indebtedness, 80% of the fair market value of
the property received exceeds one-half of the amount of Acquired Indebtedness so
Incurred; provided that such Indebtedness does not mature prior to the Stated
Maturity of the Securities and has an Average Life longer than the Securities;
(ix) Acquired Indebtedness; (x) Strategic Subordinated Indebtedness; (xi)
Indebtedness consisting of one or more loans to any Restricted Subsidiary,
evidenced by one or more Promissory Notes and Guaranteed by the Company, in each
case under the Intermediary Documents; provided that the Promissory Notes shall,
at all times, have an aggregate principal amount equal to the aggregate
principal amount of the Certificates of Deposit and shall not be outstanding at
any time that the Certificates of Deposit are not validly outstanding and
beneficially owned by the Company; (xii) Indebtedness of any Restricted
Subsidiary, to the extent that the Company is the beneficial owner of such
Indebtedness and such Indebtedness is evidenced by a promissory note or
participation certificate issued to the Company by the record holder of such
Indebtedness; (xiii) Indebtedness of the Company, the proceeds of which are used
to make an Investment in Intelsat, in an amount at any one time outstanding not
to exceed $30 million; provided that the Company reasonably believes, at the
time such Indebtedness is Incurred, that the benefits of such Investment will
result in cash
<PAGE> 50
41
flow sufficient to cover the payment of interest and principal on such
Indebtedness and (xiv) subordinated Indebtedness of the Company (in addition to
Indebtedness permitted under clauses (i) through (xiii) above) in an aggregate
principal amount outstanding at any time not to exceed $100 million, less any
amount of such Indebtedness permanently repaid as provided under Section 4.11.
(b) Notwithstanding any other provision of this Section 4.03,
the maximum amount of Indebtedness that the Company or a Restricted Subsidiary
may Incur pursuant to this Section 4.03 shall not be deemed to be exceeded, with
respect to any outstanding Indebtedness due solely to the result of fluctuations
in the exchange rates of currencies.
(c) For purposes of determining any particular amount of
Indebtedness under this Section 4.03, (1) Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (2) any Liens
granted pursuant to the equal and ratable provisions referred to in Section 4.09
shall not be treated as Indebtedness. For purposes of determining compliance
with this Section 4.03, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, the Company, in its sole discretion, shall classify, and from time to
time may reclassify, such item of Indebtedness and only be required to include
the amount and type of such Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments. The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or make any distribution on or with respect to
its Capital Stock held by Persons other than the Company or any Restricted
Subsidiary (other than (x) dividends or distributions payable solely in shares
of its or such Restricted Subsidiary's Capital Stock (other than Disqualified
Stock) or in options, warrants or other rights to acquire shares of such Capital
Stock and (y) pro rata dividends or distributions on Common Stock of Restricted
Subsidiaries), (ii) purchase, redeem, retire or otherwise acquire for value any
shares of Capital Stock of the Company (including options, warrants or other
rights to acquire such shares of Capital Stock) held by Persons other than the
Company or any of its Wholly-Owned Restricted Subsidiaries, (iii) make any
voluntary or optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
Indebtedness of the Company that is subordinated in right of payment to the
Securities or (iv) make any Investment, other than a Permitted Investment, in
any Person (such payments or any other actions described in clauses (i) through
(iv) above being collectively "Restricted Payments") if, at the time of, and
after giving effect to, the proposed Restricted Payment: (A) a Default or Event
of Default shall have occurred and be continuing, (B) the Company could not
Incur at least $1.00 of Indebtedness under the first paragraph of Section 4.03
or (C) the aggregate amount of all Restricted Payments (the amount, if other
than in cash, to be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) made
after the Closing Date shall exceed the sum of (1) 50% of the aggregate amount
of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net
Income is a loss, minus 100% of the amount of such loss) (determined by
excluding income resulting from transfers of assets by the Company or a
Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative
basis during the
<PAGE> 51
42
period (taken as one accounting period) beginning on the first day of the fiscal
quarter commencing July 1, 1998 and ending on the last day of the last fiscal
quarter preceding the Transaction Date for which reports have been filed with
the Commission or provided to the Trustee pursuant to Section 4.18 plus (2) the
aggregate Net Cash Proceeds received by the Company after June 17, 1998 as a
capital contribution or from the issuance and sale of its Capital Stock (other
than Disqualified Stock) to a Person who is not a Subsidiary of the Company,
including an issuance or sale permitted by this Indenture of Indebtedness of the
Company for cash subsequent to the Closing Date upon the conversion of such
Indebtedness into Capital Stock (other than Disqualified Stock) of the Company,
or from the issuance to a Person who is not a Subsidiary of the Company of any
options, warrants or other rights to acquire Capital Stock of the Company (in
each case, exclusive of any convertible indebtedness, Disqualified Stock or any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Securities), in each case except to the extent such Net Cash Proceeds are used
to Incur Indebtedness pursuant to clause (viii) of the second paragraph under
Section 4.03, plus (3) an amount equal to the net reduction in Investments made
pursuant to this first paragraph of this Section 4.04 in any Person resulting
from payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company or any
Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such
Investment (except, in each case, to the extent any such payment or proceeds are
included in the calculation of Adjusted Consolidated Net Income), or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investments"), not to exceed, in
each case, the amount of Investments previously made by the Company or any
Restricted Subsidiary in such Person or Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of: (i)
the payment of any dividend within 60 days after the date of declaration thereof
if, at said date of declaration, such payment would comply with the foregoing
paragraph; (ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of payment to
the Securities including premium, if any, and accrued and unpaid interest, with
the proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of
the second paragraph of part (a) of Section 4.03; (iii) the repurchase,
redemption or other acquisition of Capital Stock of the Company (or options,
warrants or other rights to acquire such Capital Stock) in exchange for, or out
of the proceeds of a capital contribution or a substantially concurrent offering
of, shares of Capital Stock (other than Disqualified Stock) of the Company (or
options, warrants or other rights to acquire such Capital Stock); (iv) the
making of any principal payment or the repurchase, redemption, retirement,
defeasance or other acquisition for value of Indebtedness of the Company which
is subordinated in right of payment to the Securities in exchange for, or out of
the proceeds of a capital contribution or a substantially concurrent offering
of, shares of the Capital Stock (other than Disqualified Stock) of the Company
(or options, warrants or other rights to acquire such Capital Stock); (v)
payments or distributions, to dissenting stockholders pursuant to applicable
law, pursuant to or in connection with a consolidation, merger or transfer of
assets that complies with Article Five; (vi) Investments in Unrestricted
Subsidiaries not to exceed, at any one time outstanding, the greater of (A) $5
million or (B) 10% of Consolidated EBITDA for the preceding four quarters for
which reports have been filed pursuant to Section 4.18; (vii) Investments in any
Person the primary business of
<PAGE> 52
43
which is related, ancillary or complementary to the business of the Company and
its Restricted Subsidiaries on the date of such Investments; provided that the
aggregate amount of Investments made pursuant to this clause (vii) does not
exceed $20 million; (viii) Investments acquired in exchange for Capital Stock
(other than Disqualified Stock) of the Company or with the proceeds of such
Capital Stock; provided that such proceeds are so applied within 90 days of
receipt thereof; (ix) the declaration or payment of dividends on the Common
Stock of the Company following a Public Equity Offering of such Common Stock of
up to 6% per annum of the Net Cash Proceeds received by the Company in such
Public Equity Offering; and (x) other Restricted Payments in an aggregate amount
not to exceed $25 million; provided that, except in the case of clauses (i) and
(iii), no Default or Event of Default shall have occurred and be continuing or
occur as a consequence of the actions or payments set forth therein. The value
of any Restricted Payment made other than in cash shall be the fair market value
thereof. The amount of any Investment "outstanding" at any time shall be deemed
to be equal to the amount of such Investment on the date made, less the return
of capital to the Company and its Restricted Subsidiaries with respect to such
Investment (up to the amount of such Investment).
Each Restricted Payment permitted pursuant to the preceding
paragraph (other than the Restricted Payment referred to in clause (ii) thereof,
an exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof and an Investment referred to in clause (vi)
thereof), and the Net Cash Proceeds from any capital contribution or any
issuance of Capital Stock referred to in clauses (iii), (iv) and (viii), shall
be included in calculating whether the conditions of clause (C) of the first
paragraph of this Section 4.04 have been met with respect to any subsequent
Restricted Payments. If the proceeds of an issuance of Capital Stock of the
Company are used for the redemption, repurchase or other acquisition of the
Securities, or Indebtedness that is pari passu with the Securities, then the Net
Cash Proceeds of such issuance shall be included in clause (C) of the first
paragraph of this Section 4.04 only to the extent such proceeds are not used for
such redemption, repurchase or other acquisition of Indebtedness. For purposes
of determining compliance with this Section 4.04, in the event that a Restricted
Payment meets the criteria of more than one of the types of Restricted Payments
described in clauses (i) through (x) of the preceding paragraph, the Company, in
its sole discretion, shall classify such Restricted Payment and only be required
to include the amount and type of such Restricted Payment in one of such
clauses.
SECTION 4.05. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. The Company will not, and will
not permit any Restricted Subsidiary to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (i) pay dividends or make any
other distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date or any other agreements in effect
on the Closing Date, and any
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44
extensions, refinancings, renewals or replacements of such agreements; provided
that the encumbrances and restrictions in any such extensions, refinancings,
renewals or replacements are no less favorable in any material respect to the
Holders than those encumbrances or restrictions that are then in effect and that
are being extended, refinanced, renewed or replaced; (ii) existing under or by
reason of applicable law; (iii) existing with respect to any Person or the
property or assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not applicable to
any Person or the property or assets of any Person other than such Person or the
property or assets of such Person so acquired; (iv) in the case of clause (iv)
of the first paragraph of this Section 4.05, (A) that restrict in a customary
manner the subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or right
with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by this Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of the Company or any Restricted Subsidiary in
any manner material to the Company or any Restricted Subsidiary; (v) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of the
Capital Stock of, or property and assets of, such Restricted Subsidiary during
the period between the execution of such agreement and the closing thereunder
within three months of such execution; (vi) with respect to Restricted
Subsidiaries in which, on and subsequent to the Closing Date, the Company and
other Restricted Subsidiaries only make Investments that are evidenced by
unsubordinated promissory notes that bear a reasonable rate of interest and are
payable prior to the Stated Maturity of the Securities; provided that such
encumbrances and restrictions expressly allow the payment of interest and
principal on such promissory notes; (vii) encumbrances or restrictions solely of
the type referred to in clause (iii) or (iv) of the preceding paragraph that are
contained in any stockholders' agreement, joint venture agreement or similar
agreement among owners of Common Stock of a Restricted Subsidiary; provided that
such restrictions consist solely of requirements that transactions between such
Restricted Subsidiaries and affiliates thereof (including the Company and its
Restricted Subsidiaries) be on fair and reasonable terms no less favorable to
such Restricted Subsidiary than could be obtained in a comparable arm's-length
transaction with a Person that is not such an affiliate; or (viii) contained in
the terms of any Indebtedness or any agreement pursuant to which such
Indebtedness was issued if (A) the encumbrance or restriction applies only in
the event of a payment default or a default with respect to a financial covenant
contained in such Indebtedness or agreement, (B) the encumbrance or restriction
is not materially more disadvantageous to the Holders of the Securities than is
customary in comparable financings (as determined by the Company) and (C) the
Company determines that any such encumbrance or restriction will not materially
affect the Company's ability to make principal or interest payments on the
Securities. Nothing contained in this Section 4.05 shall prevent the Company or
any Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in Section 4.09 or (2) restricting the sale
or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.
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SECTION 4.06. Limitation on the Issuance and Sale of Capital Stock
of Restricted Subsidiaries. The Company will not sell, and will not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except (i) to the Company or a
Wholly-Owned Restricted Subsidiary; (ii) issuances of director's qualifying
shares or sales to foreign nationals of shares of Capital Stock of foreign
Restricted Subsidiaries, to the extent required by applicable law; (iii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect to such issuance or sale would have
been permitted to be made under Section 4.04 if made on the date of such
issuance or sale; or (iv) the sale of Common Stock of Restricted Subsidiaries
that is not Disqualified Stock, if the proceeds of such issuance or sale are
applied in accordance with clause (A) or (B) of the first paragraph of Section
4.11 or (v) the transfer of up to 3% of the Common Stock of each Restricted
Subsidiary to employees of such Restricted Subsidiary in connection with such
employment.
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted
Subsidiaries. The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Securities ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to this Indenture providing for a
Guarantee (a "Subsidiary Guarantee") of payment of the Securities by such
Restricted Subsidiary and (ii) such Restricted Subsidiary waives and will not in
any manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee of any Restricted Subsidiary that existed at
the time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the
Securities, then the Guarantee of such Guaranteed Indebtedness shall be pari
passu with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to
the Securities, then the Guarantee of such Guaranteed Indebtedness shall be
subordinated to the Subsidiary Guarantee at least to the extent that the
Guaranteed Indebtedness is subordinated to the Securities.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary may provide by its terms that it shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the Company's
and each Restricted Subsidiary's Capital Stock in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by this Indenture) or (ii) the release or discharge of the
Guarantee which resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by or as a result of payment under such Guarantee.
SECTION 4.08. Limitation on Transactions with Shareholders and
Affiliates. The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly,
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46
enter into, renew or extend any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering of any
service) with any holder (or any Affiliate of such holder) of 5% or more of any
class of Capital Stock of the Company or with any Affiliate of the Company or
any Restricted Subsidiary, except upon fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary than could be obtained,
at the time of such transaction or, if such transaction is pursuant to a written
agreement, at the time of the execution of the agreement providing therefor, in
a comparable arm's-length transaction with a Person that is not such a holder or
an Affiliate.
The foregoing limitation does not limit, and shall not apply to
(i) transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized U.S.
investment banking firm stating that the transaction is fair to the Company or
such Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Wholly-Owned Restricted Subsidiaries
or solely between Wholly-Owned Restricted Subsidiaries; (iii) the payment of
reasonable and customary regular fees to directors of the Company who are not
employees of the Company; (iv) any payments or other transactions pursuant to
any tax-sharing agreement between the Company and any other Person with which
the Company files a consolidated tax return or with which the Company is part of
a consolidated group for tax purposes; or (v) any Restricted Payments not
prohibited by Section 4.04 (other than pursuant to clause (iv) of the definition
or "Permitted Investment"). Notwithstanding the foregoing, any transaction or
series of related transactions covered by the first paragraph of this Section
4.08 and not covered by clauses (ii) through (v) of this paragraph, the
aggregate amount of which exceeds $1 million in value, must be approved or
determined to be fair in the manner provided for in clause (i)(A) or (B) above.
SECTION 4.09. Limitation on Liens. The Company will not, and will
not permit any Restricted Subsidiary to, create, incur, assume or suffer to
exist any Lien on any of its assets or properties of any character (including,
without limitation, licenses), or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, without making effective provision for all of the
Securities and all other amounts due under this Indenture to be directly secured
equally and ratably with (or, if the obligation or liability to be secured by
such Lien is subordinated in right of payment to the Securities, prior to) the
obligation or liability secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on
the Closing Date; (ii) Liens granted after the Closing Date on any assets or
Capital Stock of the Company or its Restricted Subsidiaries created in favor of
the Holders; (iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or a Wholly-Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such other
Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred under clause
(iii) of the second paragraph of Section 4.03; provided that such Liens do not
extend to or cover any property or assets of the Company or any Restricted
Subsidiary other than the property or assets securing the Indebtedness being
refinanced; (v) Liens on the Capital Stock of, or any property or assets of, a
Restricted Subsidiary securing Indebtedness of such Restricted Subsidiary
permitted under Section 4.03;
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(vi) Liens on the Capital Stock of Restricted Subsidiaries securing up to $100.0
million of Indebtedness Incurred under clause (vii) of the second paragraph of
Section 4.03(a); (vii) Liens on assets having a fair market value equal to no
more than 10% of the fair market value of the Adjusted Consolidated Net Tangible
Assets that are not subject to Liens on the Closing Date; or (viii) Permitted
Liens.
SECTION 4.10. Limitation on Sale-Leaseback Transactions. The
Company will not, and will not permit any Restricted Subsidiary to, enter into
any sale-leaseback transaction involving any of its assets or properties whether
now owned or hereafter acquired, whereby the Company or a Restricted Subsidiary
sells or transfers such assets or properties and then or thereafter leases such
assets or properties or any part thereof or any other assets or properties which
the Company or such Restricted Subsidiary, as the case may be, intends to use
for substantially the same purpose or purposes as the assets or properties sold
or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if (i) the lease is for a period, including renewal rights, of not
in excess of three years; (ii) the lease secures or relates to industrial
revenue or pollution control bonds; (iii) the transaction is solely between the
Company and any Wholly-Owned Restricted Subsidiary or solely between
Wholly-Owned Restricted Subsidiaries; or (iv) the Company or such Restricted
Subsidiary, within 12 months after the sale or transfer of any assets or
properties is completed, applies an amount not less than the net proceeds
received from such sale in accordance with clause (A) or (B) of the first
paragraph of Section 4.11.
SECTION 4.11. Limitation on Asset Sales. The Company will not, and
will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless
(i) the consideration received by the Company or such Restricted Subsidiary is
at least equal to the fair market value of the assets sold or disposed of and
(ii) at least 75% of the consideration received consists of cash or Temporary
Cash Investments; provided, however, that this clause (ii) shall not apply to
long-term assignments in capacity in a telecommunications network. In the event
and to the extent that the Net Cash Proceeds received by the Company or any of
its Restricted Subsidiaries from one or more Asset Sales occurring on or after
the Closing Date in any period of 12 consecutive months exceed 10% of Adjusted
Consolidated Net Tangible Assets (determined as of the date closest to the
commencement of such 12-month period for which a consolidated balance sheet of
the Company and its Subsidiaries has been filed with the Commission pursuant to
Section 4.18), then the Company shall or shall cause the relevant Restricted
Subsidiary to (i) within 12 months after the date Net Cash Proceeds so received
exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply an amount
equal to such excess Net Cash Proceeds to permanently repay unsubordinated
Indebtedness of the Company, or any Restricted Subsidiary providing a Subsidiary
Guarantee pursuant to Section 4.07 or Indebtedness of any other Restricted
Subsidiary, in each case owing to a Person other than the Company or any of its
Restricted Subsidiaries or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A) (or enter into a definitive agreement committing
to so invest within 12 months after the date of such agreement), in property or
assets (other than current assets) of a nature or type or that are used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the property
and assets of, or the
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business of, the Company and its Restricted Subsidiaries existing on the date of
such investment (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) and (ii)
apply (no later than the end of the 12-month period referred to in clause (i))
such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i))
as provided in the following paragraph of this Section 4.11. The amount of such
excess Net Cash Proceeds required to be applied (or to be committed to be
applied) during such 12-month period as set forth in clause (i) of the preceding
sentence and not applied as so required by the end of such period shall
constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Offer to Purchase
pursuant to this Section 4.11 totals at least $5 million, the Company must
commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Securities equal to the Excess Proceeds on such
date, at a purchase price equal to 101% of the principal amount of the
Securities, plus accrued interest (if any) to the Payment Date.
