<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 2000
REGISTRATION NO. 333-88389
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
IMPSAT FIBER NETWORKS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 4899 52-1910372
<S> <C> <C>
(state or other jurisdiction (primary industrial (IRS Employer
of incorporation or classification code number) Identification Number)
organization)
</TABLE>
<TABLE>
<S> <C>
MAURICIO J. KLAU
IMPSAT USA, INC.
ALFEREZ PAREJA 256 (1107) 2040 NORTH DIXIE HIGHWAY
BUENOS AIRES, ARGENTINA WILTON MANORS, FLORIDA 33305
(5411) 4300-4007 (954) 779-7171
(Address, including zip code and (Name, address, including zip code,
telephone number, including area code, telephone number, including area code,
of registrant's principal executive offices) of agent for service for registrant)
</TABLE>
------------------------
Please send copies of communications to:
<TABLE>
<S> <C>
NEIL M. GOODMAN, ESQ. JAMES S. SCOTT, SR., ESQ.
ARNOLD & PORTER SHEARMAN & STERLING
555 TWELFTH STREET, N.W. 599 LEXINGTON AVENUE
WASHINGTON, D.C. 20004-1202 NEW YORK, NY 10022-4611
(202) 942-5000 (212) 848-4000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as possible after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
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<S> <C> <C>
Common stock, $0.01 par value................... $161,000,000 $44,604
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(2) $41,700 of this filing fee was paid on October 4, 1999 upon the initial
filing of the Registration Statement and $2,904 was paid on January 13,
2000.
------------------------
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is
not an offer to sell these securities and we are not soliciting offers to
buy these securities in any state where the offer or sale is not
permitted.
PROSPECTUS (Subject to Completion)
Issued January 14, 2000
11,500,000 Shares
[IMPSAT LOGO]
IMPSAT Fiber Networks, Inc.
COMMON STOCK
------------------------
IMPSAT FIBER NETWORKS, INC. IS OFFERING 11,500,000 SHARES OF ITS COMMON STOCK.
THIS IS OUR INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR
OUR SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN
$13 AND $15 PER SHARE.
------------------------
WE HAVE APPLIED TO LIST OUR COMMON STOCK ON THE NASDAQ NATIONAL MARKET UNDER THE
SYMBOL "IMPT."
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 12.
------------------------
PRICE $ A SHARE
------------------------
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<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS IMPSAT
-------- ------------- -----------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to an additional
1,725,000 shares of common stock to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares of common stock
to purchasers on , 2000.
------------------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
, 2000
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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<S> <C>
Prospectus Summary.................... 6
Risk Factors.......................... 12
Use of Proceeds....................... 25
Dividend Policy....................... 25
Capitalization........................ 26
Dilution.............................. 27
Selected Consolidated Financial and
Other Data.......................... 28
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 30
Industry Overview..................... 44
Business.............................. 47
Management............................ 71
</TABLE>
<TABLE>
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PAGE
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<S> <C>
Certain Relationships and Related
Transactions........................ 79
Description of Our Indebtedness....... 83
Principal Stockholders................ 85
Description of Capital Stock.......... 87
Shares Eligible for Future Sale....... 93
Certain U.S. Tax Consequences to
Non-U.S. Holders.................... 94
Underwriters.......................... 97
Legal Matters......................... 99
Experts............................... 99
Where You Can Find More Information... 99
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell shares of common stock and
seeking offers to buy shares of common stock only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the common stock. In this
prospectus, the "company," "IMPSAT," "we," "us" and "our" refer to IMPSAT Fiber
Networks, Inc. and its subsidiaries.
We have not taken any action to permit a public offering of our shares of common
stock outside the United States or to permit the possession or distribution of
this prospectus outside the United States. Persons outside the United States who
come into possession of this prospectus must inform themselves about and observe
any restrictions relating to the offering of the shares of common stock and the
distribution of this prospectus outside the United States.
Until , 2000 (25 days after commencement of this offering), all
dealers that buy, sell or trade in common stock, whether or not participating in
this offering, may be required to deliver a prospectus. This delivery
requirement is in addition to the dealers' obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
------------------------
Our principal executive offices are located at Alferez Pareja 256, 1107 Buenos
Aires, Argentina and our telephone number is 011-54-11-4300-4007. Our World Wide
Web site address is www.IMPSAT.com. The information on our web site is not
incorporated by reference into this prospectus.
Our logo and certain titles and logos of our services are our trademarks. Each
trademark, trade name or service mark of any other company appearing in this
prospectus belongs to its holder. 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 our service marks or trademarks that are
registered or otherwise protected under the laws of various jurisdictions.
3
<PAGE> 4
FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus 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 plan to
build
- 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
- 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.
------------------------
The information in this prospectus has been adjusted to reflect a 0.592 for
1 common stock share split, the conversion of 19,848 outstanding shares of our
preferred stock into 14,917,915 shares of our common stock and our redemption of
the remaining outstanding shares of our preferred stock and the additional
issuance of 2,850,000 shares, at the midpoint of the range set forth on the
cover page of this prospectus, of our common stock to British Telecommunications
plc, one of our current shareholders, which has informed us of its intention to
purchase these shares to maintain its approximate current ownership interest in
us. All of the above will occur upon the closing of this offering. The
information in this prospectus also reflects the issuance of 5,472,579 shares of
our common stock to minority shareholders in our subsidiaries in Argentina,
Venezuela and Colombia in exchange for their minority interests in those
subsidiaries. Except where indicated, the information in this prospectus does
not take into account the exercise of any of our outstanding options or the
possible issuance of additional shares of our common stock relating to the
underwriters' over-allotment option.
4
<PAGE> 5
ENFORCEABILITY OF CIVIL LIABILITIES
Although IMPSAT is a corporation organized under the laws of the State of
Delaware, our principal operations are in various Latin American countries. A
majority of our directors and officers and certain of the experts named in this
prospectus reside outside of the United States, and all or some of the portion
of the assets of our directors and officers, and substantially all of the assets
of IMPSAT, are located in Argentina, Colombia, Venezuela, Ecuador, Mexico and
Brazil. As a result, investors in our common stock may not be able to effect
service of process within the United States upon such persons or enforce against
them or against IMPSAT in U.S. courts judgments predicated upon the civil
liability provisions of the federal securities laws of the United States. There
is doubt as to enforceability in original actions in courts of each of the
foregoing Latin American jurisdictions of liabilities predicated solely on U.S.
federal securities laws and as to the enforceability in the courts in each of
those Latin American jurisdictions of judgments of U.S. courts obtained in
actions predicated upon the civil liability provisions of U.S. federal
securities laws.
MARKET DATA AND FORECASTS
This prospectus includes statistical data and forecasts concerning the
telecommunications industry that we obtained from industry publications. These
publications generally indicate that they have obtained information from sources
that they believe are reliable, but that they do not guarantee the accuracy and
completeness of the information. In particular, we do not know what rate of
general economic growth in the countries in which we operate were assumed in
preparing forecasts. Forecasts of developing industries, such as ours, are not
based upon sophisticated analysis of a substantial amount of historical data as
is the case for more mature industries. Often, interviews with corporate leaders
in developing industries, such as ours, form the basis for much statistical data
and forecasts. Thus, statistical data and forecasts for developing industries,
such as ours, are much less likely to be accurate. We also have not sought the
consent of any of these sources to refer to their data in this prospectus.
5
<PAGE> 6
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company, our common stock being sold in this offering
and our financial statements and notes thereto appearing elsewhere in this
prospectus.
IMPSAT
OVERVIEW
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 dedicated 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 currently 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 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 call this new network our Broadband Network. We
already own and operate a long-haul, fiber optic network connecting the cities
of Cali, Medellin and Bogota in Colombia over 698 route kilometers. By December
2000, we expect to have built out our Broadband Network to connect major cities
across Argentina and Brazil.
OUR COMPETITIVE STRENGTHS
We believe that we distinguish ourselves from our competitors through
several competitive strengths, including:
- strong presence in high growth telecommunications markets in Latin
America
- established and growing base of "blue chip" business customers
- early development of our extensive Broadband Network
- enduring commitment to superior customer service
- strong equity sponsors, including British Telecommunications and Morgan
Stanley Dean Witter. British Telecommunications has informed us of its
intention to purchase shares of our common stock simultaneously with this
offering to maintain its approximate current ownership share in our
company
We also believe that we have differentiated ourselves from our competitors
through our proven historical operating performance. From 1992 to 1998:
- our business customer base grew from 125 customers in two countries to
1,467 customers in seven countries
- property, plant and equipment grew from $47.9 million to $330.7 million
- total consolidated revenues grew from $20.5 million to $208.1 million
- EBITDA grew from $7.9 million to $63.8 million
6
<PAGE> 7
OUR BUSINESS STRATEGY
We intend to strengthen our market leadership position by:
- expanding and enhancing our service offerings through our Broadband
Network
- focusing on business, government, Internet service provider and
telecommunications carrier customers in Latin America
- providing end-to-end seamless solutions over our own network
infrastructure to assure quality
- increasing our market share by capitalizing on our pan-Latin American
presence, one-stop shopping capability, operating experience and regional
reputation
THE BROADBAND NETWORK
The Latin American markets in which we operate are expected to experience
compounded annual telecommunications and data services revenue growth of
approximately 14% and 30%, respectively, from 1998 through 2002. We believe that
this forecasted growth, coupled with continued deregulation in Latin America,
will fuel demand for additional broadband capacity. To take advantage of this
demand, 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 Inc. 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 $297.4 million from Nortel to finance this project and to
purchase related equipment from Nortel. 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.
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.
7
<PAGE> 8
Following the completion of the Broadband Network in Argentina and Brazil,
we plan to expand our Broadband Network to Colombia and Venezuela.
THE IMPSAT SOLUTION
Our telecommunications solutions typically consist of combinations of
services from our five service lines:
- NETWORK SERVICES. We offer our customers a broad range of end-to-end
network services for their point-to-point and point-to-multipoint
telecommunications needs, ranging from simple connections to customized
private telecommunications network solutions.
- INTERNET SERVICES. We offer backbone and access services to corporate
customers and Internet service providers, or ISPs. Our Broadband Network
will allow us to offer these services with higher speeds, greater
capacity and wider geographic coverage.
- CARRIER'S CARRIER SERVICES. In the year 2000, we intend to offer dark
fiber capacity, "lit fiber" services and duct capacity to ISPs and
telecommunications carriers. These services will include high-bandwidth
links, co-location services, operation and maintenance services and
equipment provisioning.
- TELEPHONY SERVICES. We intend to offer national and international long
distance services to our corporate customers and resellers. 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 transactional services that facilitate the
e-commerce and e-business initiatives of our customers. We also offer
information technology services, which include the design, installation
and integration of intranets, extranets and virtual private data
networks.
8
<PAGE> 9
THE OFFERING
Common stock offered....... 11,500,000 shares
Common stock to be
outstanding after this
offering................. 91,428,571 shares
Over-allotment option...... 1,725,000 shares
Voting rights.............. One vote per share
Use of proceeds............ We intend to use the net proceeds:
- to make capital expenditures relating to the
Broadband Network
- to redeem approximately $32.5 million of our
outstanding preferred stock
- for potential acquisitions
- for working capital and general corporate
purposes, including to fund losses
Dividend policy............ We do not intend to pay dividends on our common
stock. We plan to retain earnings, if any, for use
in the operation of our business and to fund future
growth. In addition, our indentures severely
restrict the payment of dividends. See "Description
of Our Indebtedness."
Proposed Nasdaq National
Market symbol............ IMPT
As of December 31, 1999, we had 91,428,571 shares of common stock
outstanding, as adjusted to give effect to the conversion of 19,848 outstanding
shares of preferred stock into 14,917,915 shares of common stock upon the
closing of this offering and the redemption of all remaining outstanding shares
of our preferred stock, the issuance of 2,850,000 additional shares of our
common stock to British Telecommunications simultaneously with this offering and
the issuance of 5,472,579 shares of our common stock to minority shareholders in
our subsidiaries in Argentina, Venezuela and Colombia in exchange for their
minority interests in those subsidiaries. This does not include outstanding
options to purchase 355,214, 441,650 and 393,340 shares of common stock at
exercise prices of $1.69, $8.38 and $10.47 per share, respectively. See
"Capitalization" and "Management -- Stock Option Grants."
9
<PAGE> 10
SUMMARY FINANCIAL AND OTHER DATA
The following financial data are derived from our audited consolidated
financial statements, except for the nine-month data, which are derived from our
unaudited consolidated financial statements.
Our net loss per share on a pro forma basis and our balance sheet data on
an as adjusted basis give effect to:
- the common stock split
- this offering
- the issuance of 2,850,000 additional shares of our common stock to
British Telecommunications simultaneously with this offering
- the redemption of approximately $32.5 million of our preferred stock and
the conversion of the remaining shares of our preferred stock into shares
of our common stock
- the issuance of 5,472,579 shares of our common stock to minority
shareholders in Argentina, Venezuela and Colombia in exchange for their
minority interests in those subsidiaries
as if these events had occurred at the beginning of the periods presented. The
pro forma amounts do not give effect to any interest income earned on the
proceeds of this offering pending our application of those proceeds.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- ---------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues from services......... $ 128,393 $ 161,065 $ 208,089 $ 149,888 $ 167,129
Costs and expenses................. (110,328) (137,701) (181,219) (132,212) (230,099)
--------- --------- --------- --------- ---------
Operating income (loss)............ 18,065 23,364 26,870 17,676 (62,970)
Interest expense, net.............. (23,185) (24,272) (44,698) (30,243) (41,976)
(Income) loss attributable to
minority interest................ (1,766) (993) (2,502) (1,717) 5,603
Net loss........................... $ (8,483) $ (7,591) $ (33,987) $ (23,333) $(100,977)
========= ========= ========= ========= =========
Comprehensive loss................. $ (8,483) $ (7,591) $ (34,513) $ (23,333) $(104,523)
========= ========= ========= ========= =========
Net loss per common share, basic
and diluted...................... $ (0.18) $ (0.14) $ (0.71) $ (0.48) $ (1.89)
========= ========= ========= ========= =========
Net loss per common share, pro
forma............................ $ (0.32) $ (1.13)
========= =========
Weighted average common shares
outstanding...................... 46,773 53,594 47,983 48,811 53,453
========= ========= ========= ========= =========
Weighted average common shares
outstanding, pro forma........... 82,723 88,193
========= =========
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
-------------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $146,078 $302,004
Property, plant and equipment, net.......................... 317,219 317,219
Total assets................................................ 599,192 825,110
Total debt.................................................. 423,198 423,198
Total long-term debt, net of current portion................ 384,113 384,113
Minority interest........................................... 6,624 --
Stockholders' equity (deficit).............................. (84,680) 293,251
</TABLE>
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"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, if we have anything left after we pay our interest
expense, to pay taxes and make capital expenditures.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- -------------------
1996 1997 1998 1998 1999
--------- --------- --------- -------- --------
(IN THOUSANDS, EXCEPT OTHER DATA)
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA............................... $ 44,383 $ 52,037 $ 63,816 $ 44,213 $ 25,120
Cash flow provided by (used in):
Operating activities............... 9,843 17,139 16,740 22,326 14,324
Investing activities............... (53,681) (58,080) (128,155) (96,615) (77,541)
Financing activities............... 66,517 22,485 191,523 203,753 122,820
Capital expenditures................. 53,998 56,440 109,934 84,733 74,262
OTHER DATA (AT PERIOD END):
Customers............................ 907 1,192 1,467 1,136 1,707
Satellite customer sites (VSAT and
SCPC technology only).............. 5,558 5,825 6,886 6,563 7,691
</TABLE>
11
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RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks not presently known to us or that
we currently deem immaterial may also impair our business operations.
Our business, financial condition and results of operations could be
materially adversely affected by any of the following risks. The trading price
of shares of our common stock could decline due to any of these risks, and you
might lose all or part of your investment.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below or elsewhere.
WE HAVE SUBSTANTIAL DEBT AND WE MAY LACK FINANCIAL RESOURCES TO MEET OUR
OBLIGATIONS OR SUPPORT OUR BUSINESS AND OPERATIONS
As of September 30, 1999, we had approximately $423.2 million of
indebtedness on a consolidated basis and our stockholder's equity was, as
adjusted, approximately $268.0 million.
We had an annual net interest expense of approximately $44.7 million for
1998. At September 30, 1999, our ratio of debt to EBITDA for the prior four
quarters was 9.5 times. Our fixed charges exceeded our earnings by approximately
$7.1 million, $2.7 million, and $22.5 million for 1996, 1997 and 1998,
respectively. For the first nine months of 1999, our fixed charges exceeded our
earnings by $110.1 million.
Our high level of indebtedness could have important consequences for our
stockholders, including:
- making it difficult for us to obtain future financing
- limiting our ability to react to changes in the marketplace
- a substantial portion of our operating income must be allocated to making
principal and interest payments
- we are more indebted than a number of our competitors and this may place
us at a competitive disadvantage in the future
Our significant indebtedness could have a material adverse effect on our
business, results of operations and the market price of our common stock.
WE MAY BE UNABLE TO RAISE THE ADDITIONAL CAPITAL NECESSARY TO CONTINUE GROWING
OUR BUSINESS
We will require significant amounts of additional capital to fund:
- the expansion of our private telecommunications networks, including the
Broadband Network
- the refinancing of short term debt
- net losses
Continuing to build out the Broadband Network will require significant
amounts of additional capital that is not available in our capital expenditures
budget. We cannot assure you that we will be able to obtain sufficient capital
on acceptable terms to fund the full reach of the Broadband Network. If we fail
to obtain financing, we may have to delay or abandon some or all of our
expansion plans, which could have a material adverse effect on us. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" for an estimate of our capital
expenditure requirements.
12
<PAGE> 13
The exact amount and timing of our future capital requirements will depend
upon many factors, including:
- the cost, timing and extent of upgrading or expanding our networks and
services
- the development of new services
- our ability to penetrate new markets
- regulatory changes
- the status of competing services
- potential acquisitions, investments and strategic alliances
- our results of operations
During 1998, our cash flow from operations totaled $16.7 million and
capital expenditures totaled $109.9 million. For the first nine months of 1999
our cash flow from operations totaled $14.3 million, and our capital
expenditures totaled $74.3 million. In addition, as of September 30, 1999,
approximately $39.1 million of our debt was scheduled to mature in 2000, and
approximately $384.1 million thereafter. We have historically incurred
substantial amounts of short-term debt. Although we do not have material
commitments for short-term debt, we may borrow substantial amounts of short-term
debt in the future.
We or our subsidiaries may obtain new capital through subsequent public and
private equity and debt financings. If we incur additional indebtedness, we may
be subject to more restrictive financial covenants. If we issue public or
private equity, the ownership percentage of investors in this offering will be
diluted. We cannot assure you that additional financing will be available on
acceptable terms or at all. If unplanned expenditures arise or our estimates of
our capital requirements prove to be inaccurate, we may require additional
financing sooner than anticipated and/or require more than we currently expect.
WE HAVE NOT BEEN OPERATING VERY LONG AND HAVE A HISTORY OF INCURRING LOSSES
WHICH MAY MAKE IT DIFFICULT TO FUND OUR FUTURE OPERATIONS
We have a limited operating history. We commenced commercial operations in
1990 and have experienced rapid growth, increasing annual revenues from $8.2
million in 1991 to $208.1 million in 1998. We have, however, incurred net losses
in every year except 1994. Our historic rate of growth and expansion may not
continue. In particular, our rates of growth in Argentina and Colombia have
slowed considerably in recent periods. If we do not achieve and sustain
profitability, our ability to respond effectively to market conditions, to make
capital expenditures and to take advantage of business opportunities could be
negatively affected.
We have recorded comprehensive losses of $2.8 million in 1993, $7.4 million
in 1995, $8.5 million in 1996, $7.6 million in 1997 and $34.5 million in 1998.
In 1994, we recorded net income of $3.0 million.
CONTINUED GROWTH OF OUR BUSINESS DEPENDS UPON OUR ABILITY TO MANAGE EXPANSION
AND DEVELOPMENT EFFECTIVELY
Our ability to manage our expansion effectively will require us to continue
to implement and improve our operating, financial and accounting systems and to
hire, train and manage new employees. Among other things, the continued
expansion and development of our business will also depend upon our ability to:
- construct the Broadband Network
- design and develop integrated private telecommunications networks
- secure financing
- install telecommunications infrastructure
- obtain any required government authorizations
- evaluate and penetrate potential new markets
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- hire enough qualified employees
In addition, we must perform these tasks in a timely manner, at reasonable costs
and on satisfactory terms and conditions. Failure to effectively manage our
planned expansion could have a material adverse effect on our business, growth,
financial condition, results of operations and the market price of our common
stock.
Our expansion may involve acquiring other companies or assets. These
acquisitions could divert our resources and management attention and require
integration with our existing operations. We cannot assure you that these
acquisitions will be successful. We further cannot assure you that we will be
successful or timely in developing and marketing service enhancements or new
services that respond to technological change, changes in customer requirements
and emerging industry standards.
WE FACE NUMEROUS RISKS THAT COULD ADVERSELY AFFECT THE DEVELOPMENT OF OUR
BROADBAND NETWORK
DEVELOPING AND BUILDING OUT THE BROADBAND NETWORK MAY HAVE A NEGATIVE IMPACT
ON OUR RESULTS OF OPERATIONS
Developing and building out the Broadband Network, which includes the
expansion into new services for our business customers, will involve:
- regulatory risks, including obtaining the appropriate licenses
- interconnection difficulties
- large amounts of capital expenditures
- competition from large, well-financed international telecommunications
carriers (such as AT&T Corporation, MCI WorldCom, Inc., Sprint
Corporation, Telecom Italia, Spain's Telefonica S.A., among others)
- substantial start-up and marketing costs
The development and implementation of the Broadband Network may have a
negative impact on our results of operations, at least over the short term. For
example, when we shift our customers from our satellite based networks to our
Broadband Network's terrestrial facilities, our revenues and results of
operations could be adversely affected by the service disruptions and conversion
costs (for example, earth station de-installation expenses) associated with
complying with these requests.
WE MUST COMPLETE THE BROADBAND NETWORK EFFICIENTLY AND ON SCHEDULE TO
IMPLEMENT SUCCESSFULLY OUR BUSINESS STRATEGY
The construction, operation and any upgrading of the Broadband Network is a
significant undertaking. Administrative, technical, operational and other
problems that could arise may be more difficult to address and solve due to its
size and complexity. The Broadband Network may be more costly than planned and
may take longer to complete than we currently estimate. We may be materially
adversely affected as a result of any significant increase in the estimated cost
of the Broadband Network or any significant delay in its anticipated completion.
The successful and timely completion of the Broadband Network will be affected
by a variety of factors, many of which we cannot control, including:
- our management of costs related to construction of route segments
- our ability to obtain required licenses, regulatory approvals and
rights-of-way
- timely performance by contractors, including Nortel
- performance of the fiber and equipment used in the Broadband Network
- our ability to attract and retain qualified personnel
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WE NEED TO OBTAIN AND MAINTAIN THE NECESSARY RIGHTS-OF-WAY FOR THE BROADBAND
NETWORK
We have obtained rights-of-way for the long-haul segments of the Broadband
Network in Argentina and Brazil. We also have rights of way covering all of our
proposed metropolitan area rings in Argentina and covering approximately
one-third of our metropolitan area rings in Brazil. We have approximately
one-half of the construction permits needed to complete the Broadband Network in
Argentina and we are in the process of obtaining our construction permits in
Brazil. While we believe that we will obtain all remaining rights-of-way, we
cannot assure you that we will be able to maintain all of our existing rights
and permits or that we will be able to obtain and maintain all additional rights
and permits needed to construct and operate the Broadband Network in accordance
with our plans.
EXPANSION OF THE BROADBAND NETWORK WILL REQUIRE SUBSTANTIAL ADDITIONAL
RESOURCES THAT WE MAY NOT HAVE
We may need to expand and adapt the Broadband Network to respond to:
- higher than expected growth in the number of our customers
- increased demands by our existing customers to transmit larger amounts of
data
- changes in our customers' service requirements
- technological advances by our competitors
We will require substantial additional financial, operational and
managerial resources to expand or adapt the Broadband Network. If we are unable
to expand or adapt the Broadband Network to respond to these developments on a
timely basis and at a commercially reasonable cost, then our business will be
materially adversely affected.
OUR FAILURE TO ACQUIRE, INTEGRATE AND OPERATE NEW TECHNOLOGIES COULD HARM OUR
COMPETITIVE POSITION
The telecommunications industry is characterized by rapid and significant
technological advancements and the introduction of new products and services. We
do not possess significant intellectual property rights with respect to the
technologies we use and we are dependent on third parties for the development of
and access to new technology. In addition, we generally own the equipment we use
to provide our services and we will own the fiber optic networks, including
switching equipment, that will constitute the Broadband Network. Therefore,
technological changes that render our equipment out of date, less efficient or
more expensive to operate than newer equipment could cause us to incur
substantial increases in capital expenditures to upgrade or replace such
equipment.
We cannot predict the effect on our business of technological changes, such
as changes relating to emerging wireline and wireless transmission technologies
and the use of the Internet for traditional voice, data or other broadband
services. In addition, it is impossible for us to predict with any certainty
which data transmission technology will prove to be the most economic, efficient
or capable of attracting new customers. A reduction in the demand for data
transmission services or a failure by us to obtain and adapt to new technology
in our markets could have a material adverse effect on our ability to compete
successfully.
WE FACE SIGNIFICANT COMPETITION IN LATIN AMERICA
The private telecommunications network industry in Latin America is highly
competitive and is generally characterized by low barriers to entry. We expect
that competition in the industry will increase substantially. We compete on the
basis of our experience, quality, customer service, range of services offered
and price.
Recently we have experienced pricing pressure for some of our services in
our more mature markets, and we expect to continue to face pricing pressure. We
may further experience declining operating profit margins as the monopoly public
telephony operators, or PTOs, in the countries in which we operate become more
competitive and place greater emphasis on data telecommunications. In addition,
we expect new competitors to enter our markets.
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PTOS HAVE COMPETITIVE ADVANTAGES IN THE MARKETPLACE
In most of our markets, our principal competitor is the local PTO or an
affiliate of the local PTO. The PTOs generally have significant competitive
advantages. These advantages generally include:
- close ties with national regulatory authorities
- control over connections to local telephone lines
- ability to subsidize competitive services with revenues generated from
services they provide on a monopoly basis
- reluctance of regulators to adopt policies and grant regulatory approvals
that will result in increased competition
For example, our principal competitors in Argentina are Telecom Soluciones
S.A. and Advance Telecomunicaciones S.A., which are data transmission companies
controlled by Telecom Argentina STET-France Telecom S.A. and Telefonica de
Argentina S.A., respectively. Telecom Argentina and Telefonica are the PTOs in
northern and southern Argentina, respectively. Telecom Soluciones and Advance
Telecomunicaciones use the infrastructure of their PTO owners to deliver
services to their customers.
In the future, the PTOs may devote substantially more resources to the
sale, marketing and provision of services that compete with us, which could have
a material adverse effect on our business, results of operations and financial
condition and the market price of our common stock.
INTERNATIONAL TELECOMMUNICATIONS CARRIERS HAVE GREATER RESOURCES THAN WE DO
We compete with private operators of VSAT (very small aperture terminal)
networks, other satellite data transmission networks and terrestrial
telecommunications links. We also expect to face competition from large
international telecommunications carriers, such as AT&T, MCI WorldCom and
Sprint, and from other industry participants. While international
telecommunications carriers have focused on long distance telephony services,
they may focus on the private telecommunications network systems segment of the
telecommunications market as deregulation continues. For example, when the
Argentine government permits full competition in long distance telephony, which
is expected in November 2000, these large telecommunications carriers may enter
the Argentine telephony market and provide data transmission services as well.
Many of these potential competitors have substantially greater financial and
other resources than we do. In addition, consolidation of telecommunications
companies and the formation of strategic alliances within the telecommunications
industry could give rise to significant new competitors. For example, 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. AT&T Latin America will have assets in Brazil, Chile, Colombia and Peru
and is expected to expand into Argentina and Venezuela. In addition, we face
competition from emerging private telecommunications providers such as MetroRED
Telecommunications S.A., Engeredes S.A. and Diginet S.A. These companies are
data transmission service providers with expanding operations in Argentina and
Brazil. If any of our competitors or potential competitors devote significant
additional resources to the provision of private telecommunications network
services to our customers, there could be a material adverse effect on our
business, financial condition and results of operations and the market price of
our common stock.
OUR COMPETITORS COULD TAKE ADVANTAGE OF NEW OR COMPETING TECHNOLOGIES TO OUR
DETRIMENT
Although we believe we have the flexibility to act quickly to take
advantage of any significant technological development, new competing
technologies may negatively affect our business. For example, new technologies
such as digital subscriber line, or DSL, can significantly enhance the speed of
traditional copper lines. DSL or other technologies could enable our PTO
competitors to offer new high-speed services without undergoing the expense of
replacing their existing copper networks. Widespread use of DSL in our markets
could have a material adverse effect on our "last mile" advantage. Our private
telecommunications network services may face competition from entities that use
new or emerging voice and data transmission services or
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technologies which currently are not widely available in Latin America. Examples
of these technologies are space-based systems dedicated to data distribution
services, generally known as "Little-LEOs" (low earth orbit satellites) and
"Broadband" (Ka-band) systems. Furthermore, competing technologies may gain
market and commercial acceptance. If these technologies are successful, they may
provide significant long-term competition that could have a material adverse
effect on our business, results of operations and financial condition and the
market price of our common stock.
OUR EARNINGS WILL DETERIORATE IF WE CANNOT COLLECT ON OUR CUSTOMER ACCOUNTS
We provide trade credit to our customers in the normal course of business.
As of September 30, 1999, excluding two customers against whom we have commenced
legal collection actions, approximately 14% of our gross accounts receivable
were past due more than six months but less than one year and approximately 26%
were past due more than one year. Our allowance for doubtful accounts was
approximately $18.1 million (or 27.8% of gross accounts receivable) at September
30, 1999.
A significant part of our past due receivables relates to a subcontract
with IBM de Argentina to provide services to Banco de la Nacion Argentina, or
BNA, and to Empresa Nacional de Correos y Telegrafos S.A., the former Argentine
national postal service known as ENCOTESA. For descriptions of these matters,
see "Business -- Legal Matters."
Prior to June 30, 1998, we generally reserved an amount equal to 30% of
accounts receivable in excess of 180 days past due but less than one year, and
100% of accounts receivable in excess of 360 days past due. At the end of the
second quarter of 1998, we decided to change our policy of provisioning for
doubtful accounts and increased our reserve to cover 100% of accounts receivable
in excess of 180 days past due. We did not apply this policy to a past due
receivable if the president of the operating subsidiary that generated the
receivable determined that it would be collected within a further 60 days.
During the third quarter of 1999, we further 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. The effect of this change resulted in 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, 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. At September 30, 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.
We cannot assure you that difficulties in collecting amounts due from
customers will not have a material adverse effect on our business, results of
operations and financial condition and the market price of our common stock.
ECONOMIC AND POLITICAL CONDITIONS IN LATIN AMERICA POSE NUMEROUS RISKS TO OUR
OPERATIONS
Substantially all of our revenues are derived from operations in Latin
America. During 1998 and the first nine months of 1999, we derived approximately
46.7% and 47.7%, respectively, of our consolidated net revenues from services
provided by IMPSAT Argentina and approximately 27.7% and 27.5%, respectively, by
IMPSAT Colombia. We have also established operations in Venezuela, Mexico and
Ecuador, and in 1998 we began operations in Brazil. An investment in our common
stock is subject to risks of doing business in Latin America. Other than the
United States, each country where we operate has experienced political and
economic instability in recent years. Moreover, as events in the Latin American
region have demonstrated, negative economic or political developments in one
country in the region can lead to or exacerbate economic or political crises
elsewhere in the region. Furthermore, events in recent years in other developing
markets have placed pressures on the stability of the currencies of a number of
countries in Latin America, including Argentina, Brazil, Colombia, Ecuador and
Venezuela. Continued pressures on the local currencies in the countries in which
we operate are likely to have an adverse effect on many of our customers, which
could in
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turn adversely affect us. Volatility in regional currencies and capital markets
has also had an adverse effect on our ability and that of our customers to gain
access to international capital markets for necessary financing and refinancing.
A lack of international capital sources for emerging market borrowers could have
a material adverse effect on us and many of our customers.
We do not expect fundamental improvements in macroeconomic conditions in
Latin America in the short term. We cannot assure you that economic difficulties
in Latin America will cease, including volatility in regional currencies and
capital markets, which would have a material adverse effect on our business,
results of operations and financial condition and the market price of our common
stock.
Argentina. While we anticipate that our business outside Argentina will
increase in the coming years, Argentina is expected to remain our most
significant market for the foreseeable future and, accordingly, developments in
Argentina are of particular importance to our future success.
The instability and volatility in the world financial markets, which began
with the crisis in the markets of Southeast Asia in 1998 and spread to Russia
and Brazil, has negatively affected the Argentine economy and financial markets.
In addition to the effects of the economic difficulties experienced in Brazil,
Argentina's largest trading partner, in the first nine months of 1999, Argentina
has experienced a decline in investor confidence as a result of domestic
political and economic developments. In October 1999, Moody's cut Argentina's
long-term foreign currency rating to B1 from Ba3. We are unable to predict the
effect of the recession on our business, financial condition and results of
operations or the market price of our common stock. In addition, we cannot
assure you that future uncertainties resulting from the presidential elections
will not negatively impact the Argentine economy, or that the Argentine monetary
authorities will continue to support the existing peso/dollar exchange rate.
Colombia. Colombia is our second largest market in terms of revenues
generated. Colombia is experiencing its first economic recession in over 50
years, with unemployment over 20%. The Colombian economy began experiencing a
severe economic crisis in 1998. A combination of low international commodity
prices, a decline in global lending to emerging markets, a drop in domestic
consumption and high interest rates have resulted in an economic recession and a
negative economic performance. Preliminary figures indicate that the Colombian
economy contracted in 1999 for the first time in over half a century and that
Colombia's GDP fell by 6% in the first half of 1999. In June of 1999, Colombia's
central bank effectively devalued the Colombian peso by 9% by widening the
foreign exchange band for the peso, and in September 1999, the central bank
discontinued the use of the foreign exchange band and permitted the peso to
float freely against the U.S. dollar. In the third quarter of 1999, citing
Colombia's macroeconomic imbalances and rising levels of government debt,
Moody's Investors Services and Standard & Poor's downgraded the country's credit
rating to below "investment grade." In addition to increasing borrowing costs
for Colombian companies, the impairment of Colombia's credit rating could
further lower investor confidence in that country and compound its economic
difficulties.
Colombia has experienced periods of violence over the past four decades,
primarily from leftist guerrilla groups, right-wing paramilitary groups and
drug-related activities. Despite the promise of peace negotiations between the
Colombian government and the main left-wing guerrilla group, known as FARC, a
recent offensive by FARC resulted in an estimated over 200 deaths among
Colombian armed forces, guerilla members and non-combatants. The offensive led
the Colombian government to cede effective control of certain portions of the
country to guerilla forces, order a curfew in certain regions of the country and
place the military on a heightened state of alert. We cannot assure you that
these matters, individually or cumulatively, will not materially adversely
affect our business, results of operations and financial condition and the
market price of our common stock.
Venezuela. Our operations in Venezuela, which is currently our third
largest market in terms of revenues generated, are expected to grow. The
Venezuelan government exercises significant control over the Venezuelan economy.
This control has included extensive regulation, including foreign exchange and
price controls. In the last 15 years, Venezuela has experienced periods of
recession or slow or negative growth, high inflation, currency devaluations and
limited availability of foreign exchange. Venezuela's ongoing budget deficit,
due in part to the decline in international oil prices in 1998 and the first
half of 1999, has put pressure on the
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Venezuelan economy. Venezuela has experienced high levels of inflation during
the past decade. The general rate of inflation, as measured by the consumer
price index, was 103.2% in 1996, 37.6% in 1997 and 29.9% in 1998.
The Venezuelan economy is expected to decline by over 5% in 1999. In
addition, Venezuela experienced a period of political uncertainty in 1999 as a
result of the actions of a Constitutional Assembly that was elected to propose a
new constitution. This project is part of a program by Venezuela's recently
elected president, Mr. Hugo Chavez, to reform and amend the Venezuelan political
system. To date, the Constitutional Assembly has declared constitutional
emergencies and taken steps to exert authority over and replace Venezuela's
judiciary and Congress. In December 1999, a new constitution was approved by
national referendum and the Venezuelan Congress was dissolved. Elections for
President, a new unicameral legislature and governorships are expected to occur
in the first quarter of 2000. Mr. Chavez is expected to run for President in the
new elections. The heightened tensions between the executive branch and the
Constitutional Assembly, on the one hand, and the Venezuelan legislature, on the
other hand, and elements of the new constitution, have made investors reluctant
to invest funds in Venezuela. We cannot assure you that the implementation of a
new constitution will not have a material adverse effect on the Venezuelan
economy and our business, results of operations and prospects in Venezuela. On
December 15, 1999, mudslides resulting from torrential rains destroyed
significant areas throughout the northern coast of Venezuela. An estimated
50,000 to 70,000 Venezuelans have been affected. The impact of the natural
disaster on the Venezuelan economy has not been determined, although the
Venezuelan government has stated that it will take a minimum of two years to
rebuild the affected areas at an estimated cost of $1 billion.
Brazil. Although our business in Brazil is currently limited, we expect
Brazil to constitute an increasing share of our business and revenues.
Throughout the 1980s and into the 1990s, the Brazilian economy has suffered from
periods of extremely high rates of inflation and recession. Historically,
Brazil's currency has frequently depreciated in relation to the U.S. dollar. At
the end of 1998, foreign exchange reserves in Brazil had declined to $40 billion
from nearly $70 billion at the end of August 1998. These outflows, which
resulted from the Russian economic crisis (and the subsequent impact on risk
perception of investments in emerging market countries in general) and high
rates of inflation prevailing in the Brazilian economy, put pressure on the
Brazilian real. The Brazilian government permitted the real to float freely
against the U.S. dollar in January 1999. Since that time, the real has devalued
to a low of R$2.17 = $1.00 on March 3, 1999. At January 5, 2000, the real traded
at a rate of R$1.85 = $1.00. We cannot assure you that the real will not again
be devalued relative to the U.S. dollar, or that the real will not fluctuate
significantly relative to the U.S. dollar. A continued downturn in Brazil's
economy could further affect other Latin American countries through the loss of
investor confidence and shocks to intra-regional trade.
Rapid changes in Brazilian political and economic conditions require us to
continually assess the risks associated with our operations in Brazil and adjust
our business and operating strategy. Although the Brazilian government has
indicated that it is committed to solving the recent economic crisis caused by
the devaluation of the Brazilian real, it will have to overcome internal
political resistance to austerity measures if the economic recession worsens and
unemployment figures rise. Economic forecasts suggest that the Brazilian economy
could continue to suffer a recession as economic austerity measures and high
interest rates depress consumption and investment. If the Brazilian government
fails to contain the current economic crisis, it could have an adverse material
effect on our business, results of operations and financial condition and the
market price of our common stock.
WE ARE VULNERABLE TO CURRENCY FLUCTUATIONS, DEVALUATIONS AND RESTRICTIONS THAT
MAY INCREASE OUR LOSSES AND CAUSE FLUCTUATIONS IN OUR OPERATING RESULTS
A substantial portion of our costs, including lease payments for satellite
transponder capacity, purchases of capital equipment, and payments of interest
and principal on our indebtedness, is payable in U.S. dollars. To date, we have
not entered into hedging or swap contracts to address currency risks because our
contracts with our 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. These contractual
provisions are structured to reduce our risk if currency exchange rates
fluctuate. However, given that the
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exchange rate is generally set at the date of invoicing and that in some cases
we experience substantial delays in collecting receivables, we are exposed to
exchange rate risk. Pursuant to Brazilian law, our contracts with customers in
Brazil cannot be denominated in dollars or linked to the exchange rate between
the Brazilian real and the U.S. dollar. Our expansion in Brazil, including our
development of the Broadband Network in Brazil, will therefore increase our
exposure to exchange rate risks.
We are negatively affected by currency devaluations as our customers'
revenues are generally denominated in local currencies. Substantial or continued
devaluations in local currencies relative to the U.S. dollar could have a
material adverse effect on the ability of our customers to absorb the costs of a
devaluation. This could result in our customers seeking to renegotiate their
contracts with us or, failing satisfactory renegotiation, defaulting on or
canceling their contracts. Our competitors and potential future competitors,
including the PTOs and large, multinational telecommunications companies, may be
less exposed to currency risk or may be better able to hedge their currency risk
and could thereby gain a relative competitive advantage in the event of a
currency devaluation. In addition, Latin American economies have experienced
shortages in foreign currency reserves and restrictions on the ability to
expatriate local earnings and convert local currencies into U.S. dollars.
Currency devaluations in one country may have adverse effects in another
country. For example, in late 1994 and 1995, several Latin American countries
were adversely affected by the devaluation of the Mexican peso. The continued
Asian and Russian economic crises have had an adverse effect on the financial
and foreign exchange markets of emerging market countries, leading to increased
pressures on local interest rates and currencies, including in Argentina and
Brazil. These pressures, in turn, have inhibited the ability of companies
operating in emerging markets to obtain necessary financing and increase prices.
Any devaluation of local currencies in the countries where we operate, or
restrictions on the expatriation of earnings or capital from such countries,
could have a material adverse effect on our business, results of operations and
financial condition and the market price of our common stock.
WE FACE REGULATORY RISKS AND UNCERTAINTY WITH RESPECT TO LOCAL LAWS AND
REGULATIONS
Our business is dependent upon the procurement and maintenance of licenses
to provide various telecommunications network services in the countries in which
we operate. We believe that we have all licenses required for the conduct of our
current operations. We expect that those licenses that are subject to expiration
will be renewed in due course upon our application to the appropriate
authorities. Due to the political and economic risks associated with the
countries in which we operate, we cannot assure you that we will be able to
maintain our licenses in force or that they will be renewed upon their
expiration. The loss, or substantial limitation upon the terms, of our licenses
could have a material adverse effect on our results of operations. For specific
details of our licenses in the various countries in which we operate, including
the expiration date of such licenses, see "Business -- Description of Country
Operations." We cannot assure you that we will succeed in obtaining all
requisite regulatory approvals to operate in those countries in which we may
desire to do business.
Local laws and regulations differ significantly among the jurisdictions in
which we operate and in which we may operate in the future. The interpretation
and enforcement of these laws and regulations vary and are often based on the
informal views of the local ministries which, in some cases, are subject to
influence by the PTOs. The conditions governing our service offerings may be
altered by future legislation or regulation. We are prohibited by law from
providing international services to or from Argentina during the term of the
monopoly granted to the two international long-distance service providers owned
by Telecom Argentina and Telefonica, unless we obtain the consent of these
entities. This international long-distance monopoly is due to expire in November
2000. In some of our principal existing and target markets, laws and regulations
prohibit or limit the provision of certain telecommunications services.
OUR BUSINESS IS HIGHLY DEPENDENT ON SATELLITE SYSTEMS AND THEY MAY FAIL AND
IMPAIR OUR ABILITY TO PROVIDE SERVICES TO OUR CUSTOMERS
We depend heavily on the integrity, capability and maintenance of third
party controlled satellite systems. The loss or disruption of any facility or
equipment related to these satellite systems, or the interruption of any such
facility's or equipment's transmission capabilities, could have a material
adverse effect on our operations
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and our ability to provide service to our customers. Loss or disruption could
also cause one or more of our customers to terminate their contracts with us or
fail to renew their contracts. We believe that the satellite systems upon which
we depend are highly reliable. However, they have in the past and may in the
future experience material operational anomalies and failures. For example, in
April 1999, Nahuelsat's Nahuel-1 satellite failed and service to part of our
telecommunications networks was lost for approximately 12 hours.
WE ARE DEPENDENT ON KEY PERSONNEL FOR OUR FUTURE SUCCESS
Our success depends to a significant degree on members of our senior
management and certain key employees, who generally are not bound by employment
contracts with us, although Mr. Ricardo Verdaguer, our President and Chief
Executive Officer, and Mr. Roberto Vivo, our Deputy Chief Executive Officer, are
indirect holders of our stock. Our success also depends in part upon our ability
to hire and retain highly skilled and qualified operating, marketing, financial
and technical personnel. Competition for qualified employees in the
telecommunications industry is intense and, accordingly, we cannot assure you
that we will be able to hire or retain necessary personnel.
In addition, the successful implementation of our Broadband Network will
require us to recruit, hire and retain a significant number of highly skilled
employees. There may be a limited supply of qualified personnel in our countries
of operations.
WE FACE MULTIPLE RISKS ASSOCIATED WITH PROVIDING INTERNET SERVICES
We offer Internet access to Internet service and content providers and
business and governmental customers. We had $21.1 million in revenues from
Internet services in 1998 and $7.8 million in 1997. As of September 30, 1999 we
had over 102,000 dial-up Internet access retail customers and 320 dedicated
Internet access corporate customers. In August 1999, we entered into an
agreement with El Sitio, Inc., an Internet content provider, for the sale of our
retail Internet businesses in Argentina, Brazil and Colombia for approximately
$21.5 million. We concluded the sale of our Brazilian retail Internet business
to El Sitio on October 6, 1999 and the sale of our Argentine retail Internet
business to El Sitio on November 5, 1999. We expect to finalize the sale of our
Colombian retail Internet business by the end of January 2000. See "Certain
Relationships and Related Transactions -- El Sitio."
As is typical in newer industries, demand and market acceptance remain
unknown factors in the provision of Internet access services. In addition,
critical issues concerning the commercial use of the Internet remain unresolved
and may impact the growth of Internet use. Despite growing interest in the many
commercial uses of the Internet, many businesses in Latin America and elsewhere
have been deterred from purchasing Internet access services. These businesses
have been deterred for a number of reasons, including:
- inconsistent service
- lack of cost-effective, high-speed options
- limited access points
- inability to integrate business applications on the Internet
- the need to deal with multiple and frequently incompatible vendors
- inadequate protection of the confidentiality of stored data and
information moving across the Internet
- a lack of tools to simplify Internet access and use
Published reports have also indicated that capacity constraints caused by
growth in the use of the Internet may, unless resolved, constrain development of
the Internet to the extent that users experience delays, transmission errors and
other difficulties. For example, inadequate transmission infrastructure in Latin
America (such as an insufficiency of telephone lines for Internet access) could
forestall the growth of Internet services in that region. Furthermore, in some
parts of Latin America, the Internet is not seen as an alternative method of
exchanging information or doing business and we cannot guarantee that the
Internet will be widely
21
<PAGE> 22
accepted in the region as an alternative means of communicating and conducting
business. We anticipate the provision of Internet access services to ISPs will
be an important segment of the services available through our Broadband Network,
and the failure of Internet growth in Latin America could adversely affect our
business, results of operations, financial condition and the market price of our
common stock.
OUR AFFAIRS AND BUSINESS POLICIES ARE SUBJECT TO CONTROL BY OUR PRINCIPAL
STOCKHOLDERS
We are a privately held corporation. After this offering and the
simultaneous issuance to British Telecommunications of an additional 2,850,000
shares of common stock, 46.4% of our issued and outstanding common stock will be
held by Nevasa Holdings Ltd., 18.8% by Nunsgate Limited, a wholly owned
subsidiary of British Telecommunications, 16.3% by certain affiliates of Morgan
Stanley Dean Witter (whom we refer to as the Morgan Stanley investors) and 5.1%
by the Suramericana Group of Colombia. Nevasa Holdings is a holding company
controlled by the Pescarmona family, Mr. Verdaguer, our President and Chief
Executive Officer, and Mr. Vivo, our Deputy Chief Executive Officer. As a result
of this stock ownership, these stockholders control our affairs and business
policies, including the election of directors.
WE HAVE ANTI-TAKEOVER PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND BYLAWS
THAT MAY PRECLUDE OUR BEING ACQUIRED EVEN IF IT WOULD BENEFIT STOCKHOLDERS
Some provisions included in our certificate of incorporation and bylaws may
discourage, delay or prevent an acquisition of our company at a premium price.
These provisions will:
- authorize the issuance of "blank check" preferred stock
- prohibit cumulative voting in the election of directors
- limit the removal of directors by the stockholders to removal for cause
- require a super-majority stockholder vote to effect certain amendments to
our certificate of incorporation and bylaws
- limit the persons who may call special meetings of stockholders
- prohibit stockholder action by written consent
- establish advance notice requirements for nominations for election to our
board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.
Our board of directors has approved the adoption of a stockholder rights
plan, which we intend to implement during the first quarter of 2000. A
stockholder rights plan would cause substantial dilution to any person or group
that attempts to acquire our company on terms not approved in advance by our
board of directors. Our stockholder rights plan and some of our employment
agreements may delay, deter or prevent someone from acquiring us in a
transaction that results in stockholders receiving a premium over the market
price for the shares of their common stock. See "Description of Capital
Stock -- Stockholder Rights Plan."
In addition, some of the governmental agencies that have regulatory
authority over us or our licensing process, including the Argentine Comision
Nacional de Comunicaciones, Brazil's Agencia Nacional de Telecomunicacoes and
the U.S. Federal Communications Commission, require prior approval of transfers
of control, including pro forma transfers of control resulting from corporate
reorganizations and assignments of regulatory authorization. These requirements
may delay, prevent or deter a change in control of our company.
THERE IS NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK AND OUR STOCK PRICE MAY BE
VOLATILE
There is no public market for our common stock. An active public market for
our common stock may not develop or be sustained after this offering. The price
of our common stock is likely to change after this offering. The market price of
our common stock may fluctuate significantly in response to a number of factors
(some of which are beyond our control), including:
- variations in operating results
- changes in financial estimates by securities analysts
22
<PAGE> 23
- changes in market valuations of telecommunications companies
- announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments
- our success or failure to implement our Broadband Network and expansion
plans
- an adverse decision by a regulatory agency in one of our primary markets
- increases or decreases in reported holdings by insiders or mutual funds
- additions or departures of key personnel
- future sales of common stock
- stock market price and volume fluctuations
SHARES OF OUR COMMON STOCK BECOMING AVAILABLE FOR SALE COULD ADVERSELY AFFECT
THE MARKET PRICE OF OUR COMMON STOCK AND MAY IMPAIR OUR ABILITY TO RAISE CAPITAL
THROUGH THE SALE OF ADDITIONAL STOCK
The 11,500,000 shares sold in this offering will generally be freely
tradable without restriction. We will have 79,928,571 shares of our common stock
outstanding upon completion of this offering that will be "restricted
securities" as that term is defined in Rule 144 under the Securities Act.
The 14,917,915 shares of our common stock that will be held by the Morgan
Stanley investors after 19,848 shares of our preferred stock are converted upon
completion of this offering and the 42,366,878 and 14,321,199 shares of common
stock held by Nevasa Holdings and Nunsgate Limited, respectively, will be
entitled to certain registration rights. See "Shares Eligible for Future Sale."
Immediately after this offering, we also will have an additional 1,190,204
shares of common stock that are the subject of options, 44,165 of which are
exercisable and 1,146,039 of which will not then be currently exercisable. To
the extent that these options are properly exercised, the underlying shares of
common stock will be freely tradable immediately upon exercise of the options.
Our existing stockholders will execute lock-up agreements that limit their
ability to sell such common stock. These stockholders will agree not to sell or
otherwise dispose of any shares of our common stock for a period of at least 180
days after the date of this prospectus without the prior written approval of
Morgan Stanley & Co. Incorporated. When the lock-up agreements expire, these
shares and the shares underlying the options will become eligible for sale, in
some cases subject to the volume, manner of sale and notice requirements of Rule
144. The availability of these shares may depress the market price of our common
stock. See "Shares Eligible for Future Sale."
OUR COMMON STOCK MAY BE SUBSTANTIALLY DILUTED AS A RESULT OF THE INITIAL PUBLIC
OFFERING PRICE
The initial public offering price of our common stock is substantially in
excess of the net tangible book value per share, which results in a benefit to
all of our existing stockholders. As a result, purchasers of common stock in
this offering will experience immediate and substantial dilution of $11.81 per
share (assuming an initial public offering price of $14.00 per share) of our
common stock from the public offering price. In addition, the 77,078,571 shares
of common stock outstanding and owned by the existing stockholders prior to this
offering were originally acquired at a substantially lower price per share on
average as compared to the price expected to be paid by new investors for the
11,500,000 shares of common stock offered hereby.
WE DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK AND ANY FUTURE PAYMENT OF
DIVIDENDS IS LIMITED BY THE TERMS OF INDENTURES TO WHICH WE ARE A PARTY
We have never paid dividends on our common stock and do not currently
intend to pay cash dividends on our common stock. Any future decisions as to the
payment of dividends will be at the discretion of our board of directors,
subject to applicable law. Our ability to pay dividends is also limited by the
terms of indentures to which we are a party. These indentures also contain
covenants restricting our ability to make certain restricted
23
<PAGE> 24
payments, incur additional indebtedness, make certain investments, create liens,
guarantee indebtedness, sell or acquire assets and enter into mergers or
consolidations, which may restrict our ability to expand or make acquisitions.
See "Dividend Policy."
FAILURE OF OUR COMPUTER SYSTEMS OR OF SATELLITES TO RECOGNIZE THE YEAR 2000
COULD DISRUPT OUR BUSINESS AND OPERATIONS
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 on or after January 1, 2000, unless corrected.
We face risks arising from year 2000 issues which could have a material
adverse effect on our business and the price of our common stock. For example,
we risk incurring contractual liabilities if we fail to provide services to our
customers because of the malfunctioning of a satellite due to a year 2000
problem with the satellite. Based on our testing and remediation, we believe
that our software and hardware systems are year 2000 compliant. However, we
cannot assure you that all systems will continue to function adequately during
and after the year 2000. We do not know whether the computer systems of our
customers and other parties on whose services we depend for transmission
capacity are year 2000 compliant. If the computer systems of the PTOs and other
carriers and our satellite providers are not year 2000 compliant, we could be
materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000" for a discussion of
these risks.
24
<PAGE> 25
USE OF PROCEEDS
We will receive net proceeds from this offering of approximately $148.9
million. This assumes that our common stock is offered at $14.00 per share, the
midpoint of the range set forth on the cover page of this prospectus, and is
after deducting underwriting discounts and commissions and the estimated
expenses of this offering. In addition, based on the same assumed offering price
of $14.00 per share, we will receive $39.5 million in net proceeds from the sale
of an additional 2,850,000 shares of our common stock to British
Telecommunications simultaneously with this offering. We intend to use the net
proceeds to make capital expenditures relating to the Broadband Network, to
redeem approximately $32.5 million of our preferred stock, 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.
DIVIDEND POLICY
We have not paid any cash dividends on our common stock and we do not
intend to pay cash dividends in the foreseeable future. We plan to retain
earnings, if any, for use in the operation of our business and to fund future
growth. In addition, our indentures currently severely restrict the payment of
dividends. See "Description of Our Indebtedness."
25
<PAGE> 26
CAPITALIZATION
The following table shows our cash and cash equivalents, short-term debt
and total capitalization as of September 30, 1999:
- on an historical basis
- as adjusted to give effect to:
- the common stock split
- this offering
- the redemption of approximately $32.5 million of our preferred stock and
the conversion of the remaining shares of our preferred stock into
14,917,915 shares of our common stock
- the issuance of an additional 2,850,000 shares of common stock to
British Telecommunications simultaneously with this offering
- the issuance of 5,472,579 shares of our common stock to minority
shareholders in our subsidiaries in Argentina, Venezuela and Colombia in
exchange for their minority interests in those subsidiaries
This table should be read in conjunction with our consolidated financial
statements and the notes at the back of this prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
-------------------------
ACTUAL AS ADJUSTED
---------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
CASH AND CASH EQUIVALENTS................................... $ 146,078 $ 302,004
========= =========
SHORT-TERM DEBT:
Short-term debt........................................... $ 15,975 $ 15,975
Current portion of long-term debt......................... 23,110 23,110
--------- ---------
Total short-term debt............................. $ 39,085 $ 39,085
========= =========
LONG-TERM DEBT:
12 1/8% Senior Guaranteed Notes due 2003.................. $ 125,000 $ 125,000
12 3/8% Senior Notes due 2008............................. 225,000 225,000
Other long-term debt, net of current portion.............. 34,113 34,113
--------- ---------
Total long-term debt, net......................... 384,113 384,113
--------- ---------
MINORITY INTEREST........................................... 6,624 --
--------- ---------
REDEEMABLE, CONVERTIBLE PREFERRED STOCK..................... 145,389 --
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value per share; (71,605,993
shares issued and outstanding, actual; 91,428,571
shares issued and outstanding, as adjusted)............ 716 914
Treasury stock, 14,917,915 shares, at cost................ (125,000) --
Additional paid in capital................................ 221,013 473,746
Accumulated deficit....................................... (172,368) (172,368)
Amount paid in excess of carrying value of assets acquired
from related party..................................... (4,969) (4,969)
Accumulated other comprehensive loss...................... (4,072) (4,072)
--------- ---------
Total stockholders' equity (deficit).............. (84,680) 293,251
--------- ---------
Total capitalization......................... $ 490,531 $ 716,449
========= =========
</TABLE>
26
<PAGE> 27
DILUTION
As of September 30, 1999, our pro forma net tangible book value, after
giving effect to the redemption of approximately $32.5 million of our preferred
stock and the conversion of the remaining shares of our preferred stock into
shares of our common stock and the issuance of 5,472,579 shares of our common
stock to minority shareholders in our subsidiaries in Argentina, Venezuela and
Colombia in exchange for their minority interest in those subsidiaries, was
$11.8 million, or $0.15 per share of common stock. Net tangible book value per
share represents the amount of our total tangible assets reduced by the amount
of our total liabilities, divided by the number of shares of common stock
outstanding. As of September 30, 1999, our pro forma net tangible book value, as
adjusted for the sale of 11,500,000 shares in this offering and the issuance of
an additional 2,850,000 shares of our common stock to British Telecommunications
simultaneously with this offering, each at an assumed initial public offering
price of $14.00 per share (the midpoint of the range set forth on the cover page
of this prospectus), and after deducting the estimated underwriting discounts
and commissions and other expenses, would have been approximately $2.19 per
share of common stock. This represents an immediate increase of $2.04 per share
to existing stockholders and an immediate dilution of $11.81 per share to new
investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $14.00
Pro Forma Net tangible book value per share as of
September 30, 1999..................................... $ 0.15
Increase in net tangible book value per share attributable
to purchases in this offering.......................... 2.04
------
Pro Forma Net tangible book value per share after this
offering............................................... 2.19
------
Dilution per share to new investors......................... $11.81
======
</TABLE>
The 77,078,571 shares of common stock outstanding and owned by our existing
stockholders prior to this offering were originally acquired at a substantially
lower price per share on average as compared to the price expected to be paid by
new investors for the 11,500,000 shares of common stock offered hereby and the
additional 2,850,000 shares of common stock to be issued to British
Telecommunications simultaneously with this offering.
At January 5, 2000, there were 1,190,204 shares of common stock subject to
outstanding options consisting of:
- 355,214 shares underlying unexercisable options with an exercise price of
$1.69 per share
- 44,165 shares underlying exercisable options and 397,485 shares
underlying unexercisable options, each with an exercise price of $8.38
per share
- 393,340 shares underlying unexercisable options with an exercise price of
$10.47 per share
As of January 5, 2000, no options were exercised. To the extent outstanding
options are exercised, there will be further dilution to new investors. See
"Capitalization," "Management -- Executive Compensation" and
"Management -- Stock Option Plans."
27
<PAGE> 28
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following financial data are derived from our consolidated financial
statements, which have been audited by Deloitte & Touche LLP, independent
auditors, except for the nine-month data, which are derived from our unaudited
financial statements. 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 prospectus.
Our net loss per share on a pro forma basis and our balance sheet data on
an as adjusted basis give effect to:
- the common stock split
- this offering
- the redemption of approximately $32.5 million of our preferred stock and
the conversion of the remaining 19,848 shares of our preferred stock into
shares of our common stock
- the issuance of an additional 2,850,000 shares of our common stock to
British Telecommunications simultaneously with this offering
- the issuance of 5,472,579 shares of our common stock to minority
shareholders in our subsidiaries in Argentina, Venezuela and Colombia, in
exchange for their minority interests in those subsidiaries
as if these events had occurred at the beginning of the periods presented. The
pro forma amounts do not give effect to any interest income earned on the
proceeds of this offering pending application.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues from services...................... $77,679 $105,641 $128,393 $161,065 $208,089 $149,888 $ 167,129
Costs and expenses:
Variable cost of services..................... 12,770 18,818 21,494 27,333 36,369 24,274 29,975
Leased telecommunications links............... 7,734 10,973 13,925 19,230 24,507 20,343 31,248
Salaries, wages and benefits.................. 13,528 22,220 25,561 29,109 38,198 26,543 34,222
Selling, general and administrative........... 19,148 26,094 23,030 33,356 45,199 34,515 46,564
Depreciation and amortization................. 12,874 20,653 26,318 28,673 36,946 26,537 88,090
------- -------- -------- -------- -------- -------- ---------
Operating income (loss)......................... 11,625 6,883 18,065 23,364 26,870 17,676 (62,970)
Other income (expenses):
Interest expense, net......................... (8,231) (15,677) (23,185) (24,272) (44,698) (30,243) (41,976)
Net gain (loss) on foreign exchange........... 1,352 1,838 910 (276) 675 813 (9,500)
Other income (expenses), net.................. 599 511 1,035 (151) 760 485 (715)
------- -------- -------- -------- -------- -------- ---------
Income (loss) before income taxes and minority
interest...................................... 5,345 (6,445) (3,175) (1,335) (16,393) (11,269) (115,161)
Benefit from (provision for) income taxes....... 3,155 740 (3,542) (5,263) (3,805) (2,358) 18,952
------- -------- -------- -------- -------- -------- ---------
(Loss) income before cumulative effect and
minority interest............................. 8,500 (5,705) (6,717) (6,598) (20,198) (13,627) (96,209)
Cumulative effect of change in accounting
principle, net of tax......................... -- -- -- -- (1,269) (1,269) --
(Income) loss attributable to minority
interest...................................... (5,464) (1,712) (1,766) (993) (2,502) (1,717) 5,603
Dividends on redeemable preferred stock......... -- -- -- -- (10,018) (6,720) (10,371)
------- -------- -------- -------- -------- -------- ---------
Net income (loss)............................... $ 3,036 $ (7,417) $ (8,483) $ (7,591) $(33,987) $(23,333) $(100,977)
======= ======== ======== ======== ======== ======== =========
Comprehensive income (loss)..................... $ 3,036 $ (7,417) $ (8,483) $ (7,591) $(34,513) $(23,333) $(104,523)
======= ======== ======== ======== ======== ======== =========
Net income (loss) per common share, basic and
diluted....................................... $ 0.06 $ (0.16) $ (0.18) $ (0.14) $ (0.71) $ (0.48) $ (1.89)
======= ======== ======== ======== ======== ======== =========
Net loss per share, pro forma................... $ (0.32) $ (1.13)
======== =========
Weighted average common shares outstanding...... 46,773 46,773 46,773 53,594 47,983 48,811 53,453
======= ======== ======== ======== ======== ======== =========
Weighted average common shares outstanding, pro
forma......................................... 82,723 88,193
======== =========
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30, 1999
----------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 ACTUAL AS ADJUSTED
-------- -------- -------- -------- --------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 32,135 $ 6,216 $ 28,895 $ 10,439 $ 90,021 $146,078 $302,004
Total current assets.................. 57,948 36,906 68,304 65,015 159,099 214,399 370,325
Net property, plant and equipment..... 152,909 199,701 227,086 255,422 330,726 317,219 317,219
Total assets.......................... 222,684 249,095 315,230 339,916 527,218 599,192 825,110
Total current liabilities............. 68,984 128,813 78,125 103,438 97,910 133,902 133,902
Total short-term debt and current
portion of long-term debt........... 48,047 97,510 42,874 60,375 40,400 39,085 39,085
Total long-term debt, net............. 59,437 30,200 156,230 159,677 379,292 384,113 384,113
Minority interest..................... 24,893 28,476 30,242 10,398 13,071 6,624 --
Redeemable preferred stock............ -- -- -- -- 135,018 145,389 --
Stockholders' equity (deficit)........ 62,780 55,363 46,881 63,389 (101,519) (84,680) 293,251
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA........................................... $24,499 $ 27,536 $ 44,383 $ 52,037 63,816 $ 44,213 $ 25,120
Cash flow provided by (used in):
Operating activities........................... 17,257 18,894 9,843 17,139 16,740 22,326 14,324
Investing activities........................... (87,603) (66,910) (53,681) (58,080) (128,155) (96,615) (77,541)
Financing activities........................... 93,351 22,097 66,517 22,485 191,523 203,753 122,820
Capital expenditures............................. 87,541 67,060 53,998 56,440 109,934 84,733 74,262
OTHER DATA (AT PERIOD END):
Customers........................................ 445 656 907 1,192 1,467 1,136 1,707
Satellite customer sites (VSAT and SCPC
technology only)............................... 2,196 3,336 5,558 5,825 6,886 6,563 7,691
</TABLE>
29
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
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 dedicated 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 currently 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 our Broadband Network to enhance the services we presently
provide and significantly increase our transmission speed and capacity. This
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 DWDM, ATM and IP. We already own and
operate a long-haul, fiber optic network connecting the cities of Cali, Medellin
and Bogota in Colombia over 698 route kilometers and we are constructing an
additional 1,351 route kilometers to close the ring between Cali and Bogota and
to extend this network to reach Barranquilla. By December 2000, we expect to
have built out our Broadband Network to connect major cities across Argentina,
Brazil and Colombia.
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 the
market price of our common stock.
Costs and Expenses. Our costs and expenses principally include:
- variable cost of services
- leased telecommunications links (payments for leased satellite
transponder and fiber optic capacity)
- salaries, wages and benefits
30
<PAGE> 31
- selling, general and administrative expenses
- depreciation and amortization
Building the Broadband Network will decrease our payments for satellite
capacity (i.e., leased telecommunications links) 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
principal items comprising variable cost of services are installation (and
de-installation) costs, sales commissions paid to third-party sales
representatives and maintenance costs for our network infrastructure.
Installation and de-installation costs are the costs we incur when we install or
remove earth stations, microstations and other equipment from customer premises.
Installation and maintenance costs include services contracted from outside
providers. Our selling, general and administrative expenses consist principally
of:
- publicity and promotion costs
- provisions for doubtful accounts
- 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 $4.8 million in 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
countries in which we operate did not have a material effect on our revenues
during 1998 and the first nine months of 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 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 by the end of
January 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.
31
<PAGE> 32
The revenues and expenses associated with the retail Internet businesses
that we sold to El Sitio were as follows for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- ---------------
1997 1998 1998 1999
------ ------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues:
Argentina............................................... $2,634 $ 2,982 $2,298 $2,710
Colombia................................................ 1,817 2,131 1,741 1,371
Brazil.................................................. -- 6,159 4,535 5,766
------ ------- ------ ------
Total........................................... $4,451 $11,272 $8,574 $9,847
====== ======= ====== ======
Direct costs and expenses:
Argentina............................................... $1,957 $ 2,181 $1,767 $1,911
Colombia................................................ 1,274 2,014 1,506 1,449
Brazil.................................................. -- 3,792 3,713 5,276
------ ------- ------ ------
Total........................................... $3,231 $ 7,987 $6,986 $8,636
====== ======= ====== ======
</TABLE>
RESULTS OF OPERATIONS
The following financial table summarizes our results of operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------ ------------------------------------
1996 1997 1998 1998 1999
---------------- ---------------- ---------------- ---------------- -----------------
(IN THOUSANDS AND AS A PERCENTAGE OF CONSOLIDATED REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues from services... $128,393 100.0% $161,065 100.0% $208,089 100.0% $149,888 100.0% $ 167,129 100.0%
Variable costs of services... 21,494 16.7 27,333 17.0 36,369 17.5 24,274 16.2 29,975 17.9
Salaries, wages and
benefits................... 25,561 19.9 29,109 18.1 38,198 18.4 26,543 17.7 34,222 20.5
Leased telecommunications
links...................... 13,925 10.8 19,230 11.9 24,507 11.8 20,343 13.6 31,248 18.7
Selling, general and
administrative expenses.... 23,030 17.9 33,356 20.7 45,199 21.7 34,515 23.0 46,564 27.9
Depreciation and
amortization............... 26,318 20.5 28,673 17.8 36,946 17.8 26,537 17.7 88,090 52.7
Interest expense, net........ 23,185 18.1 24,272 15.1 44,698 21.5 30,243 20.2 41,976 25.1
Net gain (loss) on foreign
exchange................... 910 0.7 (276) (0.2) 675 0.3 813 0.5 (9,500) (5.7)
Benefit from (provision for)
income taxes............... (3,542) (2.8) (5,263) (3.3) (3,805) (1.8) (2,358) (1.6) 18,952 11.3
Comprehensive gain (loss).... (8,483) (6.6) (7,591) (4.7) (34,513) (16.6) (23,333) (15.6) (104,523) (62.5)
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
General. Our results of operations for the first nine months of 1999 were
not as positive as prior periods for the following principal reasons:
- recessions facing our markets in Latin America, which significantly
lowered our rate of revenue growth and caused our revenues to decrease in
the third quarter of 1999 by $1.7 million compared to the second quarter
of 1999
- 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)
- an increase in our provision for doubtful accounts as a result of changes
in our provisioning policy, which we discuss further below
32
<PAGE> 33
- 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 the nine months ended September 30, 1999
totaled $167.1 million, an increase of $17.2 million, or 11.5%, from net
revenues for the same period in 1998. Recessions in most of the countries in
which we operate, and competitive pressures in Argentina and Colombia,
contributed to our lower rate of revenue growth during the third quarter of 1999
compared to prior periods. These conditions could also affect future periods.
The following table shows our revenues by operating subsidiary (including
intercompany transactions) for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1998 1999
------- -------
(IN THOUSANDS)
<S> <C> <C>
IMPSAT Argentina............................................ $72,868 $79,911
IMPSAT Colombia............................................. 45,457 45,980
IMPSAT Venezuela............................................ 10,687 16,777
IMPSAT Ecuador.............................................. 7,312 9,749
IMPSAT Mexico............................................... 3,439 2,528
IMPSAT Brazil............................................... 1,390 4,607
Mandic S.A.................................................. 4,535 6,519
IMPSAT USA.................................................. 10,453 12,633
</TABLE>
Our revenue growth for the first nine months of 1999 was attributable to an
overall increase in the number of customers and services we provided to them
offset, in the past, by decreasing prices. Excluding Internet and fax store and
forward customers, we had a total of 1,707 customers at September 30, 1999,
compared to 1,415 customers at September 30, 1998.
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. We recorded $1.6 million in net revenues from
this contract during 1998. In Colombia with Telemando E.U. (an alternative
telecommunications carrier) and Registraduria Nacional (the government elections
commission) were terminated during the third quarter of 1999. We recorded $2.1
million in net revenues from Telemando and $0.6 million in net revenues from
Registraduria Nacional during 1998. Also, 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.
In addition, revenue growth at IMPSAT Ecuador could decline in coming
periods due to the effects of the continuing economic crisis in that country. In
the first week of January 2000, the Ecuadoran government declared a national
emergency and the Ecuadoran sucre devalued approximately 40% against the U.S.
dollar. 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.
Revenues recorded by our Brazilian operations were negatively affected by
the devaluation of the Brazilian real against the U.S. dollar. Although IMPSAT
Brazil's expansion of its customer base (85 customers as of September 30, 1999
compared to 36 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 the first nine months
of 1999 as compared to the prior period in 1998 were also negatively
33
<PAGE> 34
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$1.92 = $1.00 on
September 30, 1999.
Variable Cost of Services. Our variable cost of services for the nine
months ended September 30, 1999 totaled $30.0 million, an increase of $5.7
million, or 23.5%, compared to the same period in 1998. Of our total variable
cost of services for the nine months ending September 30, 1999, $16.4 million
related to the operations of IMPSAT Argentina and $8.8 million related to the
operations of IMPSAT Colombia. This compares to $13.7 million at IMPSAT
Argentina and $7.9 million at IMPSAT Colombia for the nine months ended
September 30, 1998. Variable costs of services for Mandic and IMPSAT Brazil,
both of which commenced operations towards the end of the second quarter of
1998, each totaled $1.5 million for the nine months ended September 30, 1999.
Variable cost of services of our subsidiaries are described prior to the
elimination of intercompany transactions.
Maintenance costs for our telecommunications network infrastructure totaled
$8.5 million, compared to $7.3 million for the corresponding period in 1998,
because we had more infrastructure.
Installation costs totaled $6.7 million, compared to $5.3 million for the
corresponding period in 1998. Installation costs at IMPSAT Argentina totaled
$3.9 million for the nine months ended September 30, 1999 as compared to $3.2
million for the corresponding period in 1998. The increase in these costs was
due in part to:
- a higher number of de-installations of VSAT microstations due to customer
cancellations and customer upgrades to SCPC technology
- private telecommunications network installations completed in the first
nine months of 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
Sales commissions paid to third-party sales representatives totaled $5.7
million compared to $5.1 million for the nine months ended September 30, 1998.
Most of these commissions related to customers of IMPSAT Argentina.
In addition, royalties paid in connection with our licenses to governmental
entities increased to $1.5 million from $750,000 for the nine months ended
September 30, 1998. This increase was principally related to new
telecommunications regulations in Colombia that broadened the base of IMPSAT
Colombia's revenues upon which the royalties are levied.
Salaries, Wages and Benefits. Salaries, wages and benefits totaled $34.2
million, an increase of $7.7 million, or 29.1%, from the first nine months of
1998. The increase resulted primarily from:
- an increase in the number of employees, from 973 at September 30, 1998 to
1,133 at September 30, 1999, particularly in connection with the
commencement of operations at IMPSAT Brazil and Mandic and the
development of the Broadband Network in Argentina and Brazil
- increases in the salaries, wages and benefits of our personnel to match
market rates for personnel with the expertise we require and increases in
cost of living
IMPSAT Argentina incurred salaries, wages and benefits for the three and
nine months ended September 30, 1999 of $5.2 million and $14.5 million compared
to $4.1 million and $12.1 million for the same periods in 1998. Salaries, wages
and benefits for the first nine months of 1999 relating to the Broadband Network
totaled $0.7 million. Salaries, wages and benefits for the nine months ended
September 30, 1999 paid with respect to IMPSAT Brazil and Mandic totaled $3.2
million.
Leased Telecommunications Links Cost. Our leased telecommunication links
expenses totaled $31.2 million, which represented an increase of $10.9 million,
or 53.7%, from the corresponding period in 1998. We had approximately 769 MHz of
leased satellite capacity at September 30, 1999 and 560 MHz at September 30,
1998.
34
<PAGE> 35
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 the first nine months of 1999, we increased our
leased dedicated capacity on third-party fiber optic networks in Argentina,
spending $12.4 million compared to $8.0 million for the first nine months of
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.
Selling, General and Administrative Expenses. We incurred SG&A expenses of
$46.6 million for the nine months ended September 30, 1999. SG&A expenses
increased $12.0 million, or 34.9%, from the nine months ended September 30,
1998. SG&A expenses at IMPSAT Argentina totaled $24.4 million, an increase of
$7.1 million, or 41.3%, from SG&A expenses incurred by IMPSAT Argentina for the
nine months ended September 30, 1998.
The increase in SG&A expenses reflects:
- the increase in our provision for doubtful accounts, discussed below
- 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 $4.1 million compared to $2.8 million in the corresponding period
in 1998. Mandic's SG&A expenses totaled $1.6 million compared to $1.3
million in the corresponding period in 1998.
- increased maintenance expenses for our various offices, which totaled
$3.3 million, compared to $2.6 million for the corresponding period in
1998
The increased SG&A expenses reflect growth in our operations, including the
development and implementation of the Broadband Network.
We recorded a provision for doubtful accounts of $14.7 million compared to
$6.3 million for the same period in 1998. At September 30, 1999, excluding
amounts owed by two large former customers (ENCOTESA, the former Argentine
national postal service that was privatized in 1997, and IBM de Argentina) that
are the subject of litigation, approximately 14% 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. See "Business -- Legal
Matters" for a description of these litigations.
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 September 30, 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 the first nine months of 1999. IMPSAT Argentina's average
days outstanding for net trade receivables due was 86 days at September 30,
1999. This represents an
35
<PAGE> 36
improvement from IMPSAT Argentina's average days outstanding for net trade
receivables due of 97 days at June 30, 1999, but a decline from 49 days at
September 30, 1998.
Depreciation and Amortization. Our depreciation and amortization expenses
for the nine months ended September 30, 1999 totaled $88.1 million, an increase
of $61.6 million, or 232.0%, from the nine months ended September 30, 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 $42.0 million. This
consists of interest expense of $47.1 million and interest income of $5.1
million. Our net interest expense increased $11.7 million, or 38.8%, from net
interest expense for the nine months ended September 30, 1998.
The increase in our net interest expense reflects higher average
outstanding indebtedness in the first nine months of 1999 compared to the first
nine months of 1998 as a result of our issuance in June 1998 of $225 million
principal amount of 12 3/8% Senior Notes due 2008. For the first nine months of
1999, the average interest rate on our indebtedness was 11.9%, compared to an
average interest rate of 13.6% for the first nine months of 1998. Our total
indebtedness as of September 30, 1999 was $423.2 million, as compared to $431.9
million as of September 30, 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. See
"-- Liquidity and Capital Resources."
Net Loss on Foreign Exchange. We recorded a net loss on foreign exchange of
$9.5 million, compared to a net gain of $0.8 million for the corresponding
period in 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 $19.0 million compared to a
provision for income taxes of $2.4 million for the corresponding period in 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 in the third quarter of 1999 with respect
to some of our customer premises telecommunications equipment.
Comprehensive Loss. For the nine months ended September 30, 1999, we
incurred a comprehensive loss of $104.5 million, compared to a comprehensive
loss of $23.3 million for the nine months ended September 30, 1998. In addition
to the items described in the preceding paragraphs, the principal reasons for
the increase in our comprehensive loss as compared to prior periods related to:
- accrued dividends of $10.4 million on our preferred stock, compared to
$6.7 million during the first nine months of 1998
- the foreign currency translation adjustment loss of $3.5 million for the
first nine months of 1999 related to the effect of the devaluation of the
real on the stated carrying value of IMPSAT Brazil's and Mandic's
property, plant and equipment.
36
<PAGE> 37
1998 COMPARED TO 1997
Revenues. Revenues for 1998 totaled $208.1 million, compared to $161.1
million for 1997, representing a $47.0 million increase from revenues for 1997.
The following table shows our revenues by operating subsidiary for 1998 and
1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
IMPSAT Argentina............................................ $90,790 $98,145
IMPSAT Colombia............................................. 49,513 59,903
IMPSAT Venezuela............................................ 8,607 14,865
IMPSAT Ecuador.............................................. 5,716 9,817
IMPSAT Mexico............................................... 1,427 4,344
IMPSAT Brazil............................................... -- 3,646
Mandic...................................................... -- 8,246
IMPSAT USA.................................................. 5,018 9,123
</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.
Our net revenues in 1998 increased principally from growth in services
other than our VSAT based service offerings. For a description of our service
offerings, see "Business -- Existing Network Infrastructure." 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.
In addition, our revenues from newer service offerings such as Internet and
Minidat increased significantly during 1998. Internet service revenues totaled
$21.1 million in 1998, as compared to $7.9 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 $6.3 million, an
increase of $1.8 million, or 41.4%, from 1997. Revenues from Minidat services
for 1998 totaled $2.3 million compared to revenues of $17,000 in 1997. 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 non-value-added 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.
As part of net revenues, we recorded revenues of $4.7 million from certain
equipment sales in 1998 and $3.1 million in 1997.
Variable Cost of Services. Our variable cost of services totaled $36.4
million, an increase of $9.0 million, or 33.1%, from 1997. Of total variable
cost of services for 1998, $17.9 million related to the operations of IMPSAT
Argentina and $8.2 million related to IMPSAT Colombia (compared to $14.6 million
at IMPSAT Argentina and $7.3 million at IMPSAT Colombia in 1997).
In 1998, our maintenance costs totaled $10.3 million, an increase of $0.1
million from 1997.
37
<PAGE> 38
In 1998, our installation costs totaled $7.6 million compared to $4.7
million in 1997.
Sales commissions paid to third party sales representatives totaled $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.
In addition, we incurred costs of equipment sold of $3.7 million, compared
to $3.1 million in 1997.
Salaries, Wages and Benefits. Salaries, wages and benefits totaled $38.2
million, an increase of $9.1 million, or 31.2%, from 1997. We increased the
salaries, wages and benefits 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, wages and benefits 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, wages and benefits for 1998 relating to the Broadband Network totaled
$0.5 million.
Leased Telecommunications Links Cost. Our satellite lease payments totaled
$24.5 million, an increase of $5.3 million, or 27.4%, from 1997. IMPSAT
Argentina's satellite lease payments totaled $10.6 million, an increase of $1.0
million, or 10.6%, from 1997. We had approximately 792.5 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.
Selling, General and Administrative Expenses. We incurred SG&A expenses of
$45.2 million, an increase of $11.8 million, or 35.5%, compared to 1997. This
increase was principally due to the increase in our provision for doubtful
accounts discussed below and SG&A expenses incurred by our two new subsidiaries,
IMPSAT Brazil and Mandic.
SG&A expenses at IMPSAT Argentina totaled $20.4 million, a decrease of $0.5
million, or 2.6%, 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.
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. For more information
regarding this change, see "Risk Factors -- Our revenues will deteriorate if we
cannot collect on our customer accounts."
Our provision for doubtful accounts in 1998 included a provision of $0.6
million relating to amounts owed to IMPSAT Argentina by VideoCable
Comunicaciones S.A. (also known as VCC) under a contract pursuant to which VCC
had agreed to market IMPSAT Argentina's Internet access service to VCC's
customers. The VCC agreement was terminated on July 2, 1998. In February 1999,
we entered into an agreement with VCC for the payment by VCC of $1.0 million of
the total $1.6 million amount outstanding under this terminated contract.
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)
38
<PAGE> 39
- 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 merged into IMPSAT Argentina in November
1998, that IMPSAT Argentina used to offset its income tax liability in 1998.
Comprehensive Loss. We incurred a comprehensive loss of $34.5 million, an
increase of $26.9 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 comprehensive 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
1997 COMPARED TO 1996
Revenues. Revenues for 1997 totaled $161.1 million compared to $128.4
million for 1996, representing an increase of $32.7 million or 25.4%, from
revenues in 1996. The following table shows our revenues by operating subsidiary
for 1997 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
IMPSAT Argentina............................................ $85,148 $90,790
IMPSAT Colombia............................................. 35,278 49,513
IMPSAT Venezuela............................................ 4,496 8,607
IMPSAT Ecuador.............................................. 2,802 5,514
IMPSAT Mexico............................................... 198 1,427
IMPSAT USA.................................................. 471 5,018
</TABLE>
As part of its revenues during 1997, IMPSAT Argentina recorded revenues of
$2.2 million from certain equipment sales. The significant growth in IMPSAT
USA's revenues during 1997 was principally due to short-term, non-recurring
contracts entered into in 1997. Approximately 41% of IMPSAT USA's revenues for
1997 were derived from these short-term contracts.
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<PAGE> 40
Variable Cost of Services. Our variable cost of services totaled $27.3
million, an increase of $5.8 million, or 27.2%, from 1996. Of our total variable
cost of services for 1997, $14.6 million related to the operations of IMPSAT
Argentina and $7.3 million related to the operations of IMPSAT Colombia. This
compared to variable cost of services of $14.7 million at IMPSAT Argentina and
$5.6 million at IMPSAT Colombia for 1996.
Our maintenance costs totaled $12.5 million, representing a $4.0 million
increase from 1996. This increase was primarily attributable to the increased
level and amount of our telecommunications infrastructure in service as our
operations grew and expanded over time.
Maintenance costs for IMPSAT USA totaled $1.4 million, compared to $0.5
million in 1996. IMPSAT USA's maintenance costs for 1997 included fees paid to
third-party carriers to terminate the last mile of certain private
telecommunications network links provided by IMPSAT USA to some of its
customers. Maintenance costs in 1997 for other subsidiaries included:
- $5.8 million for IMPSAT Argentina, an increase of $1.3 million from 1996
- $4.5 million for IMPSAT Colombia, an increase of $1.2 million from 1996
Installation costs totaled $4.7 million compared to $2.2 million for 1996.
Sales commissions paid to third-party sales representatives totaled $5.9
million, compared to $8.9 million in 1996. The overwhelming amount of these
sales commissions were paid by IMPSAT Argentina, whose sales commissions totaled
$5.2 million compared to $8.3 million in 1996. We incurred lower sales
commissions for 1997 primarily because of the renegotiation of some of the
agreements with third-party sales representatives for lower commissions.
Commissions were also reduced as a result of the renegotiation of underlying
contracts with customers, which resulted in reduced sales bases underlying
contractually due commissions. For example, in the second quarter of 1997, the
renegotiation and reduction of services provided by IMPSAT Argentina to BNA
resulted in a reduction in the revenues from these services and a concomitant
reduction in related sales commissions to the third-party sales representatives
contracted with respect to these agreements.
In addition, we incurred costs of equipment sold of $2.8 million. We did
not incur any such costs during 1996. The cost of equipment sold during 1997
related to revenues recorded by IMPSAT Argentina and IMPSAT USA during the third
quarter of 1997 of $2.2 million and $0.9 million, respectively, as a result of
certain equipment sales.
Leased Telecommunications Links Cost. Our satellite lease payments totaled
$19.2 million, an increase of $5.3 million from 1996, primarily attributable to
an increase in the amount of capacity leased. We had approximately 253.0 MHz of
leased satellite capacity as of December 31, 1996 and 412.6 MHz as of December
31, 1997.
Salaries, Wages and Benefits. Salaries, wages and benefits totaled $29.1
million, an increase of $3.5 million, or 13.9%, from 1996. We increased the
salaries, wages and benefits of our personnel to match market rates and
increases in cost of living.
IMPSAT Argentina incurred $15.8 million in salaries, wages and benefits
costs, unchanged from 1996. In Colombia, salaries, wages and benefits costs
totaled $6.3 million, an increase of $1.3 million from 1996. The appreciation of
the Colombian peso against the U.S. dollar during 1997 resulted in an increase
in U.S. dollar terms in salaries, wages and benefits paid to employees of IMPSAT
Colombia during that period. Salaries, wages and benefits for our other
subsidiaries increased by varying amounts totaling $2.4 million from 1996. At
December 31, 1997, we had 669 employees compared to 650 employees at December
31, 1996.
Selling, General and Administrative Expenses. We incurred SG&A expenses of
$33.4 million, an increase of $10.3 million from 1996. This increase was
primarily attributable to an increase in SG&A expenses incurred by IMPSAT
Argentina and IMPSAT Colombia.
SG&A expenses at IMPSAT Argentina totaled $20.9 million, an increase of
$7.7 million from 1996. This increase was attributable in part to the creation
of a $2.5 million provision for doubtful accounts relating to
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<PAGE> 41
services invoiced to ENCOTESA. In addition, we increased our allowance for
doubtful accounts from $2.8 million at December 31, 1996 to $5.9 million at
December 31, 1997 as a result of payment arrears experienced by a number of
customers in Argentina. Our policy during 1997 was to reserve 30% for accounts
receivable in excess of 180 days but less than one year, and 100% for all
accounts receivable in excess of 360 days. In 1997, we provisioned $1.2 million
with respect to the IBM de Argentina receivable. As a percentage of total
revenues, our provision for doubtful accounts increased from 1.9% of total
revenues in 1996 to 3.5% of total revenues in 1997.
The increase in SG&A expenses in 1997 was also attributable to legal and
tax advice and other fees and expenses of $4.7 million, an increase of $1.1
million from 1996. These 1997 expenses were related to:
- legal fees incurred in connection with the legal proceeding commenced
against ENCOTESA described in "Business -- Legal Matters"
- our ongoing financing activities
- the conduct of preliminary feasibility assessments of the expansion of
our operations into Brazil
Depreciation and Amortization. Our depreciation and amortization expense
totaled $28.6 million, representing an increase of $2.4 million, or 9.0%, from
1996. In 1997, we adopted an improved inventory control system which enhanced
our ability to more accurately track and depreciate our equipment in service.
Interest Expense, Net. Our net interest expense totaled $24.3 million,
consisting of interest expense of $25.5 million and interest income of $1.3
million. Net interest expense increased $1.1 million, or 4.7%, from 1996. This
increase reflected primarily our increased indebtedness, which increased from
$199.1 million at December 31, 1996 to $220.1 million at December 31, 1997. The
average interest rate on our indebtedness was 11.9%, compared to 15.4% for 1996.
Provision for Income Taxes. We recorded a provision for income taxes of
$5.3 million, compared to $3.5 million for 1996.
- IMPSAT Argentina recorded a provision for income taxes for $3.2 million,
compared to $4.0 million in 1996
- IMPSAT Colombia recorded a provision for income taxes of $1.8 million,
compared to $1.5 million for 1996
- IMPSAT Venezuela recorded a provision for income taxes of $0.8 million,
compared to a credit of $1.7 million in 1996
Comprehensive Loss. We incurred a comprehensive loss of $7.6 million, a
decrease of $0.9 million, or 10.5%, from $8.5 million in 1996. IMPSAT Argentina
recorded a net loss of $3.2 million, compared to a net loss of $0.9 million for
1996. IMPSAT Colombia recorded net income of $8.4 million, an increase of $6.2
million compared to IMPSAT Colombia's net income for 1996.
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 September 30, 1999, we had total cash and cash equivalents of $146.1
million. Our cash and cash equivalents relate principally to:
- unused proceeds from our 12 3/8% note offering in 1998
- unused proceeds of our $125 million equity private placement to British
Telecommunications in April 1999
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<PAGE> 42
- advances from Global Crossing totaling approximately $23.2 million in
respect of our ongoing construction of a terrestrial portion of their
South American network, described below in "Business -- The Broadband
Network -- Global Crossing Agreements"
Our budget contemplates that we will need approximately $320 million during
the period from September 30, 1999 through the end of 2000 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 will use to
pay for Nortel's construction of the segments of our Broadband Network in
Argentina and Brazil. See "Business -- The Broadband Network -- Nortel
Agreements." In addition, we are negotiating a vendor financing agreement of
approximately $23 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.
We do not have any other commitments regarding financing for the Broadband
Network. As a result, the further expansion and development of the Broadband
Network 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.
In addition, we anticipate that we will require approximately $86.3 million
for other capital expenditures, including those related to our existing
telecommunications business (including amounts spent to date), during the last
quarter of 1999 through the end of 2000, and significant amounts thereafter.
In the nine months ended September 30, 1999, our operating activities
generated $14.3 million compared with $22.3 million generated during the same
period in 1998. Financing activities, principally our issuance of common stock
to a subsidiary of British Telecommunications in April 1999, provided $122.8
million in net cash for the nine months ended September 30, 1999, compared with
$203.8 million for the nine months ended September 30, 1998, principally related
to our issuance of 12 3/8% notes in June 1998. During the nine months ended
September 30, 1999, we used $77.5 million (net) for investing activities,
compared to $96.6 million for the nine months ended September 30, 1998. We had a
cash balance of $146.1 million as of September 30, 1999.
At September 30, 1999, we had leased satellite capacity with annual rental
commitments of approximately $26.0 million through the year 2003. In addition,
we had commitments to purchase telecommunications equipment amounting to
approximately $14.6 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 on or after January 1, 2000, unless corrected.
Our equipment and operational systems were reviewed and, where required,
detailed plans have been developed and implemented to permit our computer
systems and services to continue to function properly in the year 2000. Where
necessary, these plans involved a combination of software modification, upgrades
and replacement. We formed a senior management team consisting of a corporate
vice president and a senior management representative from each of our operating
subsidiaries. This team oversees our efforts to assess and resolve the year 2000
problem.
To develop contingency plans with respect to the year 2000 problem, we
analyzed potential operational risks that could lead to the interruption of
critical service functions and installed preventive and remedial measures, such
as alternative sources of power generation.
Ensuring that our equipment and operational systems are year 2000 compliant
increased costs in 1999. To date, we have incurred approximately $2.3 million of
costs related to the year 2000 problem. Most of these
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<PAGE> 43
costs were incurred with respect to IMPSAT Argentina ($1.0 million) and IMPSAT
Colombia ($1.0 million), our largest operating subsidiaries.
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.
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INDUSTRY OVERVIEW
GENERAL
The telecommunications industry has recently been undergoing rapid change
due to deregulation, the construction of additional high-bandwidth
infrastructure, the growth of the Internet, the introduction and increasing
adoption of other data intensive applications and the introduction of new
technologies and competition. According to industry sources, the worldwide
telecommunications industry grew by 14.3% per annum from 1989 to 1997 and is
projected to continue to grow at 12% to 18% through the year 2001.
Deregulation and privatization of telecommunication services, and the
associated onset of competition, have resulted in:
- the broadening of telecommunications service offerings, including
advanced and enhanced services (such as voicemail, faxmail, electronic
mail and Internet applications)
- lower end-user prices
These factors have contributed to the increase in worldwide
telecommunications traffic and, specifically, to an even more rapid growth in
data traffic. With our Broadband Network and existing customer relationships, we
believe that we will be well positioned to take advantage of this rapid growth.
THE LATIN AMERICAN TELECOMMUNICATIONS MARKET OPPORTUNITY
Latin America encompasses some of the largest potential telecommunications
markets in the world. The Latin American markets in which we operate have a
combined:
- estimated population of 368 million people
- average GDP per capita of over $4,700
- estimated compounded annual growth in telephone lines of approximately
11% through 2002
- expected compounded annual growth of telecommunications voice service
minutes of 14% through 2002
The table below sets forth population, GDP per capita, minutes of outgoing
telecommunications traffic (MTT) and MTT per capita for 1998 for the countries
indicated, according to industry sources:
<TABLE>
<CAPTION>
POPULATION OUTGOING OUTGOING
COUNTRY OF OPERATION (MILLIONS) GDP/CAPITA MTT (MILLIONS) MTT/CAPITA
- -------------------- --------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Argentina..................... 36.1 $9,476 223 6.2
Brazil........................ 160.2 4,746 459 2.9
Colombia...................... 40.9 2,227 136(1) 3.3
Ecuador....................... 12.2 1,615 N/A N/A
Mexico........................ 95.2 4,359 1,200 12.6
Venezuela..................... 23.7 4,401 159 6.7
----- ------ ----- ----
Total/Average....... 368.3 $4,704 2,177 5.9
===== ------ ===== ----
</TABLE>
- ------------
(1) Traffic data for 1996.
DEREGULATION
Latin American telecommunication markets are undergoing significant
deregulation. The countries in Latin America that have or are beginning to
deregulate have done so as their governments have recognized the need to
introduce market competition. Along with many other countries, Argentina,
Brazil, Chile, Colombia, Ecuador, Mexico, Peru and Venezuela have agreed under
the World Trade Organization Agreement on Basic
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Telecommunications Services to demonopolize their telecommunications industry
within varying time frames that began in February 1998.
Argentina's telecommunications sector was privatized in 1990 when Empresa
Nacional de Telecomunicaciones, the then state-owned entity, was split into two
regional monopolies. The Argentine government began demonopolization of the
sector beginning in November 1999 and granted two new licenses that became
operative starting at that time and several others that will be operative in
November 2000. We have been granted one of the licenses that will become
operative in November 2000. In Colombia, the government has awarded two long
distance operating licenses to local companies, ending the monopoly of
Colombia's PTO. Similarly, Venezuela has announced the scheduled
demonopolization of its public telephone services by November 2000.
In July 1998, Brazil privatized its principal PTO, Telebras, and has since
established an independent regulator to oversee its telecommunications industry.
In Mexico, Telefonos de Mexico, S.A. de C.V., the former PTO known as Telmex,
was privatized in 1990, and competitors have been allowed to enter the market
and render long distance services since 1996. In addition, since January 1997,
Telmex has been required to interconnect with the networks of competitors.
INCREASING AVAILABILITY AND DEMAND FOR BROADBAND SERVICES
In the United States, data service revenues are expected to grow at a
compounded annual rate of approximately 13% through 2002, according to industry
sources. In Latin America, growth in revenues derived from these services is
expected to accelerate and achieve compounded annual growth of approximately 30%
through 2002, assuming relative economic stability is maintained, due to the
following factors:
- Competition. As competitors enter the Latin American telecommunications
markets, we expect them to provide an expanded range of
telecommunications services at competitive prices. We believe that the
ongoing deregulation of the Latin American telecommunications markets has
led and will continue to lead to an increase in demand for the more
sophisticated telecommunications services and solutions. We believe that
while the incumbent providers in these markets have established customer
bases, they have not traditionally concentrated on customer service or
cost efficient operations.
- Globalization of corporations. As corporations in more developed markets
expand into growth markets such as Latin America, we believe that the
need for private network services and broadband capacity between and
within the major cities in these markets will grow. In addition, as Latin
American corporations develop into more global enterprises, we believe
that their need for broadband connections will increase and their
adoption of bandwidth intensive applications is likely to accelerate.
- Ongoing development of technologically advanced telecommunications
infrastructure. Historically, Latin American markets have been dependent
upon the legacy telecommunications infrastructure of the incumbent
operators, which is not sufficiently robust to transmit large amounts of
data traffic. Due to the poor transmission quality of regional
telecommunications infrastructure, Latin American customers have been
slower to adopt data intensive applications than similar customers in
more developed markets such as the United States. We believe that the
demand for high bandwidth and broadband services will increase as
infrastructure improves and the use of data intensive applications
becomes feasible and economical in more markets in Latin America.
- Increasing worldwide use of the Internet. Technologies such as digital
subscriber line, or DSL, are driving the adoption of the Internet and
other data intensive applications in the United States. As Internet use
increases, corporations are forced to accelerate their adoption of
additional new technologies and applications, thereby fueling incremental
demand for broadband services. The Latin American Internet market is,
according to industry sources, several years behind the market in the
United States in terms of overall penetration of Internet access and
Internet related services. Industry sources estimate that the penetration
rate of web users in the United States was approximately 16% of the U.S.
population in 1997 and is expected to increase to 40% of the population
by 2001. The penetration rate of web users in Latin America varies across
the region but was estimated on average to
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<PAGE> 46
be 0.8% of the population of the Latin American markets in which we
operate for 1997 and is forecast to reach approximately 4% by 2002. From
1993 to 1998, available data indicates that the number of Internet hosts
based in the Latin American markets in which we operate increased from
approximately 7,500 to over 340,000.
The Latin American projections that we cite in this prospectus were
published in the last half of 1998 when Latin America was generally in
recession. In contrast, the U.S. growth rates referred to occurred during an
economic expansion. However, we believe that the historical trends in Internet
growth in the U.S. market are broadly indicative of what can be expected to
occur in Latin America.
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<PAGE> 47
BUSINESS
OVERVIEW
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 DWDM, ATM and 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 to 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.
OUR COMPETITIVE STRENGTHS
We believe that we distinguish ourselves from our competitors through
several competitive strengths, including:
- STRONG PRESENCE IN HIGH GROWTH LATIN AMERICAN TELECOMMUNICATIONS
MARKETS. We began operations in Argentina in 1990 and have since expanded
into Colombia, Venezuela, Ecuador, Mexico and Brazil. These markets are
characterized by emerging economies with less developed
telecommunications infrastructure. We believe that experience and proven
success with operating and growing a competitive telecommunications
business in these deregulating markets allow us to better anticipate
future market trends and the needs of our corporate and government
clients. We also believe that we are well positioned to benefit from the
forecasted growth in telecommunications needs in Latin America and from
forecasted worldwide growth in broadband and broadband-related
telecommunications services. In addition, we are one of the few
competitive telecommunications companies that has successfully competed
against the PTOs in Latin America.
- ESTABLISHED AND GROWING BASE OF "BLUE CHIP" BUSINESS CUSTOMERS. Our early
penetration of our core Latin American markets provides us with key
competitive advantages that include industry knowledge and experience,
name recognition and credibility with customers. As a result, we have
established a blue chip customer base with numerous large, multinational
corporations, including YPF/Repsol, Citibank, Royal Dutch Shell,
SmithKline Beecham, Siemens, American Express and HSBC, as well as large
government entities such as BNA and the Government of the Province of
Buenos Aires. This
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<PAGE> 48
customer base has grown from 125 in 1992 to 1,467 in 1998. We intend to
continue to grow with our customers as they expand into other Latin
American countries and as they increase use of bandwidth-intensive
services.
- EARLY DEVELOPMENT OF OUR EXTENSIVE BROADBAND NETWORK. We possess almost
all of the authorizations, rights-of-way, easements and governmental
licenses and permits that we believe are necessary to construct the
long-haul segments of the Broadband Network in Argentina and Brazil. We
expect to be equally successful in obtaining these outstanding
authorizations for our development of the remainder of the local rings
and last mile segments of the Broadband Network. These regulatory
processes are time-consuming and we believe we are ahead of competitors
who are seeking to construct and operate similar networks. We believe
that this significant time-to-market advantage will enable us to quickly
establish a leading role in the emerging Latin American market for
bandwidth intensive data, voice and other transmission solutions.
- ENDURING COMMITMENT TO SUPERIOR CUSTOMER SERVICE. We view our
relationships with customers as long-term partnerships in which customer
satisfaction is of paramount importance. For this reason, 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 and are 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. We believe that our client service focus is rare
when compared to many incumbent telecommunications service providers and
that many customers choose us due to this consultative approach.
- STRONG EQUITY SPONSORS, INCLUDING BRITISH TELECOMMUNICATIONS AND MORGAN
STANLEY DEAN WITTER. In March 1998, the Morgan Stanley investors
purchased 100% of our outstanding preferred stock, and, in April 1999,
British Telecommunications invested in our common stock. The Morgan
Stanley investors and British Telecommunications have each appointed two
members to our board of directors. Immediately after this offering and
the simultaneous issuance to British Telecommunications of an additional
2,850,000 shares of our common stock, the Morgan Stanley investors will
own approximately 16.3% and British Telecommunications will own
approximately 18.8% of our common stock. We believe that the ongoing
sponsorship of these investors provides us with beneficial strategic
advantages as we expand our market presence.
We also believe that we have distinguished ourselves from our competitors
through our proven historical operating performance. From 1992 to 1998:
- our business customer base grew from 125 customers in two countries to
1,467 customers in seven countries
- property, plant and equipment grew from $47.9 million to $330.7 million
- total consolidated revenues grew from $20.5 million to $208.1 million
- EBITDA grew from $7.9 million to $63.8 million
BUSINESS STRATEGY
We intend to maintain and enhance our market leadership position by:
- EXPANDING AND ENHANCING OUR SERVICE OFFERINGS THROUGH OUR BROADBAND
NETWORK. We are developing and implementing new service offerings that
include high-speed Internet access, intranet and extranet service,
e-commerce and other high-bandwidth broadband telecommunications
services. We also plan to take advantage of other revenue opportunities
that we expect to continue to develop as a result of deregulation,
including domestic long-distance and international switched voice
telecommunications
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for our corporate and carrier's carrier customers. We are building out
the Broadband Network to assist us in these efforts by augmenting and
complementing our facilities, thereby allowing us to provide our
customers with a broader array of data intensive applications.
- PROVIDING END-TO-END SEAMLESS SOLUTIONS OVER OUR OWN NETWORK
INFRASTRUCTURE TO ASSURE QUALITY. Since our inception, we have provided
our services on an end-to-end basis over our networks to ensure quality
control at both ends and maintain a high level of customer service. We
seek to continue this operational strategy in the development of our
Broadband Network, where we will provide both long-haul services and
last-mile connections through fiber optic and wireless connections. We
have obtained wireless spectrum in Argentina, Colombia, Venezuela and
Peru for this purpose.
- FOCUSING ON BUSINESS, GOVERNMENT, ISP AND TELECOMMUNICATIONS CARRIER
CUSTOMERS IN LATIN AMERICA. We focus on large national and multinational
corporate and government end users, for whom reliable data transmission
is vital. We believe that our superior network quality is especially
attractive to customers such as these with sophisticated
telecommunications needs. We also believe that our greater broadband
capacity and enhanced geographic coverage following the build-out of our
Broadband Network will be highly attractive to this customer base.
- INCREASING OUR MARKET SHARE BY CAPITALIZING ON OUR PAN-LATIN AMERICAN
PRESENCE, ONE-STOP SHOPPING CAPABILITY, OPERATING EXPERIENCE AND REGIONAL
REPUTATION. We seek to leverage our existing customer base, established
regional presence, advanced infrastructure and market knowledge to expand
our operations and service offerings in Latin America. We believe that
our ability to offer one-stop shopping in Latin America is a key
competitive advantage. In addition, many of the large national and
multinational corporations doing business in Latin America demand
comprehensive telecommunications solutions and increasing amounts of
bandwidth. We believe that their needs will continue to grow and that our
established relationships and reputation with these customers will allow
us to capture an increasing share of their incremental business.
Additionally, we believe that we are one of the few telecommunications
service providers in Latin America that can provide the breadth of
services that we provide on a multinational basis. As an example, we
provide services in multiple countries to several of our multinational
customers such as Royal Dutch Shell (Argentina, Colombia and Brazil) and
Reuters (Argentina, Colombia, Ecuador and Venezuela).
THE BROADBAND NETWORK
General. The Latin American markets in which we operate are expected to
experience compounded annual telecommunications and data services revenue growth
of approximately 14% and 30%, respectively, from 1998 through 2002. We believe
that this forecasted growth, coupled with continued deregulation in Latin
America, will fuel demand for additional broadband capacity. To take advantage
of this demand, we are constructing the 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 between 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 telecommunications links as a
percentage of our net revenues, over time
- create a high capacity, pan-Latin American Internet backbone
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- 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 networks
When fully developed and implemented, our Latin American "information
highway" will provide a proprietary fiber optic link among the major cities in
the Latin American countries that we serve, thereby complementing our existing
fiber optic, satellite and wireless networks. Upon completion, we expect that
the long-haul segments of our Broadband Network will have the capacity to
transmit up to 5.7 terabits per second.
Coverage. By December 2000, we expect the Broadband Network will connect
the principal cities in Argentina and Brazil using fiber optic cable links
complemented by our existing satellite-based networks in Argentina and Brazil.
The Broadband Network will include extensive civil infrastructure in Argentina
and Brazil, including:
- six ducts along 1,800 route kilometers for the long-haul network in
Argentina, linking the cities of Buenos Aires, Rosario, Santa Fe,
Cordoba, San Luis and Mendoza, with one of these ducts containing a 36
pair, non-zero dispersion fiber, or NZDF, cable (this augments our
existing fiber optic link between the cities of Buenos Aires and La
Plata)
- three ducts along 1,586 route kilometers for the long-haul network in
Brazil, linking the cities of Curitiba, Sao Paulo, Belo Horizonte and Rio
de Janeiro, with one of these ducts containing a 36 pair, NZDF cable
- approximately 185 route kilometers of fiber optic metropolitan area
backbone and local rings, as well as 3,992 square kilometers of wireless
coverage, across Buenos Aires, Rosario, Cordoba, La Plata and Mendoza in
Argentina
- approximately 501 route kilometers of fiber optic metropolitan area
backbone and local rings, as well as 1,489 square kilometers of wireless
coverage, across Sao Paulo, Rio de Janeiro, Belo Horizonte and Curitiba
in Brazil
- eight major telehouses (each consisting of infrastructure and equipment
that form a distribution station within the network) in Buenos Aires,
Rosario, Cordoba and Mendoza in Argentina and Sao Paulo, Rio de Janeiro,
Curitiba and Belo Horizonte in Brazil
In addition to the Broadband Network in Argentina and Brazil, we will
acquire the right to use a duct on the Trans-Andean Crossing System between
Mendoza, Argentina and Valparaiso, Chile as part of our agreements with Global
Crossing. We already own and operate a long-haul fiber optic network connecting
the cities of Cali, Medellin and Bogota in Colombia over 698 route kilometers,
and we are constructing an additional 1,351 route kilometers to close the ring
between Cali and Bogota and to extend this network to reach Barranquilla.
Nortel Agreements. Nortel has agreed to design and construct the segments
of the Broadband Network in Argentina and Brazil for approximately $265 million.
On September 6, 1999, we executed two turnkey agreements with Nortel to develop:
- 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
- connections in Argentina and Brazil that will integrate our networks with
other providers' facilities, including submarine cable systems, and
provide us with access to global telecommunications links
Nortel will provide, as part of the turnkey agreements:
- required equipment and components
- civil infrastructure design and engineering
- civil works supervision
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- network infrastructure and configuration planning and engineering
- formulation of network quality and performance specifications
- compilation of network testing procedures and protocols
- preparation of network maintenance and operations plans and procedures
On October 25, 1999 we signed agreements with Nortel to borrow up to $297.4
million from Nortel to finance this project and to purchase related equipment
from Nortel. 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.
Global Crossing Agreements. On July 27, 1999, we entered into an agreement
with Global Crossing that contemplates our entering into a series of definitive
agreements.
As part of these arrangements, we 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 us to interconnect our networks and give us global international
access.
On September 22, 1999, we entered into a definitive agreement with Global
Crossing to construct the terrestrial portion of Global Crossing's South
American network between Las Toninas, Argentina on the Atlantic Ocean and
Valparaiso, Chile on the Pacific Ocean (we call this the Trans-Andean Crossing
System). We commenced construction of the Trans-Andean Crossing System in
September 1999. Global Crossing will pay us approximately $64 million for our
turnkey construction of the Trans-Andean Crossing System, which includes our:
- construction of three ducts and related facilities over 368 route
kilometers between Las Toninas and Buenos Aires, Argentina and over 464
route kilometers between Mendoza, Argentina and Valparaiso, Chile
- licensing to Global Crossing of one duct on our Broadband Network between
the cities of Buenos Aires and Mendoza in Argentina
In addition to the Trans-Andean Crossing System, we 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
Our telehouses will contain switching, routing and other network
co-location equipment owned by us or lessees of space in our telehouses. We will
lease space in our telehouses in Buenos Aires, Argentina and Santiago, Chile to
Global Crossing for its network operations. We also expect to enter into
agreements with Global Crossing providing for our maintenance of Global
Crossing's Trans-Andean Crossing System.
Technology. The Broadband Network will employ advanced technology,
including:
- Dense wavelength division multiplexing, which allows a pair of fiber
optic strands to carry simultaneously multiple signals of different
wavelengths. This dramatically increases the capacity of each fiber
strand. For example, this technology will enable the long-haul backbones
of the Broadband Network to carry up to 16 channels at 10 Gbps per pair
of fiber strands.
- High capacity wireless links, which enable point-to-point speeds ranging
from 2 Mbps to 155 Mbps and point-to-multipoint speeds ranging from 64
kbps to 4 Mbps using local multipoint distribution services (LMDS)
technology. These links will connect customers that are outside the fiber
optic rings or in low-density metropolitan areas along the Broadband
Network.
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- Internet protocol technologies, which will enable us to offer Internet,
intranet, extranet and voice services and virtual private data networks.
- Asynchronous Transfer Mode technology, which will allow us to provide low
latency switching services and support for multiple telecommunications
protocols, including traditional time division multiplexing (TDM), frame
relay and Internet protocol.
THE IMPSAT SOLUTION
Our comprehensive telecommunications solutions consist of any combination
of our service offerings and will consist of services which 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 link our Latin American Internet backbone,
as part of the Broadband Network, to the U.S. Internet through our fiber optic
links with Global Crossing. We offer both wholesale and corporate Internet
services:
- Backbone 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.
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Carrier's Carrier Services. During this year, we intend to offer dark fiber
capacity, "lit" fiber capacity and duct capacity to ISPs and telecommunications
carriers. 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 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.
EXISTING NETWORK INFRASTRUCTURE
Our existing networks are comprised of satellite, fiber optic cable and
wireless links. We are building our Broadband Network to augment and complement
these existing networks by expanding and enhancing the services we presently
provide. The following describes the components of our existing networks:
VSAT. We are a pioneer in Latin America in the use of a shared hub. We
operate one of the largest shared hub VSAT networks in Latin America as measured
by the number of microstations installed. The use of a shared hub earth station,
whereby many different customers share a central teleport operated by us, allows
us to reduce the cost of telecommunications services to our customers, which
expands our addressable market to smaller and medium-sized businesses. Typical
VSAT network architecture has several VSAT microstations linked to each other by
a teleport and then linked to terrestrially connected sites by one or more local
Teledatos networks. Each remote VSAT location has a relatively small antenna
(typically ranging from 1.2 to 2.4 meters in diameter) and uses time division
multiple access technology, which enhances the use of satellite capacity by
enabling multiple VSATs to share a single satellite channel. Our VSAT
architecture is integrated into our customer's network, in part through protocol
emulation technology that provides support for various data network protocols,
including ATM and frame relay. At September 30, 1999, we had 4,476 VSAT
microstations installed in Latin America.
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We also provide a lower cost VSAT-based service offering under the Minidat
brand name. Our Minidat services use ultra small aperture terminals, which tend
to be about half the size of VSATs. We established Minidat services to meet the
data transmission requirements of customers operating point of sales systems,
automated teller machines, lottery ticket sales, reservation systems, and
wholesales and inventory control and management systems. At September 30, 1999,
we had a total of 765 Minidat microstations installed. Certain of our VSAT
microstations and related technology are supplied to us by Hughes Network
Systems.
Single Channel Per Carrier. SCPC uses a multiplexer to transmit either
through several channels bundled into one terminal or through a single channel
that can be used by a number of different terminals (such as data, facsimile or
video). In addition, an SCPC earth station (which has a larger and more powerful
satellite dish than that of the VSAT) can communicate via satellite to another
SCPC earth station or to a teleport, where the transmission can be integrated
with the Teledatos and VSAT networks. SCPC also offers greater transmission
capacity than do VSATs because SCPC uses dedicated satellite links. We provide
these services domestically under the Dataplus brand name and internationally
under the Interplus brand name. At September 30, 1999, we had a total of 1,186
Dataplus earth stations and 371 Interplus earth stations installed.
Our major suppliers of SCPC technology include Prodelin Corp., Codan, SSE
Technologies Inc. and Radyne ComStream. Our other equipment suppliers include
Newbridge Networks, Cisco Systems, Inc. and General DataComm, Inc. for time
division multiplexers; ACT Networks Inc. for frame relay multiplexers; Harris
Corporation and Digital Microwave Corporation for radiolink systems; and Ascend
Communications and Alcatel Data Networks for packet switches. We also employ
local companies in each location where we operate for installation and
groundwork services.
Teleports. A teleport has a relatively large antenna (typically ranging
from 3.8 to 11 meters in diameter) as well as sophisticated radio frequency and
network management equipment. Teleports serve as command centers for VSAT
networks in the host country and are linked to our SCPC installations and
metropolitan area networks. Each teleport contains a radio microwave tower to
transmit and receive transmissions to and from nearby customer locations which
are not connected to our existing metropolitan area networks. 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. Regional teleports are smaller SCPC-based earth
stations that have antennas ranging from 3.8 to 4.5 meters in diameter. Regional
teleports enable us to extend our network to smaller metropolitan area networks
outside a country's capital via satellite to the teleport in that country.