SECTION 4.12. Repurchase of Securities upon a Change of Control.
The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Securities then
outstanding, at a purchase price equal to 101% of the principal amount of the
Securities on the relevant Payment Date, plus accrued interest (if any) to the
Payment Date. Prior to the mailing of the notice to Holders commencing such
Offer to Purchase, but in any event within 30 days following any Change of
Control, the Company covenants to (i) repay in full all indebtedness of the
Company that would prohibit the repurchase of the Securities pursuant to such
Offer to Purchase or (ii) obtain any requisite consents under instruments
governing any such indebtedness of the Company to permit the repurchase of the
Securities. The Company shall first comply with the covenant in the preceding
sentence before it shall be required to repurchase Securities pursuant to this
Section 4.12.
SECTION 4.13. Existence. Subject to Articles Four and Five of this
Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and the existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each such Subsidiary and the rights
(whether pursuant to charter, partnership certificate, agreement, statute or
otherwise), material licenses and franchises of the Company and each such
Subsidiary; provided that the Company shall not be required to preserve any such
right, license or franchise, or the existence of any Restricted Subsidiary
(other than itself), if the maintenance or preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiaries taken as a whole.
SECTION 4.14. Payment of Taxes and Other Claims. The Company shall
pay or discharge and shall cause each of its Subsidiaries to pay or discharge,
or cause to be paid or discharged, before the same shall become delinquent (i)
all material taxes, assessments and governmental charges levied or imposed upon
(a) the Company or any such Subsidiary, (b) the income or profits of any such
Subsidiary which is a corporation or (c) the property of the
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Company or any such Subsidiary and (ii) all material lawful claims for labor,
materials and supplies that, if unpaid, might by law become a lien upon the
property of the Company or any such Subsidiary; provided that the Company shall
not be required to pay or discharge, or cause to be paid or discharged, any such
tax, assessment, charge or claim the amount, applicability or validity of which
is being contested in good faith by appropriate proceedings and for which
adequate reserves have been established.
SECTION 4.15. Maintenance of Properties and Insurance. The Company
shall cause all properties used or useful in the conduct of its business or the
business of any of its Restricted Subsidiaries, to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided
that nothing in this Section 4.15 shall prevent the Company or any such
Restricted Subsidiary from discontinuing the use, operation or maintenance of
any of such properties or disposing on any of them, if such discontinuance or
disposal is, in the judgment of the Company, desirable in the conduct of the
business of the Company or such Restricted Subsidiary.
The Company shall provide or cause to be provided, for itself and
its Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
products liability insurance and public liability insurance, with reputable
insurers or with the government of the United States of America, or an agency or
instrumentality thereof, in such amounts, with such deductibles and by such
methods as shall be customary for corporations similarly situated in the
industry in which the Company or such Restricted Subsidiary, as the case may be,
is then conducting business.
SECTION 4.16. Notice of Defaults. In the event that the Company
becomes aware of any Default or Event of Default, the Company promptly after it
becomes aware thereof, shall give written notice thereof to the Trustee.
SECTION 4.17. Compliance Certificates. (a) The Company shall
deliver to the Trustee, within 90 days after the end of the Company's fiscal
year, an Officers' Certificate stating whether or not the signers know of any
Default or Event of Default that occurred during such fiscal year. Such
certificates shall contain a certification from the principal executive officer,
principal financial officer or principal accounting officer of the Company that
a review has been conducted of the activities of the Company and the Restricted
Subsidiaries and the Company's and the Restricted Subsidiaries' performance
under this Indenture and that, to the best knowledge of such officer, the
Company has complied with all conditions and covenants under this Indenture. For
purposes of this Section 4.17, such compliance shall be determined without
regard to any period of grace or requirement of notice provided under this
Indenture. If any such officer knows of such a Default or Event of Default, the
certificate shall describe any such Default or Event of Default and its status.
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(b) The Company shall deliver to the Trustee, within 90 days
after the end of its fiscal year, a certificate signed by the Company's
independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the
Securities as they relate to accounting matters, (ii) that they have read the
most recent Officers' Certificate delivered to the Trustee pursuant to paragraph
(a) of this Section 4.17 and (iii) whether, in connection with their audit
examination, anything came to their attention that caused them to believe that
the Company was not in compliance with any of the terms, covenants, provisions
or conditions of Article Four and Section 5.01 of this Indenture as they pertain
to accounting matters and, if any Default or Event of Default has come to their
attention, specifying the nature and period of existence thereof; provided that
such independent certified public accountants shall not be liable in respect of
such statement by reason of any failure to obtain knowledge of any such Default
or Event of Default that would not be disclosed in the course of an audit
examination conducted in accordance with generally accepted auditing standards
in effect at the date of such examination.
(c) Within 90 days of the end of each of the Company's fiscal
years, the Company shall deliver to the Trustee a list of all Significant
Subsidiaries. The Trustee shall have no duty with respect to any such list
except to keep it on file and available for inspection by the Holders.
SECTION 4.18. Commission Reports and Reports to Holders. Whether
or not the Company is required to file reports with the Commission, if any
Securities are outstanding, the Company shall file with the Commission all such
reports and other information as it would be required to file with the
Commission by Sections 13(a) or 15(d) under the Exchange Act if it were subject
thereto, unless the Company shall be unable to effect such filing or the
Commission shall refuse to accept such filing. The Company shall supply the
Trustee and each Holder of Securities or shall supply to the Trustee for
forwarding to each such Holder, without cost to such Holder, copies of such
reports and other information, whether or not the Company shall be unable to
effect such filing or the Commission refuses to accept such filing. For so long
as the Securities are listed on the Luxembourg Stock Exchange, the Company shall
supply to the Paying Agent in Luxembourg copies of all such reports and
information.
SECTION 4.19. Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. The Company will not
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person (other than a consolidation or merger with or into
a Wholly-Owned Restricted Subsidiary with a positive net worth; provided that,
in connection with any such merger or consolidation, no consideration (other
than Common Stock in the surviving Person or the Company) shall be issued or
distributed to the stockholders of the Company) or permit any Person to merge
with or into the Company unless: (i) the Company shall be the continuing Person,
or the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or that acquired or leased such property and assets
of the Company shall be a corporation organized and validly existing under the
laws of the United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, all of the obligations of the Company on all of the Securities and
hereunder; (ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; (iii) immediately
after giving effect to such transaction on a pro forma basis, the Company or any
Person becoming the successor obligor of the Securities shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
the Company immediately prior to such transaction; (iv) immediately after giving
effect to such transaction on a pro forma basis the Company, or any Person
becoming the successor obligor of the Securities, as the case may be, could
Incur at least $1.00 of Indebtedness under the first paragraph of Section 4.03;
provided that this clause (iv) shall not apply to (x) a consolidation, merger or
sale of all (but not less than all) of the assets of the Company if all Liens
and Indebtedness of the Company or any Person becoming the successor obligor of
the Securities, as the case may be, and its Restricted Subsidiaries outstanding
immediately after such transaction would, if Incurred at such time, have been
permitted to be Incurred (and all such Liens and Indebtedness, other than Liens
and Indebtedness of the Company and its Restricted Subsidiaries outstanding
immediately prior to the transaction, shall be deemed to have been Incurred) for
all purposes of this Indenture or (y) a consolidation, merger or sale of all or
substantially all of the assets of the Company if immediately after giving
effect to such transaction on a pro forma basis, the Company or any Person
becoming the successor obligor of the Securities shall have an Indebtedness to
EBITDA Ratio equal to or less than the Indebtedness to EBITDA Ratio of the
Company immediately prior to such transaction; and (v) the Company delivers to
the Trustee an Officers' Certificate (attaching the arithmetic computations to
demonstrate compliance with clauses (iii) and (iv) above) and Opinion of
Counsel, in each case stating that such consolidation, merger or transfer and
such supplemental indenture complies with this provision and that all conditions
precedent provided for herein relating to such transaction have been complied
with; provided, however, that clauses (iii) and (iv) above do not apply if, in
the good faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company; and
provided further that any such transaction shall not have as one of its purposes
the evasion of the foregoing limitations.
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SECTION 5.02. Successor Substituted. Upon any consolidation or
merger, or any sale, conveyance, transfer or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; provided that the Company shall not be released from its
obligations to pay the principal of, premium, if any, or interest on the
Securities in the case of a lease of all or substantially all of its property
and assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. Any of the following events shall
constitute an Event of Default:
(a) default in the payment of principal of (or premium, if any,
on) any Security when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Security when the
same becomes due and payable, and such default continues for a period of
30 days;
(c) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in this Indenture or under the
Securities and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of
25% or more in aggregate principal amount of the Securities;
(d) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of $5 million or more in the aggregate for
all such issues of all such Persons, whether such Indebtedness now exists
or shall hereafter be created, (I) an event of default that has caused
the holder thereof to declare such Indebtedness to be due and payable
prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (II) the failure to
make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default;
(e) any final judgment or order (not covered by insurance) for
the payment of money in excess of $5 million in the aggregate for all
such final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall
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not be paid or discharged, and either (A) an enforcement proceeding shall
have been commenced by a creditor upon such judgment or order or (B)
there shall be any period of 30 consecutive days following entry of the
final judgment or order that causes the aggregate amount for all such
final judgments or orders outstanding and not paid or discharged against
all such Persons to exceed $5 million during which a stay of enforcement
of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect;
(f) a court having jurisdiction in the premises enters a decree
or order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant
Subsidiary or for all or substantially all of the property and assets of
the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in
effect for a period of 30 consecutive days; or
(g) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B) consents
to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Company or any Significant Subsidiary or for all or substantially all of
the property and assets of the Company or any Significant Subsidiary or
(C) effects any general assignment for the benefit of creditors.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in clause (f) or (g) of Section 6.01 that occurs with
respect to the Company) occurs and is continuing under this Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Securities, then outstanding, by written notice to the Company (and to the
Trustee if such notice is given by the Holders), may, and the Trustee at the
request of such Holders shall, declare the principal of, premium, if any, and
accrued interest on the Securities to be immediately due and payable. Upon a
declaration of acceleration, such principal of, premium, if any, and accrued
interest shall be immediately due and payable. In the event of a declaration of
acceleration because an Event of Default set forth in clause (d) of Section 6.01
has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (d) of Section 6.01 shall be remedied or
cured by the Company or the relevant Significant Subsidiary or waived by the
holders of the relevant Indebtedness within 60 days after the declaration of
acceleration with respect thereto, and no other Defaults under this Indenture
have occurred and are continuing after giving pro forma effect to such remedy,
cure or waiver. If an Event of Default specified in clause (f) or (g) of Section
6.01 occurs with respect to the Company, the principal of, premium, if any, and
accrued interest on the Securities then outstanding shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder.
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At any time after such declaration of acceleration, but before a
judgment or decree for the payment of the money due has been obtained by the
Trustee, the Holders of at least a majority in principal amount of the
outstanding Securities, by written notice to the Company and to the Trustee, may
waive all past Defaults and rescind and annul a declaration of acceleration and
its consequences if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, (ii) all overdue interest on all Securities, (iii) the
principal of and premium, if any, on any Securities that have become due
otherwise than by such declaration or occurrence of acceleration and interest
thereon at the rate prescribed therefor by such Securities, and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest,
if any, at the rate prescribed therefor by such Securities, (b) all existing
Events of Default, other than the non-payment of the principal of, premium, if
any, and accrued interest on the Securities that have become due solely by such
declaration of acceleration have been cured or waived as provided in Section
6.04 and (c) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of, premium, if any, or interest
on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections 6.02,
6.07 and 9.02, the Holders of at least a majority in principal amount of the
outstanding Securities, by notice to the Trustee, may waive all existing
Defaults and Events of Default and its consequences, except a Default in the
payment of principal of, premium, if any, or interest on any Security as
specified in clause (a) or (b) of Section 6.01 or in respect of a covenant or
provision of this Indenture which cannot be modified or amended without the
consent of the Holder of each outstanding Security affected. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
Event of Default or impair any right consequent thereto.
SECTION 6.05. Control by Majority. The Holders of at least a
majority in aggregate principal amount of the outstanding Securities may,
subject to Section 7.02(iv), direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in good faith may
be unduly prejudicial to the rights of Holders of Securities not joining in the
giving of such direction and may take any other action it deems proper that is
not inconsistent with any direction received from Holders of Securities pursuant
to this Section 6.05.
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SECTION 6.06. Limitation on Suits. A Holder may not pursue any
remedy with respect to this
Indenture or the Securities
unless:
(i) the Holder gives the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount
of outstanding Securities make a written request to the Trustee to pursue
the remedy;
(iii) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liabilities or expenses
which may be incurred in compliance with such request;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the written request and the offer of indemnity; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Securities do not give the
Trustee a direction that is inconsistent with the request.
For purposes of Section 6.05 and this Section 6.06, the Trustee
shall comply with TIA Section 316(a) in making any determination of whether the
Holders of the required aggregate principal amount of outstanding Securities
have concurred in any request or direction of the Trustee to pursue any remedy
available to the Trustee or the Holders with respect to this Indenture or the
Securities or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Security to receive payment of the principal of, premium, if any, or
interest on such Security, or to bring suit for the enforcement of any such
payment, on or after the due date expressed in such Security, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
in payment of principal, premium or interest specified in clause (a) or (b) of
Section 6.01 occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the Company or any other
obligor of the Securities for the whole amount of principal, premium, if any,
and accrued interest remaining unpaid, together with interest on overdue
principal, premium, if any, and, to the extent that payment of such interest is
lawful, interest on overdue installments of interest, in each case at the rate
specified in the Securities, and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the
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reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may
file such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor of the Securities), its creditors or its
property and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Securities or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money
pursuant to this Article Six, it shall pay out the money in the following order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to the Holders for amounts then due and unpaid for
principal of, premium, if any, and interest on the Securities in respect
of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium, if
any, and interest, respectively; and
Third: to the Company or any other obligors of the Securities, as
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court may
require any party litigant in such suit to file an undertaking to pay the costs
of the suit, and the court may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit having due regard to the
merits and good faith of the claims or defenses made by the party litigant. This
Section 6.11 does not apply to a
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suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by
Holders of more than 10% in principal amount of the outstanding Securities.
SECTION 6.12. Restoration of Rights and Remedies. If the Trustee
or any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then,
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Company, Trustee and the Holders shall continue as though no
such proceeding had been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or wrongfully taken Securities in Section 2.09, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 6.14. Delay or Omission Not Waiver. No delay or omission
of the Trustee or of any Holder to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and
remedy given by this Article Six or by law to the Trustee or to the Holders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE AND AGENTS
SECTION 7.01. General. The duties and responsibilities of the
Trustee shall be as provided by the TIA and as set forth herein. Whether or not
herein expressly so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Article Seven.
SECTION 7.02. Certain Rights. Subject to TIA Sections 315(a)
through (d):
(i) the Trustee and each Agent may rely, and shall be protected
in acting or refraining from acting, upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee and each Agent need
not
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investigate any fact or matter stated in the document and may in good
faith conclusively rely as to the truth of the statements and the
correctness of the opinions therein;
(ii) before the Trustee or any Agent acts or refrains from
acting, it may require an Officers' Certificate or an Opinion of Counsel.
The Trustee and each Agent shall not be liable for any action it takes or
omits to take in good faith in reliance on such certificate, opinion
and/or an accountants' certificate;
(iii) the Trustee and each Agent may act through its attorneys
and agents and shall not be responsible for the misconduct or negligence
of any attorney or agent appointed with due care;
(iv) the Trustee and each Agent shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture at
the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee and such Agent security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or
direction;
(v) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within
its rights or powers or for any action it takes or omits to take in
accordance with the direction of the Holders of a majority in principal
amount of the outstanding Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture; provided that the Trustee's conduct does not
constitute negligence or bad faith;
(vi) whenever in the administration of this Indenture the
Trustee or any Agent shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder,
the Trustee or such Agent (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, rely upon an
Officers' Certificate;
(vii) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document, but the Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company personally or by agent or attorney;
and
(viii) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Order and any resolution of
the Board of Directors may be sufficiently evidenced by a Board
Resolution.
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SECTION 7.03. Individual Rights of Trustee. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the
Securities, (ii) shall not be accountable for the Company's use or application
of the proceeds from the Securities and (iii) shall not be responsible for any
statement in the Securities other than its certificate of authentication.
SECTION 7.05. Notice of Default. If any Default or any Event of
Default occurs and is continuing and if such Default or Event of Default is
known to an officer assigned to administer corporate trust matters of the
Trustee, the Trustee shall mail to each Holder in the manner and to the extent
provided in TIA Section 313(c) notice of the Default or Event of Default within
45 days after it occurs, unless such Default or Event of Default has been cured;
provided, however, that, except in the case of a default in the payment of the
principal of, premium, if any, or interest on any Security, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days after
each May 15, beginning with May 15, 2000, the Trustee shall mail to each Holder
as provided in TIA Section 313(c) a brief report that complies with TIA Section
313(a) dated as of such May 15, if required by TIA Section 313(a).
A copy of each report at the time of its mailing to the Holders of
Securities shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Securities are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Securities are
listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to
the Trustee from time to time such compensation as shall be agreed upon in
writing for its services. The compensation of the Trustee shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
(including costs of collection) and advances incurred or made by the Trustee.
Such expenses shall include the reasonable compensation and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability or expense incurred by it without negligence or
bad faith on its part in connection with the acceptance or administration of
this Indenture and its duties under this Indenture and the Securities,
including, without limitation, the costs and expenses of investigating or
defending itself against any claim or liability and of complying with any
process served upon it or any of its
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officers in connection with the exercise or performance of any of its powers or
duties under this Indenture and the Securities.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of, premium, if any, and interest on,
particular Securities.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (f) or (g) of Section
6.01, the expenses and the compensation for the services will be intended to
constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
SECTION 7.08. Replacement of Trustee. A resignation or removal of
the Trustee and appointment of a successor Trustee shall become effective only
upon the successor Trustee's acceptance of appointment as provided in this
Section 7.08.