Customers are connected to a regional teleport through one of our metropolitan
area networks, or by wireless or satellite links. 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.
Metropolitan Area Networks. Our fiber optic and/or wireless metropolitan
area networks provide last mile terrestrial fiber optic and wireless links among
and between points in a metropolitan area and also with other points outside the
metropolitan area network by means of satellite and planned fiber optic
connections. Ground-based wireless systems transmit signals in the form of radio
waves from an antenna on top of a building or a transmission tower and are
suitable for use in local transmission because the reach of the transmission
signal typically is limited to one discrete area. While the primary use of the
metropolitan area networks is for interconnection with our teleports and
regional teleports, we have customers that only use the metropolitan area
networks locally and that are not users of the extended satellite and planned
fiber optic
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telecommunication system. We provide these services under the Teledatos brand
name. The following diagram illustrates the configuration of an IMPSAT
metropolitan area network:
[CHART OF METROPOLITAN AREA NETWORK]
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. Our
metropolitan area networks may consist of leased capacity on existing fiber
optic networks owned and maintained by a local PTO (as is the case in Bogota) or
we may design, engineer and manage the installation of our own fiber optic and
radio wireless network (as is the case in Buenos Aires). We charge a monthly fee
for each connection to the Teledatos network and for the number of connections
to the teleport. At September 30, 1999, there were a total of 7,632 connections
in service in our metropolitan area networks. At that date, we had 137 route
kilometers installed in our owned metropolitan area networks. 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.
In connection with the build-out of the Broadband Network, we will expand
our current metropolitan area networks in Argentina using high speed fiber optic
and wireless links and will construct additional metropolitan area networks in
other major cities in Brazil, which will feature high speed fiber optic and
wireless links.
Unidirectional Teleport-to-VSAT Network. A unidirectional network typically
consists of the teleport and numerous receive-only, remote VSAT terminals. We
market this service under the Difusat brand name. The source of the information
to be broadcast is generally connected to the teleport through a Teledatos
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network. The teleport transmits the information to the VSAT receptors via
satellite. At September 30, 1999, we had installed 373 unidirectional
microstations for use in our Difusat service.
Undersea Fiber Optic Capacity. 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. Our agreement with Global Crossing provides, among other
things, for our purchase of indefeasible rights of use of capacity valued at not
less than $46 million on any of 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 have agreed to
construct 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.
Satellites. Our satellite transmissions use both C-band (4-7 GHz) and
Ku-band (10-18 GHz) frequencies. As of September 30, 1999, we had a total
available leased capacity of 769 MHz, 718 MHz of which we are using in the
following manner:
- a total of 365 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 40 MHz,
which expires in 2008
- 66 MHz of capacity on Brasilsat, which expires in 2002
- 113 MHz of capacity on Nahuelsat's Nahuel-1 satellite, which expires
between January 2002 and August 2003
- 63 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)
- 65 MHz of capacity on PanAmSat's PAS-5 satellite, which expires between
the end of 2003 and January 2009
- 5 MHz of capacity on Mexico's Solidaridad-II satellite, which expires in
January 2002
Our lease payments for satellite capacity totaled approximately $24.5
million in 1998 and $25.6 million during the first nine months of 1999.
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
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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.
CUSTOMERS
Overview. We have grown rapidly since the commencement of our operations in
1990. Our customer base has increased from 125 corporate customers in two
countries at December 31, 1992 to 1,707 corporate customers in seven countries
at September 30, 1999. Larger entities, which often have significant needs for
reliable, cost-effective data transmissions and other telecommunications
services, were the first to use our customized telecommunications services. As a
result, a significant portion of our revenues has been derived from our largest
customers. In addition, because of our relatively short operating history
outside of Argentina and Colombia, a significant number of our customers,
including our largest customers, are located in those two countries. As our
business matures and as we commence the operation of the Broadband Network, we
expect that the average size of our customers will decline.
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 17.3% of our revenues in 1998 and approximately 18.1% in 1997.
Our ten largest customers as of December 31, 1998 were:
- the Government of the Province of Buenos Aires
- BNA, a state-owned bank and the largest bank in Argentina, with over 500
branches throughout Argentina
- Banco de Galicia y Buenos Aires, a private bank with more than 180
branches in Argentina
- YPF/Repsol, an integrated oil company that is one of the largest
companies in Argentina
- BanColombia S.A., a private bank headquartered in Bogota, Colombia and
the largest commercial bank in Colombia
- Integrated Services International, a telecommunications services company
based in the United States
- Perez Companc S.A., an Argentine energy conglomerate
- SECAB, the administrator of government funds for Colombia's National
Learning Service
- The Mercer Management Group, Inc., a management consulting firm based in
the United States
- Concasa, one of Colombia's largest savings and loan corporations
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.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
----------------------------- -----------------------------
COUNTRY 1997 1998 1998 1999
- ------- ------------- ------------- ------------- -------------
(NUMBER OF CUSTOMERS AND PERCENTAGE OF TOTAL)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Argentina........................ 439 36.8% 490 33.4% 484 34.6% 660 38.7%
Colombia......................... 524 44.0 602 41.0 573 41.0 571 33.5
Venezuela........................ 102 8.5 140 9.5 123 8.8 180 10.5
Ecuador.......................... 96 8.1 134 9.1 133 9.5 144 8.4
Mexico........................... 16 1.3 28 1.9 26 1.9 28 1.6
USA.............................. 15 1.3 25 1.7 23 1.6 39 2.3
Brazil........................... -- -- 48 3.4 36 2.6 85 5.0
----- ----- ----- ----- ----- ----- ----- -----
Total.................. 1,192 100.0% 1,467 100.0% 1,398 100.0% 1,707 100.0%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
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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-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 SERVICES
We view our relationship with our customers as a long-term partnership in
which customer satisfaction is of paramount importance. For this reason, 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
We compete on the basis of our experience, network quality, customer
service, range of services offered and price. 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 agreed to acquire 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
- NetUno, a local exchange carrier and provider of broadband local access,
Internet and private network services in Venezuela
In the third category, global alliances have been formed by major
telecommunications carriers 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. We believe that increasing competition will significantly affect
our pricing policies. We cannot assure you that competition
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from these alliances will not adversely affect our financial condition or
results of operations. See "Risk Factors -- We face significant competition in
Latin America." The competition we face in each of our countries of operation is
described in the "-- Description of Country Operations" section below.
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 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. The
regulatory regime in each of our countries of operation and our licenses and
permits are separately described in the country-specific business descriptions
under "-- Description of Country Operations" below.
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 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.
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,
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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 September 30, 1999, we employed a total of 1,133 persons, of whom 322
were employed by IMPSAT Argentina and 225 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 and
into new countries, 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.
LEGAL MATTERS
We are involved in or subject to various litigation and legal proceedings
incidental to the normal conduct of our business, including with respect to
regulatory matters.
Prior to 1998, our fourth largest customer in Argentina was ENCOTESA, the
Argentine official postal service. In September 1997, the official postal
service in Argentina was privatized and its operations were succeeded to by
Correo Argentino S.A., the entity formed by a private consortium to acquire and
operate the Argentine postal system. In accordance with the privatization
structure, neither IMPSAT Argentina's accounts receivable nor the contract with
ENCOTESA were assumed by Correo Argentino, and the obligations under IMPSAT
Argentina's contracts with ENCOTESA were retained by the Argentine Government.
In November 1996, IMPSAT Argentina filed suit against ENCOTESA for amounts due
under IMPSAT Argentina's contracts with ENCOTESA totaling $5.6 million, plus
interest from the date of invoice. On December 27, 1996, ENCOTESA filed its
reply to IMPSAT Argentina's claim. The court has not yet ruled upon IMPSAT
Argentina's claim against ENCOTESA. IMPSAT Argentina has held and continues to
hold discussions and negotiations with the Argentine Government regarding the
settlement and payment of the amounts claimed against ENCOTESA. IMPSAT
Argentina, based on the advice of its Argentine counsel, had reclassified its
trade accounts receivable under the ENCOTESA receivables as noncurrent assets at
their estimated net realizable value. At September 30, 1999, we estimated that
the net realizable value of the ENCOTESA receivables to be zero and recorded an
adjustment of $5.1 million on amounts due from ENCOTESA, see "Risk
Factors -- Our earnings will deteriorate if we cannot collect on our customer
accounts," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
IMPSAT Argentina has a past due account receivable relating to IBM de
Argentina totaling $2.2 million. IMPSAT Argentina has recorded an allowance for
100% of this amount. The past due receivable was recorded for services provided
under a subcontract between IMPSAT Argentina and IBM de Argentina relating to
BNA. BNA, a state-owned bank and the largest bank in Argentina, is and has been
one of our ten largest customers. IBM de Argentina filed suit against BNA for
amounts due and owing under its direct contract with BNA. IMPSAT Argentina has a
direct contract with BNA to provide private network telecommunications services
on which BNA is generally current. The payment of the receivable by BNA to IBM
de Argentina is subject to the approval of the Supreme Court of Argentina, which
is adjudicating an audit of the procedures used by BNA in awarding the contract.
On December 14, 1998, IMPSAT Argentina filed suit against IBM de Argentina for
amounts due and arising under IMPSAT Argentina's contract with IBM de Argentina
totaling $2.2 million, plus interest from the date of invoice.
DESCRIPTION OF COUNTRY OPERATIONS
The following are brief descriptions of certain specific matters relating
to the operations of our subsidiaries in Argentina, Venezuela, Colombia,
Ecuador, the United States, Brazil and Mexico.
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IMPSAT ARGENTINA
IMPSAT Argentina, our first subsidiary, was established in 1988 and began
commercial operations in 1990. We own a 95.2% equity interest in IMPSAT
Argentina. We have reached an agreement with Credit Suisse, the owner of the
4.8% minority interest in IMPSAT Argentina, to exchange that interest for
770,786 shares of our common stock.
In Argentina, we provide our portfolio of services through our fiber optic,
wireless and satellite facilities. Our principal transmission facilities in
Argentina include our teleport in Buenos Aires, regional teleports located in
Cordoba, Mendoza, Rosario, Mar del Plata, Tucuman, La Plata and Neuquen, and
Teledatos networks in Buenos Aires, Cordoba, Mendoza, Rosario, Mar del Plata,
Tucuman and La Plata. Our Teledatos network in Buenos Aires includes
approximately 72 route kilometers of fiber.
In addition, IMPSAT Argentina operates a microwave link that provides
telecommunications services between Buenos Aires and Mendoza. At September 30,
1999, we had installed approximately 2,715 VSAT microstations and 539 Dataplus
earth stations in Argentina. We operate on both the C-band and Ku-band in
Argentina with access to the Intelsat 706, 709 and 805, PAS-1, PAS-3, PAS-5 and
Nahuel-1 satellites. IMPSAT Argentina uses 15 GHz, 18 GHz and 23 GHz frequencies
for point-to-point data and value-added services. In addition, the Comision
Nacional de Comunicaciones recently granted IMPSAT Argentina a license for the
use of the 38 GHz frequency nationwide for point-to-point and
point-to-multipoint data and value-added services.
At September 30, 1999, IMPSAT Argentina had 660 customers. Financial
institution customers provided approximately 37.0% of IMPSAT Argentina's
revenues during 1998. The second largest sector of IMPSAT Argentina's customer
base consists of industrial and manufacturing companies, which represented
approximately 29.2% of its revenues during 1998. IMPSAT Argentina's largest
customers during 1998 included:
- Gobierno de la Provincia de Buenos Aires (6.0% of IMPSAT Argentina's 1998
revenues)
- BNA (5.0% of IMPSAT Argentina's 1998 revenues)
- Banco de Galicia y Buenos Aires (4.7% of IMPSAT Argentina's 1998
revenues)
- YPF/Repsol (4.3% of IMPSAT Argentina's 1998 revenues)
Revenues from IMPSAT Argentina's top ten customers accounted for
approximately 31.1% of IMPSAT Argentina's revenues during 1998 and approximately
30.3% for the first nine months of 1999.
IMPSAT Argentina is a leader in data transmission services in Argentina and
estimates that in 1998 it had over 37% market share based on revenues. Our
principal competitors in Argentina include Telecom Soluciones, Advance
Telecomunicaciones and COMSAT Argentina S.A., a wholly owned subsidiary of
COMSAT.
In May 1999, IMPSAT Argentina entered into a distribution agreement and a
supply agreement with Concert Communications Sales Limited, a global alliance
among British Telecommunications, AT&T and others, to provide network facilities
in Argentina on a non exclusive basis. In addition, IMPSAT Argentina provides
co-location services to Concert in Argentina.
The Argentine telecommunications sector is under the supervision and
control of the Comision Nacional de Comunicaciones and the Secretaria de
Comunicaciones. Prior to 1989, telecommunication services in Argentina were
provided by Empresa Nacional de Telecomunicaciones, the former state-owned
national telecommunications monopoly. In 1989, the Argentine government enacted
a series of laws to deregulate the telecommunications sector. Under the current
regime, domestic fixed switched basic telephone services are supplied
exclusively by Telefonica and Telecom Argentina. In March 1998, the Argentine
Government announced the demonopolization of telephony services of Telecom
Argentina and Telefonica and the deregulation of local and long-distance
telephony markets commenced in November 1999. International voice services are
supplied by Telecom International, a subsidiary of Telecom Argentina, and
Telefonica Larga
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Distancia, a subsidiary of Telefonica. Other services, such as those rendered by
IMPSAT Argentina, are provided on a nonexclusive basis upon authorization by the
Argentine Comision Nacional de Comunicaciones.
IMPSAT Argentina has a license with no expiration date to provide data
transmission services with ancillary voice channels within Argentina. IMPSAT
Argentina's license is subject to no material conditions. Under the terms of the
license, IMPSAT Argentina may provide point-to-point voice service in Argentina
only if this voice transmission is accomplished without use of the local public
telephone networks and only in connection with providing a service channel to
its data transmission customers. In July 1999, IMPSAT Argentina received two
licenses from the Comision Nacional de Comunicaciones, one to operate local
telephony and the second to operate national and international long distance
telecommunications, both starting in November 2000.
IMPSAT Argentina provides value-added services in the domestic and
international market pursuant to a license granted by the Secretaria de
Comunicaciones in September 1995. Value-added services include electronic data,
voice and fax mail, fax store and forward and Internet access. IMPSAT Argentina
has also obtained licenses with no expiration date to provide trunking and
paging services within Argentina, although it has no intention of entering into
this business. IMPSAT Argentina also has licenses with no expiration date to
provide domestic and international video conferencing services.
Although some services are provided on a competitive basis, the Comision
Nacional de Comunicaciones is in charge of the authorization, supervision and
control of the telecommunications services. IMPSAT Argentina is required to pay
the Comision Nacional de Comunicaciones a monthly fee equal to 0.5% of its net
telecommunications revenues.
IMPSAT COLOMBIA
IMPSAT Colombia began operations in December 1992. We hold a 74.2% equity
interest in IMPSAT Colombia. Other principal stockholders of IMPSAT Colombia are
Portafolio de Inversiones Suramericana, Compania Suramericana de Inversiones y
Avaluos, Compania Suramericana de Inversiones and Compania Suramericana de
Construcciones, the investment and construction arms of the Sindicato
Antioqueno, which together hold a 24.6% equity interest in IMPSAT Colombia. We
have reached an agreement with the Suramericana Group to exchange their 24.6%
minority interest in IMPSAT Colombia for shares of our common stock. Sindicato
Antioqueno, formed in Medellin, Colombia in the mid-1970s, is a group of over
100 financial services, food, textile and apparel, construction and real estate
companies related through cross-ownerships and interlocking directorates. Member
companies of the Sindicato Antioqueno include BanColombia, the largest
commercial bank in Colombia; Cementos Argos, Colombia's largest cement
manufacturer; and Nacional de Chocolates, one of Colombia's largest food
processing firms. We refer to Suramericana de Seguros, Suramericana de
Capitalizacion and all other entities affiliated with the Sindicato Antioqueno
as the Suramericana Group.
We provide our portfolio of services in Colombia through fiber optic,
wireless and satellite networks. Our principal transmission facilities in
Colombia include the teleport and Teledatos network in Bogota and regional
teleports and Teledatos networks located in Medellin, Cali and Barranquilla. Our
Teledatos network in Bogota is provided through a joint venture with ETB, the
Colombian PTO that provides local telephone service in the Bogota region. Under
the terms of the joint venture, ETB provides the fiber optic infrastructure for
the network, while IMPSAT Colombia provides multiplexing equipment and terminal
equipment on customer premises, controls and monitors the network, provides
technical support and sells network services to customers. We also own and
operate a 698 route kilometer long-haul fiber optic network in Colombia
connecting Bogota, Cali, and Medellin, and we are constructing an additional
1,351 route kilometers to close the ring between Cali and Bogota and to extend
this network to reach Barranquilla. IMPSAT Colombia currently uses the 23 GHz
frequency for point-to-point data and voice services. In addition, in August
1998, we received an authorization from the Ministry of Communications to use
various frequencies within the 38 GHz frequency for the provision of
point-to-point and point-to-multipoint value-added services for a term of ten
years. At September 30, 1999, IMPSAT Colombia had approximately 983 VSAT
microstations and
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351 Dataplus earth stations installed. IMPSAT Colombia operates on the C-band
and Ku-Band with access to PAS-1 and the Intelsat 601, 709 and 801 satellites.
At September 30, 1999, IMPSAT Colombia had 571 customers. Financial
institutions provided approximately 48% of IMPSAT Colombia's revenues for 1998.
The second largest sector of IMPSAT Colombia's customer base is composed of
manufacturing companies (including oil companies) which provided approximately
27% of IMPSAT Colombia's revenues for 1998. IMPSAT Colombia's largest customers
during 1998 included:
- BanColombia
- SECAB, the administrator of government funds for Colombia's National
Learning Service
- Concasa, a savings and loan corporation
- Corporacion Nacional de Ahorro y Vivienda, one of Colombia's largest
financial institutions and a member of the Suramericana Group
- Banco de la Republica, the central bank of Colombia
- Bancafe, a large financial institution
Revenues from IMPSAT Colombia's top ten customers accounted for
approximately 30% of IMPSAT Colombia's revenues for 1998 and approximately 29.3%
for the first nine months of 1999.
In March 1999, we signed an eight-year agreement with the Ardila Lulle
Organization, the fourth largest conglomerate in Colombia. Ardila Lulle's
businesses are in industries such as bottling, textiles and media. We will
initially provide services to 52 of their subsidiaries and affiliates, although
the contract may be expanded to as many as 100 subsidiaries and affiliates. The
contract is valued at $32.9 million. The revenues for 1999 from this contract
totalled approximately $0.5 million.
At September 30, 1999, we believe that we were a leader in terms of market
share in Colombia in VSAT and data transmission services. Our principal
competitors in Colombia are:
- Telecom Colombia, a state owned PTO
- Colomsat, S.A., a privately owned provider of facsimile, data and voice
transmission services
- Telegan, a provider of VSAT services which recently was acquired by
Spain's Telefonica S.A.
- Americatel Colombia, a company owned by Grupo Santo Domingo, Colombia's
largest conglomerate, which provides voice, data and video services
primarily to Grupo Santo Domingo
- EMTELCO, a provider of data transmission and imaging services, which is
owned by Empresas Publicas de Medellin, the largest telecommunications
company in the province of Medellin
- Rey Moreno, which agreed to sell 51% of its equity to Spain's Telefonica
S.A., and offers data, internet, videoconferencing, and other corporate
network services in the main cities in Colombia
- Comsatcol, a subsidiary of COMSAT Corporation
The telecommunications industry in Colombia is subject to regulation by the
Colombian Ministry of Communications. Since 1991, the Ministry of Communications
has pursued a policy of liberalization, and has encouraged joint ventures
between public and private telecommunications companies to provide new and
improved telecommunications services.
Due in part to this policy of liberalization, IMPSAT Colombia has obtained
the following licenses and authorizations:
- in September 1991, a license to operate national and international
digital information transmission services for a term of twenty years
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- in November 1997, an authorization to use satellite capacity on Intelsat
satellites
- in August 1998, a license that permits it to operate as a national
telecommunications carrier for a term of ten years
The licenses and authorizations may be renewed so long as IMPSAT Colombia
complies with the terms and conditions of the licenses and authorizations and
any applicable laws and regulations. The licenses and authorizations permit
IMPSAT Colombia to engage in digital voice, data and video transmission
services, the provision of value added services such as fax store and forward
and electronic mail and Internet access services, and authorizes use by IMPSAT
Colombia of radio frequencies and satellite links in Colombia necessary to
provide such services. IMPSAT Colombia is prohibited by the terms of the
licenses and authorizations from connecting to the Colombian public
telecommunications network for purposes of reselling voice communications.
IMPSAT Colombia is required to pay taxes in an amount equal to 3% of its
gross revenues, less payments to terrestrial telecommunications providers, to
the Ministry of Communications.
IMPSAT VENEZUELA
IMPSAT Venezuela began operations in January 1993. We hold a 75% equity
interest in IMPSAT Venezuela and the remaining 25% is held by the Suramericana
Group. We have reached an agreement with the Suramericana Group to exchange
their 25% minority interest in IMPSAT Venezuela for shares of our common stock.
In Venezuela, we provide our portfolio of services through wireless,
satellite networks as well as leased fiber optic links. Our principal
transmission facility in Venezuela is our teleport in Caracas. We also have a
Teledatos network in Caracas. IMPSAT Venezuela uses the 10 GHz, 13 GHz and 23
GHz frequencies for point-to-point data and value-added services. In addition,
the Comision Nacional de Telecomunicaciones (CONATEL) granted IMPSAT Venezuela a
license to use the 10 GHz frequency for point-to-multipoint data and value-added
services. At September 30, 1999 we had 621 VSAT microstations and 135 Dataplus
earth stations in Venezuela. We operate on the C-band in Venezuela using the
PAS-1, PAS-5, New Skies 806 and the Intelsat 805 satellites. In addition, we
operate on the Ku-band using the Intelsat 805 satellite.
At September 30, 1999, IMPSAT Venezuela had 180 customers. IMPSAT
Venezuela's largest customers are generally large national and multinational
corporations. IMPSAT Venezuela's largest customers during 1998 included:
- Banco Mercantil SAICA, one of Venezuela's largest commercial banks
- Reacciun, a national academic telecommunications network
- Cadenas de Tiendas Venezolanas, S.A., one of Venezuela's largest retail
department stores and supermarket chains
- Corporacion Andina de Fomento, a multilateral development bank
- Nabisco de Venezuela C.A., a subsidiary of multinational food and tobacco
conglomerate RJR Nabisco Holdings Corp.
- Instituto Nacional de Hipodromos, a horse racing track
- Compania Occidental de Hidrocarburos, Inc., a subsidiary of Occidental
Petroleum Corp.
Revenues from IMPSAT Venezuela's top ten customers accounted for
approximately 52% of IMPSAT Venezuela's revenues for 1998 and approximately
56.0% for the first nine months of 1999.
Banco Mercantil, which has more than 300 agencies throughout the country
and 15 agencies abroad, is one of the largest banks in Venezuela. Banco
Mercantil became IMPSAT Venezuela's customer in 1994 when it contracted for
three Interplus links. Since then, Banco Mercantil has steadily expanded the
quantity and
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range of private telecommunications network services it contracts from us. The
services we currently provide to Banco Mercantil represent monthly revenues of
approximately $152,000. In May 1999, after a competitive bidding process, IMPSAT
Venezuela was selected to provide the outsourcing of almost all of the private
telecommunications network needs of Banco Mercantil. Participants in this
bidding process included CANTV and Bantel, two of IMPSAT Venezuela's principal
competitors. We expect to complete our implementation of the Banco Mercantil
network during the second quarter of 2000. Our projection of the monthly revenue
of this new contract upon its full implementation is approximately $440,000.
IMPSAT Venezuela estimates that it had approximately 21% market share in
data transmission services based on revenues during 1998. Our principal
competitors in Venezuela include Compania Anonima Nacional de Telefonos de
Venezuela (CANTV), the Venezuelan PTO which is operated by a consortium led by
GTE Corporation; MCI WorldCom, which provides, data transmission and value-added
services; T-Data, the data transmission and Internet services division of
Telcel, one of Venezuela's two cellular telephone providers; and Bantel, which
provides data and voice transmission services.
The Venezuelan telecommunications industry is regulated by CONATEL, which
is under the jurisdiction of the Ministry of Infrastructure.
In December 1992, IMPSAT Venezuela obtained a license to build, maintain
and operate a private telecommunications network for the transmission of data,
voice and video information. The license is valid for a period of ten years,
with an option to renew for an additional ten years. The license prohibits
IMPSAT Venezuela from providing voice services through the public switched
telephone networks operated by CANTV and from interconnecting and sharing
infrastructure with other operators of private telecommunications networks for
the transmission of voice services.
In February 1996, IMPSAT Venezuela obtained a ten-year license, with an
option to renew for an additional ten years, to provide value-added services
such as fax store and forward, electronic mail and Internet access. This license
does not prohibit IMPSAT Venezuela from interconnecting with CANTV or other
private networks.
In February 1996, IMPSAT Venezuela obtained a ten-year license which
permits it to interconnect with CANTV for the national and international
transmission of data. The license does not permit us to interconnect with CANTV
in connection with the transmission of voice.
Under each of the licenses described above, IMPSAT Venezuela is or will be
required to pay taxes and fees in an amount equal to 5.5% of a stipulated
portion of its gross revenues from the services that are provided pursuant to
the license. In 1998 and the first nine months of 1999, this stipulated portion
of its gross revenues represented approximately 47.4% and 45.7%, respectively,
of IMPSAT Venezuela's revenues.
IMPSAT ECUADOR
In January 1995, we began operations in Ecuador through our wholly owned
subsidiary IMPSAT Ecuador.
In Ecuador, we provide our portfolio of services through fiber optic,
wireless and satellite links. IMPSAT Ecuador uses the 15 GHz and 23 GHz
frequencies for point-to-point data and value-added services. We operate on the
C-band in Ecuador with access to the PAS-1, PAS-5 and Intelsat 805 satellites.
Our main teleport is located in Quito, Ecuador and we have a regional teleport
in Guayaquil.
As of September 30, 1999, IMPSAT Ecuador had approximately 144 customers.
Industrial and commercial companies provided approximately 54%, and governmental
entities and banks and financial institutions provided approximately 46% of
IMPSAT Ecuador's revenues for 1998.
At December 31, 1998, IMPSAT Ecuador's largest customers included Banco del
Pichincha, one of the largest Ecuadoran banks; Aduanas, the Ecuadoran customs
agency; Diners Club del Ecuador, a leading credit card company and Banco la
Previsora, another of Ecuador's largest banks. In addition, we provide
international telecommunications services for the regional PTO located in the
city of Cuenca. Revenues from
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IMPSAT Ecuador's top ten customers accounted for approximately 40% of its
revenues for 1998 and approximately 38.5% for the first nine months of 1999.
We believe that we are a leading provider of data transmission services in
Ecuador with a 46% market share based on revenues for 1998. Our principal
competitors in Ecuador include:
- Andinatel and Pacifictel, Ecuadoran state-owned PTOs
- Suratel, S.A., which provides national and international SCPC and voice
services
- Consorcio Ecuatoriano de Telecomunicaciones S.A., which provides national
and international SCPC services and cellular telephony
- Ram Telecom Telecomunicaciones S.A., which provides national SCPC
services
The telecommunications industry in Ecuador is regulated by the Consejo
Nacional de Telecomunicaciones and the Secretaria Nacional de Telecomunicaciones
and is under the control and supervision of the Superintendencia de
Telecomunicaciones.
In June 1994, IMPSAT Ecuador obtained a 15-year license to provide data,
voice and video transmission services so long as it does not use the installed
networks owned by the Ecuadoran PTOs or any other company granted a monopoly for
the provision of fixed telephony services. The license authorizes the
installation, operation and exploitation by IMPSAT Ecuador of a satellite system
to offer national and international information transmission services, including
the construction of two teleports (in Quito and Guayaquil), VSAT microstations
and Dataplus earth stations. IMPSAT Ecuador is required to pay an annual fee
equal to 6% of certain of its revenues, which historically has represented
approximately half of IMPSAT Ecuador's revenues.
In March 1998, Secretaria Nacional de Telecomunicaciones granted IMPSAT
Ecuador a ten-year renewable license to provide value-added services. Included
in the value-added services that IMPSAT Ecuador may offer are Internet services.
IMPSAT USA
Our wholly owned subsidiary, IMPSAT USA, began offering international
private line services between Latin America and North America in February 1996.
IMPSAT USA operates an owned teleport in Wilton Manors, Florida and has
leased teleport facilities in New Jersey.
IMPSAT USA targets corporate, ISP and telecommunications carrier customers.
IMPSAT USA's corporate sales efforts focus on providing multinational
corporations with extensive voice and data telecommunications needs, which are
the primary end-users in the U.S./Latin American market for international
private-line services. IMPSAT USA offers Internet services to Latin American
ISPs and its telecommunications carrier services are provided to international
long-distance carriers. As of September 30, 1999, IMPSAT USA was providing
services to 39 customers (excluding intercompany accounts).
IMPSAT USA recently entered into a contract with Citicorp Global
Technology, Inc. to provide private network communications services to 23
locations throughout Latin America. In addition, IMPSAT USA provides Crowley
American Transport, a California-based logistics and maritime transport
provider, with international links for voice, video and data services at 47
sites in Central and South America. IMPSAT USA also provides UBESA, the
Ecuadoran subsidiary of Dole Fresh Fruit International Ltd., with international
data links between Florida and 5 locations in South America and ABN AMRO Bank
with links covering nine locations throughout Central and South America.
IMPSAT USA's Internet services customers include Sony Music, Millicom,
Telcel (Paraguay), Celcaribe (Colombia) and Telemovil. IMPSAT USA also provides
Internet access services to Latin American ISPs that include CMET (Chile),
Metrocall (Panama), T-Net (Venezuela), Netsys (Honduras) and Inter Red
(Colombia).
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As part of its telecommunications carrier services, IMPSAT USA provides MCI
Global Resources, Inc. with circuits from Florida to MCI WorldCom customer
locations in Honduras and Colombia.
IMPSAT USA expects intense competition in the market for international
private line services between the United States and Latin America. This
competition is expected to come primarily from the large long-distance carriers
(AT&T, MCI WorldCom and Sprint) and Latin American PTOs, as well as from
alternative regional carriers. We believe IMPSAT USA can compete effectively by
offering better end-to-end customer service and quality assurance in Latin
America through its regional knowledge and in-country contacts using IMPSAT
sister companies.
The Federal Communications Commission exercises exclusive U.S. jurisdiction
over all facilities and services of telecommunications carriers to the extent
they are used for interstate or international communications. In 1995, IMPSAT
USA received authorization from the FCC to provide facilities-based
telecommunications services, including switched voice and data and private line
services, between the United States and various international points using
certain international satellite facilities. In connection with these services,
IMPSAT USA is also authorized to lease and operate any necessary U.S. connecting
facilities.
In 1997, the FCC authorized IMPSAT USA to resell telecommunications
services of other international carriers between the United States and various
international points and to operate as an international, facilities-based resale
carrier.
IMPSAT BRAZIL
IMPSAT Brazil was established to apply for a value-added telecommunications
license in Brazil and to develop this business in Brazil. We have a 99.9%
ownership interest in IMPSAT Brazil. IMPSAT Brazil is headquartered in Sao Paulo
and has offices in Rio de Janeiro, Curitiba, Belo Horizonte and Brasilia.
We provide our portfolio of services using satellite capacity subleased
from Embratel. Last mile solutions in metropolitan areas are anticipated
initially to be delivered through wireless and fiber optic links leased from
local PTOs. IMPSAT Brazil operates its network through two teleports located in
Sao Paulo and Curitiba. A teleport is currently under development in Rio de
Janeiro, and we may construct additional teleports in other Brazilian cities.
Our operations in Brazil use the C-bands and Ku-bands on Brazilsat, PanAmSat,
Intelsat and Nahuel satellites.
At September 30, 1999, IMPSAT Brazil had a total of 85 customers, including
Shell do Brasil S.A., Ericsson, YPF/Repsol, Mercedes Benz do Brasil, TV
Paranaense and Confederacao Nacional de Industrias.
Brazil is by far the largest telecommunications market in Latin America and
has attracted and is expected to continue to attract numerous providers, many of
whom may be larger and better financed than we are. The presence of large
carriers in Brazil may negatively affect our prospects there. In July 1998, the
Brazilian government split Telebras, the former Brazilian national
telecommunications company, into 17 companies by region and type of provider.
These companies were subsequently privatized. Winning bidders for these
operating companies included Telecom Italia, MCI WorldCom, Spain's Telefonica
and Sprint. In addition, numerous additional concessions to provide telephony
and data transmission services were granted. Winning bidders and concessionaires
are also likely to focus on parts of the Brazilian market beyond those in which
they initially obtain a concession.
As the Brazilian telecommunications sector is further liberalized and
deregulated, competition is likely to come from current telecommunications
service providers in that country, including:
- Embratel, Brazil's former state-owned, monopoly long-distance carrier in
which MCI WorldCom acquired a 52% interest in July 1998 as part of the
Telebras privatization
- COMSAT do Brazil Ltda.
- MetroRED Telecomunicacoes S.A., a data services company that provides
local network services in Sao Paulo and Rio de Janeiro and plans to build
local networks in other cities as well. In addition, it plans to build a
fiber optic long distance network among Sao Paulo, Rio de Janeiro and
Belo Horizonte
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- NetStream, a fiber optic network service provider that AT&T recently
agreed to acquire and that earlier this year launched fiber optic cable
local network services for 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 transmission 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
- Telefonica, the regional fixed switch telephony operator for the state of
Sao Paulo
- Intelig, a joint venture of France Telecom, Sprint and National Grid,
which holds a license to provide domestic and international long-distance
telephony and data services
- Global One, a joint venture of Deutsche Telecom, France Telecom and
Sprint that provides international telecommunications services, focusing
on multinational companies
In March 1999, IMPSAT Brazil entered into a distribution agreement and a
supply agreement with Concert Communications Sales Limited to provide network
facilities on a non-exclusive basis in Brazil. In addition, IMPSAT Brazil
provides co-location services to Concert in Brazil.
The telecommunications and postal services in Brazil are regulated by the
Ministry of Communications pursuant to the Telecommunications Law of 1962, as
amended. Brazil's telecommunications laws were significantly revised in
September 1997 when the Brazilian legislature enacted the General
Telecommunications Law. This law authorized the creation of the Agencia Nacional
de Telecomunicacoes (ANATEL), an independent agency that regulates all aspects
of telecommunications services, except radio and TV broadcasting, including the
granting of licenses under the General Telecommunications Law.
Under the General Telecommunications Law, value-added services may not be
provided in Brazil without prior governmental authorization. In January 1998,
ANATEL granted IMPSAT Brazil a ten-year license to sell corporate
telecommunications services (data, voice and video) using terrestrial and
satellite links to third parties and to provide circuits for use by other
telecommunication carriers. Additionally, in March 1999 IMPSAT Brazil was
authorized by ANATEL to lease satellite capacity directly from satellite
carriers.
IMPSAT MEXICO
IMPSAT Mexico was incorporated in 1994. We hold a 99.9% equity interest in
IMPSAT Mexico. We provide our portfolio of services in Mexico through a teleport
located in Mexico City. We operate on the C-band in Mexico with access to
Intelsat 709 and 805, which has been approved by the Secretaria de
Comunicaciones y Transportes (SCT), and to Solidaridad-II, a Mexican satellite.
As of September 30, 1999, IMPSAT Mexico had 28 customers including:
- Bimbo, a food industry company
- Becton Dickinson, a medical equipment company
- Laboratorios Syntex/Roche, a pharmaceutical company
- SmithKline Beecham, a pharmaceutical company
- ATSI de Mexico S.A. de C.V., a private pay phone operator and a
subsidiary of American TeleSource International, Inc.
- Andersen Consulting, one of the largest multinational consulting
companies
We believe IMPSAT Mexico's market share will continue to be minimal as it
is not presently a strategic focus of the company.
Our principal competitors in Mexico include:
- Telmex, which besides offering local and long distance telephony,
provides data and video services through its wholly owned subsidiary, Red
Uno
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- Alestra S.A., a joint venture of AT&T, Grupo Financiero Bancomer S.A.,
and Grupo Industrial Alfa S.A., provides long-distance telecommunications
and data transmission services using the AT&T brand
- Avantel, which is owned by MCI WorldCom and Banamex Accival, provides
national and international data, voice and long distance telephony and
Internet services
Other competitors in Mexico include Global One, COMSAT, Optel
Telecommunications, Red Sat and Intervan.
The Mexican telecommunications industry is regulated primarily by the SCT.
An agency of the SCT, Telecomunicaciones de Mexico, or Telecomm, is charged with
the regulation of non-national satellite and telegraph services. Telecomm
supervises carriers and allocates electronic frequencies for satellite
telecommunications.
IMPSAT Mexico has a permit from the SCT for the installation, operation and
exploitation of a network of earth stations to provide dedicated-link services,
including VSAT services, for the transmission of voice, data and
videoconferencing signals. This permit provides that these services must use
Mexican satellites or those designated or approved by the Mexican government.
IMPSAT Mexico's permit does not restrict its ability to carry voice.
Interconnection of IMPSAT Mexico's network to networks in other countries
requires the approval of the SCT. While IMPSAT Mexico's permit is valid for 15
years from when it was obtained in May 1994, its terms and conditions may be
revised for a nominal fee after the first five years if the SCT believes changes
to be in the public interest. IMPSAT Mexico has the right to renew the permit
for an additional 15 years if it has complied with the provisions of the permit
and agrees to accept any new conditions that may be imposed by the SCT.
IMPSAT Mexico is required to pay 5% of its telecommunications services
income to the Mexican government along with certain fees for having its signals
transmitted and received by satellite, and nominal fees for the installation of
new earth stations.
Mexican law restricts foreign investment in concession holders to no more
than a 49% interest. We have been advised by local Mexican counsel that this
restriction does not apply to IMPSAT Mexico because IMPSAT Mexico provides its
services pursuant to a permit, and does not hold a concession. In addition, the
law does not apply to concessions like ours that were granted prior to the law's
enactment.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
In accordance with our bylaws, we have ten members on our board of
directors. Our directors will hold office until the next annual meeting of
stockholders and until successors of such directors have been elected and
qualified, or until their earlier death, resignation or removal. The holders of
our preferred stock have had, since the issuance thereof, the right to vote as a
separate class to elect two directors. Mr. Stephen Munger and Mr. Jeronimo Bosch
serve in this capacity. In connection with our $125 million equity offering to
Nunsgate Limited, a wholly owned subsidiary of British Telecommunications,
British Telecommunications has the right to elect two of our directors. Mr.
Geoffrey Almeida and Mr. John McElligott serve in this capacity.
Our president is elected at our annual meeting of stockholders. The other
officers are elected at the annual meetings of our board of directors. All
officers hold office until their successors are elected and qualified, or until
their earlier death, resignation or removal. No family relationship exists among
any of the 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.
Set forth below are the names, ages and positions of directors and
executive officers as of December 31, 1999. Executive officers of IMPSAT Fiber
Networks, Inc. are employees of IMPSAT Argentina.
<TABLE>
<CAPTION>
AGE
---
<S> <C> <C>
Enrique M. Pescarmona...................... 58 Chairman of the Board
Ricardo A. Verdaguer....................... 50 Director, President and Chief Executive
Officer
Roberto A. Vivo............................ 46 Director, Deputy Chief Executive Officer
Alexander Rivelis.......................... 59 Director and Vice President, Carrier's
Carrier
Lucas Pescarmona........................... 29 Director
Sofia Pescarmona........................... 26 Director
Stephen R. Munger.......................... 41 Director
Jeronimo Bosch............................. 28 Director
Geoffrey Almeida........................... 47 Director
John McElligott............................ 48 Director
Hector Alonso.............................. 42 Chief Operating Officer
Guillermo Jofre............................ 44 Chief Financial Officer
Guillermo V. Pardo......................... 49 Vice President, Planning
Jose R. Torres............................. 41 Vice President, Administration, Chief
Accounting Officer
Rafael Carchak Canes....................... 50 Vice President, Organizational Development
Alejandro Suarez del Cerro................. 45 Vice President, Internet
Jaime Vinocur.............................. 53 Vice President, Project Execution
Marcelo Girotti............................ 34 President of IMPSAT Argentina
Mariano Torre Gomez........................ 48 President of IMPSAT Colombia
Mauricio Ceballos.......................... 35 President of IMPSAT Venezuela
Heliodoro Londono.......................... 42 President of IMPSAT Mexico
Rodolfo Arroyo............................. 39 President of IMPSAT Ecuador
Mauricio G. Klau........................... 36 President of IMPSAT USA
Daniel V. Hourquescos...................... 47 President of IMPSAT Brazil
</TABLE>
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Our board of directors has been classified into three classes, which will
consist of, as nearly as practicable, an equal number of directors. Nominees for
director will be divided among the three classes upon their election or
appointment. The members of each class will serve staggered three-year terms:
- Mr. John McElligott, Mr. Lucas Pescarmona and Ms. Sofia Pescarmona have
been 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 have been elected to serve until the annual stockholder
meeting to be held in 2002
- Mr. Geoffrey Almeida, Mr. Stephen Munger and Mr. Enrique Pescarmona have
been elected to serve until the annual stockholder meeting to be held in
2003
Upon the expiration of the initial term of a class, directors thereafter
elected to that class shall hold office for a term of three years.
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. and Mercantil Andina S.A., 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. an Internet content provider.
Roberto 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 Enrique 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 of IMPSAT Fiber
Networks, Inc. and 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 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
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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 Concert Communications Company, 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.
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.
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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.
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 has served in a variety of positions involving engineering, production,
planning, business development and new markets for companies in the Pescarmona
group over a period of 17 years. Mr. Torre 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.
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.
Rodolfo Arroyo has been 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, including Vice President, planning and control and vice
president, operations. Prior to joining IMPSAT, Mr. Arroyo was a projects
manager at IMPSA from July 1988 until December 1991.
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.
Since 1990, Mr. Horquescos has held several positions in IMPSAT, including
General Manager of IMPSAT Argentina from March 1993 to April 1995. Prior to
joining IMPSAT Argentina, Mr. Hourquescos served as Director of Information
Services of Direccion General Impositiva, the former Argentine governmental
agency charged with the collection of taxes.
COMMITTEES OF THE BOARD OF DIRECTORS
On December 21, 1998, we established a stock option committee. The stock
option committee was responsible for the granting of stock options, incentives
and other forms of compensation to eligible persons under our 1998 stock option
plan.
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 recommends policies relating to our benefit
plans. In this regard, the compensation committee replaces and assumes the
functions of the stock option committee. The compensation committee is currently
constituted by Mr. Stephen Munger and Mr. John McElligolt. The audit committee,
composed of a majority of non-employee directors, oversees the engagement of our
independent auditors and, together with our independent auditors, will review
our accounting practices, internal accounting
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controls and financial results. The audit committee is currently constituted by
Mr. Geoffrey Almeida, Mr. Stephen Munger and Mr. Jeronimo Bosch.
COMPENSATION OF OUR DIRECTORS
The members of our board of directors do not receive any compensation for
their services on our board, although we have agreed to reimburse the directors
nominated by the Morgan Stanley investors and Nunsgate Limited for any expenses
incurred by them in connection with their services as directors.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following tables set forth the compensation
paid or accrued to our chief executive officer and each of our four other most
highly compensated executive officers receiving compensation in excess of
$100,000 per year during each of the three years presented. No bonuses were paid
by us to these executive officers during 1997. We do not maintain any long term
incentive plans and have not granted stock appreciation rights or restricted
stock awards.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------
SECURITIES
NAME AND UNDERLYING OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ------------------ ---- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Enrique M. Pescarmona................. 1999 $ 353,745 $240,000(1) 106,564 --
Chairman of the Board 1998 355,315 200,000(2) 59,202 --
1997 310,495 -- -- --
Ricardo A. Verdaguer.................. 1999 449,800 300,000(1) 106,564 --
President and Chief Executive
Officer 1998 426,603 250,000(2) 59,202 --
1997 240,500 -- -- --
Roberto Vivo.......................... 1999 360,100 240,000(1) 85,251 --
Director, Deputy Chief Executive
Officer 1998 341,110 200,000(2) 47,362 --
and Vice President, Marketing 1997 198,250 -- -- --
Hector Alonso......................... 1999 260,000 150,000(1) 61,807 --
Chief Operating Officer 1998 250,287 150,000(2) 34,337 --
1997 134,680 -- -- --
Daniel Hourquescos.................... 1999 296,011 74,100(1) 34,101 $71,954(3)
President of IMPSAT Brazil 1998 240,500 --(2) 18,945 --
1997 210,600 -- -- --
</TABLE>
- ------------
(1) This amount represents bonuses we paid to the executive officers named in
the table above in December 1999. This amount relates to our 1998 operating
results.
(2) This amount represents bonuses we paid to the officers named in the table
above in December 1998. This amount related to 1997 operating results.
(3) Annual housing allowance.
STOCK OPTION GRANTS
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.
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
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throughout the vesting period. Accordingly, the potential realizable values
listed in this table may not be achieved.
<TABLE>
<CAPTION>
PERCENT POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED PRICE APPRECIATION
UNDERLYING TO EXERCISE FOR OPTION TERM
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
The following table provides information on option exercises in 1999 by the
each of the executive officers named in the summary compensation table above and
the value of those officers' unexercised options as of December 31, 1999. As our
stock is not publicly traded, a readily ascertainable market value is not
available. For purposes of this table, "exercise" means an employee's
acquisition of shares of common stock pursuant to stock option grants,
"exercisable" means options to purchase shares of common stock that are subject
to exercise and "unexercisable" means all other options to purchase shares of
common stock. No options were exercised during 1999. To calculate value of
unexercised in-the-money options at fiscal year end, we used the initial public
offering price of $14 per share, which is the midpoint of the range set forth on
the cover page of this prospectus per share minus the per share exercise price,
multiplied by the number of shares issuable upon exercise.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Enrique M. Pescarmona......... -- -- 5,920 100,644 $ 33,270 $ 565,619
Ricardo A. Verdaguer.......... -- -- 5,920 100,644 33,270 565,619
Roberto Vivo.................. -- -- 4,736 80,515 26,616 452,494
Hector Alonso................. -- -- 3,437 58,370 19,316 328,039
Daniel Hourquescos............ -- -- 1,895 32,206 10,650 180,998
</TABLE>
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 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 constituted by non-employee directors. 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
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<PAGE> 77
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 of which this prospectus is a part. 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
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Stephen Munger, who is Princes Gate's designee to our board of
directors and a member of our compensation committee, is the Co-Chairman of the
Investment Committee of Princes Gate. Princes Gate is an affiliate of Morgan
Stanley & Co. Incorporated. In 1998, we paid commissions to Morgan Stanley in
connection with their placement of our $225 million of 12 3/8% notes. The Morgan
Stanley investors have informed us that they plan to exercise their rights to
convert 19,848 shares of preferred stock into 14,917,915 shares of our common
stock upon the closing of this offering. The 14,917,915 shares of common stock
that will be held by the Morgan Stanley investors when their shares of our
preferred stock are converted upon completion of this offering will be entitled
to certain registration rights. See "Underwriters." We plan to use a portion of
the proceeds of this offering to redeem the shares of our preferred stock
remaining outstanding after the Morgan Stanley investors exercise their
conversion rights. See "Use of Proceeds."
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<PAGE> 78
Pursuant to the terms of the Securityholders Agreement between Nevasa
Holdings and the Morgan Stanley investors dated as of March 19, 1998, for so
long as any Morgan Stanley investors beneficially own a majority of the shares
of our preferred stock outstanding on their date of issuance, any material
amendment or change of the compensation arrangements of our chief executive
officer, chief financial officer, deputy chief executive officer or chief
operating officer must be approved by the designees of the Morgan Stanley
investors to our board of directors. Upon the conversion of the shares of
preferred stock upon the closing of the offering, the Morgan Stanley investors
will no longer have this approval right.
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.
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<PAGE> 79
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 a 15.4% 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 1998 and the first
nine months of 1999 to:
- companies in which CORIM or members of the Pescarmona family have an
interest totaled approximately $2.1 million
- El Sitio subsidiaries totaled approximately $416,000
- companies affiliated with the Suramericana Group totaled approximately
$15.8 million
We hold a 74.2% equity interest in IMPSAT Colombia, and the Suramericana
Group holds a 24.6% equity interest in IMPSAT Colombia. The Suramericana Group
also holds a 25% equity interest in IMPSAT Venezuela. We have reached an
agreement with the Suramericana Group to exchange their minority interests in
these subsidiaries for an aggregate of 4,624,714 shares of our common stock.
The following is a description of our most significant transactions with
entities affiliated with CORIM, the Suramericana Group and El Sitio during 1998
and the first nine months of 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 1998 and the first nine months of 1999 totaled approximately
$332,000. During the same period, IMPSA provided services to IMPSAT
Argentina totaling approximately $217,000.
- 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 1998 and the first nine months of 1999 totaled
approximately $148,800.
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<PAGE> 80
- Buenos Aires al Pacifico San Martin S.A. (BAPSA), a company controlled by
CORIM and IMPSA prior to its sale to an unaffiliated group in May 1999.
BAPSA operates the San Martin Railway between Buenos Aires and the Cuyo
region in central-western Argentina and provides cargo transportation
services along the San Martin Railway. Telecommunications services
provided to BAPSA during 1998 and the first nine months of 1999 totaled
approximately $842,000.
- 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 1998 and the first nine months of 1999 totaled
approximately $610,000. 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
$757,000.
SURAMERICANA GROUP
Representatives of the Suramericana Group serve as directors of IMPSAT
Colombia and IMPSAT Venezuela. During 1998 and the first three quarters of 1999,
the total amount of telecommunications services rendered to the Suramericana
Group totaled approximately $15.0 million, the most significant of which were as
follows:
<TABLE>
<CAPTION>
VALUE OF
SERVICES
-----------------
<S> <C>
Suramericana de Seguros (insurance)......................... $1,302,000
Corporacion Financiera Nacional y Suramericana S.A.
(Corfinsura) (finance).................................... 337,000
Susalud (health services)................................... 142,000
Sufinanciamiento (finance).................................. 303,000
Proteccion (pension fund)................................... 479,000
Suleasing (finance)......................................... 178,000
Corporacion Nacional de Ahorro y Vivienda (finance)......... 4,149
Suvalor (insurance)......................................... 275,000
Industrias Noel (food products)............................. 729,000
Acerias Paz del Rio (steel works)........................... 176,000
Suratep (insurance)......................................... 148,000
Sodexho Pass (food service)................................. 258,000
Almacenes Exito (food products)............................. 321,000
BanColombia (finance)....................................... 5,285,000
</TABLE>
During 1998 and the first nine months of 1999, IMPSAT Venezuela provided
telecommunications services to several companies within the Suramericana Group,
including Industrias Alimenticias Noel de Venezuela S.A. and Industrias
Alimenticias Hermo de Venezuela S.A., which totaled approximately $134,000, and
to Cadena de Tiendas Venezolanas S.A., which totaled approximately $1.4 million.
Corfinsura and BanColombia are creditors of IMPSAT Colombia. As of
September 30, 1999, IMPSAT Colombia was indebted to Corfinsura in the amount of
approximately $7.5 million and to BanColombia in the amount of approximately
$14.0 million. The total interest paid for 1998 and the first nine months of
1999 was approximately $6.0 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 $860,000 in 1998 and the first nine months of
1999.
Certain other companies within the Suramericana Group, including Suleasing,
provide financial leasing services to IMPSAT Colombia. Our total indebtedness to
Suleasing as of September 30, 1999 was approximately $1.4 million and the total
interest paid in 1998 and the first nine months of 1999 was approximately
$566,000.
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Other payments made by IMPSAT Colombia to companies of Suramericana Group
in 1998 and the first nine months of 1999 included: payments of approximately
$583,000 to Proteccion for pension fund services; Susalud, had total payments of
approximately $338,000 for health benefit services and payments of approximately
$451,000 to Sodexho Pass for employee luncheon services.
EL SITIO
We provide telecommunications services to El Sitio. During 1998 and the
first nine months of 1999, the total value of telecommunications services we
rendered to El Sitio was approximately $416,000. During the same period, El
Sitio charged us $110,000 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 by the end of January 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.
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 preferred stock was convertible into 25% of our common stock on the
date of issuance. The following are some of the principal features of the
preferred stock:
- cumulative dividends at the rate of 10% per annum, compounded quarterly
and, with certain exceptions, payable in kind
- mandatorily redeemable in cash by us at maturity (ten years after
issuance), plus accrued and unpaid dividends
- callable by us under certain circumstances, in whole, at 100% of the
principal amount, plus accrued and unpaid dividends
- convertible into our common stock at any time at the option of the
holders (including upon a call by us), at a specified conversion rate,
subject to certain antidilution rights
- the right by Morgan Stanley investors holding a majority of the shares of
preferred stock initially issued to appoint two directors to our board of
directors as well as to immediately appoint half of the members of our
board of directors upon the occurrence of certain specified events
- the right by directors appointed by the Morgan Stanley investors to a
veto over certain major corporate actions
Conversion of Preferred Stock. The Morgan Stanley investors have informed
us that they plan to exercise their rights to convert 19,848 shares of our
preferred stock into 14,917,915 shares of our common stock upon the closing of
this offering. We plan to use a portion of the proceeds of this offering to
redeem the shares of our preferred stock remaining outstanding after the Morgan
Stanley investors exercise their conversion rights. See "Use of Proceeds." Upon
the closing of this offering, the Morgan Stanley investors will be entitled to
certain rights with respect to the shares of common stock issuable upon the
conversion of the
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preferred stock. Some of the principal rights the Morgan Stanley investors will
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
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 British Telecommunications for $25
million. These transactions were consummated on April 19, 1999.
We are a party to a shareholders agreement with Nevasa Holdings and British
Telecommunications dated as of March 10, 1999, a copy of which has been filed as
an exhibit to the registration statement of which this prospectus is a part.
Pursuant to the terms of this shareholders agreement, as long as British
Telecommunications owns 15% of our outstanding common stock (as determined on a
fully-diluted basis) and subject to certain conditions, British
Telecommunications has the right to appoint two members of our board of
directors.
As long as British Telecommunications owns 10% of our outstanding common
stock (as determined on a fully-diluted basis) and subject to certain
conditions, British Telecommunications 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 British Telecommunications owns 5% of our outstanding common
stock (as determined on a fully-diluted basis), British Telecommunications has
the right to:
- 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 British Telecommunications in a public
offering of our common stock registered under the Securities Act, subject
to certain conditions
- appoint one member to our board of directors
British Telecommunications has informed us of its intention to purchase
from us an additional 2,850,000 shares of our common stock simultaneously with
this offering to maintain its approximate current ownership share in us.
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DESCRIPTION OF OUR INDEBTEDNESS
The following is a summary of the material provisions of agreements
governing some of our indebtedness. This summary is subject to, and qualified in
its entirety by reference to, all of the provisions of these agreements,
including the definition of certain terms therein. Terms used and not defined
herein have the meanings given to them in the documents described herein. Copies
of these agreements are available from us upon request.
Senior Notes. In July 1996, we completed the offering of our $125 million
principal amount of 12 1/8% Senior Notes due 2003, of which an aggregate of $125
million in principal amount is outstanding as of the date hereof. The 12 1/8%
notes bear interest at the rate of 12 1/8% per annum payable semi-annually in
cash on January 15 and July 15 of each year. The 12 1/8% notes have the benefit
of a guarantee issued on a senior unsecured basis by IMPSAT Argentina.
In June 1998, we completed our offering of our $225 million principal
amount of 12 3/8% Senior Notes due 2008, of which an aggregate of $225 million
in principal amount is outstanding as of the date of this prospectus. The
12 3/8% notes bear interest at the rate of 12 3/8% per annum payable
semi-annually in cash on June 15 and December 15 of each year.
The indentures under which our notes were issued contain a number of
covenants which, among other things:
- restrict our ability to consolidate, merge or sell all or substantially
all of our assets
- create restrictions on the ability of our restricted subsidiaries to make
certain payments, issue or sell stock of certain subsidiaries, and enter
into transactions with stockholders or affiliates
These indentures also restrict our and our restricted subsidiaries' ability
to:
- incur additional indebtedness
- create liens
- engage in sale-leaseback transactions
- make restricted payments
- sell assets
Vendor Financing. On October 25, 1999, each of IMPSAT Argentina and IMPSAT
Brazil signed definitive agreements with Nortel to borrow up to approximately
$149.1 million and $148.3 million, respectively, of long term vendor financing.
This vendor financing, which will be disbursed over a two year period with final
maturity in 2006, will be used by us to finance Nortel's construction of the
segments of the Broadband Network in each of Argentina and Brazil and for
purchases of equipment to be used in the Broadband Network. A copy of IMPSAT
Argentina's vendor financing agreement with Nortel is filed as an exhibit to the
registration statement of which this prospectus is a part.
Subject to mandatory or optional prepayment under the terms of the vendor
financing, principal amounts borrowed by us will be repayable over the last five
years of a seven-year period beginning on October 25, 2001, and will bear
interest at LIBOR (or, under certain circumstances, prime rate) plus an
applicable margin, commencing on the first disbursement date. The vendor
financing is not revolving. Any amounts that are repaid or prepaid by us may not
be reborrowed.
To secure repayment of disbursements under the vendor financing, we have
granted Nortel a first priority security interest over equipment, infrastructure
and other assets related to the Broadband Network and to be acquired by us with
the proceeds of the vendor financing. In addition, we have agreed to guarantee
the obligations of each of IMPSAT Argentina and IMPSAT Brazil under the vendor
financing agreements.