The Trustee may resign at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Trustee in writing and may appoint a
successor Trustee with the consent of the Company. The Company may at any time
remove the Trustee, by Company Order given at least 30 days prior to the date of
the proposed removal if: (i) the Trustee is no longer eligible under Section
7.10; (ii) the Trustee is adjudged a bankrupt or an insolvent; (iii) a receiver
or other public officer takes charge of the Trustee or its property; or (iv) the
Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the outstanding Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company. If the successor Trustee does not deliver its written acceptance
required by the next succeeding paragraph of this Section 7.08 within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of a majority in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder.
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If the Trustee is no longer eligible under Section 7.10 or shall
fail to comply with TIA Section 310(b), any Holder who satisfies the
requirements of TIA Section 310(b) may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
The Company shall give notice of any resignation and any removal
of the Trustee and each appointment of a successor Trustee to all Holders. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue
indefinitely for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee or
any Agent consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation or
national banking association, the resulting, surviving or transferee corporation
or national banking association without any further act shall be the successor
Trustee or Agent with the same effect as if the successor Trustee or Agent had
been named as the Trustee or Agent herein, provided such corporation shall be
otherwise qualified and eligible under this Article.
SECTION 7.10. Eligibility. This Indenture shall always have a
Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee
shall have a combined capital and surplus of at least $25,000,000 as set forth
in its most recent published annual report of condition.
SECTION 7.11. Money Held in Trust. The Trustee shall not be liable
for interest on any money received by it except as the Trustee may agree in
writing with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law and except for
money held in trust under Article Eight of this Indenture.
SECTION 7.12. Withholding Taxes. The Trustee, as agent for the
Company, shall exclude and withhold from each payment of principal and interest
and other amounts due hereunder or under the Securities any and all withholding
taxes applicable thereto as required by the federal law of the United States or
the law of the State of New York or any political subdivision thereof ("U.S.
Taxes"). The Trustee agrees to act as such withholding agent and, in connection
therewith, whenever any present or future U.S. Taxes or similar charges are
required to be withheld with respect to any amounts payable in respect of the
Securities, to withhold such amounts and timely pay the same to the appropriate
authority in the name of and on behalf of the holders of the Securities, that it
will file any necessary withholding tax returns or statements when due, and
that, as promptly as possible after the payment thereof, it will deliver to each
holder of a Security appropriate documentation showing the payment thereof,
together with such additional documentary evidence as such holders may
reasonably request from time to time.
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ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations. Except as
otherwise provided in this Section 8.01, the Company may terminate its
obligations under the Securities and this Indenture if:
(i) all Securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities that have been replaced
or Securities that are paid pursuant to Section 4.01 or Securities for
whose payment money or securities have theretofore been held in trust and
thereafter repaid to the Company, as provided in Section 8.05) have been
delivered to the Trustee for cancellation and the Company has paid all
sums payable by it hereunder; or
(ii) (A) the Securities mature within one year or all of them
are to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption, (B) the
Company irrevocably deposits in trust with the Trustee during such
one-year period, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds solely for
the benefit of the Holders for that purpose, money or U.S. Government
Obligations sufficient (in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee), without consideration of any
reinvestment of any interest thereon, to pay principal, premium, if, any,
and interest on the Securities to maturity or redemption, as the case may
be, and to pay all other sums payable by it hereunder, (C) no Default or
Event of Default with respect to the Securities shall have occurred and
be continuing on the date of such deposit, (D) such deposit will not
result in a breach or violation of, or constitute a default under, this
Indenture or any other agreement or instrument to which the Company is a
party or by which it is bound and (E) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, in each case
stating that all conditions precedent provided for herein relating to the
satisfaction and discharge of this Indenture have been complied with.
With respect to the foregoing clause (i), the Company's
obligations under Section 7.07 shall survive. With respect to the foregoing
clause (ii), the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06,
2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall
survive until the Securities are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After any
such irrevocable deposit, the Trustee upon request shall acknowledge in writing
the discharge of the Company's obligations under the Securities and this
Indenture except for those surviving obligations specified above.
SECTION 8.02. Defeasance and Discharge of Indenture. The Company
will be deemed to have paid and will be discharged from any and all obligations
in respect of the Securities on the 123rd day or, to the extent applicable under
clause (B) below, one year after the date of the deposit referred to in clause
(A) of this Section 8.02, and the provisions of this
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Indenture will no longer be in effect with respect to the Securities, and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same if:
(A) the Company has irrevocably deposited or caused to be
irrevocably deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10) and conveyed all right, title and interest
for the benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if any,
and interest, if any, on the Securities, and dedicated solely to, the
benefit of the Holders, in and to (1) money in an amount, (2) U.S.
Government Obligations that, through the payment of interest, premium, if
any, and principal in respect thereof in accordance with their terms,
will provide, not later than one day before the due date of any payment
referred to in this clause (A), money in an amount or (3) a combination
thereof in an amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge,
without consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and accrued interest on the outstanding Securities at
the Stated Maturity of such principal or interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to the payment of such
principal, premium, if any, and interest with respect to the Securities;
(B) the Company shall have delivered to the Trustee (i) either
(x) an Opinion of Counsel to the effect that Holders will not recognize
income, gain or loss for United States federal income tax purposes as a
result of the Company's exercise of its option under this Section 8.02
and will be subject to United States federal income tax on the same
amount and in the same manner and at the same times as would have been
the case if such option had not been exercised, which Opinion of Counsel
must be based upon (and accompanied by a copy of) a ruling of the United
States Internal Revenue Service to the same effect unless there has been
a change in applicable United States federal income tax law after the
Closing Date such that a ruling is no longer required or (y) a ruling
directed to the Trustee received from the United States Internal Revenue
Service to the same effect as the aforementioned Opinion of Counsel; and
(ii) an Opinion of Counsel to the effect that (x) the creation of the
defeasance trust does not violate the Investment Company Act of 1940 and
(y) after the passage of 123 days following the deposit (except, with
respect to any trust funds for the account of any Holder who may be
deemed to be an "insider" for purposes of the United States Bankruptcy
Code, after one year following the deposit), the trust funds will not be
subject to the effect of Section 547 of the United States Bankruptcy Code
or Section 15 of the New York Debtor and Creditor Law in a case commenced
by or against the Company under either such statute, and either (I) the
trust funds will no longer remain the property of the Company (and
therefore will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally) or (II) if a court were
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to rule under any such law in any case or proceeding that the trust funds
remained property of the Company (a) assuming such trust funds remained
in the possession of the Trustee prior to such court ruling to the extent
not paid to the Holders, the Trustee will hold, for the benefit of the
Holders, a valid and perfected security interest in such trust funds that
is not avoidable in bankruptcy or otherwise (except for the effect of
Section 552(b) of the United States Bankruptcy Code on interest on the
trust funds accruing after the commencement of a case under such
statute), (b) the Holders will be entitled to receive adequate protection
of their interests in such trust funds if such trust funds are used in
such case or proceeding and (c) no property, rights in property or other
interests granted to the Trustee or the Holders in exchange for, or with
respect to, such trust funds will be subject to any prior rights of
holders of other Indebtedness of the Company or any of its Subsidiaries;
(C) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on the
123rd day (or one year) after the date of such deposit, and such deposit
shall not result in a breach or violation of, or constitute a default
under, any other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(D) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Securities will not be delisted as a
result of such deposit, defeasance and discharge; and
(E) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day (or
one year) period referred to in clause (B)(2)(y) of this Section 8.02, none of
the Company's obligations under this Indenture shall be discharged. Subsequent
to the end of such 123-day (or one-year) period with respect to this Section
8.02, the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07,
2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 8.04, 8.05 and 8.06 shall survive until the
Securities are no longer outstanding. Thereafter, only the Company's obligations
in Sections 7.07, 8.04, 8.05 and 8.06 shall survive. If and when a ruling from
the United States Internal Revenue Service or an Opinion of Counsel referred to
in clause (B)(i) of this Section 8.02 may be provided specifically without
regard to, and not in reliance upon, the continuance of the Company's
obligations under Section 4.01, then the Company's obligations under such
Section 4.01 shall cease upon delivery to the Trustee of such ruling or Opinion
of Counsel and compliance with the other conditions precedent provided for
herein relating to the defeasance contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
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SECTION 8.03. Defeasance of Certain Obligations. The Company may
omit to comply with any term, provision or condition set forth in clauses (iii)
and (iv) of Section 5.01 and Sections 4.03 through 4.11, and clause (c) of
Section 6.01 with respect to clauses (iii) and (iv) of Section 5.01 and clauses
(d) and (e) of Section 6.01 shall be deemed not to be Events of Default, in each
case with respect to the outstanding Securities if:
(i) the Company has irrevocably deposited or caused to be
irrevocably deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10) and conveyed all right, title and interest
to the Trustee for the benefit of the Holders, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the
Trustee as trust funds in trust, specifically pledged to the Trustee for
the benefit of the Holders as security for payment of the principal of,
premium, if any, and interest, if any, on the Securities, and dedicated
solely to, the benefit of the Holders, in and to (A) money in an amount,
(B) U.S. Government Obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will
provide, not later than one day before the due date of any payment
referred to in this clause (i), money in an amount or (C) a combination
thereof in an amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge,
without consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and interest on the outstanding Securities on the Stated
Maturity of such principal or interest; provided that the Trustee shall
have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of such principal,
premium, if any, and interest with respect to the Securities;
(ii) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement or
instrument to which the Company or any of its Subsidiaries is a party or
by which it is bound;
(iii) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit;
(iv) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (A) the creation of the defeasance trust does
not violate the Investment Company Act of 1940, (B) the Holders have a
valid first-priority security interest in the trust funds, (C) the
Holders will not recognize income, gain or loss for United States federal
income tax purposes as a result of such deposit and the defeasance of the
obligations referred to in the first paragraph of this Section 8.03 and
will be subject to United States federal income tax on the same amount
and in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred, and (D) after the
passage of 123 days following the deposit (except, with respect to any
trust funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the
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trust funds will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company under either
such statute, and either (1) the trust funds will no longer remain the
property of the Company (and therefore will not be subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally) or (2) if a court were to rule
under any such law in any case or proceeding that the trust funds
remained the property of the Company (x) assuming such trust funds
remained in the possession of the Trustee prior to such court ruling to
the extent not paid to the Holders, the Trustee will hold, for the
benefit of the Holders, a valid and perfected security interest in such
trust funds that is not avoidable in bankruptcy or otherwise (except for
the effect of Section 552(b) of the United States Bankruptcy Code on
interest on the trust funds accruing after the commencement of a case
under such statute), (y) the Holders will be entitled to receive adequate
protection of their interests in such trust funds if such trust funds are
used in such case or proceeding and (z) no property, rights in property
or other interests granted to the Trustee or the Holders in exchange for,
or with respect to, such trust funds will be subject to any prior rights
of holders of other Indebtedness of the Company or any of its
Subsidiaries;
(v) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit and defeasance will not cause the
Securities to be delisted; and
(vi) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
SECTION 8.04. Application of Trust Money. Subject to Section 8.06,
the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Securities and this Indenture to
the payment of principal of, premium, if any, and interest on the Securities;
but such money need not be segregated from other funds except to the extent
required by law.
SECTION 8.05. Repayment to Company. Subject to Sections 7.07,
8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the
Company upon request any excess money held by them at any time and thereupon
shall be relieved from all liability with respect to such money. The Trustee and
the Paying Agent shall pay to the Company any money held by them for the payment
of principal, premium, if any, or interest that remains unclaimed for two years;
provided that the Trustee or such Paying Agent before being required to make any
payment may cause to be published at the expense of the Company once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money at such Holder's address (as set forth in the Security
Register) notice that such money remains unclaimed and that after a date
specified therein (which shall be at least 30 days from the date of such
publication or mailing) any unclaimed balance of such money then remaining will
be repaid
<PAGE> 76
67
to the Company. After payment to the Company, Holders entitled to such money
must look to the Company for payment as general creditors unless an applicable
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02
or 8.03, as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.01, 8.02 or 8.03, as the case may be; provided that, if the
Company has made any payment of principal of, premium, if any, or interest on
any Securities because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
SECTION 8.07. Insiders. With respect to the determination of the
Persons constituting beneficial owners of Securities and whether any such Person
is an "insider" for purposes of Sections 8.02(B)(ii)(y) and 8.03(iv)(E), the
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Officers' Certificate.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, when
authorized by resolutions of its Boards of Directors, and the Trustee may amend
or supplement this Indenture or the Securities without notice to or the consent
of any Holder:
(a) to cure any ambiguity, defect or inconsistency in this
Indenture; provided that such amendments or supplements shall not
adversely affect the interests of the Holders in any material respect;
(b) to comply with Article Five;
(c) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee;
<PAGE> 77
68
(e) to make any change that, in the good faith opinion of the
Board of Directors as evidenced by a Board Resolution, does not
materially and adversely affect the rights of any Holder; or
(f) to comply with any requirements of the Luxembourg Stock
Exchange in order to list the Securities on such Exchange.
SECTION 9.02. With Consent of Holders. Subject to Sections 6.04
and 6.07 and without prior notice to the Holders, the Company, when authorized
by its Boards of Directors (as evidenced by a Board Resolution), and the Trustee
may amend this Indenture and the Securities with the written consent of the
Holders of a majority in principal amount of the Securities then outstanding,
and the Holders of a majority in principal amount of the Securities then
outstanding by written notice to the Trustee may waive future compliance by the
Company with any provision of this Indenture or the Securities.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Security;
(ii) reduce the principal amount of, or premium, if any, or
interest on, any Security, or adversely affect any right of repayment at
the option of any Holder of any Security;
(iii) change the place or currency of payment of principal of, or
premium, if any, or interest on, any Security;
(iv) impair the right to institute suit for the enforcement of
any payment on or after the Stated Maturity (or, in the case of a
redemption, on or after the Redemption Date) of any Security;
(v) reduce the above-stated percentage of outstanding
Securities the consent of whose Holders is required for any supplemental
indenture, for any waiver of compliance with certain provisions of this
Indenture or for waiver of certain Defaults and their consequences
provided for in this Indenture;
(vi) waive a default in the payment of principal of, premium, if
any, or interest on the Securities; or
(vii) modify any of the provisions of this Section 9.02, except
to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Security affected thereby.
<PAGE> 78
69
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company will
mail supplemental indentures to Holders upon request. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. Revocation and Effect of Consent. Until an amendment
or waiver becomes effective, a consent to it by a Holder is a continuing consent
by the Holder and every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the Security of the consenting Holder, even if
notation of the consent is not made on any Security. However, any such Holder or
subsequent Holder may revoke the consent as to its Security or portion of its
Security. Such revocation shall be effective only if the Trustee receives the
notice of revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite percentage
in principal amount of the outstanding Securities.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder unless it is of the type described in any of clauses (i)
through (v) of Section 9.02. In case of an amendment or waiver of the type
described in clauses (i) through (v) of Section 9.02, the amendment or waiver
shall bind each Holder who has consented to it and every subsequent Holder of a
Security that evidences the same indebtedness as the Security of the consenting
Holder.
SECTION 9.04. Notation on or Exchange of Securities. If an
amendment, supplement or waiver changes the terms of a Security, the Trustee may
require the Holder to deliver such Security to the Trustee. At the Company's
expense the Trustee may place an appropriate notation on the Security about the
changed terms and return it to the Holder and the Trustee may place an
appropriate notation on any Security thereafter authenticated. Alternatively, if
the Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms.
<PAGE> 79
70
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee shall
be entitled to receive, and shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver if the same does not adversely affect the
rights, duties or immunities of the Trustee under this Indenture or otherwise.
The Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver that affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise.
SECTION 9.06. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article Nine shall conform to
the requirements of the TIA as then in effect.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act of 1939. Prior to the
effectiveness of the Registration Statement, this Indenture shall incorporate
and be governed by the provisions of the TIA that are required to be part of and
to govern indentures qualified under the TIA. After the effectiveness of the
Registration Statement, this Indenture shall be subject to the provisions of the
TIA that are required to be a part of this Indenture and shall, to the extent
applicable, be governed by such provisions.
SECTION 10.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:
if to the Company:
Alferez Pareja 256
1107 Buenos Aires Argentina
Attention: Chief Executive Officer
if to the Trustee:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
<PAGE> 80
71
Any notice or communication mailed to a Holder shall be mailed to
him at his address as it appears on the Security Register by first class mail
and shall be sufficiently given to him if so mailed within the time prescribed.
Copies of any such communication or notice to a Holder shall also be mailed to
the Trustee and each Agent at the same time. In addition, for so long as the
Securities are listed on the Luxembourg Stock Exchange, all notices and
communications to be delivered to the Holders shall be published in a leading
newspaper of general circulation in Luxembourg, which is expected to be the
Luxembourger Wort.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except for a notice to the Trustee, which is deemed given only when received,
and except as otherwise provided in this Indenture, if a notice or communication
is mailed in the manner provided in this Section 10.02, it is duly given,
whether or not the addressee receives it. If, by reason of the suspension of
publication or general circulation of any newspaper or otherwise, it shall be
impracticable to publish notice to the Holders in the manner described herein,
then any manner of giving such notice as shall be satisfactory to the Trustee
shall be deemed a sufficient giving of such notice.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 10.03. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
Counsel, all such conditions precedent have been complied with.
SECTION 10.04. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
<PAGE> 81
72
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with; provided,
however, that, with respect to matters of fact, an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 10.05. Rules by Trustee, Paying Agent or Registrar. The
Trustee may make reasonable rules for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 10.06. Payment Date Other Than a Business Day. If an
Interest Payment Date, Redemption Date, Payment Date, Stated Maturity or date of
maturity of any Security shall not be a Business Day, then payment of principal
of, premium, if any, or interest on such Security, as the case may be, need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date, Payment Date,
Redemption Date, or at the Stated Maturity or date of maturity of such Security;
provided that no interest shall accrue for the period from and after such
Interest Payment Date, Payment Date, Redemption Date, Stated Maturity or date of
maturity, as the case may be.
SECTION 10.07. Governing Law. This Indenture and the Securities
shall be governed by the laws of the State of New York. The Company hereby
agrees that service of process upon the Company's registered agent in the State
of Delaware, currently located at Corporation Trust Center, 1209 Orange Street,
Wilmington, DE, 19801 and written notice of such service to the Company (mailed
or delivered to the Chief Executive Officer of the Company at its principal
office at Alferez Pareja 256, 1107 Buenos Aires, Republic of Argentina), shall
be deemed to be in every respect effective service of process upon the Company,
in any suit, action or proceeding arising out of or relating to this Indenture
or the Securities.