If we sell or otherwise dispose of or suffer material losses with respect
to the property comprising Nortel's security under the financing and fail to
reinvest the proceeds within the time specified, then such proceeds
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must be used to prepay the loans under the vendor financing. We are also
mandated to prepay amounts borrowed under the vendor financing if we make
voluntary or mandatory prepayments under the indentures under which our notes
are issued. In addition, under certain circumstances, we are obligated to apply
the proceeds of certain sales of debt securities towards prepayments of the
vendor financing. We are permitted to make voluntary prepayments of amounts
borrowed under the vendor financing.
The making of each disbursement under the vendor financing will be subject
to our satisfaction of several ongoing conditions. The vendor financing
agreements also contain a number of covenants that, among other things, limit
our ability to
- incur additional indebtedness
- create liens and other encumbrances
- sell or otherwise dispose of assets
- make acquisitions, investments, loans and advances
- merge or consolidate with another entity
- engage in any business other than the telecommunications business
- make distributions to our shareholders
- enter into transactions with affiliates
In addition, the vendor financing will require ongoing compliance by IMPSAT
Argentina and IMPSAT Brazil with certain financial and operating covenants,
including, without limitation, the maintenance of specified ratios of debt to
total capitalization, total debt to EBITDA, EBITDA to interest expense and
capital expenditure limitations.
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PRINCIPAL STOCKHOLDERS
The following table and the accompanying notes show certain information
concerning the beneficial ownership of our capital stock as of December 31, 1999
by:
- each person who owned of record, or was known to own beneficially, more
than five percent of any class of our capital stock
- each director
- each executive officer
- all directors and executive officers as a group
Except as otherwise indicated, each person listed in the table has informed
us that they have sole voting and investment power with respect to their shares
of our capital stock and record and beneficial ownership with respect to their
shares of our capital stock. The number of shares beneficially owned is
determined on an as-converted basis, assuming the conversion of all issued and
outstanding shares of our preferred stock into common stock. As of December 31,
1999, each share of our preferred stock was convertible into 711.5 shares of our
common stock, or a total of 17,786,311 shares of common stock. The number of
shares beneficially owned after this offering includes the issuance of an
additional 2,850,000 shares of common stock to Nunsgate Limited simultaneously
with this offering.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
THIS OFFERING THIS OFFERING
----------------------------- -----------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------ ------------------- ------- ------------------- -------
<S> <C> <C> <C> <C>
COMMON STOCK
Beneficial Owners of more than 5%
Nevasa Holdings Ltd.(1)............... 42,366,879 56.9% 42,443,957 46.4%
Princes Gate Investors II, L.P.(2).... 14,229,049 19.1 11,934,332 13.0
Morgan Stanley Global Emerging Markets
Private Investment Fund, L.P.(3).... 3,557,262 4.8 2,983,583 3.3
Nunsgate Limited(4)................... 14,321,199 19.2 17,171,199 18.8
Suramericana Group(5)................. -- -- 4,624,714 5.1
Directors and Executive Officers(1)
Enrique Pescarmona(6)................. 42,372,799 56.9 42,449,878 46.4
Ricardo Verdaguer(1)(7)............... 5,920 * 5,920 *
Roberto Vivo(1)(7).................... 4,736 * 4,736 *
Alexander Rivelis(7).................. 1,895 * 1,895 *
Hector Alonso(7)...................... 3,437 * 3,437 *
Daniel Hourquescos(7)................. 1,895 * 1,895 *
All Directors and Officers as a Group
(24 persons)(1)..................... 42,406,315 56.9 42,483,394 46.4
PREFERRED STOCK
Beneficial Owners of more than 5%
Princes Gate Investors II, L.P.(8).... 20,000 80.0% -- --
Morgan Stanley Global Emerging Markets
Private Investment Fund, L.P.(9).... 5,000 20.0 -- --
Directors and Executive
Officers(8)(9)...................... -- -- -- --
All Directors and Officers as a Group
(24 persons)(8)(9).................. -- -- -- --
</TABLE>
- ------------
(*) Less than 1%
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(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.
Mr. Alexander Rivelis, who own a less than 1% minority interest in IMPSAT
Colombia has agreed to transfer that minority interest to our company in
exchange for 77,079 shares of our common stock. Mr. Rivelis also has
agreed simultaneously to transfer his shares of our common stock to Nevasa
Holdings in exchange for an interest in the capital stock of Nevasa
Holdings.
(2) Determined on an as-converted basis, assuming the conversion of 20,000
shares of preferred stock, which were convertible into shares of common
stock on December 31, 1999, 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.
(3) Determined on an as-converted basis, assuming the conversion of 5,000 shares
of preferred stock, which were convertible into shares of common stock on
December 31, 1999, owned by MSGEM and Morgan Stanley Global Emerging Markets
Private Investors, L.P. over which MSGEM has sole voting power.
(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 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 y Avaluos 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 42,366,879 shares of our 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) These shares of common stock are issuable under options that are presently
exercisable.
(8) These shares of preferred stock include 2,857 shares owned by certain
affiliates of Princes Gate over which Princes Gate has sole voting and
dispositive power. Mr. Stephen Munger, who is the Co-Chairman of the
Investment Committee of Princes Gate and Princes Gate's designee to our
board of directors, disclaims voting or dispositive power over the shares of
preferred stock owned by Princes Gate and its affiliates.
(9) These shares of preferred stock include 4,712 shares owned by MSGEM and 288
shares owned by Morgan Stanley Global Emerging Markets Private Investors,
L.P. MSGEM, which is a subsidiary of Morgan Stanley, manages the investment
in, and has sole voting power over, the shares of preferred stock owned by
each person comprising the MSGEM Fund. The business address of each of such
persons is c/o Morgan Stanley Global Emerging Markets Private Investment
Fund, L.P., 1221 Avenue of the Americas, 33rd Floor, New York, NY 10020. Mr.
Jeronimo Bosch who is an associate at Morgan Stanley Dean Witter Private
Equity and MSGEM's designee to our board of directors, disclaims voting or
dispositive power over the shares of preferred stock owned by MSGEM.
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DESCRIPTION OF CAPITAL STOCK
The following summary information is qualified in its entirety by the
provisions of our certificate of incorporation and bylaws, copies of which have
been filed as exhibits to the Registration Statement of which this prospectus is
a part. See "Where You Can Find More Information."
Upon completion of this offering, our authorized capital stock will consist
of 300,000,000 shares of common stock, par value $0.01 per share, of which
91,428,571 shares of common stock will be issued and outstanding. Prior to this
offering, there were 56,680,078 shares of common stock outstanding held by two
persons.
Prior to this offering, there has been no public market for our common
stock. See "Risk Factors -- There is no prior public market for our common stock
and our stock price may be volatile."
COMMON STOCK
Voting Rights. Our certificate of incorporation will provide that holders
of our common stock are entitled to one vote per share held of record on all
matters submitted to a vote of stockholders. Our principal stockholders have
entered into a shareholders' agreement that governs the voting of the common
stock held by them.
Dividends. Each holder of common stock on the applicable record date is
entitled to receive dividends if, as and when declared by our board of
directors. Under Delaware law, a corporation may declare and pay dividends out
of surplus, or if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or the preceding year. No dividends may be
declared, however, if the capital of the corporation has been diminished by
depreciation in the value of its property, losses or otherwise to an amount less
than the aggregate amount of capital represented by any issued and outstanding
stock having a preference on the distribution of assets.
Other Rights. Our stockholders have no preemptive or other rights to
subscribe for additional shares. All holders of our common stock are entitled to
share equally on a share-for-share basis in any assets available for
distribution to stockholders on our liquidation, dissolution or winding up. No
shares of our common stock are subject to conversion, redemption or a sinking
fund. All outstanding shares of our common stock are, and the common stock to be
outstanding upon completion of this offering will be, fully paid and
nonassessable.
Transfer Agent and Registrar. The transfer agent and registrar for our
common stock is The Bank of New York.
PREFERRED STOCK
Our board of directors has the authority to issue 5,000,000 shares of
preferred stock in one or more series and to fix rights, preferences, privileges
and restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action by the stockholders. The issuance
of shares of preferred stock (and the board's ability to do so) may have the
effect of delaying, deferring or preventing a change in control of IMPSAT
without further action by the stockholders and may adversely affect the voting
and other rights of the holders of common stock.
OUR CERTIFICATE OF INCORPORATION AND BYLAWS
Some of the provisions of our certificate of incorporation and bylaws
summarized below may be deemed to have an anti-takeover effect and may delay,
defer or prevent a tender offer or takeover attempt that a stockholder might
consider in its best interest, including an attempt that might result in the
receipt of a premium over the market price for the shares held by stockholders.
Our amended bylaws contain provisions requiring that advance notice be
delivered to us of any business to be brought by a stockholder before an annual
or special meeting of stockholders and providing for certain procedures to be
followed by stockholders in nominating persons for election to our board of
directors.
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Generally, these advance notice provisions require that the stockholder must
give written notice to the secretary of our company in the case of an annual
meeting:
- not less than 45 days nor more than 100 days before the first anniversary
of the date on which the company first mailed its proxy materials for the
preceding year's annual meeting of stockholders
- advanced or delayed by more than 30 days from the preceding year's annual
meeting of stockholders, not less than 90 days prior to the scheduled
date of the annual meeting or, if later, 10 days after the first public
announcement of the date of the meeting
- not less than 90 days, or, if later, 10 days after the first public
announcement of the date of the special meeting, nor more than 120 days
prior to the scheduled date of the special meeting
The notice must set forth specific information regarding the stockholder
giving the notice and each director nominee or other business proposed by the
stockholder, as applicable, as provided in our bylaws. Generally, only business
set forth in the notice for a special meeting of stockholders may be conducted
at a special meeting.
Except as provided in a securityholders agreement dated as of March 19,
1998 and a shareholders agreement dated as of March 10, 1999, our bylaws provide
that special meetings of stockholders may be called only by the Chairman of the
board of directors or pursuant to a resolution adopted by a majority of the
board of directors, but may not be called by stockholders.
In accordance with our restated certificate of incorporation, our amended
bylaws provide that except as provided in the securityholders agreement dated as
of March 19, 1998 and the shareholders agreement dated as of March 10, 1999, the
number of directors shall be fixed from time to time exclusively pursuant to a
resolution adopted by a majority of the board of directors.
Our certificate of incorporation provides for a classified board of
directors, consisting of three classes. Each class will hold office until the
third annual stockholders meeting for election of directors following the most
recent election of that class, except that the initial terms of the three
classes expire in 2001, 2002 and 2003.
Subject to the rights of the Morgan Stanley investors and British
Telecommunications to elect and remove directors under specified circumstances,
a director of our company may be removed only for cause by an affirmative vote
of the holders of at least a majority of the voting power of all of our
outstanding shares generally entitled to vote in the election of directors,
voting together as a single class. Vacancies on our board may only be filled by
the affirmative vote of a majority of the remaining directors.
Our restated certificate of incorporation provides that upon the closing of
this offering, stockholders may not act by written consent in lieu of a meeting.
In general, our restated certificate of incorporation may be altered or
repealed and new certificate of incorporation adopted by the holders of a
majority of the voting stock or by a majority of the board of directors.
However, certain provisions, including those relating to the number of directors
constituting the board of directors, the limitation of actions by stockholders
taken by written consent, the calling of special stockholder meetings, other
stockholder actions and proposals and certain matters related to our board, may
be amended only by the affirmative vote of the holders of at least 80% of the
total voting stock.
We are a Delaware corporation and subject to Section 203 of the Delaware
General Corporate Law, or DGCL. Section 203 of the DGCL prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the time a
stockholder became an interested stockholder unless, as described below, certain
conditions are satisfied. See
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"-- Limitations on Changes of Control of Our Company" below. The prohibitions in
Section 203 of the DGCL do not apply if the following occur:
- prior to the time the stockholder became an interested stockholder, our
board of directors approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of our company outstanding at the time the
transaction commenced
- at or subsequent to the time the stockholder became an interested
stockholder, the business combination is approved by our board of
directors and authorized by the affirmative vote of at least 66 2/3% of
the outstanding voting stock that is not owned by the interested
stockholder
Under Section 203 of the DGCL, a "business combination" includes the
following:
- any merger or consolidation of our company with the interested
stockholder
- any sale, lease, exchange or other disposition, except proportionately as
a stockholder of our company, to or with the interested stockholder of
assets of our company having an aggregate market value equal to 10% or
more of either the aggregate market value of all the assets of our
company or the aggregate market value of all the outstanding stock of our
company
- certain transactions resulting in the issuance or transfer by our company
of our stock to the interested stockholder
- certain transactions involving our company which have the effect of
increasing the proportionate share of the stock of any class or series of
our company which is owned by the interested stockholder
- certain transactions in which the interested stockholder receives
financial benefits provided by us
Under Section 203 of the DGCL, an "interested stockholder" generally is one
of the following:
- any person that owns 15% or more of the outstanding voting stock of our
company
- any person that is an affiliate or associate of our company and was the
owner of 15% or more of the outstanding voting stock of our company at
any time within the three-year period prior to the date on which it is
sought to be determined whether that person is an interested stockholder
- the affiliates or associates of that person
Because Nevasa, the Morgan Stanley investors and British Telecommunications
each will own more than 15% of our voting stock prior to the time that we become
a public company and upon completion of the equity offering, Section 203 of the
DGCL by its terms is currently not applicable to business combinations with
Nevasa, the Morgan Stanley investors or British Telecommunications although
Nevasa, the Morgan Stanley investors and British Telecommunications each own 15%
or more of our outstanding stock. If any other person acquires 15% or more of
our outstanding stock, that person will be subject to the provisions of Section
203 of the DGCL.
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LIMITATIONS ON CHANGES OF CONTROL OF OUR COMPANY
The provisions of our certificate of incorporation and by-laws described
above, as well as the stockholder rights plan, the concentration of our common
stock ownership and the provisions of Section 203 of the DGCL, could have the
following effects, among others:
- delaying, deferring or preventing a change in control
- delaying, deferring or preventing the removal of existing management
- deterring potential acquirers from making a tender offer to purchase our
common stock at a premium
- limiting any opportunity of our stockholders to realize premiums over
prevailing market prices of our common stock in connection with offers by
potential acquirers
STOCKHOLDER RIGHTS PLAN
On January 12, 2000, our board of directors adopted a stockholders rights
plan. We will issue one right with each share of common stock that we issue
between the record date and the earliest of the distribution date described
below, the date the rights are redeemed or the date the rights expire. After the
distribution date, we will issue one right with each common share we issue upon
the exercise of stock options or under any employee plan or arrangement or upon
the exercise, conversion or exchange of other securities that were outstanding
before the distribution date, until the date the rights are either redeemed or
expire. Each right entitles the registered holder to purchase one one-hundredth
of a share of series B preferred stock at a price per one one-hundredth of a
preferred share to be determined by our board of directors prior to our
implementation of the rights plan, which will occur after the closing of this
offering. The following is a description of the terms of the rights that we
expect will be contained in a rights agreement between us and the rights agent.
Exercisability and duration of rights. The rights are not exercisable
until the distribution date described below. The rights will expire on the tenth
anniversary of our implementation of the rights plan, unless the expiration date
is extended or unless the rights are earlier redeemed or exchanged, in each
case, as described below.
Evidence and transfer of rights. Until the distribution date:
- the rights will be evidenced by the common stock certificates and will be
transferred only with the common stock certificates
- new common stock certificates issued after the implementation of the
rights plan will contain a notation incorporating the rights agreement by
reference
- the surrender for transfer of any certificates for common stock
outstanding will also constitute the transfer of the rights associated
with the common stock represented by such certificate.
After the distribution date, separate certificates representing the rights
will be mailed to record holders of our common stock on the distribution date
and the separate certificates alone will evidence the rights.
Triggering of rights. The rights became exercisable after the lapse of
either:
- ten business days following a public announcement or disclosure that a
person or group of affiliated or associated persons, or an acquiring
person, has acquired beneficial ownership of 20% or more of the
outstanding shares of our common stock
- ten business days following the announcement of an intention to make a
tender offer or exchange offer the consummation of which would result in
a person or group becoming an acquiring person.
- ten business days after the board of directors declares a person or group
to be an adverse person under the rights plan, based on a determination
that the person or group has become the beneficial owner of 10% or more
of the outstanding shares of our common and that such beneficial
ownership is not in the best interests of our company and its
stockholders
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The earlier of those dates is called the distribution date.
The term "acquiring person" would not include our company, our
subsidiaries, or any of our employee benefit plans. The following persons are
exempted as acquiring persons under the rights plan:
- Nevasa Holdings and its affiliates, irrespective of their beneficial
ownership of our common stock
- the Morgan Stanley investors and its affiliates, so long as their
beneficial ownership of our common stock does not exceed 21% (other than
through certain underwriter or broker-dealer activities)
- Nunsgate Limited and its affiliates, so long as their beneficial
ownership of our common stock does not exceed 25% or so long as Nunsgate
Limited and its affiliates do not acquire more than 30% of the
outstanding shares of our common stock held by persons other than Nevasa
Holdings, Nunsgate Limited, the Morgan Stanley investors, Credit Suisse
and the Suramericana Group
Adjustments for stock splits or other transactions. The purchase price
payable and the number of preferred shares or other securities or property
issuable upon exercise of the rights will be adjusted from time to time to
prevent dilution in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the preferred shares, or other similar
events.
Terms of preferred shares. The preferred shares' dividend, liquidation and
voting rights will be such that the value of the one one-hundredth interest in a
preferred share purchasable upon exercise of each right should approximate the
value of one share of common stock.
Rights could purchase shares of common stock at a discount. If any person
or group becomes an acquiring or adverse person, each holder of a right, other
than the acquiring person, will have the right to receive upon exercise that
number of shares of common stock having a market value of two times the exercise
price of the right unless the event causing the person or group to become an
acquiring person is a merger, acquisition or other business combination
described in the next paragraph. If we do not have a sufficient amount of
authorized common stock to satisfy the obligation to issue shares of common
stock, we must deliver upon payment of the exercise price of a right an amount
of cash or other securities equivalent in value to the shares of common stock
issuable upon exercise of a right.
In the event that any person or group becomes an acquiring person and:
- we merge into or engage in certain other business combination
transactions with an acquiring person, or
- 50% or more of our consolidated assets or earning power are sold to an
acquiring person,
each holder of a right, other than the acquiring person, will have the right to
receive that number of shares of common stock of the acquiring company which
will have a market value of two times the exercise price of the right.
Following the occurrence of any of the triggering events set forth in the
preceding paragraphs, all rights that are, or (under certain circumstances
specified in the rights agreement) were, beneficially owned by any acquiring
person or adverse person will be null and void. Additionally, rights are not
exercisable following the occurrence of any of the triggering events until such
time as the rights are no longer redeemable by us as set forth below.
The board may redeem the rights. At any time prior to and until ten
business days after a person or group becomes an acquiring or adverse person,
our board of directors may redeem all, but not some, of the rights at a price of
$0.01 per right. The right to exercise the rights terminates immediately when
they are redeemed and the only right of the holders of rights after that time
will be to receive the redemption price.
The board may amend the rights. Prior to the distribution date, the terms
of the rights may be amended by a resolution of the board of directors without
the consent of the holders of the rights. However, from and after such time as
any person or group becomes an acquiring or adverse person, no amendment may
adversely affect the interests of the holders of the rights other than an
acquiring or adverse person.
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Holders of unexercised rights do not have privileges of a
stockholder. Until a right is exercised, the holder will have no rights as a
stockholder of our company, including, without limitation, the right to vote or
to receive dividends.
Reasons for stockholder rights plan. The rights in the proposed
stockholder rights plan are designed to protect and maximize the value of our
outstanding equity interests in our company in the event of an unsolicited
attempt by an acquirer to take over IMPSAT, in a manner or on terms not approved
by the board of directors. Issuance of the rights would not in any way weaken
our financial strength or interfere with our business plans. The issuance of the
rights themselves would have no dilutive effect, would not affect reported
earnings per share and should not be taxable to us or to our stockholders. Our
board of directors believes that the rights would represent a sound and
reasonable means of addressing the complex issues of corporate policy created by
the current takeover environment. However, when implemented, the proposed rights
plan and the rights issued under the plan could have the effect of rendering
more difficult or discouraging an acquisition of IMPSAT deemed undesirable by
the board of directors. The rights may cause substantial dilution to a person or
group that attempts to acquire IMPSAT on terms or in a manner not approved by
our board of directors.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering we will have 91,428,571 shares of common
stock outstanding. Of this amount, the shares offered hereby will be available
for immediate sale in the public market as of the date hereof. An additional
355,241 shares, 441,650 shares and 395,340 shares of our common stock are
issuable upon the exercise of outstanding options under our stock option plan at
exercise prices of $1.69, $8.38 and $10.47, respectively. Of this amount, 44,165
options are presently exercisable.
In addition, after this offering we believe that we will have greater
flexibility in consummating acquisitions and/or strategic alliances and may use
shares of our common stock as an alternative form of consideration in such
transactions.
We, along with our directors and executive officers and our existing
stockholders, will agree pursuant to the underwriting agreement and other
agreements that we will not sell any common stock without the prior consent of
Morgan Stanley & Co. Incorporated for a period of 180 days from the date of this
prospectus. Approximately 79,972,736 additional shares will be available for
sale following the expiration of the 180-day lockup period. Morgan Stanley & Co.
Incorporated has exempted from this obligation 2,834,288 shares of our common
stock held by Nevasa Holdings which have been pledged by Nevasa Holdings to a
financial institution to secure a $25 million loan to an affiliate of Nevasa.
The outstanding shares of common stock not issued in connection with this
offering are available for sale in the public market, subject to the 180-day
lockup period and compliance with the requirements of Rule 144. In general,
under Rule 144 as currently in effect, a person (or persons whose shares are
aggregated) who has beneficially owned shares for at least one year is entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of:
- 1% of the then outstanding shares of common stock
- the average weekly trading volume during the four calendar weeks
preceding the sale, subject to the filing of a Form 144 with respect to
the sale
A person (or persons whose shares are aggregated) who is not deemed to have
been our affiliate at any time during the 90 days immediately preceding the sale
who has beneficially owned his or her shares for at least two years is entitled
to sell such shares pursuant to Rule 144(k) without regard to the foregoing
volume limitations. Persons deemed to be affiliates must always sell pursuant to
the volume limitations under Rule 144, even after the applicable holding periods
have been satisfied. We are unable to estimate the number of shares that will be
sold under Rule 144 since this will depend on the market price for our common
stock, the personal circumstances of the sellers and other factors.
We intend to file a registration statement on Form S-8 under the Securities
Act to register shares of common stock reserved for issuance under our stock
option plan, thus permitting the resale of these shares by nonaffiliates in the
public market without restriction under the Securities Act. We intend to
register these shares on Form S-8, as of the date of this prospectus.
The 14,917,915 shares of our common stock that will be held by the Morgan
Stanley investors after 19,848 shares of our preferred stock are converted upon
completion of this offering and the 42,366,878 and 14,321,199 shares of common
stock held by Nevasa Holdings and British Telecommunications, respectively, will
be entitled to certain registration rights. These shares of common stock that
will be entitled to registration rights are referred to by us as the Registrable
Shares. If we propose to register any of our securities under the Securities
Act, the holders of the Registrable Shares will be entitled to notice thereof,
and subject to restrictions, to include their Registrable Shares in the
registration. In addition, immediately following the consummation of this
offering, the Morgan Stanley investors, Nevasa Holdings and British
Telecommunications may make demands that we file a registration statement under
the Securities Act, subject to conditions and limitations.
Sales of a substantial number of shares of common stock after this offering
(or the perception that they might occur) could adversely affect the market
price of our common stock and could impair our ability to raise capital through
the sale of additional equity securities. See "Risks Factors -- Shares of our
common stock becoming available for sale could adversely affect the market price
of our common stock and may impair the ability to raise capital through the sale
of additional stock."
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CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS
GENERAL
The following is a general discussion of U.S. federal income and estate tax
consequences of the ownership and disposition of our common stock that may be
relevant to you if you are a non-U.S. holder. For purposes of this summary, a
non-U.S. holder is a beneficial owner of our common stock that is, for U.S.
federal income tax purposes:
- a nonresident alien individual
- a foreign corporation
- a foreign estate or trust or
- a foreign partnership
This discussion does not address all aspects of U.S. federal income and
estate taxation that may be relevant to you in light of your particular
circumstances and does not address any foreign, state or local tax consequences.
Furthermore, this discussion is based on provisions of the Internal Revenue
Code, Treasury regulations and administrative and judicial interpretations as of
the date of this prospectus. All of these are subject to change, possibly with
retroactive effect, or different interpretations. If you are considering buying
our common stock you should consult your own tax advisor about current and
possible future tax consequences of holding and disposing of our common stock in
your particular situation.
DISTRIBUTIONS
At present, we do not anticipate paying dividends. If we do pay
distributions on our common stock, such distributions generally will constitute
dividends for U.S. federal income tax purposes to the extent paid from our
current or accumulated earnings and profits, as determined under U.S. federal
income tax principles. To the extent our distributions exceed our current or
accumulated earnings and profits, the distributions will constitute a return of
capital that is applied against and will reduce your basis in our common stock
(but not below zero), and then will be treated as gain from the sale of the
stock. Unless we are an 80/20 company, as described below, dividends paid to you
that are not effectively connected with your United States trade or business or,
if a tax treaty applies, are not attributable to a permanent establishment that
you maintain in the United States will (to the extent paid out of earnings and
profits) be subject to U.S. withholding tax at a 30 percent rate or, if a tax
treaty applies, a lower rate specified by the treaty. To receive a reduced
treaty rate, you must furnish to us or our paying agent a duly completed Form
1001 or Form W-8BEN (or substitute form) certifying to your qualification for a
lower rate.
An exception from withholding exists if at least 80 percent of the gross
income derived by a corporation during the applicable testing period qualifies
as "active foreign business income," either directly or through the
corporation's subsidiaries (an 80/20 company). If we are an 80/20 company, the
proportion of our dividends equal to our total gross income from foreign sources
over our total gross income will be exempt from the 30 percent withholding tax.
We believe that we qualify as an 80/20 company. However, the 80 percent test for
active foreign business income is applied on a periodic basis, and our
operations and business plans may change in subsequent taxable years. Therefore,
we cannot assure you that we will remain an 80/20 company and that this
exception from withholding will remain available.
Subject to the discussion regarding 80/20 companies above, withholding is
generally imposed on the gross amount of a distribution, regardless of whether
we have sufficient earnings and profits to cause the distribution to be a
dividend for U.S. federal income tax purposes. However, withholding on
distributions made after December 31, 2000 may be on less than the gross amount
of the distribution if the distribution exceeds a reasonable estimate we make of
our accumulated and current earnings and profits.
Dividends that are effectively connected with your conduct of a trade or
business within the United States or, if a tax treaty applies, are attributable
to your U.S. permanent establishment, are exempt from U.S. federal
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withholding tax, provided that you furnish to us or our paying agent a duly
completed Form 4224 or Form W-8ECI (or substitute form) certifying the
exemption. However, dividends exempt from U.S. withholding because they are
effectively connected or they are attributable to a U.S. permanent establishment
are subject to U.S. federal income tax on a net income basis at the regular
graduated U.S. federal income tax rates. Any such effectively connected
dividends received by a foreign corporation may, under certain circumstances, be
subject to an additional "branch profits tax" at a 30 percent rate or a lower
rate specified by an applicable income tax treaty.
Under current U.S. Treasury regulations, dividends paid before January 1,
2001 to an address outside the United States are presumed to be paid to a
resident of the country of address for purposes of the withholding discussed
above and for purposes of determining the applicability of a tax treaty rate.
However, U.S. Treasury regulations applicable to dividends paid after December
31, 2000 eliminate this presumption, subject to certain transition rules.
For dividends paid after December 31, 2000, you generally will be subject
to U.S. backup withholding tax at a 31 percent rate under the backup withholding
rules described below, rather than at a 30 percent rate or a reduced rate under
an income tax treaty, as described above, unless you comply with certain
Internal Revenue Service certification procedures (in general, by providing a
duly completed Form W-8BEN) or, in the case of payments made outside the United
States with respect to an offshore account, certain IRS documentary evidence
procedures. Further, to claim the benefit of a reduced rate of withholding under
a tax treaty for dividends paid after December 31, 2000, you must comply with
certain modified IRS certification requirements. Special rules also apply to
dividend payments made after December 31, 2000 to foreign intermediaries, U.S.
or foreign wholly owned entities that are disregarded for U.S. federal income
tax purposes and entities that are treated as fiscally transparent in the United
States, the applicable income tax treaty jurisdiction, or both. You should
consult your own tax advisor concerning the effect, if any, of the rules
affecting post-December 31, 2000 dividends on your possible investment in our
common stock.
You may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund along with the required information with the IRS.
GAIN ON DISPOSITION OF COMMON STOCK
You generally will not be subject to U.S. federal income tax with respect
to gain you recognize on a sale or other disposition of our common stock unless
one of the following applies:
- The gain is effectively connected with your trade or business in the
United States and, if a tax treaty applies, the gain is attributable to
your U.S. permanent establishment. In this case, you will, unless an
applicable treaty provides otherwise, be taxed on your net gain derived
from the sale at regular graduated U.S. federal income tax rates. If you
are a foreign corporation, you may be subject to an additional branch
profits tax equal to 30 percent of your effectively connected earnings
and profits within the meaning of the Internal Revenue Code for the
taxable year, as adjusted for certain items, unless you qualify for a
lower rate under an applicable income tax treaty and duly demonstrate
such qualification.
- You are an individual, you hold our common stock as a capital asset, you
are present in the United States for 183 or more days in the taxable year
of the disposition, and certain other conditions are met. In this case,
you will be subject to a flat 30 percent tax on the gain derived from the
sale, which may be offset by certain U.S. capital losses.
- We are or have been a "U.S. real property holding corporation" for U.S.
federal income tax purposes at any time during the shorter of the
five-year period ending on the date of the disposition or the period
during which you held our common stock. We believe that we never have
been and are not a U.S. real property holding corporation for U.S.
federal income tax purposes. Although we consider it unlikely based on
our current business plans and operations, we may or may not become a
U.S. real property holding corporation. Even if we were to become a U.S.
real property holding corporation, any gain you recognize still would not
be subject to U.S. federal income tax if our common stock were considered
to
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be "regularly traded on an established securities market" and you did not
own, actually or constructively, at any time during the shorter of the
periods described above, more than five percent of a class of our common
stock.
FEDERAL ESTATE TAX
If you are an individual, common stock you hold at the time of your death
will be included in your gross estate for U.S. federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Under U.S. Treasury regulations, we must report annually to the IRS and to
you the amount of dividends paid to you and the tax withheld with respect to
such dividends. These information reporting requirements apply even if
withholding was not required because the dividends were effectively connected
dividends or withholding was reduced by an applicable income tax treaty.
Pursuant to an applicable tax treaty, information may also be made available to
the tax authorities in the country in which you reside.
U.S. federal backup withholding generally is a withholding tax imposed at
the rate of 31 percent on certain payments to persons that fail to furnish
certain required information. Backup withholding generally will not apply to
dividends paid before January 1, 2001 to non-U.S. holders. See the discussion
under "Distribution" above for rules regarding reporting requirements to avoid
backup withholding on dividends paid after December 31, 2000.
As a general matter, information reporting and backup withholding will not
apply to a payment by or through a foreign office of a foreign broker of the
proceeds of a sale of our common stock effected outside the United States.
However, information reporting requirements, but not backup withholding, will
apply to a payment by or through a foreign office of a broker of the proceeds of
a sale of our common stock effected outside the United States if that broker:
- is a U.S. person for U.S. federal income tax purposes
- is a foreign person that derives 50 percent or more of its gross income
for certain periods from the conduct of a trade or business in the United
States
- is a "controlled foreign corporation" as defined in the Internal Revenue
Code or
- is a foreign partnership with certain U.S. connections (for payments made
after December 31, 2000)
Information reporting requirements will not apply in the above cases if the
broker has documentary evidence in its records that the holder is a non-U.S.
holder and certain conditions are met or the holder otherwise establishes an
exemption.
Payment by or through a U.S. office of a broker of the proceeds of a sale
of our common stock is subject to both backup withholding and information
reporting unless you certify to the payor in the manner required as to your
status as a non-U.S. holder under penalties of perjury or otherwise establish an
exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate U.S. federal income tax. Rather, any amounts withheld under the backup
withholding rules will be refunded or allowed as a credit against your U.S.
federal income tax liability, if any, provided the required information or
appropriate claim for refund is filed with the IRS.
THE FOREGOING DISCUSSION IS A SUMMARY OF CERTAIN U.S. FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES TO YOU OF THE OWNERSHIP, SALE OR OTHER DISPOSITION OF
OUR COMMON STOCK. YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO
THE PARTICULAR TAX CONSEQUENCES TO YOU OF OWNERSHIP AND DISPOSITION OF OUR
COMMON STOCK, INCLUDING THE EFFECT OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS.
96
<PAGE> 97
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date hereof, the underwriters named below, for whom Morgan
Stanley & Co. Incorporated, Goldman, Sachs & Co. and Salomon Smith Barney Inc.
are acting as representatives, have severally agreed to purchase, and IMPSAT has
agreed to sell to them, severally, the respective number of shares of common
stock shown opposite the names of the underwriters below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ---- ----------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Goldman, Sachs & Co. .......................................
Salomon Smith Barney Inc....................................
----------
Total..................................................... 11,500,000
==========
</TABLE>
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from IMPSAT and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered hereby are subject to
the approval of certain legal matters by their counsel and to certain other
conditions. The underwriters are obligated to take and pay for all of the shares
of common stock offered hereby if any of these shares are taken.
All shares of common stock to be purchased by the underwriters under the
underwriting agreement are referred to herein as the "shares."
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ a share under the public offering price. Any underwriter
may allow, and such dealers may reallow, a concession not in excess of $ a
share to other underwriters or to certain dealers. After the initial offering of
the shares of common stock, the offering price and other selling terms may from
time to time be varied by the representatives.
IMPSAT has granted to the underwriters an option, exercisable for 30 days
from the date of this prospectus, to purchase up to an aggregate of 1,725,000
additional shares of common stock at the public offering price set forth on the
cover page hereof, less underwriting discounts and commissions. The underwriters
may exercise this option solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of common stock offered
hereby. To the extent this option is exercised, each underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares of common stock as the number set forth
next to the underwriter's name in the preceding table bears to the total number
of shares of common stock set forth next to the names of all underwriters in the
preceding table. If the underwriters' option is exercised in full, the total
price to the public would be $ million, the total underwriters'
discounts and commissions would be $ and total proceeds to IMPSAT would be
$ .
The underwriters have informed IMPSAT that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
97
<PAGE> 98
Each of IMPSAT and the directors, executive officers and certain
stockholders of IMPSAT will agree that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the underwriters, it will not,
during the period ending 180 days after the date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock
whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise.
The restrictions described in the previous paragraph do not apply to:
- the sale of shares to the underwriters
- the issuance by IMPSAT of shares of common stock upon the exercise of an
option or a warrant or the conversion of a security outstanding on the
date of this prospectus of which the underwriters have been advised in
writing or
- transactions by any person other than IMPSAT relating to shares of common
stock or other securities acquired in open market transactions after the
completion of this offering
- 2,834,288 shares of our common stock held by Nevasa Holdings which have
been pledged to a financial institution to secure a $25 million loan to
an affiliate of Nevasa
In order to facilitate this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot in connection with
this offering, creating a short position in the common stock for their own
account. In addition, to cover over-allotments or to stabilize the price of the
common stock, the underwriters may bid for, and purchase, shares of common stock
in the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing shares of
common stock in this offering, if the syndicate repurchases previously
distributed common stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the common stock above independent market
levels. The underwriters are not required to engage in these activities, and may
end any of these activities at any time.
IMPSAT and the underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Upon
consummation of this offering, affiliates of Morgan Stanley & Co. Incorporated
will own approximately 16.3% of the outstanding shares of common stock of
IMPSAT.
At IMPSAT's request, the underwriters will reserve up to 1,150,000 shares
of common stock to be issued by IMPSAT and offered hereby for sale, at the
initial offering price, to directors, officers, employees, business associates
and related persons of IMPSAT, some of whom will agree to hold their shares for
at least 180 days after the date of this prospectus. This directed share program
will be administered by Morgan Stanley & Co. Incorporated. The number of shares
of common stock available for sale to the general public will be reduced to the
extent these persons purchase reserved shares. Any reserved shares that are not
so purchased will be offered by the underwriters to the general public on the
same basis as the other shares offered hereby.
From time to time, Morgan Stanley & Co. Incorporated has provided, and
continues to provide, investment banking services to IMPSAT for which they have
received customary fees and commissions.
The 2,850,000 additional shares of common stock to be issued to British
Telecommunications simultaneously with this offering are being sold directly by
us and not by or through the underwriters or pursuant to the underwriting
agreement.
98
<PAGE> 99
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiations
between IMPSAT and the representatives. Among the factors to be considered in
determining the initial public offering price will be the future prospects of
IMPSAT and its industry in general, sales, earnings and certain other financial
and operating information of IMPSAT in recent periods, and the price-earnings
ratios, price-sales ratios, market prices of securities and certain financial
and operating information of companies engaged in activities similar to those of
IMPSAT. The estimated initial public offering price range set forth on the cover
page of this preliminary prospectus is subject to change as a result of market
conditions and other factors.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon by
Arnold & Porter, Washington, D.C., counsel to IMPSAT. Certain legal matters will
be passed upon for the underwriters by Shearman & Sterling, New York, New York.
EXPERTS
The consolidated financial statements as of December 31, 1997 and 1998 and
for each of the three years in the period ended December 31, 1998 included in
this prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and is included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Act,
and, in accordance therewith, file reports and other information with the SEC.
These reports and other information can be inspected and copied at the public
reference facilities maintained by the SEC at: Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549; Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such materials also can
be obtained from the Public Reference Section of the SEC, at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The SEC
maintains a web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The address of such site is http://www.sec.gov. We have applied to list our
common stock on the Nasdaq National Market, and upon our listing with Nasdaq
such reports, proxy and information statements and other information also can be
inspected at the office of Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006.
We have filed with the SEC a Registration Statement on Form S-1 under the
Securities Act with respect to the common stock offered hereby. This prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules to the Registration Statement. For further
information with respect to IMPSAT and the common stock offered hereby,
reference is made to the Registration Statement and the exhibits and the
schedules filed as part of the Registration Statement. Statements contained in
this prospectus concerning the contents of any contract or any other document to
which this prospectus refers are not necessarily complete. Each such statement
is qualified in all respects to any underlying contract or document filed as an
exhibit to the Registration Statement. The Registration Statement, including
exhibits and schedules thereto, may be inspected without charge at the SEC's
principal office in Washington, D.C., and copies of all or any part thereof may
be obtained from such office after payment of fees prescribed by the SEC.
99
<PAGE> 100
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998
and as of September 30, 1999.............................. F-3
Consolidated Statements of Operations for each of the Three
Years in the Period Ended December 31, 1998 and for the
Nine Months Ended September 30, 1998 and 1999............. F-4
Consolidated Statements of Comprehensive Loss for each of
the Three Years in the Period Ended December 31, 1998 and
for the Nine Months Ended September 30, 1998 and 1999..... F-5
Consolidated Statements of Stockholders' Equity (Deficit)
for each of the Three Years in the Period Ended December
31, 1998 and for the Nine Months Ended September 30,
1999...................................................... F-6
Consolidated Statements of Cash Flows for each of the Three
Years in the Period Ended December 31, 1998 and for the
Nine Months Ended September 30, 1998 and 1999............. F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
F-1
<PAGE> 101
INDEPENDENT AUDITORS' REPORT
To the Shareholders of IMPSAT Corporation:
We have audited the accompanying consolidated balance sheets of IMPSAT
Corporation and its subsidiaries (the "Company") as of December 31, 1997 and
1998, and the related consolidated statements of operations, comprehensive loss,
stockholders' equity (deficit) and of cash flows for each of the three years in
the period ended December 31, 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by 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,
1997 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.
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 12, 1999
F-2
<PAGE> 102
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1997 1998 1999
-------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 10,439 $ 90,021 $ 146,078
Trade accounts receivable, net............................ 36,596 46,974 46,949
Other receivables......................................... 15,583 20,110 20,120
Prepaid expenses.......................................... 2,397 1,994 1,252
-------- --------- ---------
Total current assets............................... 65,015 159,099 214,399
-------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT, Net.......................... 255,422 330,726 317,219
-------- --------- ---------
NON-CURRENT ASSETS:
Trade account receivables, net............................ 5,143 5,143 --
Investment................................................ 4,178 10,708 10,287
Deferred financing costs, net............................. 4,044 10,329 9,359
Deferred income taxes, net................................ 17,875
Intangible assets, net.................................... 2,003 7,920 22,992
Other non-current assets.................................. 4,111 3,293 7,061
-------- --------- ---------
Total non-current assets........................... 19,479 37,393 67,574
-------- --------- ---------
TOTAL....................................................... $339,916 $ 527,218 $ 599,192
======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable -- trade................................. $ 25,289 $ 32,416 $ 40,061
Short-term debt........................................... 50,189 19,262 15,975
Current portion of long-term debt......................... 10,186 21,138 23,110
Accrued liabilities....................................... 8,878 12,628 13,288
Deferred income taxes, net................................ 247 120 --
Customer advances on construction project................. -- -- 22,736
Other liabilities......................................... 8,649 12,346 18,732
-------- --------- ---------
Total current liabilities.......................... 103,438 97,910 133,902
-------- --------- ---------
LONG-TERM DEBT, Net......................................... 159,677 379,292 384,113
-------- --------- ---------
OTHER LONG-TERM LIABILITIES................................. 3,014 3,446 13,844
-------- --------- ---------
COMMITMENTS AND CONTINGENCIES (Note 14)
MINORITY INTEREST........................................... 10,398 13,071 6,624
-------- --------- ---------
REDEEMABLE PREFERRED STOCK, Convertible, Series A, 10%,
cumulative dividend; 25,000 shares authorized, issued and
outstanding; liquidation preference $5,816 per share...... -- 135,018 145,389
-------- --------- ---------
STOCKHOLDERS' EQUITY (DEFICIT):
Common Stock $0.01 par value; 103,836,800 shares
authorized; 59,671,661 shares issued and outstanding at
December 31, 1997 and 1998, and 71,605,993 shares issued
and outstanding at September 30, 1999................... 597 597 716
Additional paid in capital................................ 100,196 100,196 221,013
Accumulated deficit....................................... (37,404) (71,391) (172,368)
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) (4,969)
Accumulated other comprehensive loss...................... -- (526) (4,072)
-------- --------- ---------
Total stockholders' equity (deficit)............... 63,389 (101,519) (84,680)
-------- --------- ---------
TOTAL....................................................... $339,916 $ 527,218 $ 599,192
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 103
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR LOSS PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- ---------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET REVENUES FROM SERVICES................... $128,393 $161,065 $208,089 $149,888 $ 167,129
-------- -------- -------- -------- ---------
COST AND EXPENSES:
Variable cost of services.................. 21,494 27,333 36,369 24,274 29,975
Leased telecommunications links............ 13,925 19,230 24,507 20,343 31,248
Salaries, wages and benefits............... 25,561 29,109 38,198 26,543 34,222
Selling, general and administrative........ 23,030 33,356 45,199 34,515 46,564
Depreciation and amortization.............. 26,318 28,673 36,946 26,537 88,090
-------- -------- -------- -------- ---------
Total cost and expenses............. 110,328 137,701 181,219 132,212 230,099
-------- -------- -------- -------- ---------
Operating income (loss)............. 18,065 23,364 26,870 17,676 (62,970)
-------- -------- -------- -------- ---------
OTHER INCOME (EXPENSES):
Interest expense, net...................... (23,185) (24,272) (44,698) (30,243) (41,976)
Net gain (loss) on foreign exchange........ 910 (276) 675 813 (9,500)
Other income (expense), net................ 1,035 (151) 760 485 (715)
-------- -------- -------- -------- ---------
Total other expense................. (21,240) (24,699) (43,263) (28,945) (52,191)
-------- -------- -------- -------- ---------
LOSS BEFORE INCOME TAXES, CUMULATIVE EFFECT
AND MINORITY INTEREST...................... (3,175) (1,335) (16,393) (11,269) (115,161)
(PROVISION FOR) BENEFIT FROM INCOME TAXES.... (3,542) (5,263) (3,805) (2,358) 18,952
-------- -------- -------- -------- ---------
LOSS BEFORE CUMULATIVE EFFECT AND MINORITY
INTEREST................................... (6,717) (6,598) (20,198) (13,627) (96,209)
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX...................... -- -- (1,269) (1,269) --
(INCOME) LOSS ATTRIBUTABLE TO MINORITY
INTEREST................................... (1,766) (993) (2,502) (1,717) 5,603
-------- -------- -------- -------- ---------
NET LOSS BEFORE DIVIDENDS ON REDEEMABLE
PREFERRED STOCK............................ (8,483) (7,591) (23,969) (16,613) (90,606)
DIVIDENDS ON REDEEMABLE PREFERRED STOCK...... -- -- (10,018) (6,720) (10,371)
-------- -------- -------- -------- ---------
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS............................... $ (8,483) $ (7,591) $(33,987) $(23,333) $(100,977)
======== ======== ======== ======== =========
NET LOSS PER COMMON SHARE:
BASIC AND DILUTED.......................... $ (0.18) $ (0.14) $ (0.71) $ (0.48) $ (1.89)
======== ======== ======== ======== =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
BASIC AND DILUTED.......................... 46,773 53,594 47,983 48,811 53,453
======== ======== ======== ======== =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 104
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- --------------------
1996 1997 1998 1997 1998
------- ------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET LOSS................................. $(8,483) $(7,591) $(33,987) $(23,333) $(100,977)
OTHER COMPREHENSIVE LOSS, net of tax:
Foreign currency translation
adjustment.......................... -- -- (526) -- (3,546)
------- ------- -------- -------- ---------
Comprehensive loss....................... $(8,483) $(7,591) $(34,513) $(23,333) $(104,523)
======= ======= ======== ======== =========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE> 105
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMOUNT PAID
IN EXCESS OF
CARRYING
VALUE
COMMON STOCK ADDITIONAL OF NET ASSETS
------------------- IMPSAT PAID IN ACCUMULATED TREASURY ACQUIRED FROM
SHARES STOCK ARGENTINA CAPITAL DEFICIT(*) STOCK RELATED PARTY
----------- ----- --------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995............... 30,371,422 $304 $ 13,360 $ 50,997 $ (8,240)
IMPSAT Argentina exchange (51%).......... 15,659,035 157 (13,360) 26,293 (13,090)
Net loss for the year.................... (8,483)
----------- ---- -------- -------- ---------
BALANCE AT DECEMBER 31, 1996............... 46,030,457 461 77,290 (29,813)
IMPSAT Argentina exchange (43.5%) 13,641,204 136 22,906
Additional capitalization IMPSAT Colombia
and IMPSAT Venezuela...................
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) $(125,000)
Acquisition of IMPSAT Brazil (Note 2).... $(5,679)
Change in minority interest, primarily
related to the acquisition of Mandic
S.A. (Note 2)..........................
Dividends on redeemable preferred stock.... (10,018)
Amortization of amount paid in excess of
carrying value of net assets acquired
from related party....................... 284
Foreign currency translation adjustment....
Net loss for the year...................... (23,969)
----------- ---- -------- -------- --------- --------- -------
BALANCE AT DECEMBER 31, 1998............... 44,753,746 597 100,196 (71,391) (125,000) (5,395)
Dividends on redeemable preferred
stock.................................. (10,371)
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..................... 426
Foreign currency translation
adjustment.............................
Acquisition of 24.9% of Mandic S.A. .....
Net loss for the period.................. (90,606)
----------- ---- -------- -------- --------- --------- -------
BALANCE AT SEPTEMBER 30, 1999
(unaudited).............................. 56,688,078 $716 $ -- $221,013 $(172,368) $(125,000) $(4,969)
=========== ==== ======== ======== ========= ========= =======
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE MINORITY
LOSS TOTAL INTEREST
------------- --------- --------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995............... $ 56,421 $ 28,495
IMPSAT Argentina exchange (51%)..........
Net loss for the year.................... (8,483) 1,766
--------- --------
BALANCE AT DECEMBER 31, 1996............... 47,938 30,261
IMPSAT Argentina exchange (43.5%) 23,042 (22,393)
Additional capitalization IMPSAT Colombia
and IMPSAT Venezuela................... 1,537
Net loss for the year.................... (7,591) 993
--------- --------
BALANCE AT DECEMBER 31, 1997............... 63,389 10,398
Acquisition of treasury stock............ (125,000)
Acquisition of IMPSAT Brazil (Note 2).... (5,679)
Change in minority interest, primarily
related to the acquisition of Mandic
S.A. (Note 2).......................... 171
Dividends on redeemable preferred stock.... (10,018)
Amortization of amount paid in excess of
carrying value of net assets acquired
from related party....................... 284
Foreign currency translation adjustment.... $ (526) (526)
Net loss for the year...................... (23,969) 2,502
------- --------- --------
BALANCE AT DECEMBER 31, 1998............... (526) (101,519) 13,071
Dividends on redeemable preferred
stock.................................. (10,371)
Common stock issuance.................... 120,936
Amortization of amount paid in excess of
Carrying value of net assets acquired
from related party..................... 426
Foreign currency translation
adjustment............................. (3,546) (3,546)
Acquisition of 24.9% of Mandic S.A. ..... (844)
Net loss for the period.................. (90,606) (5,603)
------- --------- --------
BALANCE AT SEPTEMBER 30, 1999
(unaudited).............................. $(4,072) $ (84,680) $ 6,624
======= ========= ========
</TABLE>
- ------------
(*) Includes an appropriation of retained earnings amounting to $1,254, $1,410
and $1,622 in 1996, 1997 and 1998, respectively, to comply with legal
reserve requirements in Argentina.
F-6
<PAGE> 106
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
-------- -------- --------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (8,483) $ (7,591) $ (23,969) $ (16,613) $(90,606)
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 1,269
Amortization and depreciation........................... 26,318 28,673 36,946 26,537 88,090
Deferred income tax provision (benefit)................. 3,012 4,964 (127) (765) (17,995)
Change in minority interest............................. 1,766 993 2,502 1,363 (6,447)
Changes in assets and liabilities:
(Increase) decrease in trade accounts receivable,
net................................................. (6,525) (13,627) (10,128) (2,510) 25
(Increase) decrease in prepaid expenses............... (1,406) 1,671 75 (700) 742
(Increase) decrease in other receivables and other
non-current assets.................................. (6,647) (4,678) (1,443) (1,474) 1,856
(Decrease) increase in accounts payable -- trade...... (41) 4,627 4,204 2,716 9,475
Increase in customer advances on construction
project............................................. 22,736
Increase in accrued and other liabilities............. 4,340 1,526 6,979 11,317 7,046
(Decrease) increase in other long-term liabilities.... (2,491) 581 432 1,186 (598)
-------- -------- --------- --------- --------
Net cash provided by operating activities........... 9,843 17,139 16,740 22,326 14,324
-------- -------- --------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment................ (53,648) (55,028) (107,461) (79,368) (74,262)
Cash paid in Mandic S.A. acquisition, net................. (8,485) (6,307) (3,700)
Cash paid in IMPSAT Brazil merger......................... (5,679) (5,100)
(Increase) decrease in investment......................... (3,052) (6,530) (5,840) 421
Capitalized license and permit costs...................... (33)
-------- -------- --------- --------- --------
Net cash used in investing activities............... (53,681) (58,080) (128,155) (96,615) (77,541)
-------- -------- --------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments on) borrowings from short-term debt......... (28,483) 18,337 (31,358) (16,253) (3,287)
Capital contribution from minority interest............... 1,537
Proceeds from long-term debt, net of deferred financing
costs................................................... 132,888 10,483 228,097 247,184 26,924
Repayments of long-term debt.............................. (37,888) (7,872) (5,216) (27,178) (21,753)
Proceeds from issuance of common stock, net............... 120,936
Acquisition of treasury stock............................. (125,000) (125,000)
Proceeds from issuance of redeemable preferred stock...... 125,000 125,000
-------- -------- --------- --------- --------
Net cash provided by financing activities........... 66,517 22,485 191,523 203,753 122,820
-------- -------- --------- --------- --------
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH
EQUIVALENTS............................................... (526) (3,546)
-------- -------- --------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 22,679 (18,456) 79,582 129,464 56,057
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 6,216 28,895 10,439 10,439 90,021
-------- -------- --------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 28,895 $ 10,439 $ 90,021 $ 139,903 $146,078
======== ======== ========= ========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................. $ 19,413 $ 23,442 $ 45,967 $ 30,078 $ 44,787
======== ======== ========= ========= ========
Foreign income taxes paid................................. $ 1,015 $ 1,375 $ 1,901 $ 1,155
======== ======== ========= ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
(Increase) decrease in equipment in transit............... $ (350) $ (1,412) $ (2,473) $ (5,365) $ 1,830
======== ======== ========= ========= ========
Common stock issued in exchange for an additional 51% and
44% of IMPSAT Argentina, respectively................... $ 26,450 $ 23,043
======== ========
Accrued dividends on redeemable preferred stock........... $ 10,018 $ 6,720 $ 10,371
========= ========= ========
Fair value of net assets acquired in Mandic S.A.
acquisition............................................. $ 1,794 $ 1,300
========= =========
Capitalized rights-of-way agreements...................... $ 12,618
========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 107
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, 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 Mexico, Ecuador, Peru (inactive),
United States, Brazil and Chile.
The Company's operating subsidiaries and percentages owned by the Company
(See Note 15) are as follows:
<TABLE>
<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
Venezuela Telecomunicaciones Impsat S.A. 100.0
Mexico Impsat S.A. de C.V. 99.9
USA Impsat USA, Inc. 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
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
$5,700. 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
F-8
<PAGE> 108
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. 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.
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 $9,800. The remaining
24.9% will be owned by Mr. Aleksander Mandic, the founder, and current president
of Mandic S.A. The initial stage of the acquisition of Mandic S.A., pursuant to
which the Company acquired a 58.5% interest, was consummated on May 29, 1998,
and the remaining 16.6% interest was acquired during November 1998. The
acquisition was accounted for as a purchase.
The purchase price was allocated as follows:
<TABLE>
<S> <C>
Estimated fair value of net assets acquired................ $1,794
Goodwill................................................... 7,991
------
Purchase price............................................. $9,785
======
</TABLE>
On July 28, 1999, the Company acquired the remaining 24.9% interest in
Mandic S.A. for $3,700.
The Company merged Mandic S.A. into Impsat Brazil on October 5, 1999 and
Mandic S.A. ceased operations, see Note 15.
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.
IMPSAT Argentina has been consolidated on the basis of its fiscal year-end,
November 30. Effective December 31, 1997, IMPSAT Argentina changed its fiscal
year to December 31. All significant intercompany transactions and balances have
been eliminated.
Interim Financial Information -- The unaudited consolidated statements as
of September 30, 1999 and for the nine months ended September 30, 1998 and 1999
have been prepared on the same basis as the audited consolidated financial
statements. In the opinion of management, such unaudited consolidated financial
statements include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the results for such periods. The
operating results for the nine-month period ended September 30, 1999 are not
necessarily indicative of the operating results to be expected for the full
fiscal year for any future period.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents -- Cash and cash equivalents are highly liquid
investments, including short-term investments and time deposits with maturities
of three months or less at the time of purchase. Cash equivalents and short-term
investments are stated at cost, which approximates 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 an engineering fee, an
installation charge and a monthly fee based on the quantity and type of
equipment installed. The fees stipulated in the contracts are generally
denominated in U.S. dollars equivalents. Services
F-9
<PAGE> 109
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 net revenue from services for the years ended December 31, 1996, 1997 and
1998 and for the nine months ended September 30, 1998 and 1999.
Property, Plant and Equipment Costs -- Property, plant and equipment are
recorded at cost and depreciated using the straight-line method over the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements............................. 10-25 years
Operating communications equipment..................... 5-10 years
Furniture, fixtures and other equipment................ 2-10 years
</TABLE>
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 at September 30, 1999. The
effect of this change in estimate totaled approximately $52,100 and was
accounted for prospectively.
Investment -- Investment represents a less than 1.0% ownership interest (at
December 31, 1997 and 1998, and September 30, 1999, respectively) by the Company
in unaffiliated entities established for the purchase and leasing of satellite
capacity time and are accounted for under the cost method.
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 -- Intangible assets include license and permit costs (in
1997), goodwill (in 1998 and 1999) and capitalized rights-of-way agreements (in
1999). License and permit costs, such as legal costs, regulatory fees and
application costs incurred to obtain and make functional the operating licenses
in each respective country in the amount of approximately $3,700, were
capitalized and were being amortized on the straight-line basis over periods not
to exceed ten 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 unamortized
license and permit costs were expensed as a cumulative effect of a change in
accounting principles. 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 $11,691 and other acquisitions of $900 are being
amortized on a straight-line basis of over a period of 15 years. Capitalized
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 planned Broadband Network. These capitalized
agreements are being amortized over the term of the rights-of-way, which range
from 5 to 20 years. 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.
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, 1996, 1997, and 1998 and for the nine months ended September 30,
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 Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards No. 109 ("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.
F-10
<PAGE> 110
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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 fair
value of such financial instruments have been determined using available market
information and interest rates as of December 31, 1997 and 1998 and September
30, 1999.
At December 31, 1998 and September 30, 1999, the fair value of the Senior
Guaranteed Notes and Senior Notes was approximately $299,000 and $324,000,
respectively, compared to the carrying value of $350,000. At December 31, 1997,
the fair value of the Senior Guaranteed Notes was approximately $129,000
compared to the carrying value of $125,000. 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 15). 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 1996 and 1997 consolidated
financial statements have been reclassified to conform with the 1998
presentation.