Each of the Company, the Trustee and the Holders agrees to submit
to the non-exclusive jurisdiction of the federal or state courts of the State of
New York sitting in the City of New York, Borough of Manhattan, in any such
action or proceeding. The Company hereby waives to the fullest extent permitted
by law any defense to the institution or continuance of any such suit, action or
proceeding based upon lack of proper venue, inconvenient forum or similar
grounds.
SECTION 10.08. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company
<PAGE> 82
73
or any Subsidiary of the Company. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
SECTION 10.09. No Recourse Against Others. No recourse for the
payment of the principal of, premium, if any, or interest on any of the
Securities, or for any claim based thereon or otherwise in respect thereof, and
no recourse under or upon any obligation, covenant or agreement of the Company
contained in this Indenture, or in any of the Securities, or because of the
creation of any Indebtedness represented thereby, shall be had against any
incorporator or against any past, present or future partner, shareholder, other
equity holder, officer, director, employee or controlling person, as such, of
the Company or of any successor Person, either directly or through the Company
or any successor Person, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Securities.
SECTION 10.10. Successors. All agreements of the Company in this
Indenture and the Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 10.11. Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
SECTION 10.12. Currency Indemnity. U.S. dollars are the sole
currency of account and payment for all sums payable by the Company under or in
connection with the Securities, including damages. Any amount received or
recovered in a currency other than U.S. dollars (whether as a result of, or of
the enforcement of, a judgment or order of a court of any jurisdiction, in the
winding-up or dissolution of the Company or otherwise) by any Holder of a
Security in respect of any sum expressed to be due to it from the Company shall
only constitute a discharge to the Company to the extent of the U.S. dollar
amount which the recipient is able to purchase with the amount so received or
recovered in that other currency on the date of that receipt or recovery (or, if
it is not practicable to make that purchase on that date, on the first date on
which it is practicable to do so). If that U.S. dollar amount is less than the
U.S. dollar amount expressed to be due to the recipient under any Security, the
Company shall indemnify the recipient against any loss sustained by it as a
result. In any event, the Company shall indemnify the recipient against the cost
of making any such purchase. For the purposes of this paragraph, it will be
sufficient for the Holder of a Security to certify in a satisfactory manner
(indicating the sources of information used) that it would have suffered a loss
had an actual purchase of U.S. dollars been made with the amount so received in
that other currency on the date of receipt or recovery (or, if a purchase of
U.S. dollars on such date had not been practicable, on the first date on which
it would have been practicable, it being required that the need for a change of
date be certified in the manner mentioned above). These indemnities constitute a
separate and independent obligation from the Company's other obligations, shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by any Holder of
<PAGE> 83
74
a Security and shall continue in full force and effect despite any other
judgment, order, claim or proof for a liquidated amount in respect of any sum
due under any Security.
SECTION 10.13. Currency Translations. For purposes of determining
compliance with this Indenture, the U.S. dollar equivalent of any amounts
denominated in a foreign currency shall be calculated using the noon dollar
buying rate in New York City for wire transfers of such currency as published by
the Federal Reserve Bank of New York on the date of such foreign currency amount
is received, incurred or paid. For other financial reporting purposes, currency
translations will be performed in accordance with GAAP.
SECTION 10.14. Table of Contents, Headings, Etc. The Table of
Contents, Cross-Reference Table and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms and provisions hereof.
<PAGE> 84
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, all as of the date first written above.
IMPSAT FIBER NETWORKS, INC.
By:
--------------------------------------------
Name:
Title:
By:
--------------------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
--------------------------------------------
Name:
Title:
BANQUE INTERNATIONALE A
LUXEMBOURG S.A.
By:
--------------------------------------------
Name:
Title:
<PAGE> 85
EXHIBIT A
[FACE OF NOTE]
IMPSAT FIBER NETWORKS, INC.
13 3/4% Senior Note Due 2005
[CUSIP ]
[ISIN ]
No. $_________
IMPSAT FIBER NETWORKS, INC., a Delaware corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to __________, or its
registered assigns, the principal sum of ___________ ($_____) on February 15,
2005.
Interest Payment Dates: February 15 and August 15, commencing
August 15, 2000.
Regular Record Dates: February 1 and August 1.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE> 86
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
IMPSAT FIBER NETWORKS, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
<PAGE> 87
A-3
(Form of Trustee's Certificate of Authentication)
This is one of the 13 3/4% Senior Notes due 2005 described in the
within-mentioned Indenture.
Date: February 16, 2000 THE BANK OF NEW YORK,
as Trustee
By:
------------------------------
Authorized Signatory
<PAGE> 88
A-4
[REVERSE SIDE OF NOTE]
IMPSAT FIBER NETWORKS, INC.
13 3/4% Senior Note due 2005
1. Principal and Interest.
The Company will pay the principal of this Note on February 15,
2005.
The Company promises to pay interest on the principal amount of
this Note on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of record of
the Notes at the close of business on the February 15 or August 15 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
August 15, 2000.
If an exchange offer registered under the Securities Act is not
consummated, and a shelf registration statement under the Securities Act with
respect to resales of the Notes is not declared effective by the Commission, on
or before August 16, 2000 in accordance with the terms of the Registration
Rights Agreement dated February 16, 2000 between the Company and Morgan Stanley
& Co. Incorporated, the rate of interest will increase by 0.5% per annum to 14
1/4% per annum, payable in cash semiannually, in arrears, on each Interest
Payment Date, commencing February 15, 2001. Notwithstanding the preceding two
sentences, the failure to cause such exchange offer to be consummated or such
shelf registration statement to be declared effective shall be deemed not to be
a default or breach of a covenant for purposes of Section 6.01(c) of the
Indenture. Upon consummation of the exchange offer or the effectiveness of the
shelf registration statement, as the case may be, the rate of interest will
decrease to the original rate of interest as set forth on the face of this Note.
The Holder of this Note is entitled to the benefits of such Registration Rights
Agreement. To the extent there is a conflict between this Note and such
Registration Rights Agreement, such Registration Rights Agreement shall control
to the extent permitted by applicable law.
Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from February 16,
2000; provided that, if there is no existing default in the payment of interest
and this Note is authenticated between a Regular Record Date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such Interest Payment Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium,
if any, and (to the extent lawful) interest on overdue installments of interest
at the rate per annum borne by the Notes.
<PAGE> 89
A-5
2. Method of Payment.
The Company will pay principal as provided above and interest
(except defaulted interest) on the principal amount of the Notes as provided
above on each February 15 and August 15 to the persons who are Holders (as
reflected in the Security Register at the close of business on the February 1
and August 1 immediately preceding the Interest Payment Date), in each case,
even if the Note is canceled on registration of transfer or registration of
exchange after such record date; provided that, with respect to the payment of
principal, the Company will not make payment to the Holder unless this Note is
surrendered to a Paying Agent.
The Company will pay principal, premium, if any, and as provided
above, interest in money of the United States of America that at the time of
payment is legal tender for payment of public and private debts. However, the
Company may pay interest by its check payable in such money mailed to a Holder's
registered address (as reflected in the Security Register). If a payment date is
a date other than a Business Day at a place of payment, payment may be made at
that place on the next succeeding day that is a Business Day and no interest
shall accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent, Paying
Agent and Registrar. The Company may change any authenticating agent, Paying
Agent or Registrar without notice. The Company, any Subsidiary or any Affiliate
of any of them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of
February 16, 2000 (the "Indenture"), between the Company, as issuer, and The
Bank of New York, as trustee (the "Trustee"). Capitalized terms herein are used
as defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are general unsecured unsubordinated indebtedness of the
Company, will rank pari passu in right of payment with all existing and future
unsecured, unsubordinated indebtedness of the Company and will be senior in
right of payment to all subordinated indebtedness of the Company. The Company
may, subject to Article Five of the Indenture and applicable law, issue
additional Notes under the Indenture.
5. Redemption.
<PAGE> 90
A-6
The Notes are redeemable, in whole or in part, at any time at the
Company's option at a redemption price (the "Make-Whole Price") equal to the
greater of (i) 100% of the principal amount thereof or (ii) as determined by an
Independent Investment Banker, the sum of the present values of the Remaining
Scheduled Payments discounted to the Redemption Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate, plus, in each case, accrued and unpaid interest (including
Additional Interest, as provided for in the Registration Rights Agreement), if
any, to the date of redemption.
"Adjusted Treasury Rate" means with respect to any Redemption
Date, the rate per annum equal to the semiannual equivalent yield to maturity of
the Comparable Treasury Issue, assuming a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such Redemption Date, plus 0.50%.
"Comparable Treasury Issue" means the United States Treasury
Security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the Notes that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Notes.
"Comparable Treasury Price" means, the respect to any Redemption
Date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third Business Day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the
Reference Treasury Dealer Quotations for such Redemption Date, after excluding
the highest and lowest of such Reference Treasury Dealer Quotations, or (B) if
the Trustee obtains fewer than three such Reference Treasury Dealer Quotations,
the average of all such Quotations.
"Independent Investment Banker" means any Reference Treasury
Dealer appointed by the Trustee after consultation with the Company.
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, Chase Securities Inc., First Union Capital Markets, a division of
Wheat First Securities, Inc., NationsBanc Montgomery Securities LLC and TD
Securities (USA) Inc. and their respective successors; provided, however, that
if any of the foregoing shall case to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), the Company shall
substitute another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average as determined by
the Trustee, of the bid and asked prices of the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such Redemption Date.
<PAGE> 91
A-7
"Remaining Scheduled Payments" means, with respect to each Note to
be redeemed, the remaining scheduled payments of the principal thereof and
interest thereon that would be due after the related Redemption Date but for
such redemption; provided, however, that, if such Redemption Date is not an
Interest Payment Date with respect to such Note, the amount of the next
succeeding scheduled interest payment thereon will be reduced by the amount of
interest accrued and unpaid thereon to such Redemption Date.
In addition, at any time prior to February 16, 2003, the Company
may redeem up to 35% of the principal amount of the Notes originally issued with
the Net Cash Proceeds (other than proceeds from the exercise of the
over-allotment option by the underwriters in connection with the Company's
initial public offering) of one or more public or private issuances of Capital
Stock (other than Disqualified Stock) at any time or from time to time in part,
at a Redemption Price of 113.750% of the principal amount thereof on the
Redemption Date, together with accrued and unpaid interest, if any, thereon;
provided that (i) at least 65% of the principal amount of the Notes remain
outstanding after each such redemption and (ii) notice of such redemption is
mailed within 60 days of such issuance.
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Notes to be redeemed
at such Holder's last address as it appears in the Security Register. Notes in
original denominations larger than $1,000 may be redeemed in part; provided that
Notes will only be issued in denominations of $1,000 principal amount or
integral multiples thereof. On and after the Redemption Date, interest ceases to
accrue on Notes or portions of Notes called for redemption, unless the Company
defaults in the payment of the Redemption Price.
7. Repurchase upon Change in Control.
Upon the occurrence of any Change of Control, each Holder shall
have the right to require the repurchase of its Notes by the Company in cash
pursuant to the offer described in the Indenture at a purchase price equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase (the "Change of Control Payment").
A notice of such Change of Control will be mailed within 30 days
after any Change of Control occurs to each Holder at his last address as it
appears in the Security Register. Notes in original denominations larger than
$1,000 may be sold to the Company in part; provided that Notes will only be
issued in denominations of $1,000 principal amount or integral multiples
thereof. On and after the Change of Control Payment Date, interest ceases to
accrue on Notes or portions of Notes surrendered for purchase by the Company,
unless the Company defaults in the payment of the Change of Control Payment.
8. Denominations; Transfer; Exchange.
<PAGE> 92
A-8
The Notes are in registered form without coupons in denominations
of $1,000 of principal amount and integral multiples thereof. A Holder may
register the transfer or exchange of Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
or exchange of any Notes selected for redemption. Also, it need not register the
transfer or exchange of any Notes for a period of 15 days before a selection of
Notes to be redeemed is made.
9. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all purposes.
10. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, Holders entitled to the money
must look to the Company for payment, unless an applicable law designates
another Person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to maturity, the Company will be
discharged from the Indenture and the Notes, except in certain circumstances for
certain sections thereof, and (b) to the Stated Maturity, the Company will be
discharged from certain covenants set forth in the Indenture.
12. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding, and any existing default or
compliance with any provision may be waived with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding. Without
notice to or the consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency and make any change that does not materially
and adversely affect the rights of any Holder.
13. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries, among other things, to incur additional
indebtedness; create liens; engage in sale-leaseback transactions; pay dividends
or make distributions in respect of their capital stock; make investments or
make certain other restricted payments; sell assets; issue or
<PAGE> 93
A-9
sell stock of Restricted Subsidiaries; enter into transactions with stockholders
or affiliates; or, with respect to the Company, consolidate, merge or sell all
or substantially all of their assets. Within 90 days after the end of the last
fiscal quarter of each year, the Company must report to the Trustee on
compliance with such limitations.
14. Successor Persons.
Generally, when a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
15. Defaults and Remedies.
Any of the following events shall constitute an Event of Default
under the Indenture:
(a) default in the payment of principal of (or premium, if any,
on) any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the
same becomes due and payable, and such default continues for a period of
30 days;
(c) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in the Indenture or under the
Notes and such default or breach continues for a period of 30 consecutive
days after written notice by the Trustee or the Holders of 25% or more in
aggregate principal amount of the Notes;
(d) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of $5 million or more in the aggregate for
all such issues of all such Persons, whether such Indebtedness now exists
or shall hereafter be created, (I) an event of default that has caused
the holder thereof to declare such Indebtedness to be due and payable
prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (II) the failure to
make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default;
(e) any final judgment or order (not covered by insurance) for
the payment of money in excess of $5 million in the aggregate for all
such final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall not
be paid or discharged, and either (A) an enforcement proceeding shall
have been commenced by a creditor upon such judgment or order or (B)
there shall be any period of 30 consecutive days following entry of the
final judgment or order that causes the
<PAGE> 94
A-10
aggregate amount for all such final judgments or orders outstanding and
not paid or discharged against all such Persons to exceed $5 million
during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;
(f) a court having jurisdiction in the premises enters a decree
or order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant
Subsidiary or for all or substantially all of the property and assets of
the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in
effect for a period of 30 consecutive days; or
(g) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B) consents
to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Company or any Significant Subsidiary or for all or substantially all of
the property and assets of the Company or any Significant Subsidiary or
(C) effects any general assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default specified in clause (f)
or (g) above that occurs with respect to the Company) occurs and is continuing
under the Indenture, the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes, then outstanding, by written notice to the
Company (and to the Trustee if such notice is given by the Holders), may, and
the Trustee at the request of such Holders shall, declare the principal,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. If a bankruptcy or insolvency default with respect to the Company
occurs and is continuing, the principal of, premium, if any, and accrued
interest on the Notes automatically becomes due and payable without any
declaration or other act on the part of the Trustee or any Holder. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
17. No Recourse Against Others.
<PAGE> 95
A-11
No incorporator or any past, present or future partner,
shareholder, other equity holder, officer, director, employee or controlling
person as such, of the Company or of any successor Person shall have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes.
18. Authentication.
This Note shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this Note.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to IMPSAT Fiber
Networks, Inc., Alferez Pareja 256, 1107 Buenos Aires, Republic of Argentina
Attention: Chief Executive Officer.
<PAGE> 96
A-12
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- --------------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing _____________________ attorney to transfer said Note on the books of
the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL SECURITIES OTHER THAN EXCHANGE SECURITIES, OFFSHORE GLOBAL
SECURITIES AND OFFSHORE PHYSICAL SECURITIES]
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date of an effective Registration Statement or
(ii) the end of the period referred to in Rule 144(k) under the Securities Act,
the undersigned confirms that without utilizing any general solicitation or
general advertising that:
[Check One]
[ ](a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
[ ](b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
<PAGE> 97
A-13
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date:
---------------- ----------------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the face of
the within-mentioned instrument in every particular,
without alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
-------------- ----------
NOTICE: To be executed by an executive
officer
<PAGE> 98
A-14
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.11 or Section 4.12 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 4.11 or Section 4.12 of the Indenture, state the
amount (in principal amount):
$ .
----------------
Date:
----------------
Your Signature:
------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
----------------------------------
<PAGE> 99
EXHIBIT B
Form of Certificate
------- --, ----
THE BANK OF NEW YORK
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: IMPSAT FIBER NETWORKS, INC. (the "Company")
13 3/4% Senior Notes
due 2005 (the "Securities")
Ladies and Gentlemen:
This letter relates to U.S. $______ principal amount of Securities
represented by a Note (the "Legended Note") which bears a legend outlining
restrictions upon transfer of such Legended Note. Pursuant to Section 2.02 of
the Indenture (the "Indenture") dated as of February 16, 2000 relating to the
Securities, we hereby certify that we are (or we will hold such Securities on
behalf of) a person outside the United States to whom the Securities could be
transferred in accordance with Rule 904 of Regulation S promulgated under the
U.S. Securities Act of 1933, as amended. Accordingly, you are hereby requested
to exchange the legended certificate for an unlegended certificate representing
an identical principal amount of Securities, all in the manner provided for in
the Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
---------------------------------
Authorized Signature
<PAGE> 100
EXHIBIT C
Form of Certificate to be Delivered
in Connection with Transfers
Pursuant to Regulation S
------ --, ----
THE BANK OF NEW YORK
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: IMPSAT FIBER NETWORKS, INC. (the "Company")
13 3/4% Senior Notes
due 2005 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of U.S.$______ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act of 1933.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or
<PAGE> 101
C-2
legal proceedings or official inquiry with respect to the matters covered
hereby. Terms used in this certificate have the meanings set forth in Regulation
S.
Very truly yours,
[Name of Transferor]
By:
---------------------------------
Authorized Signature
<PAGE> 102
EXHIBIT D
Form of Certificate to be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
------ --, ----
THE BANK OF NEW YORK
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: IMPSAT FIBER NETWORKS, INC. (the "Company")
13 3/4% Senior Notes
due 2005 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed purchase of $___________ aggregate
principal amount of the Securities, we confirm that:
1. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth in
the Indenture dated as of February 16, 2000 relating to the Securities
(the "Indenture") and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Securities except in compliance
with, such restrictions and conditions and the Securities Act of 1933, as
amended (the "Securities Act").
<PAGE> 103
2. We understand that the offer and sale of the Securities
have not been registered under the Securities Act, and that the
Securities may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we should
sell any Securities, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities
Act to a "qualified institutional buyer" (as defined therein), (C) to an
institutional "accredited investor" (as defined below) that, prior to
such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you and to the Company a signed letter substantially in
the form of this letter, and, if such transfer is in respect of an
aggregate principal amount of less than $100,000, an opinion of counsel
acceptable to the Company that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904
of Regulation S under the Securities Act, (E) pursuant to the provisions
of Rule 144 under the Securities Act (if available) or (F) pursuant to an
effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing any of the Securities from us a
notice advising such purchaser that resales of the Securities are
restricted as stated herein.
3. We understand that, on any proposed resale of any
Securities, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the
Securities purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Securities, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its investment.
5. We are acquiring the Securities purchased by us for our
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
<PAGE> 104
By:
--------------------------------
Authorized Signature
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
Dated February 16, 2000
between
IMPSAT FIBER NETWORKS, INC.
and
MORGAN STANLEY & CO. INCORPORATED
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into February 16, 2000, among IMPSAT FIBER NETWORKS, INC., a Delaware
corporation (the "Company"), and MORGAN STANLEY & CO. INCORPORATED (the
"Placement Agent").
This Agreement is made pursuant to the Placement Agreement dated
February 11, 2000, between the Company and the Placement Agent (the "Placement
Agreement"), which provides for the sale by the Company to the Placement Agent
of an aggregate of $300,000,000 principal amount of the Company's 13 3/4% Senior
Notes due 2005 (the "Securities"). In order to induce the Placement Agent to
enter into the Placement Agreement, the Company has agreed to provide to the
Placement Agent and its direct and indirect transferees the registration rights
set forth in this Agreement. The execution of this Agreement is a condition to
the closing under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Closing Date" shall mean the Closing Date as defined in the
Placement Agreement.
"Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Securities for Registrable Securities pursuant to Section 2(a)
hereof.
"Exchange Offer Registration" shall mean a registration under the
1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such registration
statement, in each case including the
<PAGE> 3
2
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Exchange Securities" shall mean Securities issued by the Company
under the Indenture containing terms identical to the Securities (except
that the Exchange Securities will not contain terms with respect to
transfer restrictions) and to be offered to Holders in exchange for
Securities pursuant to the Exchange Offer.
"Holder" shall mean the Placement Agent, for so long as it owns
any Registrable Securities, and its successors, assigns and direct and
indirect transferees who become registered owners of Registrable
Securities under the Indenture; provided that for purposes of Sections 4
and 5 of this Agreement, the term "Holder" shall include Participating
Broker-Dealers (as defined in Section 4(a)).
"Indenture" shall mean the Indenture relating to the Securities
dated as of February 16, 2000 among the Company, The Bank of New York, as
trustee, registrar and paying agent and Banque Internationale a
Luxembourg S.A., as paying agent and transfer agent, and as the same may
be amended from time to time in accordance with the terms thereof.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities;
provided that whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities held by the Company or any of its affiliates (other than the
Placement Agent or any other Holder deemed an affiliate solely by reason
of its holding one or more Registrable Securities) shall not be counted
in determining whether such consent or approval was given by the Holders
of such required percentage or amount.
"Person" shall mean an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Placement Agent" shall have the meaning set forth in the
preamble.
"Placement Agreement" shall have the meaning set forth in the
preamble.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus
as amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to such
prospectus, and in each case including all material incorporated by
reference therein.
<PAGE> 4
3
"Registrable Securities" shall mean the Securities; provided,
however, that the Securities shall cease to be Registrable Securities (i)
when a Registration Statement with respect to such Securities shall have
been declared effective under the 1933 Act and such Securities shall have
been disposed of pursuant to such Registration Statement, (ii) when such
Securities have been sold to the public pursuant to Rule 144(k) (or any
similar provision then in force, but not Rule 144A) under the 1933 Act or
(iii) when such Securities shall have ceased to be outstanding, provided,
further, that the Securities with respect to which the Company has caused
to be filed and declared effective an Exchange Offer Registration
Statement and has commenced an Exchange Offer, in each case pursuant to
and in accordance with Section 2 hereof, and which have not been tendered
by the last Exchange Date (as defined in Section 2(a)(ii) hereof) by the
Holder thereof shall be deemed not be to Registrable Securities.
"Registration Expenses" shall mean any and all expenses incident
to performance of or compliance by the Company with this Agreement,
including without limitation: (i) all SEC, stock exchange or National
Association of Securities Dealers, Inc. registration and filing fees,
(ii) all fees and expenses incurred in connection with compliance with
state securities or blue sky laws (including reasonable fees and
disbursements of counsel for any underwriters or Holders in connection
with blue sky qualification of any of the Exchange Securities or
Registrable Securities), (iii) all expenses of any Persons in preparing
or assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and
other documents relating to the performance of and compliance with this
Agreement, (iv) all rating agency fees, (v) all fees and disbursements
relating to the qualification of the Indenture under applicable
securities laws, (vi) the fees and disbursements of the Trustee and its
counsel, (vii) the fees and disbursements of counsel for the Company and,
in the case of a Shelf Registration Statement, the fees and disbursements
of one counsel for the Holders (which counsel shall be selected by the
Majority Holders and which counsel may also be counsel for the Placement
Agent) and (viii) the fees and disbursements of the independent public
accountants of the Company, including the expenses of any special audits
or "comfort" letters required by or incident to such performance and
compliance, but excluding fees and expenses of counsel to the
underwriters (other than fees and expenses set forth in clause (ii)
above) or the Holders and underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement of
the Company that covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
<PAGE> 5
4
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant
to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of
this Agreement which covers all of the Registrable Securities (but no
other securities unless approved by the Holders whose Registrable
Securities are covered by such Shelf Registration Statement) on an
appropriate form under Rule 415 under the 1933 Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to
such registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the Securities
under the Indenture.
"Underwriter" shall have the meaning set forth in Section 3
hereof.
"Underwritten Registration" or "Underwritten Offering" shall mean
a registration in which Registrable Securities are sold to an Underwriter
for reoffering to the public.
2. Registration Under the 1933 Act.
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the Staff of the SEC, the Company shall use its
best efforts to cause to be filed an Exchange Offer Registration Statement
covering the offer by the Company to the Holders to exchange all of the
Registrable Securities for Exchange Securities and to have such Registration
Statement remain effective until the closing of the Exchange Offer. The Company
shall commence the Exchange Offer promptly after the Exchange Offer Registration
Statement has been declared effective by the SEC and use its best efforts to
have the Exchange Offer consummated not later than 60 days after such effective
date. The Company shall commence the Exchange Offer by mailing the related
exchange offer Prospectus and accompanying documents to each Holder stating, in
addition to such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities validly
tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a
period of at least 20 business days from the date such notice is mailed)
(the "Exchange Dates");
<PAGE> 6
5
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest but will not retain any
rights under this Registration Rights Agreement (including any right to
have the interest rate therein increased pursuant thereto);
(iv) that Holders electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to surrender
such Registrable Security, together with the enclosed letters of
transmittal, to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice prior
to the close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election,
not later than the close of business on the last Exchange Date, by
sending to the institution and at the address (located in the Borough of
Manhattan, The City of New York) specified in the notice a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Securities delivered for
exchange and a statement that such Holder is withdrawing his election to
have such Securities exchanged.
As soon as practicable after the last Exchange Date, the Company
shall:
(i) accept for exchange Registrable Securities or portions
thereof tendered and not validly withdrawn pursuant to the Exchange
Offer;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so accepted
for exchange by the Company and issue, and cause the Trustee to promptly
authenticate and mail to each Holder, an Exchange Security equal in
principal amount of the Registrable Securities surrendered by such
Holder; and
(iii) use its best efforts to list the Exchange Securities on the
Luxembourg Stock Exchange.
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the Staff of the SEC. The Company shall inform the
Placement Agent of the names and addresses of the Holders to whom the Exchange
Offer is made, and the Placement Agent shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate the tender of
Registrable Securities in the Exchange Offer.
(b) In the event that (i) the Company determines that the
Exchange Offer Registration provided for in Section 2(a) above is not available
or may not be consummated as
<PAGE> 7
6
soon as practicable after the last Exchange Date because it would violate
applicable law or the applicable interpretations of the Staff of the SEC, (ii)
the Exchange Offer is not for any other reason consummated by August 16, 2000 or
(iii) the Exchange Offer has been completed and in the opinion of counsel for
the Placement Agent a Registration Statement must be filed and a Prospectus must
be delivered by the Placement Agent in connection with any offering or sale of
Registrable Securities, the Company shall use its best efforts to cause to be
filed as soon as practicable after such determination, date or notice of such
opinion of counsel is given to the Company, as the case may be, a Shelf
Registration Statement providing for the sale by the Holders of all of the
Registrable Securities and to have such Shelf Registration Statement declared
effective by the SEC (such obligation, arising solely under clause (ii) above,
to have filed a Shelf Registration Statement shall be deemed satisfied with
respect to any Holder upon consummation of the Exchange Offer with respect to
such Holder). In the event the Company is required to file a Shelf Registration
Statement solely as a result of the matters referred to in clause (iii) of the
preceding sentence, the Company shall use its best efforts to file and have
declared effective by the SEC both an Exchange Offer Registration Statement
pursuant to Section 2(a) with respect to all Registrable Securities and a Shelf
Registration Statement (which may be a combined Registration Statement with the
Exchange Offer Registration Statement) with respect to offers and sales of
Registrable Securities held by the Placement Agent after completion of the
Exchange Offer. The Company agrees to use its best efforts to keep the Shelf
Registration Statement continuously effective until the expiration of the period
referred to in Rule 144(k) with respect to the Registrable Securities or such
shorter period that will terminate when all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement. The Company further agrees to supplement or amend the
Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used by the Company for such
Shelf Registration Statement or by the 1933 Act or by any other rules and
regulations thereunder for shelf registration or if reasonably requested by a
Holder with respect to information relating to such Holder, and to use its best
efforts to cause any such amendment to become effective and such Shelf
Registration Statement to become usable as soon as thereafter practicable. The
Company agrees to furnish to the Holders of Registrable Securities copies of any
such supplement or amendment promptly after its being used or filed with the
SEC.
(c) The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or Section 2(b). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that, if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, such
Registration Statement
<PAGE> 8
7
will be deemed not to have become effective during the period of such
interference until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume. As provided for in the Indenture, in
the event the Exchange Offer is not consummated and the Shelf Registration
Statement is not declared effective on or prior to August 16, 2000, the interest
rate on the Securities will increase by .5% per annum to 14 1/4% per annum. Upon
consummation of the Exchange Offer or the effectiveness of the Shelf
Registration Statement as declared by the SEC, as the case may be, the rate of
interest on the Securities will decrease to the original rate of interest of 13
3/4% per annum for the Securities. If a Shelf Registration Statement is required
solely by the matters referred to in clause (iii) of the first sentence of
Section 2(b), such increase in interest rate shall be payable only to the
Placement Agent, with respect to the Securities held by them, and only with
respect to any period (after August 16, 2000) during which such Shelf
Registration Statement is not effective.
(e) Without limiting the remedies available to the Placement
Agent and the Holders, the Company acknowledges that any failure by the Company
to comply with its obligations under Section 2(a) and Section 2(b) hereof may
result in material irreparable injury to the Placement Agent or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Placement Agent or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Section 2(a)
and Section 2(b) hereof.
3. Registration Procedures.
In connection with the obligations of the Company with respect to
the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof,
the Company shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on
the appropriate form under the 1933 Act, which form (x) shall be selected
by the Company and (y) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the selling
Holders thereof and (z) shall comply as to form in all material respects
with the requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith, and use its best
efforts to cause such Registration Statement to become effective and
remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period and cause each Prospectus to be supplemented by any
required prospectus supplement and, as so supplemented, to be filed
pursuant to Rule 424 under the 1933 Act; to keep each Prospectus current
during the period described under Section 4(3) and Rule 174 under the
1933 Act that is applicable to transactions by brokers or dealers with
respect to the Registrable Securities or Exchange Securities;
<PAGE> 9
8
(c) in the case of a Shelf Registration, furnish to each Holder
of Registrable Securities, to counsel for the Placement Agent, to counsel
for the Holders and to each Underwriter of an Underwritten Offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or Underwriter
may reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities; and the Company consents to
the use of such Prospectus and any amendment or supplement thereto in
accordance with applicable law by each of the selling Holders of
Registrable Securities and any such Underwriters in connection with the
offering and sale of the Registrable Securities covered by and in the
manner described in such Prospectus or any amendment or supplement
thereto in accordance with applicable law;
(d) use its best efforts to register or qualify the Exchange
and Registrable Securities under all applicable state securities or "blue
sky" laws of such jurisdictions as any Holder of Registrable Securities
covered by a Registration Statement shall reasonably request in writing
by the time the applicable Registration Statement is declared effective
by the SEC, to cooperate with such Holders in connection with any filings
required to be made with the National Association of Securities Dealers,
Inc. and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Holder to consummate the
disposition in each such jurisdiction of such Exchange and Registrable
Securities owned by such Holder; provided, however, that the Company
shall not be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (ii) file any general
consent to service of process or (iii) subject itself to taxation in any
such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities, counsel for the Holders and counsel for the
Placement Agent promptly and, if requested by any such Holder or counsel,
confirm such advice in writing (i) when a Registration Statement has
become effective and when any post-effective amendment thereto has been
filed and becomes effective, (ii) of any request by the SEC or any state
securities authority for amendments and supplements to a Registration
Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the
SEC or any state securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the
Company contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to the offering
cease to be true and correct in all material respects or if the Company
receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in
<PAGE> 10
9
any jurisdiction or the initiation of any proceeding for such purpose,
(v) of the happening of any event during the period a Shelf Registration
Statement is effective which makes any statement made in such
Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such Registration
Statement or Prospectus in order to make the statements therein not
misleading and (vi) of any determination by the Company that a
post-effective amendment to a Registration Statement would be
appropriate;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at the
earliest possible moment and provide immediate notice to each Holder of
the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each Holder
of Registrable Securities, without charge, at least one conformed copy of
each Registration Statement and any post-effective amendment thereto
(without documents incorporated therein by reference or exhibits thereto,
unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends and enable
such Registrable Securities to be in such denominations (consistent with
the provisions of the Indenture) and registered in such names as the
selling Holders may reasonably request at least one business day prior to
the closing of any sale of Registrable Securities;
(i) in the case of a Shelf Registration, upon the occurrence of
any event contemplated by Section 3(e)(v) hereof, use their best efforts
to prepare and file with the SEC a supplement or post-effective amendment
to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees to notify the Holders to suspend
use of the Prospectus as promptly as practicable after the occurrence of
such an event, and the Holders hereby agree to suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus
to correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus
after the initial filing of a Registration Statement, provide copies of
such document to the Placement Agent and its counsel (and, in the case of
a Shelf Registration Statement, to the Holders and their counsel) and
make such of the representatives of the Company as shall be reasonably
requested by the Placement Agent
<PAGE> 11
10
or its counsel (and, in the case of a Shelf Registration Statement, to
the Holders or their counsel) available for discussion of such document,
and shall not at any time file or make any amendment to the Registration
Statement, any Prospectus or any amendment of or supplement to a
Registration Statement or a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus,
of which the Placement Agent and its counsel (and, in the case of a Shelf
Registration Statement, the Holders and their counsel) shall not have
previously been advised and furnished a copy or to which the Placement
Agent or its counsel (and, in the case of a Shelf Registration Statement,
the Holders or their counsel) shall reasonably object;
(k) obtain a CUSIP number for all Exchange Securities, as the
case may be, not later than the effective date of a Registration
Statement;
(l) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Securities or Registrable Securities, as the
case may be, cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA and execute, and use
their best efforts to cause the Trustee to execute, all documents as may
be required to effect such changes and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable
Securities, any Underwriter participating in any disposition pursuant to
such Shelf Registration Statement, and attorneys and accountants
designated by the Holders, at reasonable times and in a reasonable
manner, all financial and other records, pertinent documents and
properties of the Company, and cause the officers, directors and
employees of the Company to supply all information reasonably requested
by any such representative, Underwriter, attorney or accountant in
connection with a Shelf Registration Statement;
(n) in the case of a Shelf Registration, use its best efforts
to cause all Registrable Securities to be listed on any securities
exchange or any automated quotation system on which the Securities are
then listed if requested by the Majority Holders, to the extent such
Registrable Securities satisfy applicable listing requirements;
(o) use its best efforts to cause the Exchange Securities to be
rated or continue to be rated by two nationally recognized statistical
rating organizations (as such term is defined in Rule 436(g)(2) under the
1933 Act), if the Registrable Securities have been so rated;
(p) if reasonably requested by any Holder of Registrable
Securities covered by a Registration Statement, (i) promptly incorporate
in a Prospectus supplement or post-effective amendment such information
with respect to such Holder as such Holder
<PAGE> 12
11
reasonably requests to be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as
soon as the Company has received notification of the matters to be
incorporated in such filing; and
(q) in the case of a Shelf Registration, enter into such
customary agreements and take all such other actions in connection
therewith (including those requested by the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities including, but not limited to,
an Underwritten Offering and in such connection, (i) to the extent
possible, make such representations and warranties to the Holders and any
Underwriters of such Registrable Securities with respect to the business
of the Company and its subsidiaries, the Registration Statement,
Prospectus and documents incorporated by reference or deemed incorporated
by reference, if any, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested, (ii) obtain opinions of counsel
to the Company (which counsel and opinions, in form, scope and substance,
shall be reasonably satisfactory to the Holders and such Underwriters and
their respective counsel) addressed to each selling Holder and
Underwriter of Registrable Securities, covering the matters customarily
covered in opinions requested in underwritten offerings, (iii) obtain
"comfort" letters from the independent certified public accountants of
the Company (and, if necessary, any other certified public accountant of
any subsidiary of the Company, or of any business acquired by the Company
for which financial statements and financial data are or are required to
be included in the Registration Statement) addressed to each selling
Holder and Underwriter of Registrable Securities, such letters to be in
customary form and covering matters of the type customarily covered in
"comfort" letters in connection with underwritten offerings, and (iv)
deliver such documents and certificates as may be reasonably requested by
the Holders of a majority in principal amount of the Registrable
Securities being sold or the Underwriters, and which are customarily
delivered in underwritten offerings, to evidence the continued validity
of the representations and warranties of the Company made pursuant to
clause (i) above and to evidence compliance with any customary conditions
contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company may
require each Holder of Registrable Securities to furnish to the Company such
information regarding the Holder and the proposed distribution by such Holder of
such Registrable Securities as the Company may from time to time reasonably
request in writing.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 3(e)(v) hereof, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to a Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by
the Company, such Holder will deliver to the Company (at its expense) all copies
in its
<PAGE> 13
12
possession, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Registrable Securities current at the time of
receipt of such notice. The Company may give any such notice only twice during
any 365 day period and any such suspensions may not exceed 30 days for each
suspension and there may not be more than two suspensions in effect during any
365-day period.