New Accounting Pronouncements -- In June 1997, the FASB issued SFAS No.
130, Reporting Comprehensive Income. SFAS No. 130 requires that all components
of comprehensive income be reported on one of the following: (1) the statement
of income; (2) the statement of changes in stockholders' equity; or (3) a
separate statement of comprehensive income. Comprehensive income is comprised of
net income and all changes to stockholders' equity, except those due to
investments by owners (changes in paid-in capital) and distributions to owners
(dividends). SFAS No. 130 was adopted as of January 1, 1998.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information. SFAS No. 131 changes the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports issued to shareholders. SFAS No. 131 also requires
entity-wide disclosures about the products and services an entity provides, the
foreign countries in which it holds assets and reports revenues, and its major
customers. SFAS No. 131 was adopted as of January 1, 1998.
In March 1998, the American Institute of Certified Public Accountants
issues Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides guidance
for capitalizing and expensing the costs of computer software developed or
F-11
<PAGE> 111
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
obtained for internal use. SOP 98-1 is effective for financial statements for
fiscal year beginning after December 15, 1998. Management does not expect the
adoption of SOP 98-1 to have a significant impact on the Company's financial
statements.
In June 1998, the 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. SFAS No. 133 is effective
for financial statements for fiscal years beginning after July 1, 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, by operating subsidiaries, at December 31 and
September 30 are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30
1997 1998 1999
------- -------- -------------
<S> <C> <C> <C>
IMPSAT Argentina.......................................... $27,531 $ 36,378 $ 44,441
IMPSAT Colombia........................................... 10,102 8,480 7,917
IMPSAT Venezuela.......................................... 2,202 4,293 6,055
IMPSAT Ecuador............................................ 990 1,559 2,154
IMPSAT USA................................................ 1,359 2,836 1,460
IMPSAT Brasil and Mandic S.A.............................. 2,963 1,602
Others.................................................... 345 574 1,370
------- -------- --------
Total........................................... 42,529 57,083 64,999
Less: allowance for doubtful accounts..................... (5,933) (10,109) (18,050)
------- -------- --------
Trade accounts receivable, net............................ $36,596 $ 46,974 $ 46,949
======= ======== ========
</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, 1996, 1997 and 1998 and for the nine months ended September 30,
1999 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------ ------ ------- -------------
<S> <C> <C> <C> <C>
Beginning balance.................................. $1,130 $2,803 $ 5,933 $10,109
Provision for doubtful accounts.................... 1,673 3,269 5,312 14,660
Write-offs, net of recoveries...................... (139) (1,136) (6,719)
------ ------ ------- -------
Ending balance..................................... $2,803 $5,933 $10,109 $18,050
====== ====== ======= =======
</TABLE>
F-12
<PAGE> 112
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, and September 30:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1997 1998 1999
------- ------- -------------
<S> <C> <C> <C>
IMPSAT Argentina................................... $ 4,753 $ 6,439 $ 6,528
IMPSAT Colombia.................................... 4,460 5,064 4,733
IMPSAT Venezuela................................... 2,133 2,527 1,523
IMPSAT Ecuador..................................... 548 835 485
IMPSAT Mexico...................................... 2,133 1,078 2,437
IMPSAT Brazil and Mandic S.A....................... 1,124 2,708
Others............................................. 1,556 3,043 1,706
------- ------- -------
Total.................................... $15,583 $20,110 $20,120
======= ======= =======
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, and September 30 consisted
of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1997 1998 1999
-------- --------- -------------
<S> <C> <C> <C>
Land............................................ $ 1,478 $ 1,750 $ 3,819
Building and improvements....................... 23,312 29,760 28,145
Operating communications equipment.............. 301,525 398,577 467,207
Furniture, fixtures and other equipment......... 14,503 20,271 19,185
-------- --------- ---------
Total................................. 340,818 450,358 518,356
Less: accumulated depreciation.................. (92,255) (126,728) (211,430)
-------- --------- ---------
Total................................. 248,563 323,630 306,926
Equipment in transit............................ 6,525 4,289 2,459
Projects in process (Broadband Network in
1999)......................................... 334 2,807 7,834
-------- --------- ---------
Property, plant and equipment, net.............. $255,422 $ 330,726 $ 317,219
======== ========= =========
</TABLE>
The recap of accumulated depreciation for the years ended December 31,
1996, 1997 and 1998 and for the nine months ended September 30, 1999 is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------- ------- -------- -------------
<S> <C> <C> <C> <C>
Beginning balance............................... $47,155 $64,250 $ 92,255 $126,728
Depreciation expense............................ 25,913 29,665 36,027 85,939
Disposals and retirements....................... (8,818) (1,660) (1,554) (1,237)
------- ------- -------- --------
Ending balance.................................. $64,250 $92,255 $126,728 $211,430
======= ======= ======== ========
</TABLE>
F-13
<PAGE> 113
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. SHORT-TERM DEBT
The Company's short-term debt at December 31, and September 30, is detailed
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1997 1998 1999
------- ------- -------------
<S> <C> <C> <C>
Commercial paper (7.55% to 8.33%)................... $25,000
Short-term credit facilities, denominated in U.S.
dollars; interest rates ranging from 5.72% to
15.00%;
IMPSAT Argentina.................................. 15,850 $11,000 $10,240
IMPSAT Colombia................................... 5,414 5,859 422
IMPSAT Venezuela.................................. 1,714
IMPSAT Ecuador.................................... 992 186
Others............................................ 203 719
Short-term credit facilities, denominated in local
currencies; local interest rates ranging from
12.0% to 25.0%;
IMPSAT Argentina.................................. 2,000
IMPSAT Colombia................................... 4,408
IMPSAT Ecuador.................................... 200
IMPSAT Venezuela.................................. 1,219
------- ------- -------
Total short-term debt..................... $50,189 $19,262 $15,975
======= ======= =======
</TABLE>
The Company has historically refinanced its short term credit facilities on
an annual basis.
F-14
<PAGE> 114
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. LONG-TERM DEBT
The Company's long-term debt at December 31, and September 30, is detailed
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
<S> <C> <C> <C>
12.125% Senior Guaranteed Notes due 2003................. $125,000 $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 $14,000 and the assignment of customer
contracts totalling approximately $12,000
denominated in:
U.S. dollars (interest rates 8.50% -- 13.13%)....... 27,111 32,204 25,435
Local currency (interest rates 20% -- 41%).......... 6,380 6,156 12,533
IMPSAT Argentina (6.56% -- 6.75%), maturing
semiannually through 2003, collateralized by
investment.......................................... 2,435 4,802 4,184
IMPSAT USA (8.25% -- 8.75%), mortgage and other
collateralized debts................................ 2,066 1,811
IMPSAT Venezuela (9.00% -- 10.75%), maturing during
2001................................................ 5,550 3,508 1,683
IMPSAT Brazil (12.69%), maturing during 2004........... 3,854
Eximbank notes payable (7.00%), maturing semiannually
through 1999 and 2004.................................. 3,387 1,694 7,723
-------- -------- --------
Total long-term debt........................... 169,863 400,430 407,223
Less: current portion.................................... (10,186) (21,138) (23,110)
-------- -------- --------
Long-term debt, net...................................... $159,677 $379,292 $384,113
======== ======== ========
</TABLE>
The scheduled maturities of long-term debt at December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
1999..................................................... $ 21,138
2000..................................................... 19,613
2001..................................................... 5,541
2002..................................................... 3,029
2003 and thereafter...................................... 351,109
--------
Total.......................................... $400,430
========
</TABLE>
The Senior Guaranteed Notes, Senior Notes and some of the term notes
payable for IMPSAT Colombia and IMPSAT Venezuela contain certain covenants
requiring certain financial ratios, limiting the incurrence of additional
indebtedness and capital expenditures, and restricting the ability to pay
dividends.
F-15
<PAGE> 115
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES
The components of the (provision for) benefit from income taxes, all of
which are for foreign taxes, for the years ended December 31, 1996, 1997 and
1998 and for the nine months ended September 30, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Current.............................. $ (530) $ (299) $(3,932) $(3,123) $ (974)
Deferred............................. (3,012) (4,964) 127 765 19,926
------- ------- ------- ------- -------
Total...................... $(3,542) $(5,263) $(3,805) $(2,358) $18,952
======= ======= ======= ======= =======
</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 $24,235, which
begin to expire in the year 2010. Deferred taxes result from temporary
differences in the capitalization policies of preoperating costs and net
operating loss carryforwards. The composition of net deferred tax liability at
December 31 is as follows:
<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Deferred tax assets:
Preoperating costs:
IMPSAT Colombia........................................ $ 1,698 $ 1,787
IMPSAT Venezuela....................................... 1,380 1,065
IMPSAT Ecuador......................................... 58
Net operating loss carryforwards:
IMPSAT Brazil.......................................... 2,576
IMPSAT Venezuela....................................... 4,048 3,604
IMPSAT Mexico.......................................... 2,487 3,369
IMPSAT Ecuador......................................... 876
Company and IMPSAT USA................................. 2,745 9,249
Other:
IMPSAT Colombia........................................ 139 23
IMPSAT Mexico.......................................... 54 63
------- --------
Gross deferred tax assets................................... 13,485 21,736
------- --------
Deferred tax liabilities:
IMPSAT Argentina.......................................... (4,301) (4,301)
IMPSAT Colombia........................................... (389)
IMPSAT Mexico............................................. (293) (197)
------- --------
Gross deferred tax liabilities.............................. (4,983) (4,498)
------- --------
Less: valuation allowance................................... (8,749) (17,358)
------- --------
Net deferred tax liability.................................. $ (247) $ (120)
======= ========
</TABLE>
As there is no assurance that the Company will generate sufficient earnings
to utilize its available tax assets, a valuation allowance has been established
to offset deferred tax assets.
F-16
<PAGE> 116
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. 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
Morgan Stanley Dean Witter & Co., and to certain other investors affiliated with
Princes Gate and MSGEM (such investors along with Princes Gate and MSGEM, the
"Purchasers"). The Series A Preferred Stock was convertible at September 30,
1999 into 20.6% of the Common Stock of the Company.
The following are some of the principal features of the Series A Preferred
Stock: (a) cumulative dividends at the rate of 10% per annum, compounded
quarterly and, with certain exceptions, payable in kind; (b) mandatorily
redeemable in cash by the Company at maturity (ten years after issuance) plus
accrued and unpaid dividends; (c) callable under certain circumstances by the
Company, in whole, at 100% of the principal amount, plus accrued and unpaid
dividends; (d) convertible into common stock of the Company at any time at the
option of the Purchasers (including upon a call by the Company), at a specified
conversion rate subject to certain antidilution rights; (e) the right by
Purchasers holding a certain minimum number of outstanding Series A Preferred
Stock to appoint two directors to the Company's Board of Directors as well as to
immediately appoint half of the members of the Company's Board of Directors upon
the occurrence of certain specified events; and (f) the right by Directors
appointed by the Purchasers holding a certain minimum number of outstanding
Series A Preferred Stock, to a veto over certain major corporate actions.
11. STOCK OPTION PLAN
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 nine months ended September 30, 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 1. Accordingly, no compensation expense has been recognized in
the year ended December 31, 1998 and the nine months ended September 30, 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
F-17
<PAGE> 117
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $225 and $231
for the year ended December 31, 1998 and the nine months ended September 30,
1999, respectively.
12. OPERATING SEGMENT INFORMATION
The Company's operating segment information, by subsidiary (eliminating
intercompany transactions), is as follows as of and for the years ended December
31, 1996, 1997 and 1998 and for the nine months ended September 30, 1998 and
1999:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS
IMPSAT Argentina.............. $177,952 $197,820 $234,844 $221,033 $226,743
IMPSAT Colombia............... 70,501 85,709 105,187 100,069 92,733
IMPSAT Venezuela.............. 23,718 27,478 36,269 34,230 38,426
IMPSAT Mexico................. 7,043 6,199 8,640 10,244 10,424
IMPSAT Ecuador................ 9,795 12,991 21,262 20,573 21,839
IMPSAT USA.................... 997 5,931 15,095 12,812 16,750
IMPSAT Brazil................. 27,348 16,731 55,473
Parent Company and Others..... 25,224 3,788 78,573 138,622 136,804
-------- -------- -------- -------- --------
CONSOLIDATED TOTAL.... $315,230 $339,916 $527,218 $554,314 $599,192
======== ======== ======== ======== ========
NET REVENUES FROM SERVICES
SATELLITE BASED VSAT TECHNOLOGY
IMPSAT Argentina.............. $ 37,473 $ 33,022 $ 37,653 $ 29,101 $ 31,361
IMPSAT Colombia............... 15,950 17,458 13,491 12,386 9,221
IMPSAT Venezuela.............. 1,514 2,623 4,318 3,235 6,958
IMPSAT Mexico................. 16 65 184 121 204
IMPSAT Ecuador................ 1,159 1,467 1,624 1,223 1,310
IMPSAT USA.................... -- 32
IMPSAT Brazil................. 469 244 1,399
-------- -------- -------- -------- --------
CONSOLIDATED TOTAL.... $ 56,112 $ 54,635 $ 57,739 $ 46,310 $ 50,485
======== ======== ======== ======== ========
SCPC TECHNOLOGY
IMPSAT Argentina.............. $ 31,232 $ 31,638 $ 26,078 $ 18,918 $ 19,119
IMPSAT Colombia............... 11,416 15,336 22,058 15,842 19,429
IMPSAT Venezuela.............. 2,694 5,041 6,938 4,826 5,988
IMPSAT Mexico................. 182 1,321 2,951 2,094 1,678
IMPSAT Ecuador................ 1,511 2,967 5,433 3,674 4,932
IMPSAT USA.................... 471 3,547 6,536 5,427 4,385
IMPSAT Brazil................. 1,019 482 1,500
-------- -------- -------- -------- --------
CONSOLIDATED TOTAL.... $ 47,506 $ 59,850 $ 71,013 $ 51,263 $ 57,031
======== ======== ======== ======== ========
</TABLE>
F-18
<PAGE> 118
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
TERRESTRIAL BASED
IMPSAT Argentina.............. $ 5,432 $ 7,123 $ 16,389 $ 12,009 $ 13,714
IMPSAT Colombia............... 5,416 12,073 15,696 11,555 8,910
IMPSAT Venezuela.............. 212 443 837 530 1,041
IMPSAT Mexico................. 9 64 47 92
IMPSAT Ecuador................ 17 209 604 422 919
IMPSAT Brazil................. 46 26 134
-------- -------- -------- -------- --------
CONSOLIDATED TOTAL.... $ 11,077 $ 19,857 $ 33,636 $ 24,589 $ 24,810
======== ======== ======== ======== ========
VALUE ADDED
IMPSAT Argentina.............. $ 11,011 $ 19,007 $ 18,025 $ 11,991 $ 12,717
IMPSAT Colombia............... 2,496 4,646 8,658 5,303 7,234
IMPSAT Venezuela.............. 76 500 2,772 1,684 2,130
IMPSAT Mexico................. 32 1,145 1,077 195
IMPSAT Ecuador................ 115 871 2,156 1,454 2,320
IMPSAT USA.................... 1,471 2,587 1,220 2,410
IMPSAT Brazil................. 2,112 462 1,278
Parent Company and Others..... 196 8,246 4,535 6,519
-------- -------- -------- -------- --------
CONSOLIDATED TOTAL.... $ 13,698 $ 26,723 $ 45,701 $ 27,726 $ 34,803
======== ======== ======== ======== ========
TOTAL
IMPSAT Argentina.............. $ 85,148 $ 90,790 $ 98,145 $ 72,019 $ 76,911
IMPSAT Colombia............... 35,278 49,513 59,903 45,086 44,794
IMPSAT Venezuela.............. 4,496 8,607 14,865 10,275 16,117
IMPSAT Mexico................. 198 1,427 4,344 3,339 2,169
IMPSAT Ecuador................ 2,802 5,514 9,817 6,773 9,481
IMPSAT USA.................... 471 5,018 9,123 6,647 6,827
IMPSAT Brazil................. 3,646 1,214 4,311
Parent Company and Others..... 196 8,246 4,535 6,519
-------- -------- -------- -------- --------
CONSOLIDATED TOTAL.... $128,393 $161,065 $208,089 $149,888 $167,129
======== ======== ======== ======== ========
OPERATING INCOME (LOSS)
IMPSAT Argentina.............. $ 14,459 13,299 $ 14,779 $ 14,022 $(32,164)
IMPSAT Colombia............... 14,256 20,213 21,458 18,562 (3,434)
IMPSAT Venezuela.............. (731) (811) 366 1,334 (1,662)
IMPSAT Mexico................. (1,759) (1,809) (2,333) (1,194) (3,017)
IMPSAT Ecuador................ 82 1,651 1,535 2,225 256
IMPSAT USA.................... (325) 297 1,057 698 (293)
IMPSAT Brazil................. -- -- (7,611) (4,297) (11,889)
Parent Company and Others..... (7,917) (9,476) (2,381) (13,674) (10,767)
-------- -------- -------- -------- --------
CONSOLIDATED TOTAL.... $ 18,065 $ 23,364 $ 26,870 $ 17,676 $(62,970)
======== ======== ======== ======== ========
</TABLE>
13. 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, 1996, 1997 and 1998, such services totaled
approximately $1,800,
F-19
<PAGE> 119
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$6,700 and $10,080, 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, 1996, 1997 and 1998, such transactions totaled approximately $856,
$3,755 and $4,256, respectively.
Investment banking fees amounting to $5,900 were paid to representative
affiliates of the redeemable preferred stock shareholders during 1998.
14. COMMITMENTS AND CONTINGENCIES
The Company leases satellite capacity with average annual rental
commitments of approximately $26,000, through the year 2003. In addition, the
Company has commitments to purchase communications equipment amounting to
approximately $6,833 and $14,600 at December 31, 1998 and September 30, 1999,
respectively, and was obligated under letter of credits amounting to
approximately $69 at December 31, 1998.
The Company is a third party guarantor of up to 75% of a $6,000 credit
facility provided to IMPSAT Venezuela by a regional development fund. At
December 31, 1998 and September 30, 1999, the balance outstanding on the credit
facility amounted to approximately $3,500 and $1,700, respectively.
IMPSAT Brazil has entered into a $3,900 term note with El Camino Resources,
which is guaranteed by the Company and IMPSAT Argentina.
During May 1997, the Company and IMPSAT Argentina entered into a three
party arrangement with a financial institution whereby $60,000 was borrowed by
the subsidiary and concurrently a like amount certificate of deposit was placed
at the financial institution by the Company. The arrangements establish a right
of setoff and, accordingly, the amounts have been netted for purposes of the
consolidated financial statement presentation. The arrangements expired in
October 1999.
The Company is involved in or subject to various litigation and legal
proceedings incidental to the normal conduct of its business. Whenever
justified, the Company expects to vigorously prosecute or defend such claims,
although there can be no assurance that the Company will ultimately prevail with
respect to any such matters.
In November 1996, IMPSAT Argentina filed suit against one of its customers,
ENCOTESA, for amounts due and arising under IMPSAT Argentina's contracts with
ENCOTESA, the Argentine national postal service for $7,300. In 1996, the Company
reclassified the trade account receivables from ENCOTESA to non-current assets
at the estimated net realizable value of $5,143 as determined by the Company's
management based on the advice of local legal counsel. At September 30, 1999,
the Company had estimated the net realizable value to be zero and, accordingly,
recorded an adjustment of $5,143, which is included within selling, general and
administrative expenses in the accompanying consolidated statement of
operations.
15. SUBSEQUENT EVENTS
Devaluations -- The Brazilian Central Bank introduced changes in the
exchange policies by the end of the second week of January 1999. These changes
eliminated the exchange range whereby the fluctuation margin of the Brazilian
real in relation to the United States dollar was managed, allowing the market to
freely negotiate the rate of exchange. The Brazilian real has experienced a
significant decline in value in relation to the United States dollar, if
compared with the prevailing exchange rates of December 31, 1998. As a result of
this devaluation, the Company has recorded approximately $11,226 in foreign
exchange losses during the nine-month period ended September 30, 1999, which are
reflected in net gain (loss) on foreign exchange in the accompanying statement
of operations. The Company continues to operate in Brazil and therefore has
exposure to further currency exchange risk.
F-20
<PAGE> 120
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In the first week of January 2000, the Ecuadoran government declared a
national emergency and the Ecuadoran sucre devalued approximately 40% against
the U.S. dollar. The effect on the Company is yet to be determined.
Common Stock -- In connection with the Share Purchase Agreement described
below, the Board amended and restated the articles of incorporation of the
Company, increasing the authorized shares of common stock from 150,000,000 to
175,400,000.
Share Purchase Agreement -- On March 11, 1999, a Share Purchase Agreement
was entered into among the Company, Nevassa and Nunsgate Limited, a wholly owned
subsidiary of British Telecommunications plc ("BT"), in which the Company agreed
to issue, sell and deliver 11,333,186 newly issued shares of common stock to BT
and Nevasa agreed to sell 2,266,639 currently owned shares of common stock to BT
for $125,000 and $25,000, respectively. These transactions were consummated on
April 19, 1999.
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 $265,000. 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
- 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
- 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 Networks to borrow an aggregate
of up to approximately $149,000 and $148,300, 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
F-21
<PAGE> 121
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $64,000 for the Company's turnkey
construction of the Trans-Andean Crossing System, which includes:
- construction of three ducts and related facilities over 368 route
kilometers between Las Toninas and Buenos Aires, Argentina and over 464
route kilometers between Mendoza, Argentina and Valparaiso, Chile
- licensing to Global Crossing of one duct on our Broadband Network between
the cities of Buenos Aires and Mendoza in Argentina
During September 1999, Global Crossing paid the Company $23,200 in respect
of the ongoing construction of the Trans-Andean Crossing System.
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.
Framework Agreement with El Sitio -- On August 4, 1999, the Company entered
into a Framework Agreement with El Sitio, Inc. for the sale of the Company's
retail Internet businesses in Argentina, Brazil and Colombia for approximately
$21,500 and the purchase of shares of El Sitio's 8% convertible redeemable
preferred stock for $21,500. 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. In connection
with these transactions, El Sitio will enter into telecommunications services
agreements with IMPSAT Argentina, IMPSAT Brazil and IMPSAT Columbia 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. The Company
has classified and will account for its investment in El Sitio's common stock as
"available for sale" securities in accordance with SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities.
In anticipation of the Brazil transaction contemplated by the El Sitio
Framework Agreement, the Company merged Mandic S.A. into IMPSAT Brazil on
October 5, 1999, and Mandic S.A. ceased operations. On October 6, 1999, IMPSAT
Brazil sold the retail internet business acquired in the Mandic S.A. merger 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 $12,300.
On November 5, 1999, IMPSAT Argentina consummated the sale of its retail
Internet businesses to El Sitio for $6,200, of which $5,300 was received on that
date with the remainder due in 24 equal monthly
F-22
<PAGE> 122
IMPSAT FIBER NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $3,000. The Company and El Sitio
expect to consummate the sale of the Company's retail internet business in
Colombia to El Sitio by the end of January 2000.
New Stock Option Plan -- On January 5, 2000, the Company's board of
directors adopted the 1999 stock option plan, which provides for the grants to
its key officers and employees of stock options that are non-qualified for U.S.
federal income tax purposes. 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 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 stock option plan is January 5, 2010
Initial Public Offering -- The Company's Board has authorized the filing of
a registration statement relating to an initial public offering ("IPO") of
11,500,000 shares of common stock. In addition, British Telecommunications has
informed the Company of its intention to purchase shares of the Company's common
stock simultaneously with this offering to maintain its approximate current
ownership share in the Company. In connection with 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.
The Purchasers of the redeemable preferred stock have informed the Company
that they will covert their preferred shares into 14,917,915 common stock at the
closing of the IPO and the Company will use a portion of the proceeds from the
IPO to redeem the remaining shares of its preferred stock.
* * * * * *
F-23
<PAGE> 123
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses (other than underwriting
compensation) expected to be incurred by us in connection with this offering.
All of these amounts (other than the SEC Registration Fee and NASD filing fee)
are estimated.
<TABLE>
<S> <C>
Registration Fee........................................ $ 44,604
NASD Filing Fee......................................... 16,600
Nasdaq National Market Listing Fee...................... 43,125
Legal Services.......................................... 600,000
Printing and Engraving.................................. 150,000
Accounting Fees......................................... 200,000
Blue Sky Fees and Expenses.............................. 10,000
Miscellaneous........................................... 545,671
----------
Total......................................... $1,610,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any persons, including directors and officers, who are
(or are threatened to be made) parties to any threatened, pending or completed
legal action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of their being directors or officers of the
corporation. The indemnity may include expenses, attorneys' fees, judgments,
fines and amounts paid in settlement, provided such sums were actually and
reasonably incurred in connection with such action, suit or proceeding and
provided the director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, in the case of criminal proceedings, provided he had no reasonable cause to
believe that his conduct was unlawful. The corporation may indemnify directors
and officers in a derivative action (in which suit is brought by a stockholder
on behalf of the corporation) under the same conditions, except that no
indemnification is permitted without judicial approval if the director or
officer is adjudged liable to the corporation. If the director or officer is
successful on the merits or otherwise in defense of any actions referred to
above, the corporation must indemnify him against the expenses and attorneys'
fees he actually and reasonably incurred.
Article VII Section 1 of our by-laws provides that we shall indemnify our
officers and directors to the fullest extent permitted by the Delaware General
Corporation Law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On March 19, 1998, the Morgan Stanley investors purchased 25,000 shares of
our Series A preferred stock. On April 19, 1999, we sold 20,158,528 newly issued
shares of its common stock to Nunsgate Limited. These transactions were effected
without the securities sold being registered under the Securities Act, in
reliance upon the exemption provided by Section 4(2) of the Securities Act for
transactions not involving a public offering.
We have agreed to issue 5,472,579 shares of our common stock to minority
shareholders in our subsidiaries in Argentina, Venezuela and Colombia in
exchange for their minority interests in those subsidiaries. These transactions
will be effected without the securities being registered under the Securities
Act, in reliance upon the exemption provided by Regulation S under the
Securities Act.
II-1
<PAGE> 124
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The exhibits listed on the Exhibit Index of this Registration
Statement (numbered in accordance with Item 601 of Regulation S-K) are filed
herewith, or, as noted, have been previously filed, will be filed by amendment,
or are incorporated herein by reference to other filings.
(b) Financial Statement Schedules. All schedules for which provision is
made in the applicable accounting regulations of the Commission are omitted
because they are not applicable, or the information is included in the financial
statements included herein.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(1) The undersigned will provide to the underwriters at the closing
specified in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriters to permit
prompt delivery to each purchaser.
(2) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance on Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it is declared effective.
(3) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities a that time shall be
the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item 14,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-2
<PAGE> 125
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Buenos
Aires in the Republic of Argentina, January 13, 2000.
IMPSAT FIBER NETWORKS, INC.
By: /s/ RICARDO A. VERDAGUER
----------------------------------
Ricardo A. Verdaguer
President and Chief Executive
Officer of IMPSAT Fiber
Networks, Inc.
Date: January 13, 2000
II-3
<PAGE> 126
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 THIS AMENDMENT
NO. 1 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ * Chairman of the Board of January 13, 2000
- ----------------------------------------------------- Directors of IMPSAT
Enrique M. Pescarmona Fiber Networks, Inc.
/s/ RICARDO A. VERDAGUER Director, President and January 13, 2000
- ----------------------------------------------------- Chief Executive Officer
Ricardo A. Verdaguer of IMPSAT Fiber
Networks, Inc.
/s/ GUILLERMO JOFRE Chief Financial Officer of January 13, 2000
- ----------------------------------------------------- IMPSAT Fiber Networks,
Guillermo Jofre Inc.
/s/ JOSE R. TORRES Vice President, January 13, 2000
- ----------------------------------------------------- Administration and Chief
Jose R. Torres Accounting Officer of
IMPSAT Fiber Networks,
Inc.
/s/ * Director, Deputy Chief January 13, 2000
- ----------------------------------------------------- Executive Officer and
Roberto Vivo Vice President,
Marketing of IMPSAT
Fiber Networks, Inc.
/s/ * Director and Vice January 13, 2000
- ----------------------------------------------------- President, International
Alexander Rivelis Development of IMPSAT
Fiber Networks, Inc.
/s/ * Director of IMPSAT Fiber January 13, 2000
- ----------------------------------------------------- Networks, Inc.
Lucas Pescarmona
/s/ * Director of IMPSAT Fiber January 13, 2000
- ----------------------------------------------------- Networks, Inc.
Sofia Pescarmona
/s/ * Director of IMPSAT Fiber January 13, 2000
- ----------------------------------------------------- Networks, Inc.
Jeronimo Bosch
/s/ * Director of IMPSAT Fiber January 13, 2000
- ----------------------------------------------------- Networks, Inc.
Stephen R. Munger
</TABLE>
II-4
<PAGE> 127
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director of IMPSAT Fiber January 13, 2000
- ----------------------------------------------------- Networks, Inc.
Geoffrey Almeida
Director of IMPSAT Fiber January 13, 2000
- ----------------------------------------------------- Networks, Inc.
John McElligott
*By: /s/ GUILLERMO JOFRE
Guillermo Jofre
Attorney in Fact
</TABLE>
II-5
<PAGE> 128
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
- ------- ----------- ----
<C> <S> <C>
1.1 -- Form Underwriting Agreement among the Company, Morgan
Stanley & Co., Inc., Goldman, Sachs & Co. and Salomon
Smith Barney, Inc.
3.1 -- Amended and Restated Certificate of Incorporation of the
Company
3.2 -- Amended and Restated Bylaws of the Company
4.1* -- Securityholders Agreement dated as of March 19, 1998,
among Nevasa Holdings, the Morgan Stanley investors and
certain other parties
4.2 -- Shareholders Agreement dated as of March 10, 1999
4.3 -- Specimen Stock Certificate
5.1 -- Form of Opinion of Arnold & Porter as to the legality of
the securities being registered (including consent)
9.1 -- 1999 Stock Option Plan
10.1+** -- Global Crossing Framework Agreement
10.2+** -- Turnkey Project Agreement between IMPSAT Argentina and
Nortel
In accordance with Instruction 2 to Item 601 of Regulation
S-K, the following agreement was not filed as an exhibit
because it is substantially identical in all material
respects to Exhibit 10.2: Turnkey Project Agreement
between IMPSAT Brazil and Nortel
10.3+** -- TAC Turnkey Construction and IRU Agreement among IMPSAT
Argentina, IMPSAT Chile and South American Crossing Ltd.
10.4 -- Financing Agreement between IMPSAT Argentina and Nortel
In accordance with Instruction 2 to Item 601 of Regulation
S-K, the following agreement was not filed as an exhibit
because it is substantially identical in all material
respects to Exhibit 10.4: Vendor Financing Agreement
between IMPSAT Brazil and Nortel
21.1 -- List of subsidiaries of the Company (incorporated by
reference to the "Summary" section of the Prospectus
hereto)
23.1 -- Consent of Deloitte & Touche LLP, Miami, Florida
23.2 -- Consent of Arnold & Porter (contained in its opinion to
be filed as Exhibit 5.1 hereto)
24.1** -- Power of Attorney (included on the signature page hereto)
27.1 -- Financial Data Schedule
</TABLE>
- ------------
* Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for 1997, filed with the Commission on April 15, 1998, and incorporated
herein by reference.
** Previously filed.
+ Confidential treatment requested as to certain portions, which portions
were omitted and filed separately with the Commission.
<PAGE> 1
Exhibit 1.1
Shares
IMPSAT FIBER NETWORKS, INC.
Common Stock, Par Value $0.01 Per Share
UNDERWRITING AGREEMENT
, 2000
<PAGE> 2
, 2000
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Salomon Smith Barney Inc.
c/o 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 the several Underwriters (as defined
below) shares of its common stock, par value $0.01 per share (the
"FIRM SHARES").
It is understood that, subject to the conditions hereinafter
stated, the Firm Shares will be sold to the several Underwriters named in
Schedule I hereto (the "UNDERWRITERS") in connection with the initial public
offering and sale of such Firm Shares. Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co. and Salomon Smith Barney Inc. shall act as representatives
(the "REPRESENTATIVES") of the several Underwriters.
The Company also proposes to issue and sell to the several
Underwriters not more than an additional shares of its common stock,
[par value $ per share][no par value] (the "ADDITIONAL SHARES") if and to the
extent that the Representatives shall have determined to exercise, on behalf of
the Underwriters, the right to purchase such shares of common stock granted to
the Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares
are hereinafter collectively referred to as the "SHARES". The shares of common
stock, par value $0.01 per share of the Company to be outstanding after giving
effect to the sales contemplated hereby are hereinafter referred to as the
"COMMON STOCK".
The Company has filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement relating to the Shares.
The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS".
If the Company has filed an abbreviated registration statement to register
<PAGE> 3
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "Registration Statement" shall be deemed to include such Rule 462
Registration Statement.
As part of the offering contemplated by this Agreement, the
Underwriters have agreed to reserve out of the Shares set forth opposite each of
their names on Schedule I to this Agreement, up to shares, for sale to the
Company's employees, officers, and directors and other parties associated with
the Company (collectively, "PARTICIPANTS"), as set forth in the Prospectus under
the heading "Underwriting" (the "DIRECTED SHARE PROGRAM"). The Shares to be sold
by the Underwriters pursuant to the Directed Share Program (the "DIRECTED
SHARES") will be sold by the Underwriters pursuant to this Agreement at the
public offering price. Any Directed Shares not orally confirmed for purchase by
any Participants by the end of the business day on which this Agreement is
executed will be offered to the public by the Underwriters as set forth in the
Prospectus.
1. Representations and Warranties. The Company represents and
warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective;
no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are pending
before or threatened by the Commission.
(b) (i) The Registration Statement, when it became
effective, did not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) the
Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with
the Securities Act and the applicable rules and regulations of the
Commission thereunder and (iii) the Prospectus does not contain and, as
amended or supplemented, if applicable, 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 paragraph do not apply to statements
or omissions in the Registration Statement or the Prospectus, both, as
amended or supplemented, if applicable, based upon information relating
to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is
validly existing as a corporation in good standing 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 the Prospectus 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
2
<PAGE> 4
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 owned by the Company, free and clear of all liens,
encumbrances, equities or claims.
(d) Each subsidiary of the Company has been duly
incorporated, 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 the Prospectus and
is duly qualified to transact business in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to
be so qualified would not have a material adverse effect on such
subsidiary. IMPSAT S.A. ("IMPSAT ARGENTINA") is a 95.2% owned
subsidiary of the Company, IMPSAT S.A. ("IMPSAT COLOMBIA") is a 74.2%
owned subsidiary of the Company, IMPSATel del Ecuador S.A. ("IMPSAT
ECUADOR") is a wholly owned subsidiary of the Company, IMPSAT S.A. de
C.V. ("IMPSAT MEXICO") is a 99.9% owned subsidiary of the Company,
Telecomunicaciones IMPSAT S.A. ("IMPSAT VENEZUELA") is a 75% owned
subsidiary of the Company and IMPSAT Comunicacoes Ltda. ("IMPSAT
BRAZIL") is a 99.9% owned subsidiary of the Company.
(e) This Agreement has been duly authorized, executed
and delivered by the Company.
(f) The authorized, issued and outstanding capital
stock of the Company conforms to the description thereof contained in
the Prospectus.
(g) The shares of Common Stock outstanding prior to
the issuance of the Shares have been duly authorized and are validly
issued, fully paid and nonassessable.
(h) The Shares have been duly authorized and, when
issued and delivered in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable, and the issuance
of such Shares will not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and
the performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law, the certificate of
incorporation or bylaws of the Company, as amended to date, any
agreement or other instrument binding upon the Company or any of its
subsidiaries that is material to the Company and its subsidiaries,
taken as a whole (except to the extent that any such contravention
would not have a Material Adverse Effect on the Company and its
subsidiaries, taken as a whole), or any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the
Company or any subsidiary; and no consent, approval, authorization or
order of, or qualification with, any governmental body
3
<PAGE> 5
or agency is required for the performance by the Company of its
obligations under this Agreement, 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 Shares.
(j) 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 Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement).
(k) There are no legal or governmental proceedings
pending or, to the knowledge of the Company, 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 that
are required to be described in the Registration Statement or the
Prospectus and are not so described, or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as required,
except to the extent that such proceeding, statute, regulation,
contract or other document is not reasonably likely to have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to
the offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus 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) The Company and its subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, singly or in the
4
<PAGE> 6
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(o) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for cleanup, 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.
(p) 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 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 will not, in the case of dates or 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, (i) the Company has no reason to believe, and
does not believe, that (A) there are any issues related to the
Company's preparedness to address the Year 2000 Problem that are of a
character required to be described or referred to in the Registration
Statement or Prospectus which have not been accurately described in the
Registration Statement or Prospectus and (B) the Year 2000 Problem will
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; (ii) the Company reasonably believes,
after due inquiry, that the suppliers, vendors, customers or other
material third parties used or served by the Company and such
subsidiaries are addressing or will address the Year 2000 Problem in a
timely manner, except to the extent that a failure to address the Year
2000 Problem by any supplier, vendor, customer or material third party
would not 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; and (iii) 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 Registration Statement or Prospectus
which have not been accurately described in the Registration Statement
or Prospectus.
(q) Except as disclosed in the Registration Statement
and the Prospectus, there are no contracts, agreements or
understandings between the Company and any person granting such person
the right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company or to
require the Company
5
<PAGE> 7
to include such securities with the Shares registered pursuant to the
Registration Statement (or any such right has been waived).
(r) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
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.
(s) The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good 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
Prospectus 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 Prospectus.
(t) 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
Prospectus, 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.
(u) No material labor dispute with the employees of
the Company or any of its subsidiaries exists, except as described in
or contemplated by the Prospectus, 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.
(v) 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
6
<PAGE> 8
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole, except as described
in the Prospectus.
(w) 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 (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of consolidated financial
statements in conformity with generally accepted accounting principles
and to maintain asset accountability; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
Furthermore, the Company represents and warrants to the
Underwriters that (i) the Registration Statement, the Prospectus and any
preliminary prospectus comply, and any further amendments or supplements thereto
will comply, with any applicable laws or regulations of foreign jurisdictions in
which the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share Program,
and that (ii) no authorization, approval, consent, license, order, registration
or qualification of or with any government, governmental instrumentality or
court, other than such as have been obtained, is necessary under the securities
laws and regulations of foreign jurisdictions in which the Directed Shares are
offered outside the United States.
The Company has not offered, or caused to the Underwriters to
offer, Shares to any person pursuant to the Directed Share Program with the
specific intent to unlawfully influence (i) a customer or supplier of the
Company to alter the customer's or supplier's level or type of business with the
Company, or (ii) a trade journalist or publication to write or publish favorable
information about the Company.
2. Agreements to Sell and Purchase. The Company hereby agrees
to sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective number of Firm Shares set forth in Schedules I and II
hereto opposite its names at U.S.$ a share ("PURCHASE PRICE").
On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, the Company agrees
to sell to the Underwriters the Additional Shares, and the Underwriters shall
have a one-time right to purchase, severally and not jointly, up to
Additional Shares at the Purchase Price. If the Representatives, on behalf of
the Underwriters, elect to exercise such option, the Representatives shall so
notify the Company in writing not later than 30 days after the date of this
Agreement, which notice shall specify the number
7
<PAGE> 9
of Additional Shares to be purchased by the Underwriters and the date on which
such shares are to be purchased. Such date may be the same as the Closing Date
(as defined below) but not earlier than the Closing Date nor later than ten
business days after the date of such notice. Additional Shares may be purchased
as provided in Section 4 hereof solely for the purpose of covering
overallotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the Representatives may determine)
that bears the same proportion to the total number of Additional Shares to be
purchased as the number of Firm Shares set forth in Schedule I hereto opposite
the name of such Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it
will not, during the period ending 180 days after the date of the Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Shares to be sold hereunder or (B) the
issuance by the Company of shares of Common Stock upon the exercise of an option
or warrant or the conversion of a security outstanding on the date hereof of
which the Underwriters have been advised in writing.
3. Terms of Public Offering. The Company is advised by you
that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Company is
further advised by you that the Shares are to be offered to the public initially
at U.S.$ a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected
by you at a price that represents a concession not in excess of U.S.$ a share
under the Public Offering Price, and that any Underwriter may allow, and such
dealers may reallow, a concession, not in excess of U.S.$ a share, to any
Underwriter or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be
made to the account of the Company in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on , 2000, or at such other time on the same or such other date, not
later than , 2000, as shall be designated in writing by you. The time and
date of such payment are hereinafter referred to as the "CLOSING DATE".
Payment for any Additional Shares shall be made to the Company
in Federal or other funds immediately available in New York City against
delivery of such Additional Shares for the
8
<PAGE> 10
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on the date specified in the notice described in Section 2 or at such
other time on the same or on such other date, in any event not later than ,
2000, as shall be designated in writing by the U.S. Representatives. The time
and date of such payment are hereinafter referred to as the "OPTION CLOSING
DATE".
Certificates for the Firm Shares and Additional Shares shall
be in definitive form and registered in such names and in such denominations as
you shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligation
of the Company to sell the Shares to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Shares on the
Closing Date are subject to the condition that the Registration Statement shall
have become effective not later than (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery 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 Prospectus
(exclusive of any amendments or supplements thereto subsequent
to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
(b) The Underwriters 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
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<PAGE> 11
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 Underwriters 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
B.
The opinion of Arnold & Porter as set forth in
Exhibit B shall be rendered to the Underwriters at the request of the
Company and shall so state therein.
(d) The Underwriters shall have received on the
Closing Date an opinion of Nicolson & Cano, Argentine counsel for the
Company and IMPSAT Argentina, dated the Closing Date, to the effect set
forth in Exhibit C.
(e) The Underwriters shall have received on the
Closing Date an opinion of Portocarrero & Rodriguez, Colombian counsel
for IMPSAT Colombia, dated the Closing Date, to the effect set forth in
Exhibit D.
(f) The Underwriters 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 E.
(g) The Underwriters 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 F.
(h) The Underwriters 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 G.
(i) The Underwriters 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 H.
(j) The Underwriters shall have received on the
Closing Date an opinion of Latham & Watkins, U.S. regulatory counsel
for the Company, dated the Closing Date, to the effect set forth in
Exhibit I.
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<PAGE> 12
Each of the opinions referred to in clauses (d) through (j)
shall be rendered to the Underwriters at the request of the Company and
shall so state therein.
(k) The Underwriters shall have received on the
Closing Date an opinion of Shearman & Sterling, counsel for the
Underwriters, dated the Closing Date, in form and substance
satisfactory to you.
(l) The Underwriters 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 Underwriters, from Deloitte & Touche LLP,
independent public accountants, 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 Registration Statement and the
Prospectus; provided that the letter delivered on the Closing Date
shall use a "cut-off date" not earlier than the date hereof.
(m) The "lockup" agreements, each substantially in
the form of Exhibit A hereto, between you and certain shareholders,
officers and directors of the Company relating to sales and certain
other dispositions of shares of Common Stock or certain other
securities, delivered to you on or before the date hereof, shall be in
full force and effect on the Closing Date.
(n) The Common Stock shall have been approved for
trading on the Nasdaq National Market, subject only to official notice
of issuance.
(o) You shall have received such other documents and
certificates as are reasonably requested by you or your counsel.
The several obligations of the U.S. Underwriters to purchase
Additional Shares hereunder are subject to the delivery to the U.S.
Representatives on the Option Closing Date of such documents as they may
reasonably request with respect to the good standing of the Company, the due
authorization and issuance of the Additional Shares and other matters related to
the issuance of the Additional Shares.
6. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four signed
copies of the Registration Statement (including exhibits thereto) and
for delivery to each other Underwriter a conformed copy of the
Registration Statement (without exhibits thereto) and 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 Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
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<PAGE> 13
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of
the public offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary in your judgment to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare,
file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will
furnish to the Company) to which Shares may have been sold by you on
behalf of the Underwriters and to any other dealers upon request,
either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in
the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and
sale under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request provided that in no event shall the Company be
obligated to qualify to do business in any jurisdiction in which it is
not now so qualified or to take any action which would subject it to
taxation in any jurisdiction in which it is not now so subject or to
service of process in suits, other than those arising out of the
offering or sale of the Shares in any jurisdiction in which it is not
now so subject.
(e) To make generally available to the Company's
security holders and to you as soon as practicable an earning statement
covering the twelve-month period ending , 2001 that satisfies
the provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(f) Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, to pay
or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the registration and delivery of the
Shares under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration
Statement, any preliminary prospectus, the Prospectus and amendments
and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and
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<PAGE> 14
delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related
to the transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iii) the cost
of producing any Blue Sky memorandum in connection with the offer and
sale of the Shares under state securities laws and all expenses in
connection with the qualification of the Shares for offer and sale
under state securities laws as provided in Section 6(d) hereof,
including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection with such qualification and
in connection with the preparation of any Blue Sky memorandum, (iv) all
filing fees and the reasonable fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification
of the offering of the Shares by the National Association of Securities
Dealers, Inc., (v) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A
relating to the Common Stock and all costs and expenses incident to
listing the Shares on the Nasdaq National Market, (vi) the cost of
printing certificates representing the Shares, (vii) the costs and
charges of any transfer agent, registrar or depositary, (viii) the
costs and expenses of the Company relating to investor presentations on
any "road show" undertaken in connection with the marketing of the
offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road
show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and
any such consultants, and the cost of any aircraft chartered in
connection with the road show with the prior approval of the Company
and (ix) all other costs and expenses incident to the performance of
the obligations of the Company hereunder for which provision is not
otherwise made in this Section. It is understood, however, that except
as provided in this Section, Section 7 entitled "Indemnity and
Contribution", and the last paragraph of Section 9 below, the
Underwriters will pay all of their costs and expenses, including fees
and disbursements of their counsel, stock transfer taxes payable on
resale of any of the Shares by them and any advertising expenses
connected with any offers they may make.
(g) That, in connection with the Directed Share
Program, the Company will ensure that the Directed Shares will be
restricted to the extent required by the National Association of
Securities Dealers, Inc. (the "NASD") or the NASD rules from sale,
transfer, assignment, pledge or hypothecation for a period of three
months following the date of the effectiveness of the Registration
Statement. The Underwriters will notify the Company as to which
Participants will need to be so restricted. The Company will direct the
transfer agent to place stop transfer restrictions upon such securities
for such period of time.
(h) To pay all reasonable fees and disbursements of
counsel incurred by the Underwriters in connection with the Directed
Share Program and stamp duties, similar taxes or duties or other taxes,
if any, incurred by the Underwriters in connection with the Directed
Share Program.
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<PAGE> 15
Furthermore, the Company covenants with the Underwriters that
the Company will comply with all applicable securities and other applicable
laws, rules and regulations in each foreign jurisdiction in which the Directed
Shares are offered in connection with the Directed Share Program.
7. Indemnity and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred 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 the Registration Statement or any amendment thereof,
any preliminary prospectus or the 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 required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(b) Each Underwriter agrees, severally and not
jointly, to indemnify and hold harmless 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 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 such Underwriter, but only
with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter through you expressly for
use in the Registration Statement, any preliminary prospectus, the
Prospectus 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 7(a) or
7(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
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<PAGE> 16
of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all such indemnified parties and that all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
reasonably satisfactory to Morgan Stanley & Co. Incorporated, in the
case of parties indemnified pursuant to Section 7(a), and reasonably
satisfactory to the Company, in the case of parties indemnified
pursuant to Section 7(b). The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify
the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences
of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of
such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
Section 7(a) or 7(b) 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 Underwriters on the other hand
from the offering of the Shares or (ii) if the allocation provided by
clause 7(d)(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 7(d)(i) above but also the relative fault of the
Company on the one hand and of the Underwriters 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 Underwriters on the other hand in connection
with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the
Shares (before deducting expenses) received by the Company and the
total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of
the Prospectus, bear to the aggregate Public Offering Price of the
Shares. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall
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<PAGE> 17
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 Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are
several in proportion to the respective number of Shares they have
purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it
would not be just or equitable if contribution pursuant to this Section
7 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in Section 7(d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which
the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any
damages that such Underwriter 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 remedies provided for in this Section
7 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.
(f) The indemnity and contribution provisions
contained in this Section 7 and the representations, warranties and
other statements of the Company contained in this Agreement shall
remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter or
by or on behalf of the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of
the Shares.
8. Directed Share Program Indemnification. (a) The Company
agrees to indemnify and hold harmless Morgan Stanley & Co. Incorporated, its
affiliates and each person, if any, who controls Morgan Stanley & Co.
Incorporated or its affiliates within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act ("MORGAN STANLEY ENTITIES"),
from and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) (i) caused
by any untrue statement or alleged untrue statement of a material fact contained
in any material prepared by or with the consent of the Company for distribution
to
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<PAGE> 18
Participants in connection with the Directed Share Program, 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; (ii)
caused by the failure of any Participant to pay for and accept delivery of
Directed Shares that the Participant has agreed to purchase; or (iii) related
to, arising out of, or in connection with the Directed Share Program other than
losses, claims, damages or liabilities (or expenses relating thereto) that are
finally judicially determined to have resulted from the bad faith or gross
negligence of Morgan Stanley Entities.
(b) In case any proceeding (including any
governmental investigation) shall be instituted involving any Morgan
Stanley Entity in respect of which indemnity may be sought pursuant to
Section 8(a), the Morgan Stanley Entity seeking indemnity shall
promptly notify the company in writing and the Company, upon request of
the Morgan Stanley Entity, shall retain counsel reasonably satisfactory
to the Morgan Stanley Entity to represent the Morgan Stanley Entity and
any other the Company may designate in such proceeding and shall pay
the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any Morgan Stanley Entity shall have the right
to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Morgan Stanley Entity unless (i) the
Company shall have agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties)
include both the Company and the Morgan Stanley Entity and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. The Company shall not, in respect of the legal expenses of the
Morgan Stanley Entities 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 Morgan Stanley Entities. Any such firm for the Morgan
Stanley Entities shall be designated in writing by Morgan Stanley & Co.
Incorporated. The Company 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
Company agrees to indemnify the Morgan Stanley Entities from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time a Morgan Stanley
Entity shall have requested the Company to reimburse it for fees and
expenses of counsel as contemplated by the second and third sentences
of this paragraph, the Company 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
the Company of the aforesaid request and (ii) the Company shall not
have reimbursed the Morgan Stanley Entity in accordance with such
request prior to the date of such settlement. The Company shall not,
without the prior written consent of Morgan Stanley & Co. Incorporated,
effect any settlement of any pending or threatened proceeding in
respect of which any Morgan Stanley Entity is or could have been a
party and indemnity could have been sought hereunder by such Morgan
Stanley Entity, unless such settlement includes an unconditional
release of the Morgan Stanley Entities from all liability on claims
that are the subject matter of such proceeding.
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<PAGE> 19
(c) To the extent the indemnification provided for in
Section 8(a) is unavailable to a Morgan Stanley Entity or insufficient
in respect of any losses, claims, damages or liabilities referred to
therein, then the Company, in lieu of indemnifying the Morgan Stanley
Entity thereunder, shall contribute to the amount paid or payable by
the Morgan Stanley Entity 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
Morgan Stanley Entities on the other hand from the Offering of the
Directed Shares or (ii) if the allocation provide by clause 8(c)(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(c)(i) above but also the relative fault of the Company on the
one hand and of the Morgan Stanley Entities on the other hand in
connection with the statements or omissions that results 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 of the Morgan Stanley Entities on the other hand in
connection with the offering of the Directed Shares shall be deemed to
be in the same respective proportions as the net proceeds from the
offering of the Directed Shares (before deducting expenses) and the
total underwriting discounts and commissions received by the Morgan
Stanley Entities for the Directed Shares, bear to the aggregate Public
Offering Price of the Shares. If the loss, claim, damage or liability
is caused by an untrue or alleged untrue statement of a material fact,
the relative fault of the Company on the one hand and the Morgan
Stanley Entities on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement or
the omission or alleged omission relates to information supplied by the
company or by the Morgan Stanley Entities and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(d) The Company and the Morgan Stanley Entities agree
that it would not be just or equitable if contribution pursuant to this
Section 8 were determined by pro rata allocation (even if the Morgan
Stanley Entities were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in Section 8(c). The amount paid or payable
by the Morgan Stanley Entities as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by the
Morgan Stanley Entities in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this
Section 8, no Morgan Stanley Entity shall be required to contribute any
amount in excess of the amount by which the total price at which the
Directed Shares distributed to the public were offered to the public
exceeds the amount of any damages that such Morgan Stanley Entity has
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. 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 Morgan Stanley
Entity at law or in equity.
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<PAGE> 20
(e) The indemnity and contribution provisions
contained in this Section 8 shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of any Morgan Stanley Entity or
the Company, its officers or directors or any person controlling the
Company and (iii) acceptance of and payment for any of the Directed
Shares.
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, 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 8(a)(i) through 8(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
10. Effectiveness; Defaulting Underwriters. This Agreement
shall become effective upon the execution and delivery hereof by the parties
hereto.
If, on the Closing Date or the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares that it has or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I bears to the
aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; provided that in no event shall the
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 9 by an amount in excess of
one-ninth of such number of Shares without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail
or refuse to purchase Firm Shares and the aggregate number of Firm Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Firm Shares to be purchased, and arrangements satisfactory to you and
the Company for the purchase of such Firm Shares are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter or the Company. In any such case either you or
the Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other
19
<PAGE> 21
documents or arrangements may be effected. If, on the Option Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Additional Shares
and the aggregate number of Additional Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.
11. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
13. 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.
20
<PAGE> 22
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: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY INC.
Acting severally on behalf of themselves and the several Underwriters named in
Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By: ___________________________________
Name:
Title:
<PAGE> 23
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Salomon Smith Barney Inc.
---------------
Total Firm Shares ..............
===============
</TABLE>
<PAGE> 24
EXHIBIT A
[FORM OF LOCK-UP LETTER]
, 2000
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Salomon Smith Barney Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Ladies and Gentlemen:
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") propose to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with IMPSAT Fiber Networks, Inc., a Delaware
corporation (the "COMPANY") providing for the initial public offering (the
"PUBLIC OFFERING") by the several Underwriters, including Morgan Stanley (the
"UNDERWRITERS") of [ ] shares ([ ] shares if the Underwriters' over-allotment
option is exercised in full) (the "SHARES") of the common stock, par value
$0.01 per share (the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 180 days after the date of the final prospectus
relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (a) the sale of any
Shares to the Underwriters pursuant to the Underwriting Agreement or (b)
transactions relating to shares of Common Stock or other securities acquired in
open market transactions after the completion of the
<PAGE> 25
Public Offering. In addition, the undersigned agrees that, without the prior
written consent of Morgan Stanley, on behalf of the Underwriters, it will not,
during the period commencing on the date hereof and ending [180] days after the
date of the Prospectus, make any demand for or exercise any right with respect
to, the registration of any shares of Common Stock or any security convertible
into or exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters. It is understood that, if
the Underwriting Agreement is not executed, or if the Underwriting Agreement
shall terminate or be terminated prior to payment for and delivery of the Common
Stock subject thereof, this lock-up agreement shall automatically terminate and
be of no force or effect.
Very truly yours,
-------------------------
(Name)
-------------------------
(Address)
A-2
<PAGE> 26
EXHIBIT B
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 jurisdiction of its
incorporation, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus;
(B) the authorized, issued and outstanding capital stock of the Company
conforms to the description thereof contained in the Prospectus;
(C) the shares of Common Stock outstanding prior to the issuance of the
Shares have been duly authorized and are validly issued, fully paid and
nonassessable;
(D) the Shares have been duly authorized and, when issued and delivered
in accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable, and the issuance of such Shares will not be subject to
any preemptive or similar rights;
(E) the discussion set forth in the Prospectus, under the caption
"Certain U.S. Federal Income Tax Considerations to Non-U.S. Holders" 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 Shares;
(F) this Agreement has been duly authorized, executed and delivered by
the Company;
(G) the execution and delivery by the Company of, and the performance
by the Company of its obligations under this Agreement and the issuance, sale
and delivery of the Shares, 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;
(H) the statements (i) in the Prospectus under the captions
"Description of Capital Stock", "Underwriters" and "Description of Our
Indebtedness" and (ii) in the Registration Statement in Items 14 and 15, in each
case insofar as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and proceedings and
fairly summarize the matters referred to therein in all material respects;
(I) 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
<PAGE> 27
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
Prospectus 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;
(J) the Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described in
the Prospectus 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;
(K) such counsel (i) is of the opinion that the Registration Statement
and Prospectus (except for financial statements and schedules and other
financial and statistical data included therein as to which such counsel need
not express any opinion) comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder, (ii) has no reason to believe that (except for financial statements
and schedules and other financial and statistical data as to which such counsel
need not express any belief) the Registration Statement and the prospectus
included therein at the time the Registration Statement became effective
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading and (iii) has no reason to believe that (except for financial
statements and schedules and other financial and statistical data as to which
such counsel need not express any belief) the Prospectus when issued contained,
or as of the date such opinion is delivered, contains, any untrue statement of a
material fact or omitted or omits 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.
With respect to paragraph (K) above, Arnold & Porter may state that
their opinion and belief are based upon their participation in the preparation
of the Registration Statement and Prospectus and any amendments or supplements
thereto and review and discussion of the contents thereof, but are without
independent check or verification, except as specified.