The Holders of Registrable Securities covered by a Shelf
Registration Statement who desire to do so may sell such Registrable Securities
in an Underwritten Offering. In any such Underwritten Offering, the investment
banker or investment bankers and manager or managers (the "Underwriters") that
will administer the offering will be selected by the Majority Holders of the
Registrable Securities included in such offering.
4. Participation of Broker-Dealers in Exchange Offer.
(a) The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Securities that were acquired by such
broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within the
meaning of the 1933 Act and must deliver a prospectus meeting the requirements
of the 1933 Act in connection with any resale of such Exchange Securities.
The Company understands that it is the Staff's position that if
the Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means by
which Participating Broker-Dealers may resell the Exchange Securities, without
naming the Participating Broker-Dealers or specifying the amount of Exchange
Securities owned by them, such Prospectus may be delivered by Participating
Broker-Dealers to satisfy their prospectus delivery obligation under the 1933
Act in connection with resales of Exchange Securities for their own accounts, so
long as the Prospectus otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions
of this Agreement, the Company agrees that the provisions of this Agreement as
they relate to a Shelf Registration shall also apply to an Exchange Offer
Registration to the extent, and with such reasonable modifications thereto as
may be, reasonably requested by the Placement Agent or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Securities by
Participating Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; provided that:
(i) the Company shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration Statement, as
would otherwise be contemplated by Section 3(i), for a period exceeding
180 days after the last Exchange Date (as such period may be extended
pursuant to the penultimate paragraph of Section 3 of this Agreement) and
Participating Broker-Dealers shall not be authorized by the
<PAGE> 14
13
Company to deliver and shall not deliver such Prospectus after such
period in connection with the resales contemplated by this Section 4; and
(ii) the application of the Shelf Registration procedures set
forth in Section 3 of this Agreement to an Exchange Offer Registration,
to the extent not required by the positions of the Staff of the SEC or
the 1933 Act and the rules and regulations thereunder, will be in
conformity with the reasonable request to the Company by the Placement
Agent or with the reasonable request in writing to the Company by one or
more broker-dealers who certify to the Placement Agent and the Company in
writing that they anticipate that they will be Participating
Broker-Dealers; and provided further that, in connection with such
application of the Shelf Registration procedures set forth in Section 3
to an Exchange Offer Registration, the Company shall be obligated (x) to
deal only with one entity representing the Participating Broker-Dealers,
which shall be Morgan Stanley & Co. Incorporated unless it elects not to
act as such representative, (y) to pay the fees and expenses of only one
counsel representing the Participating Broker-Dealers, which shall be
counsel to the Placement Agent unless such counsel elects not to so act
and (z) to cause to be delivered only one, if any, "comfort" letter with
respect to the Prospectus in the form existing on the last Exchange Date
and with respect to each subsequent amendment or supplement, if any,
effected during the period specified in clause (i) above.
(c) The Placement Agent shall have no liability to the Company
or any Holder with respect to any request that it may make pursuant to Section
4(b) above.
5. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent, each Holder and each person, if any, who controls the Placement
Agent or any Holder within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act, or is under common control with, or is controlled
by, the Placement Agent or any Holder, from and against all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred by the Placement Agent, any Holder or any such
controlling or affiliated person in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which Exchange Securities or Registrable
Securities were registered under the 1933 Act, including all documents
incorporated therein by reference, or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or caused by any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are
<PAGE> 15
14
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Placement Agent or any Holder
furnished to the Company in writing by the Placement Agent or any Holder
expressly for use therein; provided, however, that the foregoing indemnity shall
not inure to the benefit of any of the foregoing parties from whom the person
asserting any such losses, claims, damages or liabilities purchased the
Securities or Exchange Securities, or any person controlling any of the
foregoing parties, if such party failed to send or give a copy of the Prospectus
(as amended or supplemented if the Company shall have furnished such amendments
or supplements thereto) to such person within the time required by the
Securities Act (and if so required), and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such losses, claims,
damages or liabilities. In connection with any Underwritten Offering permitted
by Section 3, the Company will also indemnify the Underwriters, if any, selling
brokers, dealers and similar securities industry professionals participating in
the distribution, their officers and directors and each Person who controls such
Persons (within the meaning of the Securities Act and the Exchange Act) to the
same extent as provided above with respect to the indemnification of the
Holders, if requested in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Placement Agent and the other selling
Holders, and each of their respective directors, officers who sign the
Registration Statement and each Person, if any, who controls the Company, the
Placement Agent and any other selling Holder within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as
the foregoing indemnity from the Company to the Placement Agent and the Holders,
but only with reference to information relating to such Holder furnished to the
Company in writing by such Holder expressly for use in any Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above,
such person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the fees and expenses of more than one
<PAGE> 16
15
separate firm (in addition to any local counsel) for the Placement Agent and for
all Holders and all persons, if any, who control the Placement Agent and any
Holders within the meaning of either Section 15 of the 1933 Act or Section 20 of
the 1934 Act, unless the Placement Agent determines in its sole discretion that
such a joint representation of the Placement Agent and the Holders would involve
differences or potential differences that render such joint representation
inadvisable, in which case the indemnifying party shall not be responsible for
(i) the fees and expenses of more than one separate firm (in addition to any
local counsel) for all Holders and all persons, if any, who control any Holders
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act and (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Placement Agent and all persons, if any,
who control the Placement Agent within the meaning of either Section 15 of the
1933 Act or Section 20 of the 1934 Act, and (b) the fees and expenses of more
than one separate firm (in addition to any local counsel) for the Company, its
directors, its officers who sign the Registration Statement and each person, if
any, who controls the Company within the meaning of either such Section, and
that all such fees and expenses shall be reimbursed as they are incurred. In
such case involving the Placement Agent and persons who control the Placement
Agent, such firm shall be designated in writing by the Placement Agent. In such
case involving the Holders and such persons who control Holders, such firm shall
be designated in writing by the Majority Holders. In all other cases, such firm
shall be designated by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent but,
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party for such fees and expenses of
counsel in accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which such indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the
<PAGE> 17
16
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company and the Holders shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Holders and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Holders' respective
obligations to contribute pursuant to this Section 5(d) are several in
proportion to the respective number of Registrable Securities of such Holder
that were registered pursuant to a Registration Statement.
(e) The Company and each Holder agree that it would not be just
or equitable if contribution pursuant to this Section 5 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 5, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Securities
were sold by such Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of the Placement Agent, any Holder or any person controlling the Placement Agent
or any Holder, or by or on behalf of the Company, its officers or directors or
any person controlling the Company, (iii) acceptance of any of the Exchange
Securities and (iv) any sale of Registrable Securities pursuant to a Shelf
Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered
into, and on or after the date of this Agreement will not enter into, any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
<PAGE> 18
17
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or consent; provided, however, that no amendment, modification,
supplement, waiver or consents to any departure from the provisions of Section 5
hereof shall be effective as against any Holder of Registrable Securities unless
consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Placement Agent,
the address set forth in the Placement Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Placement Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(c).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the second succeeding business day if timely delivered to an air courier
guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall
be concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Placement Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such person shall be entitled to receive the benefits hereof. The
Placement Agent (in its capacity as Placement Agent) shall have no liability or
obligation to the Company with respect to any failure by a Holder to comply
with, or any breach by any Holder of, any of the obligations of such Holder
under this Agreement.
<PAGE> 19
18
(e) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Placement Agent, on the other hand, and shall have the right to
enforce such agreements directly to the extent they deems such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder.
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) Governing Law. This Agreement shall be governed by the laws
of the State of New York.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
IMPSAT FIBER NETWORKS, INC.
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
By: Morgan Stanley & Co. Incorporated
By:
--------------------------------------
Name: John D. Tyree
Title: Vice President
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
$300,000,000
IMPSAT FIBER NETWORKS, INC.
13 3/4% SENIOR NOTES DUE 2005
PLACEMENT AGREEMENT
February 11, 2000
<PAGE> 2
February 11, 2000
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
IMPSAT Fiber Networks, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Morgan Stanley & Co. Incorporated (the
"Placement Agent") $300,000,000 principal amount of its 13 3/4% Senior Notes due
2005 (the "Notes") to be issued pursuant to the provisions of an Indenture to be
dated as of February 16, 2000 (the "Indenture") among the Company, The Bank of
New York, as Trustee, Registrar and Paying Agent and Banque International a
Luxembourg S.A., as Paying Agent and Transfer Agent.
The Notes will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act"), to qualified
institutional buyers (as defined in Rule 144A under the Securities Act) in
compliance with the exemption from registration provided by Rule 144A under the
Securities Act ("Rule 144A").
In connection with the sale of the Notes, the Company has prepared
a preliminary offering memorandum (the "Preliminary Memorandum") and will
prepare a final offering memorandum (the "Final Memorandum" and, with the
Preliminary Memorandum, each a "Memorandum") setting forth or including a
description of the terms of the Notes, the terms of the offering and a
description of the Company and its business.
The purchasers of the Notes and their direct and indirect
transferees will be entitled to the benefits of a Registration Rights Agreement
(the "Registration Rights Agreement") dated the date hereof (as defined below).
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, you that as of the date hereof:
(a) The Preliminary Memorandum does not contain and the Final
Memorandum, in the form used by the Placement Agent to confirm sales and
on the Closing Date, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, except that the representations and warranties set forth
in this Section 1(a) do not apply to statements or omissions in either
Memorandum based upon information relating to the Placement Agent
furnished to the Company in writing by the Placement Agent expressly for
use therein.
<PAGE> 3
2
(b) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the State of
Delaware, United States of America, has the corporate power and authority
to own its property and to conduct its business as described in each
Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole. All of the shares of capital stock of the
Company's subsidiaries owned by the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are directly
owned by the Company, free and clear of all liens, encumbrances, equities
or claims.
(c) Each subsidiary of the Company has been duly incorporated
and is validly existing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in each Memorandum and is duly
qualified to transact business in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
would not have a material adverse effect on such subsidiary. IMPSAT S.A.
("IMPSAT Argentina") is a wholly owned subsidiary of the Company, IMPSAT
S.A. ("IMPSAT Colombia") is a wholly owned subsidiary of the Company,
Impsatel del Ecuador S.A. ("IMPSAT Ecuador") is a wholly owned subsidiary
of the Company, IMPSAT S.A. de C.V. ("IMPSAT Mexico") is a 99.9% owned
subsidiary of the Company, Telecomunicaciones IMPSAT S.A. ("IMPSAT
Venezuela") is a wholly owned subsidiary of the Company and IMPSAT
Comunicacoes Ltda. ("IMPSAT Brazil") is a 99.9% owned subsidiary of the
Company.
(d) This Agreement has been duly authorized, executed and
delivered by the Company.
(e) The Registration Rights Agreement has been duly authorized
and, when executed and delivered by the Company, will be a valid and
binding agreement of the Company enforceable in accordance with its
terms, except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally, (y) the availability of equitable remedies may be limited by
equitable principles of general applicability and (z) any rights to
indemnity and contribution may be limited by federal and state securities
laws and public policy considerations.
(f) The Notes have been duly authorized and, when executed,
authenticated and delivered in accordance with the terms of the Indenture
and paid for by the Placement Agent in accordance with the terms of this
Agreement, will (x) be valid and binding obligations of the Company
enforceable in accordance with their terms, except as (A) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws
<PAGE> 4
3
affecting creditors' rights generally and (B) rights of acceleration, if
applicable, and the availability of equitable remedies may be limited by
equitable principles of general applicability and (y) be entitled to the
benefits of the Indenture and the Registration Rights Agreement.
(g) The Indenture has been duly authorized, executed and
delivered by the Company, and is a valid and binding agreement of the
Company, enforceable in accordance with its terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (y) rights of
acceleration, if applicable, and the availability of equitable remedies
may be limited by equitable principles of general applicability.
(h) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Indenture, the Registration Rights Agreement, the Notes and the issuance,
sale and delivery of the Notes will not contravene any provision of
applicable law or the certificate of incorporation or bylaws of the
Company, as amended to date, or any agreement or other instrument binding
upon the Company or any of its subsidiaries or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
the Company or any subsidiary of the Company, and no consent, approval,
authorization or order of, or qualification with, any governmental body
or agency is required for the performance by the Company of its
obligations under this Agreement, the Indenture, the Registration Rights
Agreement or the Notes or the issuance, sale and delivery of the Notes,
except (x) for any consents, approvals, authorizations, orders or
qualifications, the failure to obtain which would not have a material
adverse effect on the ability of the Company to perform its obligations
under this Agreement and (y) such as may be required by the securities or
Blue Sky laws of the various states in connection with the offer and sale
of the Notes.
(i) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Preliminary Memorandum.
(j) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or
to which any of the properties of the Company or any of its subsidiaries
is subject other than proceedings accurately described in all material
respects in each Memorandum and proceedings that would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole, or on the power or ability of the Company to perform its
obligations under this Agreement, the Indenture, the Registration Rights
Agreement or the Notes, to consummate the transactions contemplated by
each such agreement, or to apply the net proceeds of the
<PAGE> 5
4
issuance of the Notes as described in the Final Memorandum under the
caption "Use of Proceeds."
(k) Each of the Company and its subsidiaries has all necessary
certificates, orders, permits, licenses, authorizations, consents and
approvals of and from, and has made all declarations and filings with,
all federal, state, local, foreign supranational, national, regional and
other governmental authorities and all courts and tribunals, to own,
lease, license and use its properties and assets and to conduct its
business in the manner described in the Final Memorandum, and neither the
Company nor any of its subsidiaries has received any notice of
proceedings relating to revocation or modification of any such
certificates, orders, permits, licenses, authorizations, consents or
approvals, nor is the Company or any of its subsidiaries in violation of,
or in default under, any federal, state, local, foreign supranational,
national or regional law, regulation, rule, decree, order or judgment
applicable to the Company or any of its subsidiaries the effect of which,
singly or in the aggregate, would have a material adverse effect on the
Company and its subsidiaries, taken as a whole, except as described in
the Final Memorandum.
(l) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act, an "Affiliate") of the
Company has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be
integrated with the sale of the Notes in a manner that would require the
registration under the Securities Act of the Notes or (ii) engaged in any
form of general solicitation or general advertising in connection with
the offering of the Notes (as those terms are used in Regulation D under
the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act; provided, however,
that no such representation or warranty is given or made with respect to
the Placement Agent or any of its Affiliates.
(m) The Company is not, and after giving effect to the offering
and sale of the Notes and the application of the proceeds thereof as
described in the Final Memorandum under the caption "Use of Proceeds",
will not be an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(n) It is not necessary in connection with the offer, sale and
delivery of the Notes to the Placement Agent in the manner contemplated
by this Agreement to register the Notes under the Securities Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as amended.
(o) The Company and its subsidiaries (i) are in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to
<PAGE> 6
5
conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would
not, singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(p) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(q) None of the Company, its Affiliates or any person acting on
its or their behalf has engaged in any directed selling efforts (as that
term is defined in Regulation S under the Securities Act ("Regulation
S")) with respect to the Notes; provided, however, that no such
representation or warranty is given or made with respect to the Placement
Agent or any of its Affiliates.
(r) The Company has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or operations
of the Company or any of its subsidiaries have been or will be affected
by the Year 2000 Problem (that is, any significant risk that computer
hardware or software applications used by the Company and its
subsidiaries during the time periods occurring after December 31, 1999,
function at least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000); as a result of such review, nothing
has come to the attention of the Company as of the date hereof, after due
inquiry, that any Year 2000 Problems have occurred that (A) could have a
material adverse effect on the condition, financial or otherwise, or on
the earnings, business or operations of the Company and its subsidiaries,
taken as a whole, or result in any material loss or interference with the
business or operations of the Company and its subsidiaries, taken as a
whole or (B) are of a character required to be described or referred to
in the Final Memorandum which have not been accurately described in the
Final Memorandum.
(s) Subsequent to the respective dates as of which information
is given in the Final Memorandum, (1) the Company and its subsidiaries
have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary
course of business; (2) the Company has not purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock other than
ordinary and customary dividends; and (3) there has not been any material
change in the capital stock, short-term debt or
<PAGE> 7
6
long-term debt of the Company and its consolidated subsidiaries, except
in each case as described in the Final Memorandum.
(t) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them which is material to the business of
the Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in the Final
Memorandum or such as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made
of such property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not materially
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries, in each case except as
described in the Final Memorandum.
(u) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and trade
names currently employed by them in connection with the business now
operated by them, and, except as described in the Final Memorandum,
neither the Company nor any of its subsidiaries has received any notice
of infringement of or conflict with asserted rights of others with
respect to any of the foregoing which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(v) No material labor dispute with the employees of the Company
or any of its subsidiaries exists, except as described in or contemplated
by the Final Memorandum, or, to the knowledge of the Company, is
imminent; and the Company is not aware of any existing, threatened or
imminent labor disturbance by the employees of any of its principal
suppliers, manufacturers or contractors that could have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(w) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as the Company reasonably believes are prudent
and customary in the businesses in which they are engaged; neither the
Company nor any such subsidiary has been refused any insurance coverage
sought or applied for; and neither the Company nor any such subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a
<PAGE> 8
7
material adverse effect on the Company and its subsidiaries, taken as a
whole, except as described in the Final Memorandum.
(x) The Company and each of its subsidiaries keep accurate
books and records reflecting their assets and 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 consolidated financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (3) access to assets is permitted only in
accordance with management's general or specific authorization; and (4)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(y) The Notes satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
2. Agreements to Sell and Purchase. The Company hereby agrees
to sell to the Placement Agent, and the Placement Agent, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees to purchase from the Company $300,000,000 principal
amount of Notes at a purchase price of 98.125% of the principal amount of the
Notes plus accrued interest, if any, to the Closing Date (the "Purchase Price").
The Company hereby agrees that, without the prior written consent
of Morgan Stanley & Co. Incorporated, as Placement Agent, it will not, during
the period beginning on the date hereof and continuing to and including the
Closing Date, offer, sell, contract to sell or otherwise dispose of any debt of
the Company or warrants to purchase debt of the Company substantially similar to
the Notes (other than the sale of the Notes under this Agreement).
3. Terms of Offering. You have advised the Company that the
Placement Agent will make an offering of the Notes purchased by the Placement
Agent hereunder on the terms to be set forth in the Final Memorandum, as soon as
practicable after this Agreement is entered into as in your judgment is
advisable.
4. Payment and Delivery. Payment for the Notes shall be made
to the account of the Company in Federal or other funds immediately available in
New York City against delivery of such Notes for the account of the Placement
Agent at 10:00 a.m., New York city time, on February 16, 2000, or at such other
time on the same or such other date, not later than February 28, 2000, as shall
be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Closing Date."
Certificates for the Notes shall be in definitive form or global
form, as specified by you, and registered in such names and in such
denominations as you shall request in writing
<PAGE> 9
8
not later than one full business day prior to the Closing Date. The certificates
evidencing the Notes shall be delivered to you on the Closing Date for the
account of the Placement Agent, with any transfer taxes payable in connection
with the transfer of the Notes to the Placement Agent duly paid, against payment
of the Purchase Price therefor.
5. Conditions to the Placement Agent's Obligations. The
obligation of the Placement Agent under this Agreement to purchase the Notes
will be subject to the following conditions:
(a) Subsequent to the date of this Agreement and prior to the
Closing Date,
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating
accorded any of the Company's securities by any "nationally
recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act;
and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations, of the Company and its subsidiaries, taken as a whole,
from that set forth in the Final Memorandum (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement) that, in the judgment of Morgan Stanley & Co.
Incorporated, is material and adverse and that makes it, in the
judgment of Morgan Stanley & Co. Incorporated, impracticable to
market the Notes on the terms and in the manner contemplated in
the Final Memorandum.
(b) You shall have received on the Closing Date a certificate,
dated the Closing Date and signed by an executive officer of the Company,
to the effect set forth in Section 5(a)(i) above and to the effect that
the representations and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or
before the Closing Date.
The officer signing and delivering such certificate may rely upon
the best of his or her knowledge as to proceedings threatened.
(c) The Placement Agent shall have received on the Closing Date
an opinion of Arnold & Porter, special U.S. counsel for the Company,
dated the Closing Date, to the effect set forth in Exhibit A.
<PAGE> 10
9
(d) The Placement Agent shall have received on the Closing Date
an opinion of Nicholson & Cano, Argentine counsel for the Company and
IMPSAT Argentina, dated the Closing Date, to the effect set forth in
Exhibit B.
(e) The Placement Agent shall have received on the Closing Date
an opinion of S.E. Consultores Asociados Ltda., Colombian counsel for
IMPSAT Colombia, dated the Closing Date, to the effect set forth in
Exhibit C.
(f) The Placement Agent shall have received on the Closing Date
an opinion of Perez Bustamante & Perez, Ecuadoran counsel for IMPSAT
Ecuador, dated the Closing Date, to the effect set forth in Exhibit D.
(g) The Placement Agent shall have received on the Closing Date
an opinion of Basham, Ringe & Correa, Mexican counsel for IMPSAT Mexico,
dated the Closing Date, to the effect set forth in Exhibit E.
(h) The Placement Agent shall have received on the Closing Date
an opinion of Baumeister & Brewer, Venezuelan counsel for IMPSAT
Venezuela, dated the Closing Date, to the effect set forth in Exhibit F.
(i) The Placement Agent shall have received on the Closing Date
an opinion of Pinheiro Neto, Brazilian counsel for IMPSAT Brazil, dated
the Closing Date, to the effect set forth in Exhibit G.
(j) The Placement Agent shall have received on the Closing Date
an opinion of Latham & Watkins, United States regulatory counsel for the
Company, dated the Closing Date, to the effect set forth in Exhibit H.
Each of the opinions referred to in clauses (c) through (j) shall
be rendered to the Placement Agent at the request of the Company and
shall so state therein.
(k) The Placement Agent shall have received on the Closing Date
an opinion of Shearman & Sterling, United States counsel for the
Placement Agent, dated the Closing Date, with respect to such matters as
you may reasonably request.
(l) The Placement Agent shall have received, on each of the
date hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Placement Agent, from Deloitte & Touche LLP, independent public
accountants for the Company, containing statements and information of the
type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain
financial information contained in the Final Memorandum; provided that
the letter delivered on the Closing Date shall use a "cut-off date" not
earlier than the date hereof.
<PAGE> 11
10
(m) You shall have received such other documents and
certificates as are reasonably requested by you and your counsel.
6. Covenants of the Company. In further consideration of the
agreements of the Placement Agent contained in this Agreement, the Company
covenants with the Placement Agent as follows:
(a) To furnish to you in New York City, without charge, prior
to 10:00 a.m. New York City time on the business day next succeeding the
date of this Agreement and during the period mentioned in Section 6(c)
below, as many copies of the Final Memorandum and any supplements and
amendments thereto as you may reasonably request.
(b) Before amending or supplementing either Memorandum, to
furnish to you a copy of each such proposed amendment or supplement and
not to use any such proposed amendment or supplement to which you
reasonably object.
(c) If, during such period after the date hereof and prior to
the date on which all of the Notes shall have been sold by the Placement
Agent, any event shall occur or condition exist as a result of which it
is necessary in your judgment to amend or supplement the Final Memorandum
in order to make the statements therein, in the light of the
circumstances when such Memorandum is delivered to a purchaser, not
misleading, or if, in the opinion of United States counsel to the
Placement Agent it is necessary to amend or supplement such Memorandum to
comply with applicable law, forthwith to prepare and furnish, at its own
expense, to the Placement Agent, either amendments or supplements to such
Memorandum so that the statements in such Memorandum as so amended or
supplemented will not, in the light of the circumstances when such
Memorandum is delivered to a purchaser, be misleading or so that such
Memorandum, as so amended or supplemented, will comply with applicable
law.
(d) To endeavor to qualify the Notes for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) Whether or not any sale of the Notes is consummated, to pay
all expenses incident to the performance of its obligations under this
Agreement, including: (i) the preparation of each Memorandum and all
amendments and supplements thereto, (ii) the preparation, issuance and
delivery of the Notes, (iii) the fees and disbursements of the Company's
counsel and accountants and the Trustee and its counsel, (iv) the
qualification of such Notes under securities or Blue Sky laws in
accordance with the provisions of Section 5(d), including filing fees and
the fees and disbursements of counsel for the Placement Agent in
connection therewith and in connection with the preparation of any Blue
Sky or legal investment memoranda, (v) the printing and delivery to the
Placement
<PAGE> 12
11
Agent in quantities as hereinabove stated of copies of the Memorandum and
any amendments or supplements thereto, (vi) any fees charged by rating
agencies for the rating of the Notes, (vii) all document production
charges and expenses of counsel to the Placement Agent (but not including
their fees for professional services) in connection with the preparation
of this Agreement, (viii) the fees and expenses, if any, incurred in
connection with the admission of the Notes for trading in any appropriate
market system and (ix) any expenses incurred by the Company in connection
with a "road show" presentation to potential investors.
(f) Neither the Company nor any Affiliate will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) which could be integrated
with the sale of the Notes in a manner which would require the
registration under the Securities Act of the Notes.
(g) Not to solicit any offer to buy or offer or sell the Notes
by means of any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2) of
the Securities Act.
(h) While any of the Notes remain outstanding, to make
available, upon request, to any seller of such Notes the information
specified in Rule 144A(d)(4) under the Securities Act, unless the Company
is then subject to Section 13 or 15(d) of the Exchange Act.
(i) To use its best efforts to permit the Notes to be
designated PORTAL securities in accordance with the rules and regulations
adopted by the National Association of Securities Dealers, Inc. relating
to trading in the PORTAL Market.
(j) None of the Company, its Affiliates or any person acting on
its or their behalf (other than the Placement Agent) will engage in any
directed selling efforts (as that term is defined in Regulation S) with
respect to the Notes, and the Company and its Affiliates and each person
acting on its or their behalf (other than the Placement Agent) will not
engage in any selling efforts pursuant to Regulation S.
(k) For the sole benefit of the Placement Agent:
(1) prior to the consummation of the Exchange Offer (as defined
in the Registration Rights Agreement) or the effectiveness of a Shelf
Registration Statement if, in the reasonable judgment of the Placement
Agent, the Placement Agent or any of its affiliates (as such term is
defined in the rules and regulations under the Securities Act) is
required to deliver an offering memorandum in connection with sales of,
or market-making activities with respect to, the Notes or the Exchange
Securities (as defined in the Registration Rights Agreement), (A) to
periodically amend or supplement the Final
<PAGE> 13
12
Memorandum so that the information contained in the Final Memorandum
complies with the requirements of Rule 144A of the Securities Act, (B) to
amend or supplement the Final Memorandum when necessary to reflect any
material changes in the information provided therein so that the Final
Memorandum will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances existing as of the date the Final
Memorandum is so delivered, not misleading and (C) to provide the
Placement Agent with copies of each such amended or supplemental Final
Memorandum, as the Placement Agent may reasonably request;
(2) following the consummation of the Exchange Offer or the
effectiveness of a Shelf Registration Statement and for so long as the
Notes or, the Exchange Securities are outstanding if, in the reasonable
judgment of the Placement Agent, the Placement Agent or any of its
affiliates (as such term is defined in the rules and regulations under
the Securities Act) is required to deliver a prospectus in connection
with sales of, or market-making activities with respect to the Notes or
the Exchange Securities, (A) to periodically amend the applicable
registration statement so that the information contained therein complies
with the requirements of Section 10(a) of the Securities Act, (B) if
requested by the Placement Agent, within 45 days following the end of the
Company's most recent fiscal quarter, file a supplement to the prospectus
included in the applicable registration statement which sets forth the
financial results of the Company for the previous quarter, (C) to amend
the applicable registration statement or supplement the related
prospectus or the documents incorporated therein when necessary to
reflect any material changes in the information provided therein so that
the registration statement and the prospectus will not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances
existing as of the date the prospectus is so delivered, not misleading
and (D) to provide the Placement Agent with copies of each such amendment
or supplement as the Placement Agent may reasonably request;
(3) notwithstanding clauses (1) and (2) above, (A) prior to
amending the Final Memorandum or to filing any post-effective amendment
to any registration statement or to supplementing any related prospectus,
to furnish to the Placement Agent and its counsel, copies of all such
documents proposed to be amended, filed or supplemented, and (B) it will
not issue any amendment to the Final Memorandum, any post-effective
amendment to a registration statement or any supplement to a prospectus
to which the Placement Agent or its counsel shall reasonably object;
(4) it shall notify the Placement Agent and its counsel and (if
requested by any such person) confirm such advice in writing, (A) when
any amendment to the Final Memorandum has been issued, when any
prospectus supplement or amendment or post-effective amendment has been
filed, and, with respect to any post-effective amendment, when the same
has become effective, (B) of any request by the SEC for any
post-
<PAGE> 14
13
effective amendment or supplement to a registration statement, any
supplement or amendment to a prospectus or for additional information,
(C) the issuance by the SEC of any stop order suspending the
effectiveness of a registration statement or the initiation of any
proceedings for that purpose, (D) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Notes or the Exchange Securities for sale in any jurisdiction or the
initiation or threatening of any proceedings for such purpose and (E) of
the happening of any event which makes any statement made in the Final
Memorandum, a registration statement, a prospectus or any amendment or
supplement thereto untrue or which requires the making of any change in
the Final Memorandum, a registration statement, a prospectus or any
amendment or supplement thereto, in order to make the statements therein
not misleading;
(5) it consents to the use of the Final Memorandum and any
prospectus referred to in this paragraph (k) or any amendment or
supplement thereto, by the Placement Agent in connection with the
offering and sale of the Notes or Exchange Securities, as the case may
be;
(6) it will comply with the provisions of this paragraph (k) at
its own expense and will reimburse the Placement Agent for its expenses
associated with this paragraph (k) (including fees of counsel); and
(7) it expressly acknowledges that the indemnification and
contribution provisions of Section 8 of this Agreement shall be
specifically applicable and relate to each offering memorandum,
registration statement, prospectus, amendment or supplement referred to
in this paragraph (k).
(l) to make or cause to be made an application to list the
Notes on the Luxembourg Stock Exchange within 45 days after the Closing
Date and thereafter to use best efforts to obtain such listing.
7. Offering of Notes; Restrictions on Transfer. The Placement
Agent represents and warrants that it is a qualified institutional buyer as
defined in Rule 144A under the Securities Act (a "QIB"). The Placement Agent
agrees with the Company that (i) it will not solicit offers for, or offer or
sell, the Notes by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act and (ii) it will solicit offers for the Notes only from, and will offer the
Notes only to, persons that it reasonably believes to be QIBs that, in
purchasing the Notes are deemed to have represented and agreed as provided in
the Final Memorandum under the caption "Transfer Restrictions."
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Placement Agent, and each person, if any, who
controls the Placement Agent within the meaning of either Section 15 of the
Securities Act or Section 20 of the
<PAGE> 15
14
Exchange Act, or is under common control with, or is controlled by, the
Placement Agent, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by the Placement Agent or any such controlling or affiliated
person in connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a material fact
contained in either Memorandum (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Placement Agent furnished to the
Company in writing by the Placement Agent through you expressly for use therein.
(b) The Placement Agent agrees to indemnify and hold harmless
the Company and its directors, officers and each person, if any, who controls
the Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to the Placement Agent, but only with reference to information
relating to such Placement Agent furnished to the Company in writing by the
Placement Agent through you expressly for use in either Memorandum or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 8(a) or 8(b), such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
reasonably satisfactory to the Placement Agent, in the case of parties
indemnified pursuant to Section 8(a) above and reasonably satisfactory to the
Company, in the case of parties indemnified pursuant to Section 8(b) above. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the
<PAGE> 16
15
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
and third sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section
8(a) or 8(b) of this Section 8 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Placement
Agent, on the other hand, from the offering of such Notes or (ii) if the
allocation provided by clause 8(a)(i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(a)(i) above but also the relative fault of the Company,
on the one hand, and the Placement Agent, on the other hand, in connection with
the statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company, on the one hand, and the Placement
Agent, on the other hand, in connection with the offering of such Notes shall be
deemed to be in the same respective proportions as the net proceeds from the
offering of such Notes (before deducting expenses) received by the Company and
the total discounts and commissions received by the Placement Agent in respect
thereof bear to the aggregate offering price of such Notes. The relative fault
of the Company, on the one hand, and of the Placement Agent, on the other hand,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Placement Agent and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The Company and the Placement Agent agree that it would not
be just or equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to
<PAGE> 17
16
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, the Placement Agent shall not be required to contribute any amount in
excess of the amount by which the total price at which the Notes resold by it in
the initial placement of such Notes were offered to investors exceeds the amount
of any damages that the Placement Agent has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
indemnity and contribution provisions contained in this Section 8 and the
representations and warranties and other statements of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of the Placement Agent or any person controlling the Placement Agent or
by or on behalf of the Company or its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of the
Notes. The remedies provided for in this Section 8 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
9. Termination. This Agreement shall be subject to termination
by notice given by you to the Company, if (a) after the execution and delivery
of this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange or the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or
together with any other such event makes it, in your judgment, impracticable to
market the Notes on the terms and in the manner contemplated in the Final
Memorandum.
10. Effectiveness; Payment of Expenses Upon Termination. This
Agreement shall become effective upon the execution and delivery hereof by the
parties hereto.
If this Agreement shall be terminated by the Placement Agent
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Placement Agent for all out-of-pocket
expenses (including the fees and disbursements of their counsel) reasonably
incurred by the Placement Agent in connection with this Agreement or the
offering contemplated hereunder.
<PAGE> 18
17
11. Notices. All notices and other communications under this
Agreement shall be in writing and mailed, delivered or sent by facsimile
transmission to: if sent to the Placement Agent, Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, New York 10036, Attention: High Yield New
Issues Group, facsimile number (212) 761-0587 and if sent to the Company, to
Alferez Pareja 256, 1107 Buenos Aires, Argentina, attention: Chief Financial
Officer, facsimile number 011 (541) 307 1525.
12. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
14. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
<PAGE> 19
Please confirm your agreement to the foregoing by signing in the
space provided below for that purpose and returning to us a copy hereof,
whereupon this Agreement shall constitute a binding agreement between us.
Very truly yours,
IMPSAT FIBER NETWORKS, INC.
By /s/ RICARDO A. VERDAGUER
------------------------------------
Name: Ricardo A. Verdaguer
Title: President and Chief Executive
Officer
By /s/ GUILLERMO JOFRE
------------------------------------
Name: Guillermo Jofre
Title: Chief Financial Officer
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
By: Morgan Stanley & Co. Incorporated
By /s/ JOHN D. TYREE
-------------------
Name: John D. Tyree
Title: Vice President
<PAGE> 20
EXHIBIT A
Opinion of Arnold & Porter
(A) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the State of Delaware, and
has the corporate power and authority to own its property and to conduct its
business as described in the Final Memorandum (references herein to the Final
Memorandum being taken to mean the same, as amended or supplemented);
(B) the Placement Agreement has been duly authorized, executed
and delivered by the Company;
(C) the Indenture has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms;
(D) the Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms;
(E) the Notes have been duly authorized by the Company, and
when executed, authenticated and delivered in accordance with the terms of the
Indenture and paid for in accordance with the terms of the Placement Agreement,
will constitute valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, and will be entitled to the benefits
of the Indenture and the Registration Rights Agreement;
(F) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, the Placement Agreement,
the Indenture, the Registration Rights Agreement, the Notes, and the issuance,
sale and delivery of the Notes, will not result in a breach or violation of any
of the terms or provisions of, or constitute a default under, (i) the
certificate of incorporation or bylaws of the Company, as amended to date, (ii)
to such counsel's knowledge, any statute, rule, regulation or order of general
applicability of any United States federal, New York or Delaware governmental
agency, body or court, (iii) to such counsel's knowledge, any judgment, decree
or order of any United States federal, New York or Delaware governmental agency,
body or court or (iv) any of the agreements or instruments listed in Schedule 1
hereto;
(G) no consent, approval, authorization or order of, or
qualification with any court or governmental agency or body of the United
States, New York or Delaware is required for the performance by the Company of
its obligations under the Placement Agreement, the Indenture, the Registration
Rights Agreement, the Notes, or the issuance, sale and delivery of the
<PAGE> 21
A-2
Notes, except in each case as may be required by the securities or Blue Sky laws
of the various states in connection with the offer and sale of the Notes;
(H) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened in the United States to which
the Company or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject other than
proceedings fairly summarized in the Final Memorandum and proceedings which such
counsel believes are not likely to have a material adverse effect on the Company
and its subsidiaries, taken as a whole, or on the power or ability of the
Company to perform its obligations under the Placement Agreement, the Indenture,
the Registration Rights Agreement or the Notes or to consummate the transactions
contemplated by the Placement Agreement, the Indenture, the Registration Rights
Agreement and the Notes;
(I) the Company is not, and after giving effect to the offering
and sale of the Notes and the application of the proceeds thereof as described
in the Final Memorandum under the caption "Use of Proceeds", will not be an
"investment company" within the meaning of the United States Investment Company
Act of 1940, as amended (the "Investment Company Act"), and the offer and sale
of the Notes in the manner contemplated by the Placement Agreement does not
require registration of the Company as an "investment company" under the
Investment Company Act;
(J) the statements set forth in the Final Memorandum under the
captions "Description of the Notes", "Private Placement", "Description of Our
Indebtedness", and "Transfer Restrictions" insofar as such statements constitute
a summary of the legal matters and documents referred to therein, accurately
summarize such matters and documents in all material respects;
(K) the discussion set forth in the Final Memorandum, under the
caption "Certain U.S. Federal Income Tax Considerations" to the extent such
discussion constitutes matters of law or legal conclusions, accurately describes
the material United States federal income tax consequences of an investment in
the Notes;
(L) such counsel believes that (except for financial statements
and other financial data as to which such counsel need not express any belief)
the Final Memorandum when issued did not, and as of the date such opinion is
delivered does not, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(M) based upon the representations, warranties, and agreements
of the Company in the Placement Agreement and of the Placement Agent in the
Placement Agreement, it is not necessary in connection with the offer, sale and
delivery of the Notes to the Placement Agent under the Placement Agreement or in
connection with the initial resale of such Notes by
<PAGE> 22
A-3
the Placement Agent in accordance with the Placement Agreement to register the
Notes under the Securities Act of 1933, it being understood that no opinion is
expressed as to any subsequent resale of any Notes; and
With respect to paragraph (L) above, counsel may state that their
opinion and belief are based upon their participation in the preparation of the
Final Memorandum (and any amendments or supplements thereto) and review and
discussion of the contents thereof, but are without independent check or
verification except with respect to paragraphs (J) and (K) above.