B-2
<PAGE> 28
EXHIBIT C
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 Prospectus 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 Prospectus, 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 Prospectus;
(D) the statements in the Prospectus 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; and
(E) 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 Prospectus 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 D
Opinion of Portocarrero & Rodriguez
(A) IMPSAT Colombia has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the Republic of
Colombia, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus 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 Prospectus, 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 Prospectus;
(D) the statements in the Prospectus 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) 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 Prospectus 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> 30
EXHIBIT E
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 Prospectus 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 Prospectus, 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 Prospectus;
(D) the statements in the Final Prospectus 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) 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 Prospectus 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
<PAGE> 31
Company to perform its obligations under this Agreement or to consummate the
transactions contemplated by this Agreement.
<PAGE> 32
EXHIBIT F
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 Prospectus 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 Prospectus 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 Prospectus;
(D) the statements in the Prospectus 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) 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 Prospectus 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 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 Prospectus 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 Prospectus. 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 Prospectus;
(E) the statements in the Prospectus 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) 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
<PAGE> 34
the Prospectus 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.
G-2
<PAGE> 35
EXHIBIT H
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 Prospectus, 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 Prospectus;
(D) the statements in the Prospectus 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) 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 Prospectus 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> 36
EXHIBIT I
Opinion of Latham & Watkins
(A) the execution and delivery by the Company of the
Underwriting 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 (the "FCC Rules");
(B) IMPSAT USA 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 publicly available on , 2000, and informal
and non binding statements and representations of members of staff of the FCC
(together, the "FCC Records"), 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;
and
(D) the statements in the Prospectus under the caption
"Business Description of Country Operations - IMPSAT USA" insofar as such
statements constitute summaries relating to U.S. legal matters, documents or
proceedings referred to therein, are accurate in all material respects.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
IMPSAT CORPORATION
(ORIGINAL CERTIFICATE FILED ON 31 AUGUST 1994)
It is hereby certified that:
1. The name of the corporation (the "Corporation") is IMPSAT
Corporation.
2. The following Amended and Restated Certificate of Incorporation of
IMPSAT Corporation amends and restates the provisions of and supersedes the
Certificate of Incorporation originally filed with the Secretary of State of the
State of Delaware on August 31, 1994, in its entirety.
ARTICLE I
The name of the Corporation is "IMPSAT Fiber Networks, Inc.".
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
The Corporation shall have the authority to issue three hundred million
(300,000,000) shares of common stock (the "Common Stock") with a par value of
$0.01 per share and each such share shall have one vote per share. The
Corporation shall also have the authority to issue five million (5,000,000)
shares of Preferred Stock (the "Preferred Stock"), with a par value of $0.01
per share, amounting in the aggregate to fifty thousand dollars ($50,000) par
value. The Board of Directors is hereby authorized, as it may determine, to
issue such number of the authorized shares of Preferred Stock at any time and
from time to time, in one or more series, and to fix or alter the designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions, of such shares of Preferred Stock,
including without limitation
<PAGE> 2
of the generality of the foregoing, dividend rights, dividend rates, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices and liquidation preferences of any
wholly unissued series of preferred shares and the number of shares constituting
any such series and the designation thereof, or any of them; and to increase or
decrease the number of shares of that series, but not below the number of shares
of such series then outstanding. In case the number of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series. Holders of shares of Common Stock are not entitled to
cumulate their votes in the election of directors.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
In furtherance of (and not in limitation of) the powers conferred by
statute, the Board of Directors shall have the power to adopt, alter, amend or
repeal the by-laws of the Corporation, except, however, in respect of any rights
provided for in the by-laws of the Corporation pursuant to the Securityholders
Agreement dated as of March 19, 1998, as amended and supplemented, among the
Corporation and certain other parties thereto (the "Securityholders Agreement"),
for so long as it remains in force and effect.
ARTICLE VII
The following provisions are inserted for the management of the business
and the conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its directors
and stockholders:
(a) Management of the Corporation
The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(b) Directors
(1) The number of directors that shall constitute the whole Board of
Directors shall be determined by resolution of a majority of the
Board of Directors, but in no event shall be less than ten nor
more than fourteen.
(2) The directors shall be classified by the Board of Directors with
respect to the time for which they severally hold office, into
three classes, as nearly equal in number as possible, one class
to be originally elected for a term expiring at the annual
meeting of stockholders to be held in 2001, another class to be
originally elected
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for a term expiring at the annual meeting of stockholders to be
held in 2002, and another class to be originally elected for a
term expiring at the annual meeting of stockholders to be held
in 2003. Thereafter, all directors shall be elected for
three-year terms.
(3) Each director of the Corporation shall hold office for the term
for which that person was elected and until his or her successor
is duly elected and qualified. At each succeeding annual meeting
of stockholders, directors elected to succeed those directors
whose terms then expire shall be elected for a term of office to
expire at the third annual meeting of stockholders following
such director's election and until such director's successor
shall have been elected and qualified. No decrease in the number
of directors shall shorten the term of any incumbent director.
Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall so provide.
(4) Except as otherwise provided for or fixed by or pursuant to the
provisions of this Restated Certificate of Incorporation, any
vacancy on the Board of Directors of the Corporation resulting
from death, resignation, removal or other cause and any newly
created directorship resulting from any increase in the
authorized number of directors between meetings of stockholders
shall be filled only by the affirmative vote of a majority of
all the directors then in office. Any director so chosen shall
hold office for the remainder of the full term of the class of
directors in which the vacancy occurred or the new directorship
was created and until a successor is duly elected and qualified,
or until his or her earlier death, resignation or removal from
office in accordance with this Restated Certificate of
Incorporation or any applicable law or pursuant to an order of
the court. If there are no directors in office, then an election
of directors may be held in the manner provided by applicable
law.
(c) Stockholders
(1) Effective upon the date shares of Common Stock are first sold to
the public pursuant to an effective registration statement under
the Securities Act of 1933, as amended, stockholders of the
Corporation may not act by written consent without a meeting.
(2) Special meetings of stockholders of the Corporation may be
called only by the Board of Directors pursuant to a resolution
adopted by a majority of the Directors then serving.
(3) Meetings of the stockholders of the Corporation may be held
within or without the State of Delaware, as the by-laws of the
Corporation may provide. The books of the Corporation may be
kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or
in the by-laws of the Corporation, except as and to the extent
provided by applicable law.
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(4) Advance notice of nominations for the election of directors and
business to be transacted at any stockholders meeting shall be
given in the manner and to the extent provided in the by-laws of
the Corporation.
(5) Notwithstanding any provision herein to the contrary, in
connection with any acquisition of Common Stock (and/or any
other voting securities of the Corporation) as to which the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), would, but for this paragraph be applicable,
any person or entity (as defined in the HSR Act) acquiring such
Common Stock (and/or other voting securities of the Corporation)
shall have no right to vote such Common Stock or voting
securities until such person or entity has complied with the
filing and waiting period requirements of the HSR Act.
Notwithstanding anything to the contrary elsewhere contained in this
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least eighty percent (80%) of the combined voting power of the then outstanding
shares of stock of the Corporation entitled to vote for the election of
directors shall be required to alter, amend or repeal, or to adopt any provision
inconsistent with, this Article SEVENTH.
ARTICLE VIII
Unless otherwise expressly provided for herein, the Corporation may
amend this Restated Certificate of Incorporation from time to time in any and as
many respects as may be desired (except in respect of Article VI hereof with
respect to the adoption, alteration, amendment or repeal of the by-laws of the
Corporation in respect on any rights provided for thereunder pursuant to the
Securityholders Agreement, for so long as it remain in force and effect), so
long as this certificate of incorporation, as amended, contains only such
provisions as it would be lawful and proper to insert in an original certificate
of incorporation filed at the time of the filing of the amendment, and, if a
change in stock or the rights of stockholders, or an exchange, reclassification
or cancellation of stock or rights of stockholders, is to be made, such
provisions as may be necessary to effect such change, exchange, reclassification
or cancellation.
ARTICLE IX
No director of the Corporation shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that this Article NINTH does not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of General Corporation Law of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. For purposes of the prior sentence, the term
"damages" shall, to the extent permitted by law, include without limitation, any
judgment, fine, amount paid in settlement, penalty, punitive damages, excise or
other tax assessed with respect to an employee benefit plan, or expense of any
nature (including, without limitation, counsel
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<PAGE> 5
fees and disbursements). Each person who serves as a director of the Corporation
while this Article NINTH is in effect shall be deemed to be doing so in reliance
on the provisions of this Article NINTH, and neither the amendment or repeal of
this Article NINTH, nor the adoption of any provision of this Restated
Certificate of Incorporation inconsistent with this Article NINTH, shall apply
to or have any effect on the liability or alleged liability of any director of
the Corporation for, arising out of, based upon, or in connection with any acts
or omissions of such director occurring prior to such amendment, repeal, or
adoption of an inconsistent provisions. The provisions of this Article NINTH are
cumulative and shall be in addition to and independent of any and all other
limitations on or elimination of the liabilities of directors of the
Corporation, as such, whether such limitation or elimination's arise under or
are created by any law, rule, regulation, by-law, agreement, vote of
stockholders or disinterested directors, or otherwise.
Notwithstanding anything to the contrary elsewhere contained in this
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least eighty percent (80%) of the combined voting power of the then outstanding
shares of stock of the Corporation entitled to vote for the election of
directors shall be required to alter, amend or repeal, or to adopt any provision
inconsistent with, this Article NINTH.
ARTICLE X
The Corporation shall indemnify every person who was or is a party or is
or was threatened to be made a party to any threatened, pending or completed
action, suit or proceeding (other than an action, suit or proceeding by or in
the right of the Corporation) whether civil, criminal, administrative or
investigative by reason of the fact he is or was a director or officer, or is or
was serving at the request of the Corporation as a director or officer, general
partner or trustee of any partnership, joint venture, trust, employee benefit
plan or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding had no reasonable cause to believe his conduct was unlawful (except
in such cases involving gross negligence or willful misconduct) in the
performance of his duties, to the fullest extent permitted by the Delaware
General Corporation Law. Such indemnification may, in the discretion of the
Board of Directors, include advances of his expenses in advance of final
disposition subject to the provisions of the Delaware General Corporation Law.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendre or its equivalent,
shall not, of itself, create a presumption that the person did not in good faith
and in a manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful. Such
right of indemnification shall not be deemed exclusive of any other rights to
which any director or officer serving at the request of the Corporation may be
entitled under any charter provision, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise."
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IN WITNESS WHEREOF, I have signed this Restated Certificate of
Incorporation, on behalf of the Corporation and in the capacity set forth below,
and certify that the foregoing Restated Certificate of Incorporation was duly
adopted by the board of directors and stockholders of the Corporation pursuant
to sections 242 and 245 of the General Corporation Law of Delaware.
/s/ Allen Libow
--------------------------------------------
Allen Libow, Secretary
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<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
IMPSAT CORPORATION
ARTICLE I
Offices
Section 1. Principal Office. The principal office of IMPSAT Corporation
(the "Corporation") shall be in the City, County and State designated in the
Certificate of Incorporation of the Corporation (such Certificate and any
amendments thereof being hereinafter collectively referred to as the
"Certificate of Incorporation").
Section 2. Other Offices. The Corporation also may have offices at such
other places both within and without the State of Florida as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Stockholders
Section 1. Time and Place of Meeting. Meetings of the stockholders shall
be held at such times and at such places, within or without the State of
Delaware, as shall be determined by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of stockholders, at which
they shall elect a Board of Directors, and transact such other business as may
properly be brought before the meeting, shall be held at such date and time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Written notice of the annual meeting, stating the
place, date and hour of the meeting, shall be given to each stockholder entitled
to vote at such meeting not less than ten (10) nor more than ninety (90) days
before the date of the meeting.
Section 3. Special Meetings. Except as provided in: (i) the
Securityholders Agreement dated as of March 19, 1998 among the Corporation and
certain other parties thereto, for so long as it remains in force and effect (as
supplemented and amended from time to time, the "Securityholders Agreement");
(ii) the Shareholders Agreement dated as of March 10, 1999 among the Corporation
and certain other parties thereto, for so long as it remains in force and effect
(as supplemented and amended from time to time, the "Shareholders Agreement");
or (iii) in the Certificate of Incorporation, special meetings of the
stockholders may be called only by the Chairman of the Board or by the Board of
Directors pursuant to a resolution adopted by a majority of the Directors then
serving.
<PAGE> 2
Business transacted at special meetings shall be confined to the purposes stated
in the notice of the meeting.
Section 4. Notice. Written or printed notice stating the place, day and
hour of any stockholders' meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the Secretary or the
officer or person calling the meeting, to each stockholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, postage prepaid, to the stockholder at
his or her address as it appears on the stock transfer books of the Corporation.
Section 5. Closing of Transfer Books and Fixing Record Date. For the
purpose of determining stockholders entitled to notice of, or to vote at, any
meeting of stockholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of stockholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, sixty (60) days. If the stock transfer books shall be
closed for the purpose of determining stockholders, such books shall be closed
for at least ten (10) days immediately preceding such meeting. In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of stockholders, such date in
any case to be not more than sixty (60) days and, in case of a meeting of
stockholders, not less than ten (10) days prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of stockholders entitled to notice of, or to vote at, a meeting of
stockholders, or stockholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of stockholders.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof, except where the determination has been made
through the closing of stock transfer books and the stated period of closing has
expired.
Section 6. List of Stockholders. The officer or agent of the Corporation
having charge of the stock transfer books for stocks of the Corporation shall
make, at least ten (10) days before each meeting of the stockholders, a complete
list of the stockholders entitled to vote at such meeting or any adjournment
thereof, arranged in alphabetical order, with the address of, and the number of
voting stocks held by, each, which list, for a period of ten (10) days prior to
such meeting, shall be kept on file either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the location for the meeting as specified
in the notice for such meeting and shall be subject to inspection by any
stockholder at any time during the usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any stockholder during the whole time of the meeting. The
original stock transfer books shall be prima facie
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evidence as to who are the stockholders entitled to examine such list of
transfer books or to vote at any meetings of stockholders.
Section 7. Nominations and Stockholder Business.
(i) To be properly brought before an annual meeting, nominations
of persons for election to the Board of Directors of the Corporation and
the proposal of business to be considered by the stockholders at an
annual meeting of stockholders must be either (x) specified in the
notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors (or any duly authorized committee
thereof), (y) otherwise properly brought before the annual meeting by or
at the direction of the Board of Directors (or any duly authorized
committee thereof), or (z) otherwise brought before the annual meeting
by any stockholder of the Corporation who is a stockholder of record on
the date of the giving of the notice provided for in Section 5 of this
Article II, who is entitled to vote at the meeting and who has complied
with the notice procedures set forth in this Section 7.
(ii) For nominations or other business to be properly brought
before an annual meeting by a stockholder under this Section 7, the
stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation and such business must be a proper subject
for stockholder action under the Delaware General Corporation Law. To be
timely, a stockholder's notice shall be delivered to the Secretary at
the principal executive offices of the Corporation not less than
forty-five (45) days nor more than one hundred (100) days prior to the
first anniversary of the date on which the Corporation first mailed its
proxy materials for the prior year's annual meeting of stockholders;
provided, however, that in the event that the date of the annual meeting
is advanced by more than thirty (30) days or delayed (other than as a
result of adjournment) by more than thirty (30) days from the
anniversary of the previous year's annual meeting, then notice by the
stockholder to be timely must be delivered not later than the close of
business ninety (90) days prior to the annual meeting or ten (10) days
following the day on which the date of the meeting is publicly
announced, whichever is later. Such stockholder's notice must set forth
(x) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such
person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director
if elected); (y) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired
to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of
such stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (z) as to the stockholder giving the notice and
the beneficial owners, if any, on whose behalf the nomination or
proposal is made (I) the name
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and address of such stockholder, as they appear on the Corporation's
books, and of such beneficial owner, (II) the number of shares of the
Corporation which are owned (beneficially or of record) by such
stockholder and such beneficial owner, (III) a description of all
arrangements or understandings between such stockholder and such
beneficial owner and any other person or persons (including their names)
in connection with the proposal of such business by such stockholder and
any material interest of such stockholder and of such beneficial owner
in such business, and (IV) a representation that such stockholder or its
agent or designee intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting.
(iii) Notwithstanding anything in this Section 7 to the contrary,
if the number of directors to be elected to the Board of Directors of
the Corporation is increased and there is no public announcement
specifying the size of the increased Board of Directors made by the
Corporation at least forty-five (45) days prior to the date on which the
Corporation first mailed its proxy materials for the prior year's annual
meeting of stockholders, then a stockholder's notice required by this
Section 7 will also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it is
delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business ten (10) days following
the day on which such public announcement is first made by the
Corporation.
(iv) Only such business may be conducted at a special meeting of
stockholders as has been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to
the Board of Directors may be made at a special meeting of stockholders
at which directors are to be elected pursuant to the Corporation's
notice of meeting (x) by or at the direction of the Board of Directors
or (y) by any stockholder of the Corporation who is a stockholder of
record at the time of giving the notice required by this Section 7, who
is entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 7. Nominations by stockholders of
persons for election to the Board of Directors may be made at such a
special meeting of stockholders if the stockholder's notice required by
this Section 7 is delivered to the Secretary of the Corporation at the
principal executive offices of the Corporation not earlier than one
hundred and twenty (120) days prior to such special meeting and not
later than the close of business ninety (90) days prior to such special
meeting or the tenth day following the day on which public announcement
is first made of the date of the special meeting and of the nominees
proposed by the Board of Directors to be elected at such meeting,
whichever is later.
(v) Only those persons who are nominated in accordance with the
procedures set forth in this Section 7 will be eligible for election as
directors at any meeting of stockholders. Only business brought before
the meeting in accordance with the procedures set forth in this Section
7 may be conducted at a meeting of stockholders. The chairman of the
meeting has the power and duty to
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determine whether a nomination or any business proposed to be brought
before the meeting was made in accordance with the procedures set forth
in this Section 7 and, if any proposed nomination or business is not in
compliance with this Section 7, to declare that such defective proposal
shall be disregarded.
(vi) For purposes of this Section 7, "public announcement" shall
include disclosure in a press release reported by the Dow Jones News
Service, Associated Press, Business Wire, PR Newswire or comparable
national news service or in a document publicly filed by the Corporation
with the Securities and Exchange Commission pursuant to the Exchange
Act.
(vii) Notwithstanding the foregoing provisions of this Section 7,
a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 7. Nothing in this Section 7 may
be deemed to remove any obligation of stockholders to comply with the
requirements of Rule 14a-8 under the Exchange Act with respect to
proposals requested to be included in the Corporation's proxy statement
pursuant to said Rule 14a-8.
Section 8. Quorum. The holders of a majority of the issued and
outstanding stock and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by the Certificate of
Incorporation or by the General Corporation Law of the State of Delaware (herein
called the "Act"); provided, however, that in the case of a meeting of
stockholders pertaining to a particular class of capital stock or as to any
matter on which such class of stock is entitled to vote separately from any
other class of stock, the holders of a majority of the issued and outstanding
stock of such class, present in person or represented by proxy, shall constitute
a quorum for the transaction of business at any such meeting. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote, present in person or represented by proxy,
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. Once a quorum is constituted, the
stockholders present or represented by proxy at a meeting may continue to
transact business until adjournment, notwithstanding the subsequent withdrawal
therefrom of such number of stockholders as to leave less than a quorum.
Section 9. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the stockholders present or represented by proxy at
such meeting and entitled to vote shall be the act of the stockholders;
provided, however, that when a quorum is present at any meeting of stockholders
pertaining to a particular class of capital stock or as to any matter on which
such class of stock is entitled to vote separately from any other class of
stock, the vote of the holders of a majority of the issued and outstanding stock
of such class present in person or represented by proxy, shall be the act
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of the stockholders of such class of stock. Each stockholder shall at every
meeting of the stockholders be entitled to one vote in person or by proxy for
stock having voting power held by such stockholder, except to the extent that
the voting rights of the stock of any class or classes are limited or denied by
the Certificate of Incorporation. At each election for directors every
stockholder shall be entitled to vote, in person or by proxy, the number of
shares of stock owned by him for as many persons as there are directors to be
elected and for whose election he or she has a right to vote. Cumulative voting
is not permitted by the Certificate of Incorporation and, hence, is prohibited.
Every proxy must be executed in writing by the stockholder or by his or her duly
authorized attorney-in-fact. No proxy shall be valid after three (3) years from
the date of its execution unless otherwise provided therein. Each proxy shall be
revocable unless expressly provided therein to be irrevocable or unless
otherwise made irrevocable by law. Stock registered in the name of another
corporation may be voted by such officer, agent, or proxy as the Bylaws of such
corporation may prescribe or, in the absence of such provisions, as the board of
directors of such corporation may determine. Stock held by an administrator,
executor, guardian, or conservator may be voted by him, either in person or by
proxy without a transfer of such stock into his or her name. Stock standing in
the name of a trustee may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote the stock held by him without a transfer of
such stock into his or her name as trustee. Stock standing in the name of a
receiver may be voted by such receiver, and stock held by or under the control
of a receiver may be voted by such receiver without being transferred into his
or her name, if such authority is contained in an appropriate order of the court
that appointed the receiver. A stockholder whose stock is pledged shall be
entitled to vote such stock until the stock has been transferred into the name
of the pledgee, and thereafter the pledgee shall be entitled to vote the shares
so transferred. Stock belonging to the Corporation or held by it in a fiduciary
capacity shall not be voted, directly or indirectly, at any meeting, and shall
not be counted in determining the total amount of outstanding stock at any given
time.
Section 10. Presence at Meetings by Means of Communication Equipment;
Action by Unanimous Consent. Stockholders may participate in and hold a meeting
of such stockholders by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this section shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at an annual or special meeting
of the stockholders, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
Section 11. Inspectors of Election. The Board of Directors shall, in
advance of any meeting of stockholders, appoint one or more inspectors of
election and may
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designate one or more persons as alternate inspectors to replace any inspector
who fails to act. If no inspector or alternate so appointed shall be willing or
able to serve, the chairman of the meeting shall appoint the necessary inspector
of elections. Each inspector so appointed, before entering upon the discharge of
his or her duties, shall take and sign an oath faithfully to execute the duties
of inspector with strict impartiality and according to the best of his or her
ability. The inspector shall: (a) ascertain the number of shares of capital
stock of the Corporation outstanding and the voting power of each; (b) determine
the shares represented at the meeting, the existence of a quorum, and the
validity of proxies and ballots; (c) count and tabulate all votes and ballots;
(d) determine and retain for a reasonable period a record of the disposition of
any challenges made to any determination by the inspectors; (e) certify their
determination of the number of shares represented at the meeting and their count
of all votes and ballots; and (f) do such acts as are proper to conduct the
election or vote with fairness to all stockholders. The date and time of the
opening and closing of the polls for each matter upon which stockholders will
vote at a meeting shall be announced at the meeting, and no ballots, proxies or
votes, nor any revocations thereof or change thereto, shall be accepted by the
inspectors after the closing of the polls. No director or candidate for the
office of director shall act as an inspector of election of directors.
Inspectors need not be stockholders.
ARTICLE III
Directors
Section 1. Number of Directors. The number of directors of the
Corporation shall be fixed from time to time by resolution of the Board of
Directors, but in no case shall the number of directors be less than ten (10) or
more than fourteen (14); provided, however, that for as long as each such
Agreement remains in force and effect, the Securityholders Agreement and the
Shareholders Agreement shall prescribe the number and method of election,
removal and replacement with respect to the directors of the Corporation
referred to therein. Until otherwise fixed by resolution of the Board of
Directors, the number of directors shall be the number stated in the Certificate
of Incorporation of the Corporation. No decrease in the number of directors
shall have the effect of reducing the term of any incumbent director. Directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 2 of this Article III or in the Certificate of Incorporation, and
each director shall hold office until (i) his or her successor is elected and
qualified, (ii) he or she dies, (iii) he or she resigns, or (iv) he or she is
removed. Directors need not be residents of the State of Delaware or
stockholders of the Corporation.
Section 2. Vacancies. Subject to other provisions of this Section, the
Certificate of Incorporation and except as otherwise provided in the
Securityholders Agreement or the Shareholders Agreement, any vacancy occurring
in the Board of Directors may be filled by the affirmative vote of a majority of
the remaining directors, although the remaining directors may constitute less
than a quorum of the Board of Directors as fixed by Section 10 of this Article
III. A director elected to fill a vacancy shall be elected for the unexpired
term of his or her predecessor in office. Any directorship to be filled by
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reason of an increase in the number of directors shall be filled by unanimous
vote of the existing directors. Except as otherwise provided in the
Securityholders Agreement or the Shareholders Agreement, stockholders holding a
majority of the issued and outstanding stock entitled to vote may, at any time,
terminate the term of office of all or any of the directors, with or without
cause, by a vote at any annual or special meeting, or by written statement,
signed by the holders of all of such stock, and filed with the Secretary or, in
his or her absence, with any other officer; provided, however, that (i) the term
of office of any director elected by holders of Series A Stock or Series A
Common Shares (each as defined in the Securityholders Agreement) may only be
terminated in the manner provided herein by a majority of the issued and
outstanding stock of such class that has elected such director and (ii) the term
of office of any director nominated by the Purchaser (as defined in the
Shareholders Agreement) may only be terminated by the Purchaser in the manner
provided for in the Shareholders Agreement. Such removal shall be effective
immediately upon such stockholder action even if successors are not elected
simultaneously, and the vacancies on the Board of Directors caused by such
action shall be filled only by election by the stockholders.
Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things, as are not by the Act, the
Certificate of Incorporation or these Bylaws directed or required to be
exercised or done by the stockholders
Section 4. Place of Meetings. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.
Section 5. Annual Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this bylaw in conjunction with and at
the same place as the annual meeting of stockholders. In the event such meeting
is not held at the time and place specified in the preceding sentence, the
meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the Board of Directors, or
as shall be specified in a written waiver of notice signed by all the directors.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
shall be held without special notice at such time and at such place as shall
from time to time be determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by, or at the request of, the Chairman or Vice Chairman of the
Board of Directors, or the President and shall be called by the Secretary on the
written request of a majority of the incumbent directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
for holding any special meeting of the Board of Directors called by them.
Section 8. Notice of Special Meetings. Notice of any special meetings
shall be given at least forty-eight (48) hours previous thereto if given either
personally (including written notice delivered personally (including by
telecopy) or telephone notice) or by
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telegram, and at least one hundred twenty (120) hours previous thereto if given
by written notice mailed to each director at the address of his or her business
or residence. If mailed, the notice shall be deemed to be delivered when
deposited in the United States mail addressed, in the above-specified manner,
with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed to be delivered when the telegram is delivered to the telegraph
company. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 9. Waiver of Notice. Any Director may waive notice of any
meeting, as provided in Article IV, Section 2, of these Bylaws. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
Section 10. Quorum and Voting. At all meetings of the Board of
Directors, the presence of a majority of the number of directors fixed by
Article III, Section 1, of these Bylaws shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the affirmative vote of
at least a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by the Act, the Certificate of Incorporation or these
Bylaws. If a quorum shall not be present at any meeting of directors, a majority
of the directors present thereat may adjourn the meeting from time to time
without notice other than announcement at the meeting, until a quorum shall be
present.
Section 11. Committees. The Board of Directors by resolution passed by a
majority of the whole Board may designate committees (other than an Executive
Committee), each committee to consist of two or more directors, one of whom
shall be designated as Chairman and shall preside at all meetings of such
committee, which committees shall have such power and authority and shall
perform such functions as may be provided in such resolution. At any meeting of
the committee a majority of the members of the committee shall constitute a
quorum for the transaction of business, and the act of a majority of the members
present at any meeting at which a quorum is present shall be the act of the
committee. Such committee or committees shall have such name or names as may be
designated by the Board of Directors. All other such committees shall keep
regular minutes of their proceedings and report the same to the Board of
Directors when required.
Section 12. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors;
provided, however, that any director nominated by either the holders of Series A
Preferred Stock and Series A Common Shares (as each such term is defined in the
Securityholders Agreement) or the Purchaser shall be entitled to reimbursements
in respect of any expenses incurred by such director in his or her capacity as
such. Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving
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compensation therefor. Members of any committee may, by resolution of the Board
of Directors, be allowed like compensation of attending meetings.
Section 13. Action by Unanimous Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors or of a committee
designated by the Board of Directors may be taken without a meeting if a written
consent, setting forth the action so taken, is signed by all the members of the
Board of Directors or the committee, as the case may be, and such consent shall
have the same force and effect as a unanimous vote at a meeting.
Section 14. Presence at Meetings by Means of Communication Equipment.
Members of the Board of Directors of the Corporation or any committee designated
by the Board of Directors may participate in and hold a meeting of such board or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this section shall constitute
presence in person at such meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
ARTICLE IV
Notices
Section 1. Form of Notice. Whenever under the provisions of the Act, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, and no provision is made as to how such notice
shall be given, such notice shall be given in writing, by mail, postage prepaid,
addressed to such director or stockholder at such address as appears on the
books of the Corporation, provided, that such notice as is required to be given
to any director also may be given either personally (including written notice
delivered personally or telephone notice) or by telegram. Any notice required or
permitted to be given by mail shall be deemed to be given at the time when the
same be thus deposited in the United States mail addressed, in the
above-specified manner, with postage thereon prepaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the Act, the
Certificate of Incorporation or these Bylaws, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated in such notice, shall be equivalent to the giving of such notice.
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ARTICLE V
Officers
Section 1. General. The elected officers of the Corporation shall be a
Chairman of the Board, a Vice Chairman of the Board, a President, one or more
Vice Presidents, with or without such descriptive titles as the Board of
Directors shall deem appropriate, a Secretary, a Chief Financial Officer and a
Treasurer. The Board of Directors by resolution may also appoint one or more
Assistant Secretaries, and such other officers and assistant officers and agents
as from time to time may appear to be necessary or advisable in the conduct of
the affairs of the Corporation. Any two or more offices may be held by the same
person.
Section 2. Election. The Board of Directors shall elect and appoint the
officers to fill the positions designated in Section 1 of this Article V. The
Board of Directors may appoint such other officers and agents as it shall deem
necessary and may determine the salaries, powers and duties of all officers and
agents from time to time. The officers shall hold office until their successors
are chosen and qualified. Except as set forth in the Certificate of
Incorporation, the Securityholders Agreement or the Shareholders Agreement, any
officer elected or appointed by the Board of Directors may be removed for or
without cause, at any time by a majority vote of the whole Board when in its
judgment the best interests of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Election or appointments of an officer or agent shall not of itself
create contract rights. Any vacancy occurring in any office of the Corporation
by death, resignation, removal or otherwise shall be filled by the Board of
Directors.
Section 3. Chairman of the Board. The Chairman of the Board shall be a
director of the Corporation and shall preside at all meetings of the
stockholders and Board of Directors. The Chairman of the Board shall have
general supervision of the affairs of the Corporation and general control of all
of its business or businesses.
Section 4. Vice Chairman of the Board. The Vice Chairman of the Board
shall be a director of the Corporation and shall be subordinate only to the
Chairman of the Board, the Executive Committee and the Board of Directors. The
Vice Chairman of the Board shall, in the absence of the Chairman, preside at all
meetings of the Board of Directors and stockholders of the Corporation. The Vice
Chairman of the Board shall assist the Chairman of the Board with the general
supervision of the affairs of the Corporation and the general control of all of
its business or businesses and the Vice Chairman of the Board shall perform such
duties and services in connection therewith as shall be assigned to or required
of the Vice Chairman of the Board from time to time by the Chairman of the Board
and Board of Directors.
Section 5. President. The President shall have active control of the
operations and business or businesses of the Corporation, subordinate only to
the Chairman of the Board and the Board of Directors. The President shall have
authority to execute bonds, deeds, contracts in the name of the Corporation and
to affix the corporate seal thereto;
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and, in general, to exercise all the power usually appertaining to the office of
President of a corporation, except as otherwise provided in these Bylaws. The
President shall perform such other duties and services as shall be assigned to
or required of the President from time to time by the Chairman of the Board and
Board of Directors.
Section 6. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents, shall perform all such duties and services as
shall be assigned to or required of them from time to time by the Chairman of
the Board, Board of Directors or President.
Section 7. Secretary and Assistant Secretaries. The Secretary shall
have charge of the seal of the Corporation and have authority to affix the same
to any instrument requiring it, and when so affixed, it shall be attested by the
Secretary's signature or by the signature of an Assistant Secretary, which may
be in facsimile. The Secretary shall keep and account for all books, documents,
papers and records of the Corporation except those for which some other officer
or agent is properly accountable. The Secretary shall have authority to sign
stock certificates, and shall generally perform all the duties usually
appertaining to the office of the Secretary of a corporation. Assistant
Secretaries, in the order of their seniority unless otherwise determined by the
Board of Directors, shall assist the Secretary, and in the absence,
unavailability or disability of the Secretary, perform the duties and exercise
the powers of the Secretary.
Section 8. Chief Financial Officer. The Chief Financial Officer shall
be the principal financial officer of the Corporation. The Chief Financial
Officer shall have active control of and shall be responsible for all matters
pertaining to the finances of the Corporation. The Chief Financial Officer shall
perform such other duties and services as shall be assigned to or required of
the Chief Financial Officer from time to time by the Chairman of the Board,
Executive Committee, Board of Directors and the President.
Section 9. Treasurer. The Treasurer shall have the care and custody of
all monies, funds and securities of the Corporation and shall deposit all monies
and other valuable effects in the name of and to the credit of the Corporation
in such depositories as may be designated by the Board of Directors. The
Treasurer shall cause to be recorded a statement of all receipts and
disbursements of the Corporation in order that proper entries may be made in the
books of account. The Treasurer shall have the power to endorse for deposit or
collection, or otherwise, all checks, drafts, notes, bills of exchange, or other
commercial paper payable to the Corporation, and to give proper receipts or
discharges for payments to the Corporation.
Section 10. Bonding. If required by the Board of Directors, all or
certain of the officers shall give the Corporation a bond in such form, in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors, for the faithful performance of the duties of their office and for
the restoration to the Corporation, in case of their death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in their possession or under their control
belonging to the Corporation.
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ARTICLE VI
Certificates Representing Stock
Section 1. Form of Certificates. The Corporation shall deliver
certificates representing all stock to which stockholders are entitled.
Certificates representing stock of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the name of the registered
holder; the number, class of stock and the designation of the series, if any,
which said certificate represents; and either the par value of the stocks or
statement that the stock is without par value. Each certificate shall also set
forth on the back thereof, a full or summary statement of matters required by
the Act or the Certificate of Incorporation to be described on certificates
representing the stock and shall contain a statement on the face thereof
referring to the matters set forth on the back thereof. Certificates shall be
signed by the Chairman of the Board or the President or any Vice President and
the Secretary or any Assistant Secretary, and may be sealed with the seal of the
Corporation or a facsimile thereof. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the signatures of the
Corporation's officers may be facsimiles. In case any officer or officers who
have signed, or whose facsimile signature or signatures have been used on such
certificate or certificates, shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the Corporation or its
agents, such certificate or certificates may be adopted, nevertheless, by the
Corporation and issued and delivered as though the person or persons who or
whose facsimile signature or signatures have been used thereon had not ceased to
be such officer or officers of the Corporation.
Section 2. Restrictions on Transferability of Stock. In the event any
restriction on the transfer, or registration of the transfer of stock, shall be
imposed or agreed to, by the Corporation, as permitted by law, each certificate
representing stock so restricted shall conspicuously set forth a full or summary
statement of the restriction on the face of the certificate, or shall set forth
such statement on the back of the certificate and conspicuously refer to the
same on the face of the certificate, or shall conspicuously state on the face or
back of the certificate that such restriction exists pursuant to a specified
document and that the Corporation will furnish to the holder of the certificate
without charge upon written request to the Corporation at its principal place of
business or registered office a copy of the specified document.
Section 3. Lost Certificates. The Corporation may direct that a new
certificate or certificates be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate or certificates, the officers of the Corporation,
in their discretion and as a condition precedent to the issuance thereof, may
require the owner of the lost, stolen or destroyed certificate or certificates,
or his or her legal representative, to advertise the same in such manner as it
shall require and give the
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Corporation a bond in such form, in such sum, and with such surety or sureties
as the Corporation may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfer of Shares. Stock shall be transferable on the books
of the Corporation by the holder thereof in person or by his or her duly
authorized attorney. Subject to any restrictions on transfer set forth in the
Certificate of Incorporation of the Corporation, these Bylaws, the
Securityholders Agreement, the Shareholders Agreement or any other agreement
among stockholders to which the Corporation is a party or has notice, upon
surrender to the Corporation or to the transfer agent of the Corporation of a
certificate representing stock duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, it shall be the duty of the
Corporation or the transfer agent of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books
Section 5. Registered Stockholders. The Corporation shall be entitled
to recognize the holder of record of any stock as the holder in fact thereof
and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such stock on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by law.
ARTICLE VII
Indemnification of Directors and Officers
Section 1. Indemnification.
(A) Subject to the conditions and limitations of this Article VII and
the Corporation's Certificate of Incorporation, the Corporation shall, to the
fullest extent permitted by the Act as it may then be in effect, indemnify and
hold harmless any person who is or was a party, or is threatened to be made a
party to, any threatened, pending or completed action, claim, litigation, suit
or proceeding, whether civil, criminal, administrative or investigative, whether
predicated on foreign, federal, state or local law, and whether formal or
informal (collectively, "actions") by reason of his or her status as, or the
fact that he or she is or was or has agreed to become, a director or officer (an
"executive") of the Corporation or of an affiliate, and as to acts performed in
the course of the executive's duty to the Corporation or to an affiliate,
against expenses, fees, costs and charges, including, without limitation,
attorneys' fees and disbursements (collectively, "expenses"), judgments, fines
and amounts paid in settlement actually and reasonably incurred by or on behalf
of the executive in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, in connection with the investigation, defense,
settlement or appeal of such action), no matter by whom brought; provided, that
it is not determined pursuant to Section 2 of this Article VII or by the court
before which such action was brought, that:
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(i) the executive did not act in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best
interests of the Corporation and its stockholders,
(ii) the executive engaged in criminal conduct, and had no
reasonable cause to believe his or her conduct was lawful; or
(iii) the executive engaged in fraudulent or intentional
misconduct in the performance of his or her duty to the Corporation.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
(B) Subject to the conditions and limitations of this Article VII and
the Certificate of Incorporation, the Corporation shall, to the fullest extent
permitted by the Act as it may then be in effect, indemnify and hold harmless
any person who is or was a party, or is threatened to be made a party to, any
threatened, pending or completed action by reason of his or her status as, or
the fact that he or she is or was or has agreed to become an executive of the
Corporation or of an affiliate, and as to acts performed in the course of the
executive's duty to the Corporation or to an affiliate, against expenses
actually and reasonably incurred by him in connection with the defense or
settlement of such action; provided, that
(i) it is not determined pursuant to Section 2 of this Article
VII or by the court before which such action was brought, that the
executive did not act in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of
the Corporation and its stockholders; and
(ii) no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court
of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court shall be
deemed proper.
(C) To the extent the executive has been successful on the merits or
otherwise in connection with any action referred to in Section 1(A) or (B) of
this Article VII, no matter by whom brought (including, without limitation, the
settlement, dismissal, abandonment or withdrawal of any such action where the
executive does not pay, incur or assume any material liability), or in
connection with any claim, issue or matter therein, he or she shall be
indemnified by the Corporation against expenses reasonably incurred by
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or on behalf of him in connection therewith. The Corporation shall pay such
amounts (net of all amounts, if any, previously advanced to the executive
pursuant to Section 4 of this Article VII) to the executive (or to such other
person or entity as the executive may designate in writing to the Corporation)
upon the executive's written request therefor without regard to the provisions
of Section 2 of this Article VII.
(D) Notwithstanding the provisions of Section 1(A)(ii), and 1(A)(iii),
no executive shall be indemnified by the Corporation for monetary damages
incurred by the executive pursuant to an action brought by or in the right of
the Corporation to procure a judgment in its favor (sometimes hereinafter
referred to as a "derivative action") or an action brought by a stockholder of
the Corporation if it is determined pursuant to Section 2 of this Article VII,
or by the court before which such action was brought:
(i) the executive materially breached his or her duty of
loyalty to the Corporation or its stockholders;
(ii) the executive committed material acts or omissions in bad
faith or which involve intentional misconduct or a knowing violation of
the law;
(iii) the executive engaged in any material willful or
negligent conduct in paying dividends or repurchasing stock of the
Corporation out of other than lawfully available funds; or
(iv) the executive derived an improper personal benefit from
any transaction, unless such improper personal benefit is determined to
be immaterial in light of all of the circumstances of such action.
(E) If the executive is or was serving as an executive, trustee,
fiduciary, employee or agent of an employee benefit plan or similar plan the
Corporation shall indemnify and hold harmless the executive against any and all
of such reasonable amounts in the same manner and under the same conditions as
set forth in Section 1(A) and (B) above.
Section 2. Right to Indemnification: How Determined.
(A) Except as otherwise set forth in this Section 2, any
indemnification to be provided to the executive by the Corporation under Section
1 of this Article VII upon the final disposition or conclusion of an action (or
a claim, issue or matter associated with such an action), unless otherwise
ordered by the court before which such action was brought, shall be paid by the
Corporation (net of amounts, if any, previously advanced to the executive
pursuant to Section 4 of this Article VII) to the executive (or to such other
person or entity as the executive may designate in writing to the Corporation)
within sixty (60) days after the receipt of the executive's written request
therefor, which request shall include a comprehensive accounting of amounts for
which indemnification is being sought and shall reference the provision of this
Article VII pursuant to which such claim is being made.
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Notwithstanding the foregoing, the payment of the requested amounts may
be denied by the Corporation if (i) the Board of Directors of the Corporation by
a majority vote thereof determines that such payment, in whole or in part, would
not be in the best interests of the Corporation and its stockholders and would
contravene the terms and conditions of this Article VII; or (ii) a majority of
the directors of the Corporation are a party in interest to such action. In
either of such events, the Board shall immediately authorize and direct, by
resolution, that an independent determination be made as to whether the
executive has met the applicable standard of conduct set forth in Section 1 of
this Article VII and, therefore, whether indemnification is proper pursuant to
this Article VII.
Such independent determination shall be made by a panel of three
arbitrators, at the option of the Corporation in Miami, Florida, New York, New
York or Wilmington, Delaware, in accordance with the rules then prevailing of
the American Arbitration Association or, at the option of the executive, by an
independent legal counsel mutually selected by the Board of Directors and the
executive (such panel of arbitrators or independent legal counsel being
hereinafter referred to as the "authority").
In any such determination there shall exist a rebuttable presumption
that the executive has met such standard of conduct and is therefore entitled to
indemnification pursuant to this Article VII. The burden of rebutting such
presumption by clear and convincing evidence shall be on the Corporation.
If a panel of arbitrators is to be employed, one of such arbitrators
shall be selected by the Board of Directors by a majority vote of a quorum
thereof consisting of directors who were not parties in interest to such action
(or, if such quorum is not obtainable, by an independent legal counsel chosen by
the Board of Directors), the second by the executive and the third by the
previous two arbitrators.
The authority shall make a determination within sixty (60) days of
being selected and shall simultaneously submit a written opinion of its
conclusions to both the Corporation and the executive and, if the authority
determines that the executive is entitled to be indemnified for any amounts
pursuant to this Article VII, the Corporation shall pay such amounts (net of all
amounts, if any, previously advanced to the executive pursuant to Section 4 of
this Article VII), including interest thereon as provided in Section 5(C) of
this Article VII, to the executive (or to such other person or entity as the
executive may designate in writing to the Corporation) within ten (10) days of
receipt of such opinion.
(B) The executive may, either before or within two (2) years after a
determination, if any, has been made by the authority, petition any court of
competent jurisdiction to determine whether the executive is entitled to
indemnification under this Article VII. Such court shall thereupon have the
exclusive power to make such determination unless and until such court dismisses
or otherwise terminates such proceeding without having made such determination.
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The court shall make an independent determination of whether the
executive is entitled to indemnification as provided under this Article VII,
irrespective of any prior determination made by the authority; provided,
however, that there shall exist a rebuttable presumption that the executive has
met the applicable standard of conduct and is therefore entitled to
indemnification pursuant to this Article VII. The burden of rebutting such
presumption by clear and convincing evidence shall be on the Corporation.
If the court determines that the executive is entitled to be
indemnified for any amounts pursuant to this Article VII, unless otherwise
ordered by such court, the Corporation shall pay such amounts (net of all
amounts, if any, previously advanced to the executive pursuant to Section 4 of
this Article VII), including interest thereon as provided in Section 5(C) of
this Article VII, to the executive (or to such other person or entity as the
executive may designate in writing to the Corporation) within ten (10) days of
the rendering of such determination.
The executive shall pay all expenses incurred by the executive in
connection with the judicial determination provided in this Section 2(B), unless
it shall ultimately be determined by the court that he or she is entitled to be
indemnified, in whole or in part, by the Corporation as authorized hereby. All
expenses incurred by the executive in connection with any subsequent appeal of
the judicial determination provided for in this Section 2(B) shall be paid by
the executive regardless of the disposition of such appeal.
(C) Except as otherwise set forth in this Section 2, the expenses
associated with the indemnification process set forth in this Section 2,
including, without limitation, the expenses of the authority selected hereunder,
shall be paid by the Corporation.
Section 3. Termination of an Action is Nonconclusive. The termination
of any action, no matter by whom brought, by judgement, order, settlement,
conviction, or upon a plea of no contest or its equivalent, shall not, of
itself, create a presumption that the executive has not met the applicable
standard of conduct set forth in Section 1 of this Article VII.
Section 4. Advance Payment.
(A) Expenses reasonably incurred by or on behalf of the executive in
connection with any action (or claim, issue or matter associated with such
action), no matter by whom brought, shall be paid by the Corporation to the
executive (or to such other persons or entity as the executive may designate in
writing to the Corporation) in advance of the final disposition or conclusion of
such action (or claim, issue or matter associated with such action) upon the
receipt of the executive's written request therefor; provided, the following
conditions are satisfied:
(i) the executive has first requested an advance of such
expenses in writing (and delivered a copy of such request to the
Corporation) from each insurance carrier, to whom a claim has been
reported under and insurance policy purchased by the Corporation, if
any, as provided under Section 7 of this Article VII and each such
insurance carrier has declined to make such an advance;
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<PAGE> 19
(ii) the executive furnishes to the Corporation an executed
written certificate affirming his or her good faith belief that he or
she has met the applicable standard of conduct set forth in Section 1
of this Article VII; and
(iii) the executive furnishes to the Corporation, in a form
reasonably satisfactory to the Corporation, an executed written
agreement to repay any advances made under this Section 4 if it is
ultimately determined that he or she is not entitled to be indemnified
by the Corporation for such amounts pursuant to this Article VII.
(B) If the Corporation makes an advance of expenses to the executive
pursuant to this Section 4, the Corporation shall be subrogated to every right
of recovery the executive may have against any insurance carrier from whom the
Corporation has purchased insurance for such purpose.
Section 5. Partial Indemnification; Interest.
(A) If it is determined by the authority pursuant to Section 2 of this
Article VII, or by the court before which such action was brought, that the
executive is entitled to indemnification as to some claims, issues or matters,
but not as to other claims, issues or matters, involved in any action, no matter
by whom brought, the authority (or the court) shall authorize the reasonable
proration of such expenses, judgements, penalties, fines and amounts incurred in
settlement with respect to which indemnification is sought by the executive,
among such claims, issues or matters as the authority (or the court) shall deem
appropriate in light of all of the circumstances of such action.
(B) If it is determined by the authority pursuant to Section 2 of this
Article VII or by the court before which such action was brought, that certain
amounts incurred by the executive are for whatever reason unreasonable in
amount, the authority (or the court) shall authorize indemnification to be paid
by the Corporation to the executive for only such amounts as the authority (or
the court) shall deem reasonable in light of all of the circumstances of such
action.
(C) To the extent deemed appropriate by the authority, or by the court
before which such action was brought, interest shall be paid by the Corporation
to the executive, at a reasonable interest rate, for amounts for which the
Corporation indemnifies the executive.
Section 6. Nonexclusivity of Agreement. The right to indemnification
and advancement of expenses provided to the executive of this Article VII shall
not be deemed exclusive of any other rights to which the executive may be
entitled under any charter provision, bylaw, agreement, resolution, vote of
stockholders or disinterested directors of the Corporation or otherwise,
including, without limitation, under Section 145 of the Act as it may then be in
effect, both as to acts in his or her official capacity as such executive or
other employee or agent of the Corporation or of an affiliate or as to acts in
any other capacity while holding such office or position, and the terms and
provisions of this Article VII shall continue as to the executive if he or she
ceases to be
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<PAGE> 20
an executive or other employee or agent of the Corporation or of an affiliate,
and such terms and provisions shall inure to the benefit of the heirs, executors
and administrators of the executive.
Section 7. Insurance.
(A) The Corporation may purchase and maintain insurance on behalf of
the executive against any liability asserted against him or incurred by or on
behalf of him in such capacity as an executive or other employee or agent of the
Corporation or of an affiliate, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article VII or under Section 145 of
the Act as it may then be in effect. The purchase and maintenance of such
insurance shall not in any way limit or affect the rights and obligations of the
Corporation or the executive under this Article VII and the adoption of this
Article VII by the Corporation shall not in any way limit or affect the rights
and obligations of the Corporation or of the other party or parties thereto
under any such policy or agreement of insurance.
(B) If the executive shall receive payment from any insurance carrier
or from the plaintiff in any action against the executive in respect of
indemnified amounts after payments on account of all or part of such indemnified
amounts have been made by the Corporation pursuant to this Article VII, the
executive shall promptly reimburse the Corporation for the amount, if any, by
which the sum of such payment by such insurance carrier or such plaintiff and
payments by the Corporation to the executive exceeds such indemnified amounts;
provided, however, that such portions, if any, of such insurance proceeds that
are required to be reimbursed to the insurance carrier under the terms of its
insurance policy, such as deductible or coinsurance payments, shall not be
deemed to be payments to the executive hereunder. In addition, upon payment of
indemnified amounts under this Article VII, the Corporation shall be subrogated
to the executive's rights against any insurance carrier in respect of such
indemnified amounts and the executive shall execute and deliver any and all
instruments and documents and perform any and all other acts and deeds which the
Corporation deems necessary or advisable to secure such rights. The executive
shall do nothing to prejudice such rights of recovery or subrogation.
Section 8. Witness Expenses. Upon the executive's written request, the
Corporation shall pay (in advance or otherwise) or reimburse any and all
expenses reasonably incurred by the executive in connection with his or her
appearances as a witness in any action at a time when he or she has not been
formally named a defendant or respondent to such an action.
Section 9. Contribution.
(A) If the indemnity provided for in Section 1 of this Article VII is
unavailable to the executive for any reason whatsoever, the Corporation, in lieu
of indemnifying the executive, shall contribute to the amount reasonably
incurred by or on behalf of the executive, whether for judgments, fees,
penalties, amounts incurred in settlement or for expenses in connection with any
action, no matter by whom brought, in such proportion
20
<PAGE> 21
as deemed fair and reasonable by the authority pursuant to Section 2 of this
Article VII, or by the court before which such action was brought, taking into
account all of the circumstances of such action, in order to reflect (i) the
relative benefits received by the Corporation and the executive as a result of
the event or transaction giving cause to such action; and (ii) the relative
fault of the Corporation (and its other executives, employees and agents) and
the executive in connection with such event or transaction.
(B) The executive shall not be entitled to contribution from the
Corporation under this Section 9 if it is determined pursuant to Section 2 of
this Article VII, or by the court before which such action was brought, that the
executive engaged in criminal, fraudulent or intentional misconduct in the
performance of his or her duty to the Corporation or otherwise violated the
provisions of Section 1(C) of this Article VII.
(C) The Corporation's payment of, and the executive's right to,
contribution under this Section 9 shall be made and determined in accordance
with Section 2 of this Article VII relating to the Corporation's payment of, and
the executive's right to, indemnification.
Section 10. Severability. If any provision of this Article VII shall be
deemed invalid or inoperative, or if a court of competent jurisdiction
determines that any of the provisions of this Article VII contravene public
policy, this Article VII shall be construed so that the remaining provisions
shall not be affected, but shall remain in full force and effect, and any such
provisions which are invalid and inoperative or which contravene public policy
shall be deemed, without further action or deed on the part of any person, to be
modified, amended or limited, but only to the extent necessary to render the
same valid and enforceable, and the Corporation shall indemnify the executive as
to expenses, judgments, fines and amounts incurred in settlement with respect to
any action, no matter by whom brought, to the full extent permitted by any
applicable provision of this Article VII that shall not have been invalidated
and to the full extent otherwise permitted by the Act as it may then be in
effect.
Section 11. Amendment and Modification. This Article VII has been
adopted by the affirmative vote of a majority of the stockholders of the
Corporation entitled to vote therefor and may only be altered, amended or
repealed by the affirmative vote of a majority of the stockholders of each class
of stock of the Corporation so entitled to vote; provided, however, that such
stockholder authorization shall not be required in the event such alteration or
amendment:
(A) is made in order to conform to any amendment or revision of the Act
which expands an executive's rights to indemnification thereunder or is
otherwise beneficial to the executive, or
(B) in the sole judgment and discretion of the Board of Directors of
the Corporation, does not adversely affect the rights and protection of the
stockholders of the Corporation.
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<PAGE> 22
ARTICLE VIII
General Provisions
Section 1. Dividends. Dividends upon the outstanding stock of the
Corporation, subject to the provisions of the Act, the Certificate of
Incorporation and any agreements or obligations of the Corporation, if any, may
be declared by the Board of Directors at any regular or special meeting.
Dividends may be declared and paid in cash, in property, or in stock of the
Corporation, provided that all such declarations and payment of dividends shall
be in strict compliance with all applicable laws and the Certificate of
Incorporation. The Board may fix in advance a record date for the purpose of
determining stockholders entitled to receive payment of any dividend, such
record date to be not more than sixty (60) days nor less than ten (10) days
prior to the payment of such dividend. In the absence of any action by the Board
of Directors, the date upon which the Board of Directors adopts the resolution
declaring such dividend shall be the record date.
Section 2. Reserves. There may be created by resolution of the Board of
Directors such reserve or reserves as the Board of Directors from time to time,
in its absolute discretion, deems proper to provide for contingencies, or to
equalize dividends, or to repair or maintain any property of the Corporation, or
for such other proper purposes as the Board of Directors shall deem beneficial
to the Corporation, and the Board of Directors may modify or abolish any reserve
in the same manner in which it was created.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Seal. The Corporation shall have a seal which may be used by
causing it or a facsimile thereof to be impressed on, affixed to, or in any
manner reproduced upon, instruments of any nature required to be executed by its
proper officers.
Section 5. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the stockholders at any
special meeting of the stockholders, a full and clear statement of the business
and condition of the Corporation.
Section 6. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may designate from time to time.
Section 7. Voting Securities Owned by Corporation. Voting securities in
any other corporation held by this Corporation shall be voted by the Chairman of
the Board, the Vice Chairman of the Board, the President or any Vice President,
unless the Board of Directors confers authority to vote with respect thereto,
which may be general or confined to specific investments, upon some other person
or officer. Any person authorized to vote securities shall have the power to
appoint proxies with the general power of substitution.
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<PAGE> 23
Section 8. Resignation. Any director, officer, employee or agent of the
Corporation may resign by giving written notice to the Chairman of the Board or
the Secretary. The resignation shall take effect at the time specified therein,
or immediately if no time is specified therein. Unless specified in such notice,
the acceptance of such resignation shall not be necessary to make it effective.
Section 9. Restated Certificate of Incorporation. Notwithstanding
anything to the contrary herein, if any provision contained in these Restated
Bylaws is inconsistent with or conflicts with a provision of the Restated
Certificate of Incorporation, such provision of these Restated Bylaws shall be
superseded by the inconsistent provision in the Restated Certificate of
Incorporation to the extent necessary to give effect to such provision in the
Restated Certificate of Incorporation.
ARTICLE IX
Amendments To Bylaws
Except as set forth in the Securityholders Agreement or the
Shareholders Agreement and except with respect to the amendment of any rights
provided for hereunder pursuant to the Securityholders Agreement, for so long as
it remains in force and effect, these Bylaws may be altered, amended, modified
or repealed, or new Bylaws may be adopted at any meeting of the Board of
Directors at which a quorum is present by the affirmative vote of a majority of
the directors present at such meeting.
<PAGE> 1
EXHIBIT 4.2
SHAREHOLDERS AGREEMENT
dated as of March 10, 1999
among
NEVASA HOLDINGS LIMITED
NUNSGATE LIMITED
and
IMPSAT CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I: DEFINITIONS.........................................................1
SECTION 1.1. Definitions...............................................1
ARTICLE II: RESTRICTIVE LEGEND.................................................5
SECTION 2.1. Restrictive Legend........................................5
ARTICLE III: REGISTRATION RIGHTS...............................................6
SECTION 3.1. Demand Registration Rights................................6
SECTION 3.2. Piggy-Back Registration...................................7
SECTION 3.3. Reduction of Offering.....................................8
SECTION 3.4. Registration Procedures..................................10
SECTION 3.5. Shelf Registration.......................................12
SECTION 3.6. Registration Expenses....................................13
SECTION 3.7. Indemnification by the Company...........................13
SECTION 3.8. Indemnification by the Purchaser.........................13
SECTION 3.9. Indemnification by Nevasa................................13
SECTION 3.10. Conduct of Indemnification Proceedings...................14
SECTION 3.11. Contribution.............................................15
SECTION 3.12. Participation in Underwritten Registrations..............16
SECTION 3.13. Rule 144.................................................16
SECTION 3.14. Holdback Agreements......................................16
ARTICLE IV COVENANTS..........................................................17
SECTION 4.1. Information..............................................17
SECTION 4.2. Access...................................................18
SECTION 4.3. Right of First Offer.....................................19
SECTION 4.4. Right to Participate in Certain Dispositions.............22
SECTION 4.5. Drag-Along...............................................23
SECTION 4.6. Preemptive Rights........................................23
SECTION 4.7. Approvals................................................25
SECTION 4.8. Right of Transfer Upon Deadlock..........................26
ARTICLE V BOARD OF DIRECTORS..................................................28
SECTION 5.1. Nomination of Directors..................................28
SECTION 5.2. Removal..................................................28
ARTICLE VI MISCELLANEOUS......................................................29
SECTION 6.1. Headings.................................................29
SECTION 6.2. No Inconsistent Agreements...............................29
SECTION 6.3. Entire Agreement.........................................29
</TABLE>
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<TABLE>
<S> <C>
SECTION 6.4. Notices..................................................29
SECTION 6.5. Applicable Law...........................................30
SECTION 6.6. Severability.............................................30
SECTION 6.7. Effectiveness; Termination...............................30
SECTION 6.8. Successors, Assigns, Transferees.........................30
SECTION 6.9. Amendments; Waivers......................................31
SECTION 6.10. Counterparts; Effectiveness..............................31
SECTION 6.11. Recapitalization, Etc....................................31
SECTION 6.12. Remedies.................................................31
SECTION 6.13. Transferability..........................................31
SECTION 6.14. Consent to Jurisdiction..................................32
SECTION 6.15. Confidentiality..........................................32
</TABLE>
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<PAGE> 4
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT (this "Agreement") dated as of March 10, 1999
among Nevasa Holdings Limited, an Irish company, Nunsgate Limited, a
wholly-owned Subsidiary of British Telecommunications plc, (the "Purchaser") and
IMPSAT Corporation, a Delaware corporation (the "Company").
WHEREAS, the Company, Nevasa Holdings Limited and the Purchaser have
entered into a Share Purchase Agreement dated as of March 10, 1999 (the "Share
Purchase Agreement"), pursuant to which the Purchaser has agreed to purchase
from the Company and the Seller a total of 24,190,234 shares (the "Shares") of
Common Stock of the Company;
WHEREAS, the Company and Nevasa Holdings Limited are parties to a
Securityholders Agreement, dated as of March 19, 1998, among the Company, Nevasa
Holdings Limited, Princes Gate Investors II, L.P., Morgan Stanley Global
Emerging Markets Private Investment Fund, L.P., and certain other parties, a
copy of which has been provided to the Purchaser (the "Securityholders
Agreement");
WHEREAS, the Company, Nevasa Holdings Limited and the Holders (as such
term is defined in the Securityholders Agreement) have entered into a letter
agreement of even date herewith pursuant to which the Holders have consented to
the transactions contemplated by this Agreement and the Share Purchase Agreement
(the "Consent Agreement");
WHEREAS, Nevasa Holdings Limited, the Purchaser and the Holders have
entered into an agreement of even date herewith pursuant to which the Purchaser
and Nevasa Holdings Limited have been granted certain rights of first offer by
the Holders (the "Right of First Offer Agreement"); and
WHEREAS, Nevasa Holdings Limited, the Purchaser and the Company wish to
record certain agreements between them regarding certain rights and restrictions
with respect to the Shares and the management of the Company, which agreements
will become effective on the Closing Date upon the consummation of the
transactions contemplated by the Share Purchase Agreement.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. In addition to terms defined elsewhere in this
Agreement, the following terms, as used herein, have the following meanings:
<PAGE> 5
"Affiliate," as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person and "Affiliated" has a meaning correlative with the
foregoing. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Board of Directors" means the Board of Directors of the Company.
"Business" means the business of telecommunications, information
technology and internet services and all related and ancillary businesses.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Charter" means the Certificate of Incorporation of the Company.
"Closing Date" means the date of the closing of the purchase of the
Shares pursuant to the Share Purchase Agreement.
"Commission" means the United States Securities and Exchange Commission
and any successor agency having similar powers.
"Common Stock" means Class A common stock, par value $1.00 per share, of
the Company, as such common stock may be adjusted in the circumstances
contemplated by and in accordance with Section 6.11 hereof.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"CORIM" means Corporacion IMPSA, S.A.
"Director" means a member of the Board of Directors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute.
"Existing Stockholders" means: (i) Mr. Enrique Pescarmona, Mrs. Silvia
Monica Pescarmona de Baldini, Mrs. Liliana Pescarmona de Mayol, Mr. Roberto Vivo
and Mr. Ricardo Verdaguer; (ii) a parent, brother, 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) CORIM; (viii) any Person in which all
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of the equity interests are owned, directly or indirectly, by any one or more of
the Persons named in clauses (i) through (vii); (ix) Princes Gate Investors II,
L.P., PGI Investments Limited, Gregor Von Opel or Investor Investments AB; and
(x) Morgan Stanley Global Emerging Markets Private Investment Fund, L.P. or
Morgan Stanley Global Emerging Markets Private Investors, L.P.
"Holder" means any registered holder of shares of Series A Stock or
Series A Common Shares.
"Initial Public Offering" means the first registration of shares of
Common Stock after the date hereof under the Securities Act, using Form S-1, S-2
or S-3 or any successor forms, and after which the Common Stock is listed or
quoted for trading on the New York Stock Exchange, the American Stock Exchange
or the NASDAQ National Market.
"Member of the Nevasa Group" means any Person which individually is a
member of the Nevasa Group; provided, however, that CORIM shall not be deemed to
be a Member of the Nevasa Group for any purposes under this Agreement.
"Nevasa Group" means Nevasa and any Person described in clause (viii) of
the definition of "Existing Stockholders;" provided, however, that CORIM shall
not be deemed to be any such Person for any purposes under this Agreement.
"Law" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order or other requirement or rule of law.
"Nevasa" means Nevasa Holdings Limited, an Irish company, and any Person
that succeeds to or acquires all of the assets currently owned by Nevasa
Holdings Limited, whether by share transfer, merger, consolidation or operation
of law, so long as all of the outstanding equity interests thereof are owned of
record and beneficially by the current record and beneficial owners of all of
the outstanding equity interests of Nevasa Holdings Limited as of the date
hereof.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, limited liability company, unincorporated association,
joint venture or any other entity or organization, whether or not a legal
entity, including, without limitation, a government or political subdivision or
an agency or instrumentality thereof.
"Registrable Securities" means the Shares and any shares of Common Stock
held by Nevasa; provided, however, in any event, that such securities shall
cease to be Registrable Securities when a registration statement relating to
such securities shall have been declared effective by the Commission and such
securities shall have been disposed of pursuant to such effective registration
statement or sold under Rule 144 (but not Rule 144A).
"Registration Expenses" means any and all expenses incurred in connection
with or incidental to a registration or other offering, listing, marketing or
selling efforts (but not underwriting discounts or commissions), including all:
(i) registration and filing fees;
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(ii) fees and expenses of compliance with securities or blue sky laws or the
rules of the National Association of Securities Dealers, Inc. or any successor
agency and the cost of preparing any blue sky or legal investment memorandum in
connection with the qualification of Registrable Securities (including
reasonable fees and disbursements of a qualified independent underwriter, if
any, counsel in connection therewith and the reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities); (iii) printing expenses; (iv) internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees performing legal or accounting duties); (v) fees and disbursements of
U.S. and foreign counsel for the Company; (vi) customary fees and expenses for
independent certified public accountants retained by the Company (including the
expenses of any comfort letters or costs associated with the delivery by
independent certified public accountants of a comfort letter or comfort
letters); (vii) fees and expenses of any special experts retained by the Company
in connection with such registration or other offering, listing, marketing or
selling efforts; (viii) fees and expenses of one U.S. counsel for the Purchaser
and Nevasa, as the case may be, and one foreign counsel, if any, for each
applicable foreign jurisdiction; (ix) fees and expenses of listing the
Registrable Securities on a securities exchange or on the NASDAQ National Market
System; (x) the costs and other out-of-pocket expenses of the Company relating
to investor presentations on the "road show" undertaken in connection with the
marketing of Registrable Securities, including, without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging expense
of the representatives and officers of the Company and any such consultants, and
the cost of any transportation utilized in connection with the road show; and
(xi) all other costs or expenses incident to the performance of the obligations
of the Company with respect to Article III.
"Rule 144" means Rule 144 under the Securities Act, as such rule may be
amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act, as such rule may be
amended from time to time.
"Rule 144(k)" means Rule 144(k) under the Securities Act, as such rule
may be amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor statute.
"Series A Common Shares" means the shares of Common Stock of the Company
to be issued upon conversion of the Series A Stock.
"Series A Stock" means the Company's Redeemable, Convertible Preferred
Stock, Series A, having the rights, preferences and privileges set forth in the
Certificate of Designations, dated March 19, 1998, therefor adopted pursuant to
the Charter.
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<PAGE> 8
"Subsidiary" means, with respect to any Person, any other Person of which
more than fifty percent (50%) of (i) the economic interest in the assets,
earnings or cash flow or (ii) the total voting power of shares of capital stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof, is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person or a combination thereof.
"Transfer" means any transfer, in whole or in part, by sale, pledge,
assignment, grant or other means, including, without limitation, by the grant of
an option.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as a principal in connection with a distribution of such Registrable
Securities and not as part of such dealer's market-making activities.
"Seller" means Nevasa.
"Selling Holders" has the meaning ascribed to such term in the
Securityholders Agreement.
"Voting Securities" of any Person means any securities ordinarily having
the power to vote for the election of directors, managers or other voting
members of the governing body of such Person.
ARTICLE II
RESTRICTIVE LEGEND
SECTION 2.1. Restrictive Legend.
(a) For so long as this Agreement remains in effect, each certificate
representing the Shares and the shares of Common Stock held by Nevasa shall
(unless otherwise permitted by the provisions of Section 2.1(b) or (c) or the
Charter) include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE
WITH THE ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND
ANY APPLICABLE STATE SECURITIES LAWS.
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<PAGE> 9
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SHAREHOLDERS AGREEMENT DATED AS OF MARCH 10, 1999 THAT FIXES
CERTAIN RIGHTS AND OBLIGATIONS OF THE HOLDER OF THIS SECURITY. A
COPY OF THE AGREEMENT MAY BE OBTAINED FROM IMPSAT CORPORATION, 256
ALFEREZ PAREJA, 1107 BUENOS AIRES, ARGENTINA.
(b) The Purchaser, Nevasa or any transferee of the Shares or of shares
of Common Stock transferred by Nevasa, as the case may be, may, upon providing
evidence reasonably satisfactory to the Company that such Share is not a
"restricted security" (as defined in Rule 144), may be sold pursuant to Rule
144(k) or has been registered under the Securities Act, exchange the certificate
representing such Share for a new certificate that does not bear the first
legend set forth in Section 2.1(a).
(c) In the event that any Shares are sold by the Purchaser or any
shares of Common Stock are sold by Nevasa, in each case to an unaffiliated third
party in accordance with the terms and conditions of this Agreement, the
Purchaser, Nevasa or such third party may, upon providing evidence reasonably
satisfactory to the Company of any such sale, exchange the certificates
representing such Shares or such shares of Common Stock, for new certificates
that do not bear the second legend set forth in Section 2.1(a).
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1. Demand Registration Rights
(a) IPO Demand. From and after the third anniversary of the Closing
Date until the consummation of the Initial Public Offering, in the event that
the Purchaser shall own at least ten percent (10%) of the Company's Common Stock
(determined on a fully diluted basis), the Purchaser may make a written request
(the "IPO Demand") that the Company consummate the Initial Public Offering and,
upon receipt of such IPO Demand, the Company shall be obligated to use its best
efforts to proceed to consummate the Initial Public Offering as provided for in
Section 3.4 hereof.
(b) Subsequent Purchaser Demand. At any time after the consummation of
the Initial Public Offering, the Purchaser may make written requests (each, a
"Purchaser Registration Demand") to the Company for registration under the
Securities Act of Registrable Securities. Thereafter, the Company shall use its
best efforts to register the Registrable Securities under the Securities Act.
Any Purchaser Registration Demand will specify the number of shares of Common
Stock proposed to be sold and will also specify the intended method of
disposition thereof. The Company shall not be obligated to effect more than one
Purchaser Registration Demand in any six-month period. The Purchaser is entitled
to make only five such Purchaser Registration Demands to the Company over the
duration of this Agreement, and each Purchaser Registration Demand shall cover
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Registrable Securities with a then current market value in excess of $25
million. The Purchaser agrees that in connection with any registration of
Registrable Securities pursuant to a Purchaser Registration Demand, the Company
shall have the right to select the lead Underwriter for the sale of the
Registrable Securities subject to the consent of the Purchaser, which consent
shall not be unreasonably withheld.
(c) Nevasa Demand. At any time after the consummation of the Initial
Public Offering, Nevasa may make written requests (each, a "Nevasa Registration
Demand") to the Company for registration under the Securities Act of Registrable
Securities. Thereafter, the Company shall use its best efforts to register the
Registrable Securities under the Securities Act. Any Nevasa Registration Demand
will specify the number of shares of Common Stock proposed to be sold and will
also specify the intended method of disposition thereof. The Company shall not
be obligated to effect more than one Nevasa Registration Demand in any six-month
period. Nevasa is entitled to make only ten such Nevasa Registration Demands to
the Company over the duration of this Agreement, and each Nevasa Registration
Demand shall cover Registrable Securities with a then current market value in
excess of $25 million. Nevasa agrees that in connection with any registration of
Registrable Securities pursuant to a Nevasa Registration Demand, the Company
shall have the right to select the lead Underwriter for the sale of the
Registrable Securities subject to the consent of Nevasa, which consent shall not
be unreasonably withheld.
(d) Effective Registration. A registration requested pursuant to this
Section 3.1 shall be deemed not to be effected (i) if a registration statement
with respect thereto shall not have become effective, (ii) if, after it has
become effective, such registration is interfered with for any reason by any
stop order, injunction or other order or requirement of the Commission or any
other governmental agency or any court, and the result of such interference is
to prevent the Purchaser or Nevasa, as the case may be, from disposing of the
Registrable Securities to be sold thereunder in accordance with the intended
methods of disposition or (iii) if the closing specified in the purchase
agreement or underwriting agreement entered into in connection with any
underwritten registration shall not have occurred due to a breach by the Company
of any provision contained in any such purchase or underwriting agreement.
SECTION 3.2. Piggy-Back Registration. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering of
Common Stock (i) for its own account (other than a registration statement on
Form S-4 or S-8 (or any substitute form that may be adopted by the Commission)
and other than with respect to the Initial Public Offering) or (ii) for the
account of any holders of capital stock of the Company, then the Company shall
give written notice of such proposed filing to the Purchaser and Nevasa as soon
as practicable (but in any event not less than 20 days before the anticipated
filing date), and such notice shall offer the Purchaser and Nevasa the
opportunity to register any of their Registrable Securities that are then
eligible for registration. If either the Purchaser or Nevasa wishes to register
securities of the same class or series as the Company or such holder, such
registration shall be on the same terms and conditions as the registration of
the Company or other holders of such securities (a "Piggy-Back Registration").
If the Piggy-Back Registration is of a different
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<PAGE> 11
class, then the Company shall have the option of effecting a concurrent
registration. In the event that the Purchaser or Nevasa wishes to cause the
registration of any of their Registrable Securities in the Piggy-Back
Registration, then the right to include the Registrable Securities in the
Piggy-Back Registration shall be reduced in accordance with the provisions of
Section 3.3 below.
SECTION 3.3. Reduction of Offering.
(a) Each of the Purchaser and Nevasa acknowledges that the Holders of
the Company's Series A Stock have previously been granted certain rights under
the Securityholders Agreement, which rights limit the ability of the Company to
register the Registrable Securities under the Securities Act. The Purchaser
hereby acknowledges that any rights granted by the Company under Sections 3.1
and 3.2 above are subject to the terms, conditions and restrictions of the
Securityholders Agreement, as such terms, conditions and restrictions have been
amended by the Consent Agreement.
(b) If the lead Underwriter of an offering described in Section 3.1 or
3.2 informs the Company in writing that the success of such offering could be
materially and adversely affected by inclusion of all the securities requested
to be included, then the Company may, upon written notice to the Purchaser and
Nevasa, reduce (if and to the extent stated by such Underwriter to be necessary
to eliminate such effect) the number of securities offered for the accounts of
the Company, the Purchaser, the Selling Holders and Nevasa, as the case may be,
so that the resultant aggregate number of the securities that will be included
in such registration shall be equal to the number of securities stated in such
Underwriter's letter; provided, however, that priority in such registration
shall be as follows:
(i) in the case of the Initial Public Offering resulting from an IPO
Demand either by any of the Selling Holders pursuant to their
rights under the Securityholders Agreement or by the Purchaser
pursuant to its rights under Section 3.1(a) hereof, first,
securities offered for the account of the Company, second,
securities offered for the accounts of the Selling Holders and the
Purchaser, with the securities offered for the accounts of the
Selling Holders and the Purchaser allocated sixty percent (60%) to
the Selling Holders and forty percent (40%) to the Purchaser
(calculated for the purpose of this clause (i) and for each of the
following clauses (ii) through (vi) as if all shares of Series A
Stock had been converted into shares of Common Stock), and third,
securities offered for the account of Nevasa;
(ii) in the case of any other initial public offering, first,
securities offered for the account of the Company, and second,
securities offered for the accounts of the Selling Holders and the
Purchaser with respect to sixty percent (60%) of any additional
shares being registered, with the securities offered for the
accounts of the Selling Holders and the Purchaser allocated sixty
percent (60%) to the Selling Holders and forty percent (40%) to
the
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<PAGE> 12
Purchaser, and with respect to the remaining forty percent (40%)
of any additional shares being registered, for the account of
Nevasa;
(iii) in the case of a "Registration Demand" (as defined under Section
3.1(b) of the Securityholders Agreement) by any of the Selling
Holders or a Purchaser Registration Demand, first, securities
offered for the accounts of the Selling Holders and the Purchaser,
with the securities offered for the accounts of the Selling
Holders and the Purchaser allocated sixty percent (60%) to the
Selling Holders and forty percent (40%) to the Purchaser, second,
securities offered for the account of Nevasa, and third,
securities offered for the account of the Company;
(iv) in the case of a Nevasa Registration Demand, first securities
offered for the account of Nevasa with respect to 50% of all
shares being registered, second, with respect to the remaining 50%
of all shares being registered, securities offered for the
accounts of the Selling Holders and the Purchaser, with the
securities offered for the accounts of the Selling Holders and the
Purchaser allocated sixty percent (60%) to the Selling Holders and
forty percent (40%) to the Purchaser, and third, securities
offered for the account of the Company;
(v) in the case of an offering described in Section 3.2(i), first,
securities offered for the account of the Company, and second,
with respect to sixty percent (60%) of any additional shares being
registered, securities offered for the accounts of the Selling
Holders and the Purchaser, with the securities offered for the
accounts of the Selling Holders and the Purchaser allocated sixty
percent (60%) to the Selling Holders and forty percent (40%) to
the Purchaser, and, with respect to the remaining forty percent
(40%) of any additional shares being registered, securities
offered for the account of Nevasa; and
(vi) in any other case, first, with respect to sixty percent (60%) of
any additional shares being registered, securities offered for the
accounts of the Selling Holders and the Purchaser, with the
securities offered for the accounts of the Selling Holders and the
Purchaser allocated sixty percent (60%) to the Selling Holders and
forty percent (40%) to the Purchaser, and, with respect to the
remaining forty percent (40%) of any additional shares being
registered, securities offered for the account of Nevasa, and
second, securities offered for the account of the Company;
provided, however, that in respect of each of the foregoing clauses (i) through
(vi) to the extent that the Purchaser or the Selling Holders elect not to
exercise their respective rights thereunder, then with respect to the securities
to which such rights are not exercised (the "Additional Shares"), the Purchaser
or the Selling Holders, as the case may be, may also require registration of its
securities in such number as is equal to the number of Additional Shares; and
provided further, that in respect of each of the foregoing clauses (i) through
(vi) to the extent that Nevasa does not elect to exercise its rights
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<PAGE> 13
thereunder, then with respect to the securities to which such rights are not
exercised (the "Additional Nevasa Shares"), the Purchaser and the Selling
Holders may also require registration of their securities (allocated between the
Purchaser and the Selling Holders as set forth in clauses (i) through (vi)) in
accordance with such foregoing clauses in an aggregate amount equal to the
number of Additional Nevasa Shares.
SECTION 3.4. Registration Procedures. Whenever the Company receives an
IPO Demand, a Purchaser Registration Demand or a Nevasa Registration Demand or
any holder of Registrable Securities elects to participate in a Piggy-Back
Registration pursuant to Section 3.2 hereof, the Company will use its best
efforts, (i) in the case of the IPO Demand, to consummate the Initial Public
Offering, and (ii) in the case of a Purchaser Registration Demand, Nevasa
Registration Demand or election to participate in a Piggy-Back Registration, to
effect the registration and the sale of the relevant Registrable Securities in
accordance with the intended method of disposition thereof, in each case as
promptly as practicable, and in connection therewith:
(a) The Company will as expeditiously as possible prepare and file
with the Commission a registration statement on any form for which the Company
then qualifies or which counsel for the Company shall deem appropriate and which
form shall be available for the sale of the Registrable Securities to be
registered thereunder in accordance with the intended method of distribution
thereof, and use its best efforts to cause such filed registration statement to
become and remain effective until all Registrable Securities requested to be
registered thereunder have been sold thereunder.
(b) The Company will, concurrently with filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to the
Purchaser, Nevasa and each Underwriter, if any, such number of copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as the Purchaser, Nevasa or
such Underwriter may reasonably request in order to facilitate the sale of the
Registrable Securities.
(c) After the filing of the registration statement, the Company will
promptly notify the Purchaser and Nevasa of any comments from or any material
correspondence with the Commission or the National Association of Securities
Dealers, Inc. and of any stop order issued or threatened by the Commission and
use its best efforts to prevent the entry of such stop order or to remove it if
entered.
(d) The Company will use its best efforts to (i) register or qualify
the Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States or elsewhere as the Purchaser or Nevasa
requests and to keep such registration or qualification in effect for so long as
such registration statement remains in effect, and to take any other action
which may be reasonably necessary or advisable to enable the Purchaser and
Nevasa to consummate the disposition in such jurisdictions of the securities
owned by the Purchaser or Nevasa and (ii) cause such disposition and
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<PAGE> 14
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary or advisable by virtue
of the business and operations of the Company and/or its Subsidiaries, so as to
enable the Purchaser and Nevasa to consummate the disposition of such
Registrable Securities; provided, however, that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (d), (ii) subject itself
to taxation in any such jurisdiction other than taxation arising with respect to
the registration of securities or (iii) consent to general service of process in
any such jurisdiction.
(e) At any time when a prospectus relating to the sale of Registrable
Securities is required to be delivered under the Securities Act, the Company
will immediately notify the Purchaser and Nevasa of the occurrence of an event
requiring the preparation of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading and promptly make available to the Purchaser,
Nevasa and the Underwriters any such supplement or amendment. Each of the
Purchaser and Nevasa agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in the preceding sentence, it
will forthwith discontinue the offer and sale of Registrable Securities pursuant
to the registration statement covering such Registrable Securities until receipt
of the copies of such supplemented or amended prospectus and, if so directed by
the Company, each of the Purchaser and Nevasa will deliver to the Company all
copies, other than permanent file copies then in the possession of the Purchaser
or Nevasa, as the case may be, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice.
(f) The Company will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions (including
engaging in a road show) as are necessary or desirable in order to expedite or
facilitate the disposition of such Registrable Securities.
(g) The Company will furnish to the Purchaser, Nevasa and to each
Underwriter, if any, addressed to the Purchaser, Nevasa or such Underwriter,
signed copies of (i) an opinion or opinions of counsel to the Company and (ii) a
comfort letter or comfort letters from the Company's independent public
accountants, each in such form and covering such matters as the Purchaser,
Nevasa or the lead Underwriter reasonably requests.
(h) The Company will otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available to its
shareholders, as soon as reasonably practicable, an earnings statement covering
a period of 12 months, beginning within three months after the effective date of
the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
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<PAGE> 15
(i) The Company will provide and cause to be maintained a transfer
agent and registrar of national standing for all Registrable Securities covered
by such registration statement from and after a date not later than the
effective date of such registration statement.
(j) The Company will use its best efforts (i) to cause all such
Registrable Securities covered by such registration statement to be listed or
quoted on any U.S. national securities exchange or quotation system on which the
Common Stock is then listed or quoted or will be listed or quoted in connection
with the Initial Public Offering if the listing of such Registrable Securities
is then permitted under the rules of such exchange; or (ii) to secure the
designation of all such Registrable Securities covered by such registration
statement as a NASDAQ "national market system security" within the meaning of
Rule 11Aa2-1 under the Exchange Act or, failing that, to secure NASDAQ
authorization for listing or quoting such Registrable Securities, in each case
if the Registrable Securities so qualify, and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register as such
with respect to such Registrable Securities with the National Association of
Securities Dealers, Inc. in the case of each action referred to in this clause
(ii) if requested by the Purchaser or by the lead Underwriter.
SECTION 3.5. Shelf Registration.
(a) At any time after 180 days following the closing of the Initial
Public Offering, the Company, upon the request of the Purchaser or Nevasa, will
use its best efforts to file a "shelf" registration statement (the "Shelf
Registration") with respect to the Registrable Securities owned by the Purchaser
or Nevasa, as the case may be, on an appropriate form pursuant to Rule 415 (or
any similar provision that may be adopted by the Commission) under the
Securities Act and to cause such Shelf Registration to become effective and to
keep such Shelf Registration effective and the disclosure therein current and
complete until (i) the Purchaser or Nevasa, as the case may be, shall no longer
hold any Registrable Securities or (ii) such time when the Common Stock
registered under the Shelf Registration can be sold pursuant to Rule 144 without
any limitations under clauses (c), (e), (f) and (h) of Rule 144. Any sale of
Registrable Securities pursuant to the Shelf Registration in an underwritten
public offering shall be deemed to be a Purchaser Demand Registration or a
Nevasa Demand Registration, as the case may be, subject to the provisions of
Sections 3.1, 3.3 and 3.14 hereof.
(b) During any consecutive 365-day period, the Company shall have the
privilege to suspend availability of the Shelf Registration and the related
prospectus for up to 60 days if the Board of Directors determines in good faith
that there is a valid purpose for such suspension and provides notice of such
determination to the Purchaser and Nevasa at their addresses set forth in the
Share Purchase Agreement. Notice of such suspension shall be given promptly to
the Purchaser and Nevasa.
SECTION 3.6. Registration Expenses. The Company shall pay Registration
Expenses incurred in connection with (x) any registration made or requested to
be made pursuant to this Article III, whether or not any registration statement
becomes effective
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and (y) any resale of Registrable Securities pursuant to any underwritten Rule
144A offering.
SECTION 3.7. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each of the Purchaser, Nevasa, and their respective
officers, directors, agents and Affiliates, and each Person, if any, who
controls the Purchaser and Nevasa within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and expenses caused by any untrue statement
or alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Securities (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein (in the case of a prospectus,
in the light of the circumstances under which they were made) not misleading
except insofar as such losses, claims, damages, liabilities or expenses are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information furnished in writing to the Company by or on
behalf of the Purchaser or Nevasa, as the case may be, expressly for use
therein. The Company also agrees, to the extent permitted by applicable law, to
indemnify any Underwriters of the Registrable Securities, their officers and
directors and each Person who controls such underwriters on reasonable and
customary terms.
SECTION 3.8. Indemnification by the Purchaser. The Purchaser agrees to
indemnify and hold harmless the Company, its officers, directors and agents 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 Purchaser, but only
with reference to information related to the Purchaser furnished in writing by
the Purchaser expressly for use in any registration statement or prospectus
relating to the Registrable Securities, or any amendment or supplement thereto,
or any preliminary prospectus. The Purchaser also agrees to indemnify and hold
harmless Underwriters of the Registrable Securities, their officers and
directors and each Person who controls such Underwriters on substantially the
same basis as that of the indemnification of the Company provided in this
Section 3.8.
SECTION 3.9. Indemnification by Nevasa. Nevasa agrees to indemnify and
hold harmless the Company, its officers, directors and agents 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 Purchaser, but only with reference
to information related to Nevasa furnished in writing by Nevasa expressly for
use in any registration statement or prospectus relating to the Registrable
Securities, or any amendment or supplement thereto, or any preliminary
prospectus. Nevasa also agrees to indemnify and hold harmless Underwriters of
the Registrable Securities, their officers and directors and each Person who
controls such Underwriters on substantially the same basis as that of the
indemnification of the Company provided in this Section 3.9.
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SECTION 3.10. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
Section 3.7, 3.8 or 3.9, such Person (the "Indemnified Party") shall promptly
notify the Person against whom such indemnity may be sought (the "Indemnifying
Party") in writing and the Indemnifying Party upon request of the Indemnified
Party shall retain counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party and any others the Indemnifying Party may
designate in such proceeding and shall pay the reasonable fees and disbursements
of such counsel related to the proceeding. In any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party and representation of both parties by the same
counsel would be in conflict or otherwise inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all such Indemnified Parties, and that all such fees
and expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Indemnified Parties, such firm shall be designated in
writing by the Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Party shall have requested an Indemnifying Party
to reimburse the Indemnified Party for fees and expenses of counsel as
contemplated by the third sentence of this paragraph, the Indemnifying Party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
Business Days after receipt by such Indemnifying Party of the aforesaid request
and (ii) such Indemnifying Party shall not have reimbursed the Indemnified Party
in accordance with such request prior to the date of such settlement. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Party is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Party, unless such settlement (x)
includes an unconditional release of such Indemnified Party from all liability
arising out of such proceeding and (y) provides that such Indemnified Party does
not admit any fault or guilt with respect to the subject matter of such
proceeding.
SECTION 3.11. Contribution.
(a) To the extent the indemnification provided for herein is for any
reason unavailable to the Indemnified Parties in respect of any losses, claims,
damages or liabilities referred to herein, then each such Indemnifying Party, in
lieu of indemnifying
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<PAGE> 18
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities as
between the Company on the one hand and the Purchaser or Nevasa, as the case may
be, on the other, in such proportion as is appropriate to reflect the relative
benefits received by the Company, the Purchaser and Nevasa from the offering of
the securities, or if such allocation is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits but
also the relative fault of the Company on the one hand and of the Purchaser or
Nevasa, as the case may be, on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Purchaser or Nevasa, as the case may be,
on the other shall be deemed to be in the same proportion as the total proceeds
from the offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company, the Purchaser and Nevasa, as set
forth in the table on the cover page of the prospectus. The relative fault of
the Company on the one hand and of the Purchaser or Nevasa, as the case may be,
on the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Purchaser or Nevasa, as the case may be, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(b) The Company, the Purchaser and Nevasa agree that it would not be
just and equitable if contribution pursuant to this Section 3.11 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 3.11, the Purchaser and Nevasa
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Registrable Securities of the Purchaser or Nevasa,
as the case may be, were offered to the public (less underwriters' discounts and
commissions) exceeds the amount of any damages which the Purchaser or Nevasa has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 3.12. Participation in Underwritten Registrations. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by such Person and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and these registration rights.
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SECTION 3.13. Rule 144. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange Act
and will take such further action as the Purchaser or Nevasa shall reasonably
request, all to the extent required from time to time to enable the Purchaser or
Nevasa to sell Registrable Securities without registration under the Securities
Act pursuant to (a) Rule 144 under the Securities Act and Rule 144A under the
Securities Act, as such Rules are amended from time to time, or (b) any similar
rule or regulation hereafter adopted by the Commission. Upon the request of the
Purchaser or Nevasa, the Company will deliver to the Purchaser or Nevasa a
written statement as to whether it has complied with such requirements.
SECTION 3.14. Holdback Agreements.
(a) Restrictions on Public Sale by the Purchaser and Nevasa. If and to
the extent requested by the Company, in the case of a non-underwritten public
offering, and if and to the extent requested by the lead Underwriter or
Underwriters, in the case of an underwritten public offering, each of the
Purchaser and Nevasa agrees not to effect, except as part of such registration
or a concurrent registration, any public sale or distribution of the securities
being registered or a similar security of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, including a
sale pursuant to Rule 144 or Rule 144A, during the 10 days prior to, and during
such period that the Company (in the case of a non-underwritten public offering)
or the lead Underwriter (in the case of an underwritten public offering) may
reasonably request, but in no event longer than (i) 180 days, in the case of the
Initial Public Offering and (ii) 90 days in all other cases, in each case from
the effective date of the registration statement.
(b) Restrictions on Public Sale by the Company. The Company agrees (i)
not to effect any public sale or distribution of any securities similar to those
being registered in accordance with Section 3.1 or Section 3.2 hereof, or any
securities convertible into or exchangeable or exercisable for such securities,
during the 10 days prior to, and during such period as the lead Underwriter may
reasonably request, but in no event longer than 90 days, beginning on, the
effective date of any registration statement (except pursuant to such
registration statement and except pursuant to registrations on Form S-4 or S-8
or any successor or similar form thereto or pursuant to an unregistered offering
to employees of the Company or its Subsidiaries pursuant to an employee benefit
plan as defined in Rule 405 of Regulation C of the Securities Act) or the
commencement of a public distribution of Registrable Securities; and (ii) that
any agreement entered into after the date of this Agreement pursuant to which
the Company issues or agrees to issue any securities shall contain a provision
under which holders of such securities agree not to effect any public sale or
distribution of any such securities during the periods described in (a) above,
in each case including a sale pursuant to Rule 144 or Rule 144A (except as part
of any such registration, if permitted); provided, however, that the provisions
of this Section 3.14(b) shall not prevent the exercise, conversion or exchange
of any securities pursuant to their terms into or for other securities.
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ARTICLE IV
COVENANTS
SECTION 4.1. Information. So long as the Purchaser owns at least five
percent (5%) of the Company's outstanding Common Stock (determined on a fully
diluted basis), the Company shall deliver to the Purchaser:
(a) as soon as practicable and in any event within forty-five (45)
days after the end of the first three fiscal quarters, consolidated balance
sheets of the Company and its Subsidiaries as at the end of such period and the
related consolidated statements of operations, stockholders' equity and cash
flows of the Company and its Subsidiaries for such fiscal quarter, setting forth
in each case in comparative form the consolidated figures for the corresponding
periods of the previous fiscal year, all in reasonable detail and certified by
the Company's Chief Financial Officer that they fairly present the financial
condition of the Company and its Subsidiaries as at the dates indicated and the
results of their operations and changes in their financial position for the
periods indicated in accordance with generally accepted accounting principles in
the United States consistently applied except as described therein, subject to
changes resulting from normal year-end adjustments;
(b) as soon as practicable and in any event within ninety (90) days
after the end of each fiscal year of the Company commencing with the fiscal year
ended December 31, 1999, audited consolidated balance sheets of the Company and
its Subsidiaries as at the end of such year and the related audited consolidated
statements of income, stockholders' equity and cash flow of the Company and its
Subsidiaries for such fiscal year, setting forth in each case, in comparative
form the consolidated figures for the previous year, all in reasonable detail
and accompanied by a report thereon of independent certified public accountants
of recognized national standing selected by the Company, which report shall be
unqualified as to scope of audit and shall state that such consolidated
financial statements present fairly the financial position of the Company and
its Subsidiaries as at the dates indicated and the results of their operations
and changes in their financial position for the periods indicated in conformity
with generally accepted accounting principles in the United States applied on a
basis consistent with prior years (except as otherwise stated therein) and that
the examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards in the United States; and
(c) promptly upon the receipt thereof, copies of all reports submitted
to the Company by independent public accountants in connection with each annual,
interim or special audit of the Company's financial statements made by such
accountant, including, without limitation, the comment letter submitted by such
accountants to management in connection with their annual audit;
(d) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its shareholders or by any Subsidiary of the Company
to its shareholders other than the Company or another Subsidiary, of all regular
and periodic reports and all registration
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statements and prospectuses, if any, filed by the Company or any of its
Subsidiaries with any securities exchange or quotation system or with the
Commission, and of all press releases and other written statements made
available generally by the Company or any Subsidiary to the public or to other
investors or potential investors in securities of the Company; and
(e) upon the request of the Purchaser, promptly after filing thereof,
copies of the Company's and its Subsidiaries' final tax assessments and any
other information reasonably required by the Purchaser or any of the Purchaser's
Affiliates to calculate any foreign tax credits realizable under the laws of the
United Kingdom on any dividends paid by the Company, along with copies of the
balance sheets and statements of income for the respective fiscal year for the
Company's Subsidiaries.
SECTION 4.2. Access. For so long as the Purchaser shall own at least ten
percent (10%) of the Company's Common Stock (determined on a fully diluted
basis), the Purchaser and its auditors shall be entitled to and shall at the
Purchaser's request be supplied with: (a) the right to routinely consult with
the management of the Company on matters relating to the Company; (b) the right
to inspect the properties and operations of the Company; (c) the right to
inspect the books and records of the Company; and (d) except for any period
during which the Purchaser has the right to elect a Director, the right to have
its representative attend the meetings of the Board of Directors and to
participate in discussions (but not vote) at such meetings; provided, however,
that any such rights pursuant to clauses (a), (b) and (c) may only be exercised
during business hours and on the giving by the Purchaser of reasonable advance
notice to the Company of the exercise thereof.
SECTION 4.3. Right of First Offer. Prior to the Initial Public Offering,
if and for so long as the Purchaser owns at least ten percent (10%) of the
Company's Common Stock (determined on a fully diluted basis):
(a) In the event that (i) Nevasa wishes to Transfer any shares of
Common Stock or (ii) any Existing Stockholder wishes to Transfer any of its
common equity interests in any Member of the Nevasa Group (a "Nevasa Holder")
(in each case, other than to any Existing Stockholder who is, or at the time of
any Transfer becomes, a party to this Agreement), in a transaction in which
after the consummation thereof the aggregate number of shares of Common Stock
sold by Nevasa and all Nevasa Holders (treating the sale of common equity
interests in any Member of the Nevasa Group as the sale of the number of shares
of Common Stock effectively represented thereby) on a cumulative basis
commencing on the day immediately following the Closing Date through the date of
such sale shall exceed ten percent (10%) of the then total outstanding shares of
Common Stock (on a fully diluted basis) (the "Control Shares"), Nevasa and each
Nevasa Holder shall first comply with the following procedures with respect to
the Control Shares:
(i) Nevasa or such Nevasa Holder shall deliver a written notice (a
"Sale Notice") to the Purchaser, with a copy to the Company,
stating that Nevasa or such Nevasa Holder wishes to sell such
Control Shares, which
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Sale Notice shall set forth the number of shares of Common Stock
covered (or effectively represented) thereby;
(ii) Upon the receipt of a Sale Notice, the Purchaser shall have the
right for a period of thirty (30) days (the "Sale Period") to
negotiate in good faith with Nevasa or such Nevasa Holder to
purchase all, but not less than all, of the Control Shares set
forth in the Sale Notice. In the event that the Purchaser wishes
to enter into such negotiations, the Purchaser shall send a
written notice to Nevasa or such Nevasa Holder prior to the end of
the Sale Period as to whether and on what terms it wishes to
purchase such Control Shares (the "Control Offer"), which Control
Offer shall include the aggregate purchase price that the
Purchaser is willing to pay with respect to such Control Shares
and any other material terms and conditions of the Control Offer.
In the event that the Purchaser shall not deliver to Nevasa or
such Nevasa Holder a Control Offer within the Sale Period or if
the Purchaser shall notify Nevasa or such Nevasa Holder prior to
the end of the Sale Period that it does not wish to enter into
negotiations to purchase such Control Shares, Nevasa or such
Nevasa Holder may sell such Control Shares free and clear of any
restrictions set forth in this Agreement provided that such sale
is consummated within one hundred twenty (120) days after the end
of the Sale Period;
(iii) Upon receipt of the Control Offer within the Sale Period, Nevasa
or such Nevasa Holder shall have the right, at its absolute
discretion, to accept the Control Offer, to continue to pursue
other courses of action with respect to the Control Shares or to
terminate its efforts to sell such Control Shares;
(iv) In the event that Nevasa or such Nevasa Holder wishes to accept
the Control Offer, Nevasa or such Nevasa Holder shall notify the
Purchaser within thirty (30) days after the end of the Sale Period
and such sale shall be consummated within forty-five (45) days of
the Purchaser's receipt of Nevasa's or such Nevasa Holder's
acceptance of the Control Offer; and
(v) In the event that Nevasa or such Nevasa Holder does not wish to
accept the Control Offer, it shall have the right to seek
alternative bona fide offers with respect to such Control Shares
from third parties; provided, however, that Nevasa or such Nevasa
Holder shall not consummate any alternative transaction with
respect to such Control Shares unless the financial and other
terms of such transaction are more favorable to Nevasa or such
Nevasa Holder than those set forth in the Control Offer. In the
event that any alternative transaction includes any non-cash
consideration for such Control Shares, Nevasa or such Nevasa
Holder shall not consummate such alternative transaction unless it
has delivered to the Purchaser a "fairness" opinion from any
internationally recognized investment banking firm unaffiliated
with the Company or Nevasa, which opinion shall provide that the
terms and conditions of such alternative transaction are fair to
Nevasa or such Nevasa Holder from a financial point of view, and
in connection
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with the rendering of such fairness opinion Nevasa or such Nevasa
Holder shall promptly disclose to such investment banking firm the
Control Offer delivered by the Purchaser.
(b) In the event that Nevasa or any Nevasa Holder receives an
unsolicited bona fide offer from a prospective buyer to purchase any Control
Shares that it wishes to actively pursue with such proposed buyer, Nevasa or
such Nevasa Holder shall comply with the following procedures with respect to
such Control Shares:
(i) Nevasa or such Nevasa Holder shall deliver a written notice (a
"Purchase Notice") to the Purchaser, with a copy to the Company,
stating that it has received an offer to sell such Control Shares;
provided, however, that Nevasa or such Nevasa Holder shall not be
obligated to include in the Purchase Notice any of the terms or
conditions of such unsolicited offer other than the number of
Control Shares covered thereby;
(ii) Upon the receipt of a Purchase Notice, the Purchaser shall have
the right for a period of (30) days (the "Purchase Period") to
negotiate in good faith with Nevasa or such Nevasa Holder to
purchase all, but not less than all, of the Control Shares set
forth in the Purchase Notice. In the event that the Purchaser
wishes to enter into such negotiations, the Purchaser shall send a
written notice to Nevasa or such Nevasa Holder prior to the end of
the Purchase Period as to whether and on what terms it wishes to
purchase such Control Shares (the "Purchase Offer"), which
Purchase Offer shall include the aggregate purchase price that the
Purchaser is willing to pay with respect to such Control Shares
and any other material terms and conditions of the proposed
purchase by the Purchaser. In the event that the Purchaser shall
not deliver to Nevasa or such Nevasa Holder a Purchase Offer
within the Purchase Period or if the Purchaser shall notify Nevasa
or such Nevasa Holder prior to the end of the Purchase Period that
it does not wish to make a Purchase Offer with respect to such
Control Shares, Nevasa or such Nevasa Holder may sell such Control
Shares free and clear of any restrictions set forth in this
Agreement provided that such sale is consummated within one
hundred twenty (120) days of the end of the Purchase Period;
(iii) Upon receipt of the Purchase Offer within the Purchase Period,
Nevasa or such Nevasa Holder shall have the right, at its absolute
discretion, to accept the Purchase Offer, to continue to pursue
the unsolicited offer or to terminate its efforts to sell such
Control Shares;
(iv) In the event that Nevasa or such Nevasa Holder wishes to accept
the Purchase Offer, Nevasa or such Nevasa Holder shall notify the
Purchaser within thirty (30) days after the end of the Purchase
Period, and such sale shall be consummated within forty-five (45)
days of the Purchaser's receipt of Nevasa's or such Nevasa
Holder's acceptance of the Offer; and
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<PAGE> 24
(v) In the event that the financial and other terms of the unsolicited
offer are more favorable to Nevasa or such Nevasa Holder than
those set forth in the Purchase Offer, Nevasa or such Nevasa
Holder may accept and consummate the unsolicited offer. In the
event that any unsolicited offer includes any non-cash
consideration for such Control Shares, Nevasa or such Nevasa
Holder shall not consummate such alternative transaction unless it
has delivered to the Purchaser a "fairness" opinion from any
internationally recognized investment banking firm unaffiliated
with the Company or Nevasa, which opinion shall provide that the
terms and conditions of such alternative transaction are fair to
the Nevasa or such Nevasa Holder from a financial point of view,
and in connection with the rendering of such fairness opinion
Nevasa or such Nevasa Holder shall promptly disclose to such
investment banking firm the Purchase Offer delivered by the
Purchaser.
(c) In the event that any Member of the Nevasa Group or any Existing
Stockholder (other than any Existing Stockholder described in clause (ix) or (x)
of the definition of "Existing Stockholders") wishes to Transfer any of its
voting capital stock of CORIM to any Person other than any Existing Stockholder
who is, or at the time of any Transfer becomes, a party to this Agreement, or
receives an unsolicited bona fide offer from any such Person that CORIM wishes
to actively pursue, in each case in a transaction in which after the
consummation thereof all Existing Stockholders shall own in the aggregate less
than 50.1% of the aggregate voting capital stock of CORIM and as a result of
such transaction the aggregate number of shares of Common Stock sold by Nevasa,
all Nevasa Holders and CORIM (treating the sale of voting capital stock of CORIM
as the sale of the number of shares of Common Stock effectively represented
thereby) on a cumulative basis commencing on the day immediately following the
Closing Date through the date of such sale shall exceed ten percent (10%) of the
then total outstanding shares of Common Stock (on a fully diluted basis), then
such Member of the Nevasa Group or such Existing Stockholder shall provide to
the Purchaser a right of first offer with respect to such voting capital stock
of CORIM in accordance with the provisions of Sections 4.3(a) and (b) hereof.
SECTION 4.4. Right to Participate in Certain Dispositions.
(a) Without affecting any of the rights of the Purchaser set forth in
Section 4.3 and for so long as the Purchaser owns at least ten percent (10%) of
the Company's Common Stock (determined on a fully diluted basis), any Transfer
of shares of Common Stock by Nevasa or any Transfer of common equity interests
in any Member of the Nevasa Group by any Nevasa Holder (except a Transfer (y) by
Nevasa or any Nevasa Holder to any Existing Stockholder who is, or at the time
of any Transfer becomes, a party to this Agreement or (z) pursuant to a public
offering registered under the Securities Act or a sale through the facilities of
the New York Stock Exchange, American Stock Exchange or NASDAQ National Market)
shall include by its terms and conditions an offer to include in such Transfer
(in accordance with the provisions of paragraphs (a)-(d) of this Section 4.4),
at the option of the Purchaser, the "Pro Rata Portion" (as hereinafter
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defined) of the Common Stock then owned by the Purchaser, on the same terms and
conditions as the Transfer by Nevasa or such Nevasa Holder; provided, however,
that subsequent to the Initial Public Offering the obligation of Nevasa and any
Nevasa Holder to provide the Purchaser with the option under this Section 4.4 to
include in such Transfer the Pro Rata Portion of Common Stock owned by the
Purchaser shall apply only in the event that Nevasa and all Nevasa Holders shall
have Transferred since the date of the Initial Public Offering to Persons (other
than the Purchaser, any Existing Stockholder who is, or at the time of any
Transfer becomes, a party to this Agreement or pursuant to a public offering
registered under the Securities Act or a sale through the facilities of the New
York Stock Exchange, American Stock Exchange or NASDAQ National Market) shares
of Common Stock in the aggregate in excess of fifteen percent (15%) of the then
outstanding shares of Common Stock (determined on a fully diluted basis).
(b) If Nevasa or any Nevasa Holder receives or solicits from a third
party or parties (a "Transferee") an offer (an "Offer") or offers to purchase or
otherwise acquire shares of Common Stock or common equity interests in any
Member of the Nevasa Group (the "Offered Shares") held by Nevasa or such Nevasa
Holder, and Nevasa or such Nevasa Holder intends to pursue a Transfer of such
Offered Shares to such Transferee, Nevasa or such Nevasa Holder shall provide
written notice (the "Offer Notice") of such Offer to the Purchaser and the
Company not later than 35 days prior to the consummation of such Transfer. The
Offer Notice shall identify the Offered Shares, the price offered for such
Offered Shares (which, if the Offered Shares are common equity interests in
Nevasa, shall be the price effectively offered for the Common Stock effectively
represented by such common equity interests), all other material terms and
conditions of the Offer and, in the case of an Offer in which the consideration
payable for the Offered Shares consists in whole or in part of consideration
other than cash, reasonably detailed information regarding such other
consideration. The Purchaser shall have the right and option, for a period of
not less than 30 days after the date the Offer Notice is given to the Purchaser
(the "Notice Period"), to notify Nevasa or such Nevasa Holder of its interest in
Transferring to the Transferee up to the Pro Rata Portion of the Purchaser's
Common Stock pursuant to the Offer. The Purchaser desiring to exercise such
option shall, prior to the expiration of the Notice Period, provide the
Transferee with a written notice specifying the number of Shares which the
Purchaser has an interest in Transferring pursuant to the Offer (a "Notice of
Interest"). In addition, Nevasa or such Nevasa Holder shall use reasonable
efforts to cause the Transferee to make himself available to the Purchaser, at
reasonable times and places, and to respond to reasonable inquiries with respect
to the Offer, the terms and conditions thereof and all other matters with
respect thereto. This Section 4.4(b) shall not apply to any Transfer not subject
to Section 4.4(a).
(c) If, at the end of the Notice Period, the Purchaser shall not have
given a Notice of Interest with respect to some or all of the Pro Rata Portion
of the Purchaser's Common Stock contemplated by the Offer, the Purchaser will be
deemed to have waived all its rights under this Section 4.4 with respect to the
Transfer pursuant to the Offer of the portion of the Pro Rata Portion of the
Common Stock owned by the Purchaser with respect to which a Notice of Interest
shall not have been given.
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(d) "Pro Rata Portion" means, with respect to the Purchaser, a number
equal to the product of (i) the total number of shares of Common Stock proposed
to be Transferred to the Transferee by Nevasa or any Nevasa Holder, times (ii) a
fraction, the numerator of which shall be the total number of shares of Common
Stock owned by the Purchaser, and the denominator of which shall be the total
number of shares of Common Stock owned in the aggregate by Nevasa (including the
shares proposed to be Transferred), the Purchaser and the Holders.
SECTION 4.5. Drag-Along. At or after such time as all of the obligations
of Nevasa pursuant to Section 4.3 have been performed and all of the rights of
the Purchaser pursuant to Section 4.3 have been either exercised, waived or
expired, and for so long as the aggregate ownership of Common Stock held by
Nevasa, the other Members of the Nevasa Group and, so long as it is controlled
by any of the Existing Stockholders, CORIM shall exceed the Purchaser's
ownership of Common Stock, in the event that Nevasa proposes to Transfer
substantially all of the shares of capital stock of the Company beneficially
owned (as defined in Rule 13d-3 under the Exchange Act) by Nevasa, and if Nevasa
so requests, the Purchaser shall Transfer all of the Common Stock held by it on
the same terms as the Transfer by Nevasa. Such demand for Transfer to the
Purchaser by Nevasa shall be given in writing (the "Written Request") no later
than 30 days prior to the proposed consummation of such Transfer.
SECTION 4.6. Preemptive Rights.
(a) Prior to the occurrence of the Initial Public Offering, if and for
so long as the Purchaser owns at least ten percent (10%) of the Company's Common
Stock (determined on a fully diluted basis) and subject to the other provisions
of this Agreement, the Company shall not issue, sell, or enter into any
agreement(s) or commitment(s) pursuant to which it becomes obligated to issue,
in each case for cash, any shares of its common stock, or any warrants, options
or other securities convertible or exchangeable into common stock (collectively,
the "Equity Securities"), unless the Company shall first provide a written offer
(the "Preemptive Rights Offer") to the Purchaser and Nevasa, offering to sell to
the Purchaser and Nevasa at the same price, and on the same terms and
conditions, such amount of such Equity Securities as would enable the Purchaser
and Nevasa to maintain their then proportionate interests (determined on a fully
diluted basis) of the Company's common stock. Such Preemptive Rights Offer shall
remain outstanding for at least thirty (30) days from the date of such notice
and shall be exercised by the Purchaser or Nevasa by serving written notice on
the Company within such thirty (30) day period; provided, however, that in the
case of a proposed underwritten sale of any such Equity Securities, the
Preemptive Rights Offer shall commence on the offering of such Equity Securities
and shall remain outstanding only until the consummation of the sale of such
Equity Securities in accordance with the terms and timing of such offering. The
consummation of the Preemptive Rights Offer shall take place simultaneously with
the closing of the sale by the Company of such Equity Securities.
Notwithstanding the foregoing, if the Company sells such Equity Securities as
part of a unit, the Preemptive Rights Offer shall be for such units.
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(b) The Preemptive Rights Offer shall not apply to: (i) any issuances
or grants of common stock or rights by the Company to the officers, directors or
employees of the Company or any of its Subsidiaries pursuant to the Company's
1998 Stock Option Plan or pursuant to any other employee benefit or other
incentive plan adopted by the Board of Directors after the date hereof
(collectively, the "Option Plans"); (ii) except as set forth in Section 4.6(c),
the exercise of any options or rights issued pursuant to or in connection with
any Option Plan; or (iii) the issuance of any securities by the Company upon the
exercise of any exchange, conversion or similar feature contemplated by any
security issued pursuant to the Securityholders Agreement.
(c) Notwithstanding anything to the contrary above, the exercise of
the Purchaser's Preemptive Rights Offer in the event of the exercise of any
options granted under any Option Plan by any grantee of such options shall be
effected solely in accordance with the following terms and conditions: (i) no
later than January 15 of each year prior to the occurrence of the Initial Public
Offering, the Company shall notify the Purchaser of any exercise of stock
options and of the issuance of shares of Common Stock pursuant to such exercises
under Option Plans during the preceding calendar year and the "Fair Market
Value" (as such term is defined in the 1998 Stock Option Plan or any other
Option Plan) as determined by the Stock Option Committee of the Board of
Directors with respect to grants of stock options for the Company's Common Stock
under any Option Plan for such preceding calendar year; (ii) with respect to any
shares of Common Stock issued to grantees under any Option Plan during such
preceding calendar year, in the event that (A) the Purchaser has prior to such
date exercised all rights under prior Preemptive Rights Offers provided to it
under this Section 4.6, and (B) without the exercise of a Preemptive Rights
Offer in respect of such issued shares of Common Stock, the Purchaser would own
less than twenty percent (20%) of the Company's outstanding common stock at the
end of the preceding calendar year, then the Company shall provide to the
Purchaser a Preemptive Rights Offer to purchase such number of additional shares
of Common Stock to maintain the lesser of (1) twenty percent (20%) of the
Company's outstanding common stock determined on a fully diluted basis or (2)
the Purchaser's then proportionate interest (determined on a fully diluted
basis) of the Company's common stock calculated as if no options had been
exercised during the preceding calendar year, at the Fair Market Value
determined by the Stock Option Committee of the Board of Directors for the
preceding calendar year for grants of stock options during such year under any
Option Plan; and (iii) the Purchaser shall have a period of thirty (30) days to
notify the Company of its intent to exercise its preemptive rights and to pay in
cash to the Company the purchase price for such shares of Common Stock and shall
receive certificates for such shares against payment therefor. For the avoidance
of doubt, the obligation of the Company to provide a Preemptive Rights Offer to
the Purchaser in connection with the issuance of shares of Common Stock pursuant
to the exercise of stock options under the Option Plans shall cease on the
earlier of (y) the Initial Public Offering and (z) any failure by the Purchaser
to exercise its rights under a prior Preemptive Rights Offer provided to it
pursuant to this Section 4.6.
(d) In furtherance of Section 4.6(c), (i) effective on the Closing
Date, the Company will reserve for issuance to the Purchaser such number of
shares of Common
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Stock as is equal to twenty percent (20%) of the number of shares of Common
Stock then subject to options granted to date under the Company's 1998 Stock
Option Plan, and (ii) the Company will not grant any further options under its
1998 Stock Option Plan or any other Option Plan unless prior to such grant it
shall have reserved for issuance to the Purchaser such number of shares of
Common Stock as is equal to twenty percent (20%) of the number of shares of
Common Stock subject to such options.