<PAGE> 23
EXHIBIT B
Opinion of Nicholson & Cano
(A) IMPSAT Argentina has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the Republic of
Argentina, has the corporate power and authority to own its property and to
conduct its business as described in the Final Memorandum and is duly qualified
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(B) all of the shares of capital stock of IMPSAT Argentina
owned by the Company have been duly and validly authorized and issued and are
fully paid and non-assessable and are directly owned by the Company, free and
clear of all liens, encumbrances, equities or claims;
(C) IMPSAT Argentina has all necessary certificates, orders,
permits, licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all Argentine governmental authorities,
courts and tribunals, to own, lease, license and use its properties and assets
and to conduct its business in the manner described in the Final Memorandum, and
IMPSAT Argentina has not received any notice of proceedings relating to
revocation or modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is IMPSAT Argentina in violation of,
or in default under, any federal, state, local, foreign supranational, national
or regional law, regulation, rule, decree, order or judgment applicable to
IMPSAT Argentina the effect of which, singly or in the aggregate, would have a
material adverse effect on the prospects, condition, financial or otherwise, or
in the earnings, business or operations of the Company and its subsidiaries,
taken as a whole, except as described in the Final Memorandum;
(D) the statements in the Final Memorandum under the caption
"Risk Factors -- We face regulatory risks and uncertainty with respect to local
laws and regulations", "Business -- Legal Matters" and "Business -- Description
of Country Operations -- IMPSAT Argentina" in each case insofar as such
statements constitute summaries of the Argentine legal matters, documents or
proceedings referred to therein, are accurate in all material respects and
fairly summarize all matters referred to therein;
(E) There are no restrictions (legal, contractual or otherwise)
on the ability IMPSAT Argentina to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
referred to in the Final Memorandum (including, without limitation, the
description of withholding taxes contained therein) and any applicable
creditors' rights under Argentine law, and such restrictions as would not have a
material adverse effect on the prospects, condition, financial or otherwise, or
in the earnings,
<PAGE> 24
B-2
business or operations of the Company and its subsidiaries, taken as a whole;
and such descriptions, if any, fairly summarize such restrictions, provided
however that such dividends may be delcared (i) out of positive retained
earnings determined in accordance with local generally accepted accounting
principles as reflected in duly approved financial statements of IMPSAT
Argentina and (ii) pursuant to Article 27 of IMPSAT Argentina's by-laws; and
(F) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened in Argentina to which IMPSAT
Argentina is a party or to which any of the properties of IMPSAT Argentina is
subject other than proceedings fairly summarized in the Final Memorandum and
proceedings which such counsel believes are not likely to have a material
adverse effect on the Company and its subsidiaries, taken as a whole, or on the
power or ability of the Company to perform its obligations under this Agreement
or to consummate the transactions contemplated by this Agreement.
<PAGE> 25
EXHIBIT C
Opinion of S.E. Consultores Asociados Ltda.
(A) IMPSAT Colombia has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the Republic of
Colombia, has the corporate power and authority to own its property and to
conduct its business as described in the Final Memorandum and is duly qualified
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(B) all of the shares of capital stock of IMPSAT Colombia owned
by the Company have been duly and validly authorized and issued and are fully
paid and non-assessable and are directly owned by the Company, free and clear of
all liens, encumbrances, equities or claims;
(C) IMPSAT Colombia has all necessary certificates, orders,
permits, licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all Colombian governmental authorities,
courts and tribunals, to own, lease, license and use its properties and assets
and to conduct its business in the manner described in the Final Memorandum, and
IMPSAT Colombia has not received any notice of proceedings relating to
revocation or modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is IMPSAT Colombia in violation of,
or in default under, any federal, state, local, foreign supranational, national
or regional law, regulation, rule, decree, order or judgment applicable to
IMPSAT Colombia the effect of which, singly or in the aggregate, would have a
material adverse effect on the prospects, condition, financial or otherwise, or
in the earnings, business or operations of the Company and its subsidiaries,
taken as a whole, except as described in the Final Memorandum;
(D) the statements in the Final Memorandum under the caption
"Business -- Description of Country Operations - IMPSAT Colombia" insofar as
such statements constitute summaries of the Colombian legal matters, documents
or proceedings referred to therein, are accurate in all material respects and
fairly summarize all matters referred to therein;
(E) there are no restrictions (legal, contractual or otherwise)
on the ability of IMPSAT Colombia to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
referred to in the Final Memorandum (including, without limitation the
description of withholding taxes described therein) and such restrictions as
would not have a material adverse effect on the prospects, condition, financial
or otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole; and such descriptions, if any, fairly summarize
such restrictions; and
<PAGE> 26
C-2
(F) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened in Colombia to which IMPSAT
Colombia is a party or to which any of the properties of IMPSAT Colombia is
subject other than proceedings fairly summarized in the Final Memorandum and
proceedings which such counsel believes are not likely to have a material
adverse effect on the Company and its subsidiaries, taken as a whole, or on the
power or ability of the Company to perform its obligations under this Agreement
or to consummate the transactions contemplated by this Agreement.
<PAGE> 27
EXHIBIT D
Opinion of Perez Bustamante & Perez
(A) IMPSAT Ecuador has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the Republic of
Ecuador, has the corporate power and authority to own its property and to
conduct its business as described in the Final Memorandum dated February 11,
2000 (the "Final Memorandum") and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries taken as a whole;
(B) all of the shares of capital stock of IMPSAT Ecuador owned
by the Company have been duly and validly authorized and issued and are fully
paid and non-assessable and are directly owned by the Company, free and clear of
all liens, encumbrances, equities or claims;
(C) IMPSAT Ecuador has all necessary certificates, orders,
permits, licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all Ecuadoran governmental authorities,
courts and tribunals, to own, lease, license and use its properties and assets
and to conduct its business in the manner described in the Final Memorandum, and
IMPSAT Ecuador has not received any notice of proceedings relating to revocation
or modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is IMPSAT Ecuador in violation of, or
in default under, any federal, state, local, foreign supranational, national or
regional law, regulation, rule, decree, order or judgment applicable to IMPSAT
Ecuador the effect of which, singly or in the aggregate, would have a material
adverse effect on the prospects, condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken as a
whole, except as described in the Final Memorandum;
(D) the statements in the Final Memorandum under the caption
"Business -- Description of Country Operations -- IMPSAT Ecuador" insofar as
such statements constitute summaries of the legal matters of Ecuador, documents
or proceedings referred to therein, are accurate in all material respects and
fairly summarize all matters referred to therein;
(E) There are no restrictions (legal, contractual or otherwise)
on the ability of IMPSAT Ecuador to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
referred to in the Final Memorandum (including, without limitation, the
description of withholding taxes contained therein) and such restrictions as
would not have a material adverse effect on the prospects, condition, financial
or otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole; and such descriptions, if any, fairly summarize
such restrictions; and
<PAGE> 28
D-2
(F) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened in Ecuador to which IMPSAT
Ecuador is a party or to which any of the properties of IMPSAT Ecuador is
subject other than proceedings fairly summarized in the Final Memorandum and
proceedings which such counsel believes are not likely to have a material
adverse effect on the Company and its subsidiaries, taken as a whole, or on the
power or ability of the Company to perform its obligations under this Agreement
or to consummate the transactions contemplated by this Agreement.
<PAGE> 29
EXHIBIT E
Opinion of Basham, Ringe & Correa
(A) IMPSAT Mexico has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its organization, has the corporate power and authority to own its property and
to conduct its business as described in the Final Memorandum under the caption
"Business -- Description of Country Operations -- IMPSAT Mexico" and is duly
qualified to transact business and is in good standing in each Mexican
jurisdiction in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material adverse effect
on the Company taken as a whole;
(B) all of the shares of capital stock of IMPSAT Mexico owned
by the Company have been duly and validly authorized and issued and are fully
paid and non-assessable and are directly owned by the Company, free and clear of
all liens, encumbrances, equities or claims;
(C) IMPSAT Mexico has all necessary certificates, orders,
permits, licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all Mexican governmental authorities,
all self-regulatory organizations and all courts and tribunals, to own, lease,
license and use its properties and assets and to conduct its business in the
manner described in the Final Memorandum under the caption "Business --
Description of Country Operations -- IMPSAT Mexico" and IMPSAT Mexico has not
received any notice of proceedings relating to revocation or modification of any
such certificates, orders, permits, licenses, authorizations, consents or
approvals, nor is IMPSAT Mexico in violation of, or in default under, any
federal, state, local, foreign supranational, national or regional law,
regulation, rule, decree, order or judgment applicable to IMPSAT Mexico the
effect of which, singly or in the aggregate, would have a material adverse
effect on the prospects, condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries, taken as a whole,
except as described in the Final Memorandum;
(D) the statements in the Final Memorandum under the caption
"Business -- Description of Country Operations -- IMPSAT Mexico" insofar as such
statements constitute summaries of the Mexican legal matters, documents or
proceedings referred to therein, are accurate in all material respects and
fairly summarize all matters referred to therein;
(E) There are no restrictions (legal, contractual or otherwise)
on the ability of IMPSAT Mexico to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
referred to in the Final Memorandum (including without limitation, the
description of withholding taxes contained therein) and such restrictions as
would not have a material adverse effect on the prospects, condition, financial
or otherwise, or
<PAGE> 30
E-2
in the earnings, business or operations of the Company and its subsidiaries,
taken as a whole; and such descriptions, if any, fairly summarize such
restrictions; and
(F) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened in Mexico to which IMPSAT
Mexico is a party or to which any of the properties of IMPSAT Mexico is subject
other than proceedings fairly summarized in the Final Memorandum and proceedings
which such counsel believes are not likely to have a material adverse effect on
the Company and its subsidiaries, taken as a whole, or on the power or ability
of the Company to perform its obligations under this Agreement or to consummate
the transactions contemplated by this Agreement.
<PAGE> 31
EXHIBIT F
Opinion of Baumeister & Brewer
(A) IMPSAT Venezuela has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its organization, has the corporate power and authority to own its property and
to conduct its business as described in the Final Memorandum and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole;
(B) all of the shares of capital stock of IMPSAT Venezuela
owned by the Company have been duly and validly authorized and issued and are
fully paid and non-assessable and are directly owned by the Company, free and
clear of all liens, encumbrances, equities or claims;
(C) IMPSAT Venezuela has no subsidiaries;
(D) IMPSAT Venezuela, to our better knowledge, has all
necessary certificates, orders, permits, licenses, authorizations, consents and
approvals of and from, and has made all declarations and filings with, all
Venezuelan governmental authorities, all self-regulatory organizations and all
courts and tribunals, to own, lease, license and use its properties and assets
and to conduct its business in the manner described in the Final Memorandum. Up
to this date, IMPSAT Venezuela has not received any notice of proceedings
relating to revocation or modification of any such certificates, orders,
permits, licenses, authorizations, consents or approvals, nor is IMPSAT
Venezuela in violation of, or in default under, any federal, state, local,
foreign supranational, national or regional law, regulation, rule, decree, order
or judgment applicable to IMPSAT Venezuela the effect of which, singly or in the
aggregate, would have a material adverse effect on the prospects, condition,
financial or otherwise, or in the earnings, business or operations of the
Company, taken as a whole, except as described in the Final Memorandum;
(E) the statements in the Final Memorandum under the captions
(including, without limitation, the description of withholding taxes contained
therein) "Business -- Description of Country Operations -- IMPSAT Venezuela"
insofar as such statements constitute summaries of the Venezuelan legal matters,
documents or proceedings referred to therein, are accurate in all material
respects and fairly summarize all matters referred to therein;
(F) There are no restrictions (legal, contractual or otherwise)
on the ability of IMPSAT Venezuela to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
referred to in the Final Memorandum (including without limitation the
description of withholding taxes contained therein) and such
<PAGE> 32
F-2
restrictions as would not have a material adverse effect on the prospects,
condition, financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole; and such descriptions, if
any, fairly summarize such restrictions; and
(G) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened in Venezuela to which IMPSAT
Venezuela is a party or to which any of the properties of IMPSAT Venezuela is
subject other than proceedings fairly summarized in the Final Memorandum and
proceedings which such counsel believes are not likely to have a material
adverse effect on the Company and its subsidiaries, taken as a whole, or on the
power or ability of the Company to perform its obligations under this Agreement
or to consummate the transactions contemplated by this Agreement.
<PAGE> 33
EXHIBIT G
Opinion of Pinheiro Neto
(A) IMPSAT Comunicacoes Ltda. ("IMPSAT Brazil") has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of Brazil, has the corporate power and authority to own its property and to
conduct its business as described in the Final Memorandum and is duly qualified
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries as a whole;
(B) all of the shares of capital stock of IMPSAT Brazil owned
by the Company have been duly and validly authorized and issued and are fully
paid and non-assessable and are directly owned by the Company, free and clear of
all liens, encumbrances, equities or claims;
(C) IMPSAT Brazil has all necessary certificates, orders,
permits, licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all Brazilian governmental authorities,
courts and tribunals, to own, lease, license and use its properties and assets
and to conduct its business in the manner described in the Final Memorandum, and
IMPSAT Brazil has not received any notice of proceedings relating to revocation
or modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, nor is IMPSAT Brazil in violation of, or
in default under, any federal, state, local, foreign supranational, national or
regional law, regulation, rule, decree, order or judgment applicable to IMPSAT
Brazil the effect of which, singly or in the aggregate, would have a material
adverse effect on the prospects, condition, financial or otherwise, or in the
earnings, business or operation of the Company and its subsidiaries, taken as a
whole, except as described in the Final Memorandum;
(D) the statements in the Final Memorandum under the caption
"Business -- Description of Country Operations -- IMPSAT Brazil" insofar as such
statements constitute summaries of the Brazil legal matters, documents or
proceedings referred to therein, are accurate in all material respects and
fairly summarize all matters referred to therein;
(E) there are no restrictions (legal, contractual or otherwise)
on the ability of IMPSAT Brazil to declare and pay any dividends or make any
payment or transfer of property or assets to its stockholders other than those
referred to in the Final Memorandum (including, without limitation, the
description of withholding taxes contained therein) and such restrictions as
would not have a material adverse effect on the prospects, condition, financial
or otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole; and such descriptions, if any, fairly summarize
such restrictions; and
<PAGE> 34
G-2
(F) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened in Brazil to which IMPSAT
Brazil is a party or to which any of the properties of IMPSAT Brazil is subject
other than proceedings fairly summarized in the Final Memorandum and proceedings
which such counsel believes are not likely to have a material adverse effect on
the Company and its subsidiaries, taken as a whole, or on the power or ability
of the Company to perform its obligations under this Agreement or to consummate
the transactions contemplated by this Agreement.
<PAGE> 35
EXHIBIT H
Opinion of Latham & Watkins
(A) the execution and delivery by the Company of the Placement
Agreement, the Indenture, the Registration Rights Agreement and the Notes, and
the performance by the Company of its obligations thereunder in accordance with
the terms thereof, (i) do not require any consent, approval, authorization or
other order of the Federal Communications Commission ("FCC") and (ii) do not
violate the Federal Communications Act of 1934, as amended (the "Communications
Act") or the rules, regulations and published policies of the FCC;
(B) IMPSAT USA, Inc. holds the FCC licenses, permits and
authorizations set forth in Attachment 1 (the "FCC Licenses"). The FCC Licenses
are in full force and effect. The FCC Licenses are not subject to any conditions
outside the ordinary course;
(C) based on such counsel's review of the FCC files relating to
the Company and IMPSAT USA, Inc., publicly available on February 15, 2000, and
informal and non binding statements and representations of members of staff of
the FCC, and to the best of such counsel's knowledge, there is no pending
threatened proceeding or action by or before the FCC to revoke, cancel, rescind
or adversely modify any of the FCC Licenses, except for proceedings affecting
the telecommunications or satellite industries generally;
(D) the statements in the Final Memorandum under the caption
"Business -- Description of Country Operations -- IMPSAT USA" insofar as such
statements constitute summaries relating to U.S. federal telecommunications
legal matters, and the licenses held by IMPSAT USA, Inc., referred to therein,
are accurate in all material respects.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATMENTS OF IMPSAT CORPORATION AND ITS CONSOLIDATED
SUBSIDIARIES AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 97,507
<SECURITIES> 225,690
<RECEIVABLES> 52,176
<ALLOWANCES> 19,820
<INVENTORY> 0
<CURRENT-ASSETS> 179,026
<PP&E> 382,198
<DEPRECIATION> 244,024
<TOTAL-ASSETS> 828,332
<CURRENT-LIABILITIES> 243,150
<BONDS> 399,415
149,035
0
<COMMON> 221,729
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 828,332
<SALES> 0
<TOTAL-REVENUES> 228,451
<CGS> 0
<TOTAL-COSTS> 324,637
<OTHER-EXPENSES> 8,042
<LOSS-PROVISION> 16,375
<INTEREST-EXPENSE> 55,561
<INCOME-PRETAX> (144,484)
<INCOME-TAX> 20,733
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (131,543)
<EPS-BASIC> (2.31)
<EPS-DILUTED> (2.31)
</TABLE>