SECTION 4.7. Approvals. Prior to the occurrence of the Initial Public
Offering, if and so long as the Purchaser owns at least ten percent (10%) of the
Company's Common Stock (determined on a fully diluted basis), unless
specifically approved by the Director or Directors appointed by the Purchaser
pursuant to Article V and except as otherwise expressly provided by this
Agreement, the Company and its Subsidiaries shall not, and no Person acting on
behalf of the Company or any of its Subsidiaries shall permit or cause the
Company or any of its Subsidiaries to:
(a) engage in any transaction or series of related transactions with
any Affiliate (other than a Subsidiary of the Company) or Director or officer of
the Company or any material Subsidiary or any relative of any such Director or
officer other than on arm's-length terms;
(b) authorize any amendment to the charter or by-laws of the Company
or any Significant Subsidiary (within the meaning of Regulation S-X under the
Exchange Act), except as required by law, that could have an adverse effect on
the exercise by the Purchaser of the rights granted by the Company and Nevasa to
it hereunder, excluding for the purposes of this Section 4.7(b) any amendment
that affects equally the rights of all holders of shares of Common Stock so long
as any such amendment does not provide a right to the holders of Series A Stock
to the detriment of the Purchaser (it being understood that the Purchaser's
consent to any such amendment providing a right to such holders to the detriment
of the Purchaser shall not be unreasonably withheld);
(c) issue or grant for cash any capital stock, or any stock options,
warrants or other securities exchangeable or exercisable for or convertible into
any capital stock, in each case as to which the Purchaser is not granted a
preemptive right under Section 4.6 hereof (other than as excluded under Section
4.6(b) and (c)). For the avoidance of doubt, this Section 4.7(c) shall not apply
in any respect to the authorization or issuance of shares of the Company's
common stock pursuant to the Initial Public Offering;
(d) authorize or effect a material change in the Business of the
Company;
(e) add to, or permit, an increase in the number of members of the
Board of Directors of the Company (other than as provided for in Section 5.1
hereof);
(f) hire, remove or change the Company's Chief Executive Officer,
Chief Financial Officer, Deputy Chief Executive Officer, Chief Operating Officer
or materially amend the employment contract or arrangements with any such
Person;
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(g) commence a voluntary case under any applicable bankruptcy,
insolvency or other similar laws now or hereafter in effect, or consent to the
entry of an order for relief in any involuntary case under any such law;
(h) (i) convey, sell, transfer, lease or otherwise dispose of (whether
in one transaction or in a series of transactions) all or substantially all of
the Company's or any of its Significant Subsidiary's assets unless in connection
with such transaction(s) the Company voluntarily provides the Purchaser with a
right of first offer with respect to such assets substantially on terms
consistent with Section 4.3 hereof; (ii) in any transaction in which the
Purchaser does not have with a right of first offer under Section 4.3 hereof or
in which the Company voluntarily provides the Purchaser with a right of first
offer substantially on terms consistent with Section 4.3 hereof, merge or
consolidate the Company with or into any Person or enter into any similar
business transaction; or (iii) take any action to bring about a liquidation,
winding-up or dissolution of the Company or any Significant Subsidiary of the
Company; or
(i) authorize, release, circulate, or permit the release of any public
announcement or press release relating to the Purchaser or any of its
Affiliates.
SECTION 4.8. Right of Transfer Upon Deadlock. Prior to the Initial Public
Offering, upon the occurrence of a Deadlock (as defined below), Nevasa and the
Purchaser shall have the following rights and obligations (the "Deadlock
Rights"):
(a) The Deadlock Rights may only be initiated by Nevasa. In the event
that Nevasa wishes to exercise the Deadlock Rights, it shall deliver a written
notice to such effect (a "Deadlock Notice") to the Purchaser within 60 days
after the occurrence of a Deadlock. For the avoidance of doubt, the sending of
the notice referred to in the second sentence of the definition of "Deadlock"
shall not be considered to be the initiation of the Deadlock Rights.
(b) Nevasa shall include in the Deadlock Notice the cash purchase
price per share of Common Stock that Nevasa is willing to pay to the Purchaser
for each of the Purchaser's shares of Common Stock (the "Deadlock Price") and
any other terms and conditions of such proposed purchase. Thereafter, the
Purchaser shall either (i) sell all of its shares of Common Stock to Nevasa for
a per share price equal to the Deadlock Price or (ii) purchase all of Nevasa's
shares of Common Stock at a per share price equal to the Deadlock Price. The
Purchaser shall notify Nevasa within thirty (30) days of its receipt of a
Deadlock Notice whether it will sell its shares of Common Stock to Nevasa or
purchase Nevasa's shares of Common Stock (the "Purchaser Election Notice"). In
the event that the Purchaser elects in the Purchaser Election Notice to purchase
all of Nevasa's shares of Common Stock, Nevasa agrees to exercise its right
under Section 4.3 of the Securityholders Agreement to cause the Holders to sell
all of their shares of the Company to the Purchaser on the same terms and
conditions as Nevasa. In the event that the Purchaser has not provided Nevasa
with a Purchaser Election Notice within such thirty-day period, (1) the members
of the Board of Directors nominated by the Purchaser shall have irrevocably been
deemed to vote, and the Purchaser hereby grants an irrevocable proxy to Nevasa
to vote, such proxy to be valid only upon the failure of the
-26-
<PAGE> 30
Purchaser to provide Nevasa with a Purchaser Election Notice within such 30-day
period, in favor of the resolution of the Board of Directors upon which the
Deadlock was initially premised and (2) Nevasa shall have the right to acquire
all of the Purchaser's shares of Common Stock at the per share price set forth
in the Deadlock Notice. In the event that Nevasa wishes to exercise such right
to acquire all of the Purchaser's shares of Common Stock, it shall notify the
Purchaser in writing no later than sixty (60) days after the date on which
Nevasa delivered to the Purchaser the Deadlock Notice.
(c) The closing of the purchase and sale of the shares of Common Stock
pursuant to the Deadlock Rights shall be consummated no later than ninety (90)
days after the delivery by the Purchaser of the Purchaser Election Notice, or in
the case that Nevasa exercises its option under clause (b)(2) above, no later
than ninety (90) days after the delivery to the Purchaser of Nevasa's notice of
such exercise.
(d) For purposes of this Section 4.8:
(i) "Deadlock" shall mean: (x) in connection with the exercise of the
rights granted to the Purchaser under Section 4.7 hereof, the
failure of the Board of Directors to adopt in any six-month period
a resolution proposed by Nevasa's nominees to the Board of
Directors solely by virtue of the negative vote by the Director or
Directors nominated by the Purchaser (and such negative votes are
the only votes against the adoption of such resolution) with
respect to a Deadlock Matter (as defined below) at two consecutive
duly held meetings of the Board of Directors. In the event that
Nevasa considers the failure of the Board of Directors to adopt
such resolution to be the basis for a Deadlock Matter, it shall
notify the Purchaser in writing within thirty (30) days of the
initial Board of Directors meeting, and the second meeting of the
Board of Directors to adopt the respective resolution shall be
held no earlier than sixty (60) days after the date of the initial
meeting of the Board of Directors at which such resolution failed
to be adopted; and
(ii) "Deadlock Matters" shall mean the matters described in Section
4.7(a) - (i) above.
ARTICLE V
BOARD OF DIRECTORS
SECTION 5.1. Nomination of Directors.
(a) Upon the effectiveness of the Share Purchase Agreement, the size
of the Board of Directors shall be increased to ten (10), with the right of the
Board of Directors to further increase the size of the Board of Directors to
twelve (12) in connection with the Initial Public Offering. For so long as the
Purchaser owns at least fifteen percent (15%) of the Company's outstanding
Common Stock (determined on a fully diluted basis), upon the request of the
Purchaser, Nevasa shall vote, at any regular or special meeting of the
stockholders of the Company at which Directors will be elected or in any written
consent
-27-
<PAGE> 31
executed in lieu of such a meeting of stockholders, all of its shares of Common
Stock in favor of (and shall cause all of its Directors on the Board of
Directors to vote in favor of), two persons nominated by the Purchaser to be
Directors of the Company. For so long as the Purchaser owns less than fifteen
percent (15%), but at least five percent (5%), of the Company's outstanding
Common Stock (determined on a fully diluted basis), upon the request of the
Purchaser, Nevasa shall vote, at any regular or special meeting of the
stockholders of the Company at which Directors will be elected or in any written
consent executed in lieu of such a meeting of stockholders, all of its shares of
Common Stock in favor of (and shall cause all of its Directors on the Board of
Directors to vote in favor of), one person nominated by the Purchaser to be a
Director of the Company.
(b) For so long as Nevasa votes its shares of Common Stock in favor of
such nominees as Purchaser may nominate pursuant to Section 5.1(a) above, the
Purchaser and all of its Affiliates shall vote their shares of Common Stock in
favor of (and shall cause all of their Directors on the Board of Directors to
vote in favor of) all of the persons that Nevasa may nominate to be Directors of
the Company, at any regular or special meeting of the stockholders of the
Company at which Directors will be elected or in any written consent executed in
lieu of such a meeting of stockholders.
SECTION 5.2. Removal. Upon the written request of the Purchaser, Nevasa
shall consent in writing to the removal (whether or not for cause) of any
Director who was nominated by the Purchaser and shall take or cause to be taken
all actions necessary to remove such Director, and any replacement for such
removed Director shall be nominated and elected as provided in Section 5.1.
Nevasa shall not take any action to cause the removal without cause of any
Director nominated by the Purchaser, unless so requested by the Purchaser.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Headings. The headings in this Agreement are for convenience
of reference only and shall not control or affect the meaning or construction of
any provisions hereof.
SECTION 6.2. No Inconsistent Agreements. Except for the Securityholders
Agreement, neither the Company nor the Seller is a party to nor will hereafter
enter into any agreement with respect to its securities which is inconsistent
with, or otherwise conflicts with or grants rights superior to, the rights
granted to the Purchaser under this Agreement; and each of the Company, the
Seller and the Purchaser represents that it is not and agrees that it will not
become a party to any other agreement relating to the voting or transfer of
Voting Securities of the Company, the management of the Company, or granting any
registration rights to any Person with respect to any of the Company's equity
securities except as permitted by the terms of this Agreement.
SECTION 6.3. Entire Agreement. This Agreement, the Purchaser's rights as
a third party beneficiary under the Consent Agreement, the Right of First Offer
Agreement, and the Share Purchase Agreement constitute the entire agreement and
understanding of
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<PAGE> 32
the parties hereto in respect of the subject matter contained herein and
therein, and there are no restrictions, promises, representations, warranties,
covenants, or undertakings with respect to the subject matter hereof, other than
those expressly set forth or referred to herein or therein. This Agreement and
the documents referred to in the preceding sentence supersede all prior
agreements and understandings between the parties hereto with respect to the
subject matter hereof.
SECTION 6.4. Notices. Any notice, request, instruction or other document
to be given hereunder by any party hereto to another party hereto shall be in
writing (including telex, telecopier or similar writing) and shall be given to
such party by certified first class mail with a return receipt requested, by
Federal Express or similar overnight mail service with signature required for
receipt, or by telex or telecopy at its address or telex or telecopier number
set forth in the Share Purchase Agreement or to such other address as the party
to whom notice is to be given may provide in a written notice to the party
giving such notice. Each such notice, request or other communication shall be
effective (i) if given by telex or telecopy, when such telex or telecopy is
transmitted to the telex or telecopy number specified in the Share Purchase
Agreement and the appropriate answerback or confirmation, as the case may be, is
received, and a copy of such notice is sent by overnight mail service or (ii) if
given by certified mail or overnight courier, 72 hours after such communication
is deposited in the mails with first class postage prepaid or given to overnight
courier service, addressed as aforesaid.
SECTION 6.5. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
SECTION 6.6. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the matters contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the matters contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 6.7. Effectiveness; Termination. This Agreement shall become
effective on the Closing Date upon the consummation of the transactions
contemplated by the Share Purchase Agreement and shall terminate and be of no
further force or effect on the earlier of (i) the date on which the Purchaser
shall no longer own at least five percent (5%) of the Company's Common Stock
(determined on a fully diluted basis) and (ii) in the event that the Purchaser
or any permitted transferee of the Purchaser referred to in the proviso to
Section 6.8 hereof is no longer a direct or indirect wholly-owned Subsidiary of
British Telecommunications plc; provided, however, that the provisions of
Sections 3.7, 3.8, 3.9, 3.10, 3.11 and this Section 6.7 shall survive any such
termination.
-29-
<PAGE> 33
SECTION 6.8. Successors, Assigns, Transferees. The provisions of this
Agreement shall be binding upon and accrue to the benefit of the parties hereto
and their respective heirs, successors, their direct and indirect transferees
and assigns. Neither this Agreement nor any provision hereof shall be construed
so as to confer any right or benefit upon any Person other than the parties to
this Agreement and their respective successors and assigns; provided, however,
that the rights and benefits granted to the Purchaser under Sections 4.2, 4.3,
4.5, 4.6 and 4.7 hereof and Article V hereof shall not be assignable to, and
shall not accrue to the benefit of, any transferee or assignee of the Purchaser
other than to any such transferee or assignee that is a direct or indirect
wholly-owned Subsidiary of British Telecommunications plc and becomes a party to
this Agreement.
SECTION 6.9. Amendments; Waivers.
(a) No failure or delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
(b) Neither this Agreement nor any term or provision hereof may be
amended or waived except by an instrument in writing signed, in the case of an
amendment, by the parties thereto or, in the case of a waiver, by the party
against whom the enforcement of such waiver is sought.
SECTION 6.10. Counterparts; Effectiveness. This Agreement may be executed
in any number of counterparts, each of which shall be an original with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other party hereto, and the closing under the
Share Purchase Agreement shall have occurred.
SECTION 6.11. Recapitalization, Etc. If any capital stock or other
securities are issued in respect of, or in exchange or substitution for, any of
the Shares by reason of any reorganization, recapitalization, reclassification,
merger, consolidation, spin-off, partial or complete liquidation, stock
dividend, split-up, sale of assets, distribution to stockholders or combination
of the shares of Common Stock or any other change in capital structure of the
Company, appropriate adjustments shall be made with respect to the relevant
provisions of this Agreement so as to fairly and equitably preserve, as far as
practicable, the original rights and obligations of the parties hereto under
this Agreement.
SECTION 6.12. Remedies. The parties hereby acknowledge that money damages
would not be adequate compensation for the damages that a party would suffer by
reason of a failure of any other party to perform any of the obligations under
this Agreement. Therefore, each party hereto agrees that specific performance is
the only appropriate remedy under this Agreement and hereby waives the claim or
defense that any other party has an adequate remedy at law.
-30-
<PAGE> 34
SECTION 6.13. Transferability. The Purchaser shall have the right to
Transfer the Common Stock to any Person; provided, however, that each such
transfer is made in compliance with the Securities Act and the Company receives
evidence of such compliance reasonably satisfactory to it.
SECTION 6.14. Consent to Jurisdiction. Each of the Company, the Purchaser
and Nevasa irrevocably submit to the non-exclusive jurisdiction of any Court of
Chancery of Delaware or the United States District Court sitting in Delaware
over any suit, action or proceeding arising out of or relating to this
Agreement. Each of the Purchaser and Nevasa (i) hereby irrevocably appoints CT
Corporation (together with any successor, the "Process Agent"), as its
authorized agent in the State of Delaware upon which process may be served in
any such suit, action or proceeding described in this Section 6.14, (ii)
acknowledges that the Process Agent has accepted such designation and agrees
that service of process upon the Process Agent, and written notice of such
service to Nevasa or the Purchaser, as the case may be, by the person serving
the same to the addresses specified in the Share Purchase Agreement, shall be
deemed in every respect effective service of process upon Nevasa or the
Purchaser, as the case may be, in any such suit, action or proceeding and (iii)
agrees to take any and all action, including the execution and filing of any and
all such documents and instruments as may be necessary to continue such
designation and appointment of the Process Agent in full force and effect for
the term of this Agreement.
SECTION 6.15. Confidentiality. Each of the Company, Nevasa and the
Purchaser agrees that any and all written or oral non-public, proprietary
information concerning any of the Purchaser, the Company and Nevasa that comes
into the possession of any other party hereto or any Affiliate thereof as a
result of the ownership of shares of Common Stock, representation on the Board
of Directors or otherwise in connection with this Agreement shall be kept
strictly confidential and shall not be used by such Person or any of its
Affiliates in connection with any activities of the Purchaser or any of its
Affiliates, on the one hand, or of the Company and Nevasa and their respective
Affiliates, on the other hand, undertaken in competition with the Company or any
of its Subsidiaries, on the one hand, or with the Purchaser or any of its
Affiliates, on the other hand. The preceding obligations shall not apply to any
such information which (i) is or becomes publicly available other than as a
result of a breach by the Company, Nevasa or the Purchaser or any of their
Affiliates of their obligations hereunder, (ii) is required by applicable Law or
stock exchange regulation to be disclosed; provided, however, that any party
hereto shall have obtained the advice of counsel that such information is
required by Law or stock exchange regulation to be disclosed, or (iii) is
utilized in connection with a proposed sale by Nevasa or the Purchaser, as the
case may be, of any of their shares of Common Stock, in each case to the extent
that the recipient of such information has entered into a standard
confidentiality agreement covering the use and disclosure of such information in
such proposed sale. This provision shall survive the termination of this
Agreement and may be enforced by a mandatory injunction or other form of
equitable relief appropriate and applicable to ensure its specific performance,
but this shall not be construed as a limitation on other available remedies.
-31-
<PAGE> 35
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the day and year first above written.
IMPSAT CORPORATION
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
NEVASA HOLDINGS LIMITED
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
NUNSGATE LIMITED
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
-32-
<PAGE> 36
ACCEPTED AND AGREED
AS TO SECTIONS 4.3, 4.4 AND 4.5
CORPORACION IMPSA, S.A.
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
MILITELLO LIMITED
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
ROTLING INTERNATIONAL CORPORATION
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
- ----------------------------
ENRIQUE M. PESCARMONA
- ----------------------------
RICARDO A. VERDAGUER
- ----------------------------
ROBERTO A. VIVO CHANETON
-33-
<PAGE> 1
EXHIBIT 4.3
NUMBER SHARES
C - COMMON STOCK
SEE REVERSE FOR CERTAIN DEFINITIONS
[LOGO OF IMPSAT FIBER NETWORKS, INC.]
INCORPORATED UNDER THE LAWS OF THE STATE OF
DELAWARE CUSIP 45321T103
THIS CERTIFIES that
is the record holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE,
OF
IMPSAT FIBER NETWORKS, INC.
transferable on the share register of the Corporation in person or by a duly
authorized attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid unless countersigned by the Transfer Agent and
registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
[Signature of Authorized Officer]
[CORPORATE SEAL]
[BANK NAME]
TRANSFER AGENT AND
REGISTRAR
[Signature of Authorized Officer]
<PAGE> 2
This certificate also evidences and entitles the holder hereof to certain Rights
as set forth in the Rights Agreement between IMPSAT Fiber Networks, Inc. (the
"Company") and The Bank of New York (the "Rights Agent") dated as of _______,
2000 (the "Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal offices of the
Company. Under certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date of mailing,
without charge promptly after receipt of a written request therefor. Under
certain circumstances set forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an Acquiring Person, an Adverse
Person or any Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement), whether currently held by or on behalf of such Person or by
any subsequent holder, may become null and void.
[Reverse of Certificate]
IMPSAT FIBER NETWORKS, INC.
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of designation, the
number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge at
the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - Custodian
--------- --------------
(Cust) (Minor)
under Uniform Gifts to Minors
Act
---------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------------------------
- ------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
shares of the capital stock represented by the within Certificate, and does
hereby irrevocably constitute and appoint
- --------------------------------------------------------------------- as
Attorney to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated:
--------------------------------
---------------------------------------
Signature
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of this Certificate in
every particular, without alteration or
enlargement or any change whatever.
Signature(s) Guaranteed:
By
THE SIGNATURE MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 5.1
January ___, 2000
Board of Directors
IMPSAT Fiber Networks, Inc.
Alferez Pareja 256 (1107)
Buenos Aires
Argentina
Ladies and Gentlemen:
We are acting as counsel to IMPSAT Fiber Networks, Inc., a Delaware
corporation (the "Company"), in connection with the Company's filing with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "1933 Act"), of a registration statement on Form S-1 (the
"Registration Statement") relating to the proposed initial public offering by
the Company of [ ] shares ([ ] shares if the Underwriter's over-allotment option
is fully exercised) (the "Shares") of the Company's common stock, par value
$.001 per share. This opinion is furnished to you at your request to enable you
to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. (S)
229.601(b)(5), in connection with the Registration Statement.
For purposes of this opinion, we have examined such corporate records
of the Company, including executed copies of the Registration Statement and
Amendment No. 1 thereto, the Company's Amended and Restated Certificate of
Incorporation, the Company's Amended and Restated Bylaws, resolutions of the
Company's Board of Directors (including resolutions relating to the issuance and
sale of the Shares and arrangements in connection therewith) and the proposed
form of underwriting agreement by and among the Company and Morgan Stanley & Co.
Incorporated, Goldman, Sachs & Co., and Salomon Smith Barney Inc., filed as
Exhibit 1 to the Registration Statement (the "Underwriting Agreement"), and such
other documents as we deem necessary for rendering the opinion hereafter
expressed.
In our examination of the aforesaid documents, we assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
accuracy and completeness of all documents submitted to us, the authenticity of
all original documents and the conformity to authentic original documents of all
documents submitted to us as copies (including telecopies). We also have assumed
the accuracy, completeness and authenticity of statements of fact on which we
are relying and have made no independent investigations
<PAGE> 2
IMPSAT Fiber Networks, Inc.
January ___, 2000
Page 2
thereof. This opinion is given, and all statements herein are made, in the
context of the foregoing.
This opinion is based as to matters of law solely on the General
Corporation Law of the State of Delaware. We express no opinion herein as to any
other laws, statutes, regulations or ordinances.
Based upon, subject to and limited by the foregoing, we are of the
opinion that following (i) final action of the pricing committee of the Board of
Directors of the Company approving the price of the Shares and (ii) the issuance
and sale of the Shares pursuant to the terms of the Underwriting Agreement, the
Shares will be validly issued, fully paid and nonassessable under the General
Corporation Law of the State of Delaware.
We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion. We hereby consent to the filing of
this opinion as Exhibit 5 to the Registration Statement and to the reference to
this firm under the caption "Legal Matters" in the prospectus constituting a
part of the Registration Statement. In giving this consent, we do not thereby
admit that we are an "expert" within the meaning of the 1933 Act.
Sincerely,
Arnold & Porter
<PAGE> 1
EXHIBIT 9.1
IMPSAT FIBER NETWORKS, INC. 1999 NONSTATUTORY STOCK OPTION PLAN
1. DEFINITIONS
In this Plan, except where the context otherwise indicates, the
following definitions apply:
1.1. "Affiliate" means parent or subsidiary corporations of the
Company, as defined in Sections 424(e) and (f) of the Code (but substituting
"the Company" for "employer corporation"), including parents or subsidiaries of
the Company which become such after adoption of the Plan.
1.2. "Agreement" means a written agreement granting an Option that is
executed by the Company and the Optionee.
1.3. "Board" means the Board of Directors of the Company.
1.4. "Code" means the Internal Revenue Code of 1986, as amended.
1.5. "Common Stock" means the common stock, par value $0.01 per share,
of the Company.
1.6. "Company" means IMPSAT Fiber Networks, Inc., a Delaware
corporation.
1.7. "Date of Exercise" means the date on which the Company receives
notice of the exercise of an Option in accordance with the terms of Article 8.
1.8. "Date of Grant" means the date on which an Option granted under
the Plan.
1.9. "Director" means a member of the Board of Directors of the Company
or any Affiliate.
1.10. "Eligible Individual" means (i) any Employee or Director or (ii)
any consultant or advisor to the Company or an Affiliate who renders bona fide
services to the Company or an Affiliate.
1.11. "Employee" means any employee of the Company or an Affiliate or
any person who has been hired to be an employee of the Company or an Affiliate.
1.12. "Fair Market Value" means the fair market value of a Share as
determined by the Board pursuant to a reasonable method adopted in good faith
for such purpose; provided, however, that if the Common Stock is traded on the
NASDAQ National Market System, the American Stock Exchange or the New York Stock
<PAGE> 2
Exchange (or any similar organization or agency succeeding such market or
exchange's functions of reporting prices), "Fair Market Value" as of any date
shall be determined by the Board based on the average of the closing bid and
asked prices of a Share for the ten (10) consecutive trading days preceding the
given date, as reported on such market or exchange and published in The Wall
Street Journal or a comparable reporting or quotation service of national
reputation selected by the Board.
1.13. "Nonstatutory Stock Option" means an Option granted under the
Plan that does not qualify as an incentive stock option under Section 422 of the
Code.
1.14. "Option" means an option to purchase Shares granted under the
Plan.
1.15. "Option Period" means the period during which an Option may be
exercised.
1.16. "Option Price" means the price per Share at which an Option may
be exercised. The Option Price shall be determined by the Board. The Option
Price of any Option shall be subject to adjustment to the extent provided in
Article 10 hereof.
1.17. "Optionee" means an Eligible Individual to whom an Option has
been granted.
1.18. "Plan" means the IMPSAT Fiber Networks, Inc. 1999 Nonstatutory
Stock Option Plan.
2. PURPOSE
The Plan is intended to assist the Company and its Affiliates in
attracting and retaining Eligible Individuals of outstanding ability and to
promote the identification of their interests with those of the stockholders of
the Company.
3. ADMINISTRATION
The Board shall administer the Plan and shall have plenary authority,
in its discretion, to award Options to Eligible Individuals, subject to the
provisions of the Plan. The Board shall have plenary authority and discretion,
subject to the provisions of the Plan, to determine which Eligible Individuals
shall be granted Options, the time or times at which Options are granted and the
terms (which terms need not be identical) of all Options including, but not
limited to, the Option Price, the number of Shares subject to an Option, any
provisions relating to vesting, any circumstances in which Options terminate or
Shares may be repurchased by the Company, the period during which may be
exercised and any other restrictions on Options. In making these determinations,
the Board may take into account the nature of the services rendered by the
Eligible Individuals, their present and potential contributions to the success
of the Company and its Affiliates, and such other factors as the Board in its
discretion shall deem relevant. Subject to the provisions of the Plan, the Board
shall have plenary authority to construe
2
<PAGE> 3
and interpret the Plan and the Agreements, to prescribe, amend and rescind rules
and regulations relating to the Plan and to make all other determinations deemed
necessary or advisable for the administration of the Plan, including, but not
limited to, any determination to accelerate the vesting of outstanding Options.
The determinations of the Board on the matters referred to in this Article 3
shall be binding and final.
4. ELIGIBILITY
Options may be granted only to Eligible Individuals. No Eligible
Individual shall be granted Options totaling more than [ ]% of the total number
of Shares issuable under the Plan.
5. STOCK SUBJECT TO THE PLAN
5.1. Subject to adjustment as provided in Article 9, the maximum number
of Shares that may be issued under the Plan is 355,214 Shares.
5.2. If an Option expires or terminates for any reason without having
been fully exercised, the unissued Shares that had been subject to such Option
shall become available for the grant of additional Options.
6. OPTIONS
6.1 Options granted under the Plan shall be Nonstatutory Stock Options.
Each Option granted under the Plan shall be clearly identified as a Nonstatutory
Stock Option and shall be evidenced by an Agreement that specifies the terms and
conditions of the grant. Options granted to Eligible Individuals shall be
subject to the terms and conditions set forth in this Article 6 and such other
terms and conditions not inconsistent with this Plan as the Board may specify.
6.2 The Option Period for Options granted to Eligible Individuals shall
be determined by the Board and specifically set forth in the Agreement,
provided, however, that an Option shall not be exercisable after ten years from
its Date of Grant.
7. EXERCISE OF OPTIONS
7.1. An Option may, subject to the terms of the applicable Agreement
under which it is granted, be exercised in whole or in part by the delivery to
the Company of written notice of the exercise, in such form as the Board may
prescribe, accompanied by full payment of the Option Price for the Shares with
respect to which the Option is exercised as provided in Section 7.2 hereof.
7.2. Payment of the aggregate Option Price for the Shares with respect
to which an Option is being exercised shall be made in cash; provided, however,
that the Board, in its sole discretion, may provide in an Agreement that part or
all of such
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<PAGE> 4
payment may be made by the Optionee in one or more of the following manners: (a)
by delivery (including constructive delivery) to the Company of Shares valued at
Fair Market Value on Date of Exercise; (b) by delivery on a form prescribed by
the Board of a properly executed exercise notice and irrevocable instructions to
a registered securities broker approved by the Board to sell Shares and promptly
deliver cash to the Company; (c) by delivery of a promissory note as provided in
Section 7.3 hereof; or (d) by surrender to the Company of an Option (or a
portion thereof) that has become exercisable and the receipt from the Company
upon such surrender, without any payment to the Company (other than required tax
withholding amounts), of (x) that number of Shares (equal to the highest whole
number of Shares) having an aggregate Fair Market Value as of the date of
surrender equal to that number of Shares subject to the Option (or portion
thereof) being surrendered multiplied by an amount equal to the excess of (i)
the Fair Market Value on the date of surrender over (ii) the Option Price, plus
(y) an amount of cash equal to the Fair Market Value of any fractional Share to
which the Optionee would be entitled but for the parenthetical in clause (x)
above relating to whole number of Shares.
7.3. To the extent provided in an Agreement and permitted by applicable
law, the Board may accept as payment of the Option Price a promissory note
executed by the Optionee evidencing his or her obligation to make future cash
payment thereof; provided, however, that in no event may the Board accept a
promissory note for an amount in excess of the difference between the aggregate
Option Price and the par value of the Shares. Promissory notes made pursuant to
this Section 7.3 shall be payable upon such terms as may be determined by the
Board, shall be secured by a pledge of the Shares received upon exercise of the
Option and shall bear interest at a rate fixed by the Board.
8. RESTRICTIONS ON TRANSFER
Options shall not be transferable other than by will or the laws of
descent and distribution. An Option may be exercised during the Optionee's
lifetime only by the Optionee or, in the event of his or her legal disability,
by his or her legal representative. The Shares acquired pursuant to the Plan
shall be subject to such restrictions and agreements regarding sale, assignment,
encumbrances, or other transfers or dispositions thereof (i) as are in effect
among the stockholders of the Company at the time such Shares are acquired, (ii)
as the Board shall deem appropriate and (iii) as are required by applicable law.
9. CAPITAL ADJUSTMENTS
In the event of any change in the outstanding Common Stock by reason of
any stock dividend, split-up (or reverse stock split), recapitalization,
reclassification, reorganization, reincorporation, combination or exchange of
shares, merger, consolidation, liquidation or similar change in corporate
structure, the Board shall provide for a substitution for or adjustment in (i)
the number and class of Shares subject to outstanding Options, (ii) the Option
Price, or (iii) the aggregate number and class of Shares that may be issued
under the Plan.
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10. TERMINATION OR AMENDMENT
The Board may amend, alter, suspend or terminate the Plan in any
respect at any time; provided, however, that no amendment, alteration,
suspension or termination of the Plan shall be made by the Board without
approval of (i) the Company's stockholders to the extent stockholder approval is
required by applicable law or regulations and (ii) each affected Optionee if
such amendment, alteration, suspension or termination would adversely affect his
or her rights or obligations under any Option granted prior to the date of such
amendment, alteration, suspension or termination. No Option may be granted nor
any Shares issued under the Plan during any suspension or after termination of
the Plan.
11. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS; SUBSTITUTED OPTIONS
11.1. Subject to the terms and conditions of the Plan, the Board may
modify, extend or renew the terms of any outstanding Options, or accept the
surrender of outstanding Options granted under the Plan or options and stock
appreciation rights granted under any other plan of the Company or an Affiliate
(to the extent not theretofore exercised) and authorize the granting of new
Options in substitution therefor (to the extent not theretofore exercised). Any
such substituted Options may specify a lower exercise price than the surrendered
options and stock appreciation rights, a longer term than the surrendered
options and stock appreciation rights, or have any other provisions that are
authorized by the Plan. Notwithstanding the foregoing, however, no modification
of an Option shall, without the consent of the Optionee, alter or impair any of
the Optionee's rights or obligations under such Option.
11.2. Anything contained herein to the contrary notwithstanding,
Options may, at the discretion of the Board, be granted under the Plan in
substitution for stock appreciation rights and options to purchase shares of
capital stock of another corporation which is merged into, consolidated with, or
all or a substantial portion of the property or stock of which is acquired by,
the Company or one of its Affiliates. The terms and conditions of the substitute
Options so granted may vary from the terms and conditions set forth in this Plan
to such extent as the Board may deem appropriate in order to conform, in whole
or part, to the provisions of the options and stock appreciation rights in
substitution for which they are granted.
12. EFFECTIVENESS OF THE PLAN
The Plan and any amendment thereto shall be effective on the date on
which it is adopted by the Board, provided that any such adoption requiring
stockholder approval is subject to approval by vote of the stockholders of the
Company within 12 months after such adoption by the Board.
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13. WITHHOLDING
The Company's obligation to deliver Shares or pay any amount pursuant
to the terms of any Option shall be subject to the satisfaction of applicable
federal, state and local tax withholding requirements. To the extent provided in
the applicable Agreement and in accordance with rules prescribed by the Board,
an Optionee may satisfy any such withholding tax obligation by any of the
following means or by a combination of such means: (i) tendering a cash payment,
(ii) authorizing the Company to withhold Shares otherwise issuable to the
Optionee, or (iii) delivering to the Company already owned and unencumbered
Shares.
14. TERM OF THE PLAN
Unless sooner terminated by the Board pursuant to Article 10, the Plan
shall terminate on ______________, 2010, and no Options may be granted after
such date. The termination of the Plan shall not affect the validity of any
Option outstanding on the date of termination.
15. INDEMNIFICATION OF BOARD
In addition to such other rights of indemnification as they may have as
Directors, the members of the Board shall be indemnified by the Company against
the reasonable expenses, including attorneys' fees, actually and reasonably
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option or Right granted hereunder, and against all amounts
reasonably paid by them in settlement thereof or paid by them in satisfaction of
a judgment in any such action, suit or proceeding, if such members acted in good
faith and in a manner which they believed to be in, and not opposed to, the best
interests of the Company.
16. GENERAL PROVISIONS
16.1. The establishment of the Plan shall not confer upon any Eligible
Individual any legal or equitable right against the Company, any Affiliate or
the Board, except as expressly provided in the Plan.
16.2. The Plan does not constitute inducement or consideration for the
employment or service of any Eligible Individual, nor is it a contract between
the Company or any Affiliate and any Eligible Individual. Participation in the
Plan shall not give an Eligible Individual any right to be retained in the
service of the Company or any Affiliate.
16.3. The adoption of this Plan shall not be taken to impose any
limitations on the powers of the Company or its Affiliates to issue, grant, or
assume options, warrants, rights, or restricted stock, otherwise than under this
Plan, or to adopt other stock option or restricted stock plans or to impose any
requirement of stockholder approval upon the same.
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16.4. The interests of any Eligible Individual under the Plan are not
subject to the claims of creditors and may not, in any way, be assigned,
alienated or encumbered except as provided in an Agreement.
16.5. The Plan shall be governed, construed and administered in
accordance with the laws of the State of Delaware.
16.6. The Board may require each person acquiring Shares pursuant to
Options hereunder to represent to and agree with the Company in writing that
such person is acquiring the Shares without a view to distribution thereof. The
certificates for such Shares may include any legend which the Board deems
appropriate to reflect any restrictions on transfer. All certificates for Shares
issued pursuant to the Plan shall be subject to such stock transfer orders and
other restrictions as the Board may deem advisable under the rules, regulations
and other requirements of the Securities and Exchange Commission, any stock
exchange or interdealer quotation system upon which the Common Stock is then
listed or quoted, and any applicable federal or state securities laws. The Board
may place a legend or legends on any such certificates to make appropriate
reference to such restrictions. The certificates for Shares acquired pursuant to
an Option may also include any legend which the Board deems appropriate to
reflect restrictions contained in this Plan or in the applicable Agreement or to
comply with the Delaware General Corporation Law.
16.7. The Company shall not be required to issue any certificate or
certificates for Shares upon the exercise of Options, or record any person as a
holder of record of such Shares, without obtaining, to the complete satisfaction
of the Board, the approval of all regulatory bodies deemed necessary by the
Board, and without complying to the Board's complete satisfaction, with all
rules and regulations, under federal, state or local law deemed applicable by
the Board.
*** ***
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OPTION NO.
OPTIONEE
DATE OF GRANT
OPTION PRICE $1.69
COVERED SHARES
IMPSAT FIBER NETWORKS, INC.
1999 NONSTATUTORY STOCK OPTION PLAN
* * *
NONSTATUTORY STOCK OPTION AGREEMENT
1. DEFINITIONS. In this Agreement, except where the context otherwise
indicates, the following definitions apply:
1.1. "Affiliate" means parent or subsidiary corporations of
the Company, as defined in Sections 424(e) and (f) of the Code (but substituting
"the Company" for "employer corporation").
1.2. "Agreement" means this Nonstatutory Stock Option
Agreement.
1.3. "Board" means the Board of Directors of the Company.
1.4. A "Change of Control" means the occurrence of any of the
following events after the Date of Grant: (i)(a) prior to the occurrence of a
Public Market, the Existing Stockholders ultimately "beneficially own" (as
defined in Rule 13d-3 of the Exchange Act) Voting Stock representing less than
50% of the total outstanding Voting Stock of the Company on a fully diluted
basis and (b) after the occurrence of a Public Market, any "person" or "group"
(as defined in Section 13(d) and 14(d) of the Exchange Act) together with their
Affiliates becomes the ultimate "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of Voting Stock of the Company representing more than
30% of the voting power of the total Voting Stock of the Company and such
ownership is greater than the voting power of the Voting Stock of the Company
ultimately held by the Existing Shareholders; (ii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation or entity regardless of which entity is the survivor, other than a
merger or consolidation which would result in the Voting Stock of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or being converted into voting securities of the surviving
entity or the parent thereof) at least 50% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; (iii) individuals who on the
Date of Grant 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
<PAGE> 9
of Directors then in office who either were members of the Board of Directors on
the Date of Grant or whose election or nomination for election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; or (iv) the stockholders of
the Company approve a plan of complete liquidation or winding-up of the Company
or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
1.5. "Code" means the Internal Revenue Code of 1986, as
amended.
1.6. "Common Stock" means the common stock, par value $0.01
per share, of the Company.
1.7. "Company" means IMPSAT Fiber Networks, Inc.
1.8. "Covered Shares" means the number of Shares subject to
the Option set forth as the "Covered Shares" on page 1 of this Agreement.
1.9. "Date of Exercise" means the date on which the Company
receives notice pursuant to Section 4.1 of the exercise, in whole or in part, of
the Option.
1.10. "Date of Expiration" means the date on which the Option
shall expire, which shall be the earliest of the following times:
(a) the date on which the Optionee's Employment is
terminated by the Company or any Affiliate for Good Cause;
(b) thirty (30) days after the termination of the
Optionee's Employment by reason of resignation;
(c) one hundred eighty (180) days after the
termination of the Optionee's Employment by reason of retirement, death or
Disability;
(d) one hundred eighty (180) after the date the
Optionee's Employment is terminated by the Company or any Affiliate other than
for Good Cause, or
(e) eight (8) years after the Date of Grant.
1.11. "Date of Grant" means the date set forth as the "Date of
Grant" on page 1 of this Agreement.
1.12. "Disability" means (i) incapacity due to physical or
mental illness or injury where the Optionee shall have been absent from his full
time duties at the Company for four (4) consecutive months; or (ii) the
Optionee's health should become impaired to an extent that makes the continued
performance of his duties at the Company hazardous to his physical or mental
health or his life, provided that the Optionee shall have furnished the Company
with a written statement from a qualified doctor to such
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effect and provided further, that, at the Company's request made within thirty
(30) days of the date of such written statement, the Optionee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
the Optionee or the Optionee's doctor and such doctor shall have concurred in
the conclusion of the Optionee's doctor.
1.13. "Employment" means the Optionee's employment with the
Company and its Affiliates, including service as a director.
1.14. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.15. "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) Corporacion
IMPSA, S.A.; (viii) 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 (vii); (ix) Princes Gate Investors II, L.P. or any Affiliate thereof;
and (x) Morgan Stanley Global Emerging Markets Private Investment Fund, L.P. or
any Affiliate thereof.
1.16. "Fair Market Value" means the fair market value of a
Share as determined by the Board pursuant to a reasonable method adopted in good
faith for such purpose; provided, however, that if the Common Stock is traded on
the NASDAQ National Market System, the American Stock Exchange or the New York
Stock Exchange (or any similar organization or agency succeeding such market or
exchange's functions of reporting prices), "Fair Market Value" as of any date
shall be determined based on the average of the closing bid and asked prices of
a Share for the ten (10) consecutive trading days preceding the given date, as
reported on such market or exchange and published in The Wall Street Journal or
a comparable reporting or quotation service of national reputation selected by
the Board.
1.17. "Good Cause" means a termination based on an Optionee's
(i) willful misconduct or gross negligence in the performance or intentional
nonperformance (continuing for ten (10) days after receipt of written notice of
need to cure) of any of the Optionee's material duties and responsibilities for
the Company; (2) dishonesty, fraud, alcohol or illegal drug abuse, or misconduct
with respect to the business or affairs of the Company, which adversely affects
the operations, prospects or reputation of the Company; or (3) conviction of a
felony or other crime involving moral turpitude.
1.18. "Option" means the nonstatutory stock option granted to
the Optionee in Section 2 of this Agreement.
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1.19. "Option Price" means the dollar amount per Share set
forth as the "Option Price" on page 1 of this Agreement.
1.20. "Optionee" means the person identified as the "Optionee"
on page 1 of this Agreement.
1.21. "Plan" means the IMPSAT Fiber Networks, Inc. 1999
Nonstatutory Stock Option Plan.
1.22. "Public Equity Offering" means an underwritten primary
public offering of Common Stock that is broadly distributed to the public
pursuant to an effective registration statement under the Securities Act and
after which the Common Stock is listed or quoted for trading on the New York
Stock Exchange, the American Stock Exchange or the NASDAQ National Market.
1.23. "Public Market" means, and shall be deemed to exist, if
(i) a Public Equity Offering has been consummated and (ii) at least 15% of the
total issued and outstanding (not fully diluted) Common Stock has been
distributed by means of an effective registration statement under the Securities
Act or sales pursuant to Rule 144 under the Securities Act.
1.24. "Securities Act" means the Securities Act of 1933, as
amended.
1.25. "Share" means a share of Common Stock.
2. GRANT OF OPTION. Pursuant to the Plan and subject to the terms of
this Agreement, the Company hereby grants to the Optionee the Option to purchase
from the Company that number of Shares equal to the Covered Shares, exercisable
at the Option Price.
3. TERMS OF THE OPTION.
3.1. Type of Option. The Option is intended to be a
nonstatutory stock option, and is not an incentive stock option within the
meaning of Section 422 of the Code.
3.2. Exercise Period. During the period commencing on the Date
of Grant and terminating on the Date of Expiration, the Option may be exercised
with respect to all or a portion of the Covered Shares (in full shares), to the
extent that the Option has vested and has not been previously exercised with
respect to such Covered Shares.
3.3. Vesting Schedule.
(a) On each of the fourth, fifth, sixth and seventh
anniversaries of the Date of Grant, the Option shall vest as to ten percent,
twenty percent, thirty percent and forty percent respectively, of the Covered
Shares,
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<PAGE> 12
rounded up to the nearest whole number of Shares (or, if less, the remainder of
the Covered Shares with respect to which the Option has not yet vested).
(b) Notwithstanding the provisions of Section 3.3(a),
(i) any unvested portion of the Option set forth in said Section 3.3(a) shall
vest in full upon a Change of Control and (ii) no part of the Option shall vest
after the date of termination for any reason of the Optionee's Employment.
4. EXERCISE.
4.1. Notice. The Option shall be exercised, in whole or in
part, by the delivery to the Company of written notice of such exercise, in such
form as the Board may from time to time prescribe, accompanied by (i) full
payment of the Option Price with respect to that portion of the Option being
exercised and (ii) any amounts required to be withheld pursuant to applicable
tax laws in connection with such exercise. Options may be exercised only with
respect to whole numbers of Shares. Until the Board notifies the Optionee to the
contrary, the form attached to this Agreement as Exhibit A shall be used to
exercise the Option.
4.2. Payment of the Option Price. Upon exercise of the Option,
the Optionee shall pay the Option Price and any applicable withholding tax
amounts in cash. With the prior written approval of the Board, which approval
shall be in the Board's sole discretion, the Optionee may also pay the Option
Price, in whole or in part, by delivering duly endorsed certificates
representing, or duly executed stock transfer instruments in respect of, a whole
number of Shares having an aggregate value on the Date of Exercise (determined
based on the Fair Market Value) not more than the portion of the Option Price
being paid by delivery of such Shares, or in a combination of cash and Shares.
Notwithstanding the preceding sentence, no Shares may be used to pay any portion
of the Option Price unless those Shares were issued to the Optionee at least six
months prior to the Date of Exercise.
5. RESTRICTIONS ON TRANSFER.
5.1. Options. Except by will or the laws of descent and
distribution, the Option may not be sold, transferred, assigned, pledged or
otherwise disposed of or encumbered by the Optionee, and any attempt to do so
shall be null and void. The Option may be exercised during the Optionee's
lifetime only by the Optionee or, in the event of the Optionee's legal
disability, by the Optionee's legal representative. The terms of the Option
shall be binding upon any successor or permitted assignee of the Optionee.
5.2. Company Call Right. At any time within one hundred eighty
(180) days following the termination of the Optionee's Employment by the Company
or any Affiliate for Good Cause or by the Optionee by reason of resignation (but
only prior to the existence of a Public Market), the Company shall have the
right (the "Call Right") to elect to repurchase, and cause the Optionee to sell
to the Company, all or any portion of the Covered Shares held by the Optionee
(or his estate or designated beneficiary in the event of his death following his
termination of Employment) in accordance with this
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<PAGE> 13
Section 5.2. Each exercise of the Call Right shall be effected by giving the
Optionee written notice of the Company's election to exercise the Call Right,
which notice shall be delivered in accordance with Section 11 hereof and shall
set forth (a) the number of Covered Shares with respect to which the Call Right
is then being exercised and (b) the proposed closing date for the sale and
purchase of the relevant Covered Shares, which shall be a date not less than ten
(10) business days following the effective date of delivery of such written
notice (the "Call Right Closing"). The purchase price per Covered Share with
respect to which the Call Right is exercised shall be the Option Price plus an
amount equal to interest on the Option Price at the rate of six percent (6%) per
annum, compounded annually, calculated from the Date of Grant to the date of the
Call Right Closing. At the Call Right Closing, the Optionee (or his estate or
designated beneficiary) shall deliver duly endorsed certificates representing,
or duly executed stock transfer instruments in respect of, the number of Covered
Shares with respect to which the Call Right is being exercised, and the Company
shall pay the purchase price for such shares to the Optionee (or his estate or
designated beneficiary) in cash or by wire transfer in immediately available
funds.
5.3. Securities Act. The Optionee understands that this Option
and the Covered Shares have not been registered under the Securities Act or any
state or other jurisdiction's securities laws, and upon exercise of the Option
the Shares must be held indefinitely unless the sale or other transfer thereof
is subsequently registered under the Securities Act or exemptions from such
registration requirements are available. The Optionee is further aware that the
Company is under no obligation to register the Option or the Covered Shares
under the Securities Act or any state or other jurisdiction's securities laws or
to assist the Optionee in complying with any such registration requirements. The
Optionee represents that it is an "accredited investor," as such term is defined
in Rule 501 under the Securities Act.
6. CAPITAL ADJUSTMENTS. In the event of any change in the outstanding
Common Stock by reason of any stock dividend, split-up (or reverse stock split),
reclassification, reincorporation, liquidation or similar change in corporate
structure, the Board shall, in its discretion, provide for a substitution for or
adjustment in (i) the number and class of Covered Shares and (ii) the Option
Price.
7. INVESTMENT INTENT; LEGENDS.
7.1. Representations. The Optionee agrees that, upon the
issuance of any Shares upon the exercise of the Option, the Optionee will, upon
the request of the Company, represent and warrant in writing that the Optionee
(i) has received and reviewed a copy of the Plan; (ii) is capable of evaluating
the merits and risks of exercising the Option and acquiring the Shares and able
to bear the economic risks of such investment; (iii) has made such
investigations as he or she deems necessary and appropriate of the business and
financial prospects of the Company; and (iv) is acquiring the Shares for
investment only and not with a view to resale or other distribution thereof. The
Optionee acknowledges that the Company has made available to the Optionee the
opportunity to obtain information to evaluate the merits and risks associated
with this Agreement and the transactions contemplated hereby. The Optionee
further
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<PAGE> 14
acknowledges that the investment contemplated by the Option involves a high
degree of risk, including risks associated with the Company's business
operations and prospects, the lack of a public market for the Shares, and the
limitations on the transferability of the Option and the Shares.
7.2. LEGENDS. The Optionee agrees that the certificates
evidencing the Shares issued upon exercise of the Option may include any legend
which the Board deems appropriate to reflect any transfer or other restrictions
contained in the Plan, this Agreement or the Securities Act or to comply with
other applicable laws.
8. RIGHTS AS STOCKHOLDER. The Optionee shall have no rights as a
stockholder with respect to any Covered Shares until and unless a certificate or
certificates representing such shares are issued to the Optionee pursuant to
this Agreement. Except as provided in Section 6, no adjustment shall be made for
dividends or other rights for which the record date is prior to the issuance of
such certificate or certificates.
9. EMPLOYMENT. Neither the granting of the Option evidenced by this
Agreement nor any term or provision of this Agreement shall constitute or be
evidence of any understanding, express or implied, on the part of the Company or
any of its Affiliates to employ the Optionee (or have the Optionee serve as a
director) for any period.
10. SUBJECT TO THE PLAN. The Option evidenced by this Agreement and the
exercise thereof are subject to the terms and conditions of the Plan, which are
incorporated herein by reference and made a part hereof, but the terms of the
Plan shall not be considered an enlargement of any benefits under this
Agreement. In addition, the Option is subject to any rules and regulations
promulgated by the Board pursuant to the Plan.
11. NOTICE. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
by facsimile or sent by overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
If to the Company to:
IMPSAT Fiber Networks, Inc.
Alferez Pareja 256
1107 Buenos Aires, Argentina
Attention: President
Facsimile: 011-54114-307-1525
If to the Optionee, to the address set forth beneath the Optionee's signature on
the signature page hereof.
All deliveries of notice shall be deemed effective when received by
the person entitled to such receipt or when delivery has been attempted but
refused by such person. Any party may change the person or address to which such
deliveries shall be made with
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<PAGE> 15
respect to such party by delivering notice thereof to the other party hereto in
accordance with this Section 11.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
signed on its behalf effective as of the Date of Grant.
ATTEST: IMPSAT FIBER NETWORKS, INC.
By:
Accepted and agreed to as of the Date of Grant.
Optionee:
Address:
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EXHIBIT A
EXERCISE OF OPTION
Board of Directors
IMPSAT Fiber Networks, Inc.
Alferez Pareja 256
1107 Buenos Aires, Argentina
Ladies and Gentlemen:
The undersigned, the Optionee under the Nonstatutory Stock Option
Agreement identified as Option No. ______ (the "Agreement"), granted pursuant to
the IMPSAT Fiber Networks, Inc. 1999 Nonstatutory Stock Option Plan (the
"Plan"), hereby irrevocably elects to exercise the option granted in such
Agreement (the "Option") to purchase ________ [whole numbers only] shares of
Common Stock, par value $0.01 per share, (the "Shares") of IMPSAT Fiber
Networks, Inc. (the "Company"), and herewith makes payment of $_________ in
cash.
The Optionee hereby represents and warrants as follows:
1. The Optionee has received and reviewed a copy of the Plan;
2. The Optionee is capable of evaluating the merits and risks of
exercising the Option and acquiring the Shares and able to bear the economic
risks of such investment;
3. The Optionee has made such investigations as he or she deems
necessary and appropriate of the business and financial prospects of the
Company; and
4. The Optionee is acquiring the Shares for investment only and not
with a view to resale or other distribution thereof.
The Optionee acknowledges that the Company has made available to
the Optionee the opportunity to obtain information to evaluate the merits and
risks associated with the Agreement and the transactions contemplated thereby.
The Optionee further acknowledges that the investment contemplated by the Option
involves a high degree of risk, including risks associated with the Company's
business operations and prospects, the lack of a public market for the Shares,
and the limitations on the transferability of the Option and the Shares.
Dated: _____________________ ___________________________
(Signature of Optionee)
Date Received by
IMPSAT Fiber Networks, Inc.: ___________________
Received by: __________________________
<PAGE> 1
EXHIBIT 10.4
US$149,100,000
FINANCING AGREEMENT
DATED AS OF OCTOBER 25, 1999
BY AND AMONG
IMPSAT S.A.
AS BORROWER,
NORTEL NETWORKS CORPORATION,
AS ADMINISTRATIVE AGENT,
NORTEL NETWORKS CORPORATION,
AS COLLATERAL AGENT
AND
THE LENDERS PARTY HERETO FROM TIME TO TIME
AS LENDERS
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FINANCING AGREEMENT
THIS FINANCING AGREEMENT, dated as of this October 25, 1999 (this "AGREEMENT"),
by and among IMPSAT S.A., a corporation (sociedad anonima) organized pursuant to
the laws of the Republic of Argentina (the "BORROWER"); NORTEL NETWORKS
CORPORATION ("NORTEL"), a corporation organized pursuant to the laws of the
Province of Ontario, Canada, as administrative agent (the "ADMINISTRATIVE
AGENT"); Nortel as collateral agent (the "COLLATERAL AGENT"); and the several
lenders party hereto from time to time, as lenders (together with Nortel, the
"LENDERS").
W I T N E S S E T H:
WHEREAS, (i) the Borrower, Nortel Networks de Argentina S.A. ("NORTEL
ARGENTINA") and Nortel have entered into a Turnkey Project Agreement dated as of
September 6, 1999 (the "TURNKEY CONTRACT") and (ii) Nortel and IMPSAT (as
defined hereinbelow) are currently negotiating the terms of a supply agreement
(the "SUPPLY AGREEMENT") (the Turnkey Contract and the Supply Agreement,
collectively, the "NORTEL CONTRACTS") pursuant to which the Borrower will
purchase telecommunications equipment and/or services manufactured or supplied
by Nortel or its Affiliates related to the design, procurement, installation,
commissioning, and operation of a broadband telecommunications network in
Argentina (the "PROJECT");
WHEREAS, the Borrower has requested that the Lenders make available to
the Borrower under the terms and conditions hereof a credit facility in a
principal amount not to exceed one hundred forty nine million one hundred
thousand Dollars (US$149,100,000) to finance the purchase of products and
services under the Turnkey Contract and the Supply Agreement;
WHEREAS, the Borrower is a Subsidiary of IMPSAT Corporation, a
corporation organized pursuant to the laws of the State of Delaware, U.S.A.
("IMPSAT");
WHEREAS, as a material inducement to the Lenders to extend the credit
under this Agreement, IMPSAT has agreed to guarantee the obligations of the
Borrower to the Lenders under this Agreement and to make certain agreed equity
contributions to the Borrower;
WHEREAS, concurrently herewith, the Parties other than the Borrower have
entered into a financing agreement (the "BRAZIL FINANCING AGREEMENT") with the
Borrower's Affiliate, IMPSAT Comunicacoes Ltda., a company organized pursuant to
the laws of Brazil ("IMPSAT BRAZIL"), to finance the purchase of products and
services under the Turnkey Project Agreement dated September 6, 1999 among
IMPSAT Brazil, Nortel and Northern Telecom do Brasil Comercio e Servicos Ltda.
("NORTEL BRAZIL") (the "BRAZIL TURNKEY CONTRACT") and together with the Supply
Agreement, the "BRAZIL NORTEL CONTRACTS");
WHEREAS, the Lenders are willing to provide the credit facility requested
by the Borrower upon the terms and subject to the conditions hereinafter set
forth;
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NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the Parties
agree as follows:
SECTION 1. DEFINITIONS.
SECTION 1.1 DEFINED TERMS.
The following capitalized terms shall have the meanings set forth in this
Section 1.1 when used in this Agreement, including its preamble and recitals:
"AFFILIATE" means, as to any Person, any other Person Controlled by,
Controlling, or under common Control with, such Person.
"AGENTS" means the Administrative Agent and the Collateral Agent.
"APPLICABLE LAW" means any statute, law, regulation, ordinance, rule,
judgment, writ, rule of common law, common law duty, code, order, decree,
governmental approval, administrative order, directed duty, request, license,
authorization, permit, approval, concession, grant, franchise, directive,
guideline, policy, requirement, or other governmental restriction, or any
similar form of decision of, determination by, agreement with, or requirements
of (or any interpretation or administration of any of the foregoing by) any
Governmental Authority, whether in effect as of the date hereof or thereafter
(including any Environmental Laws).
"APPLICABLE PERMITS" means the Applicable Permits as defined in the
Turnkey Contract.
"ARGENTINA" means the Republic of Argentina.
"ARGENTINE GAAP" means generally accepted accounting principles in
Argentina as established from time to time by the Consejo Profesional de
Ciencias Economicas.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means an assignment and assumption
agreement between a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, substantially in the form of Exhibit A.
"AUTHORIZED OFFICER" means, with respect to any Person, each of the
following officers of such Person: (a) the Chief Executive Officer; (b) the
Chief Operating Officer; or (c) the Chief Financial Officer.
"BORROWER BUSINESS PLAN" means the 10-year consolidated Business Plan of
the Borrower dated August 31, 1999 and not including any amendments, supplements
or replacements thereof (except as contemplated by Section 6.2(l)).
"BORROWER'S NET DEBT" means, on any date, (a) the Borrower's Total Debt
outstanding on such date; minus (b) the amount of the Borrower's Quasi
Equity outstanding on such date; minus (c) the aggregate amount of cash and
Temporary Cash Investments of the Borrower and its Subsidiaries that are subject
to a Lien in favor of the Lenders pursuant to the Security Documents.
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"BRAZIL" means the Federative Republic of Brazil.
"BRAZIL AGREEMENTS" means, collectively, the Financing Documents as
defined in the Brazil Financing Agreement and the Brazil Nortel Contracts.
"BRAZIL EQUIPMENT PLEDGE AGREEMENT" means the Equipment Pledge Agreement
as defined in the Brazil Financing Agreement.
"BRAZIL ESCROW ACCOUNT AGREEMENT" means the Escrow Account Agreement as
defined in the Brazil Financing Agreement.
"BRAZIL GUARANTEE" means the IMPSAT Guarantee as defined in the Brazil
Financing Agreement.
"BRAZIL MORTGAGE DEEDS" means the Mortgage Deeds as defined in the Brazil
Financing Agreement.
"BRAZIL PLEDGED SHAREHOLDER NOTE" means a Pledged Shareholder Note as
defined in the Brazil Financing Agreement.
"BRITISH TELECOM" means British Telecommunications plc, a corporation
organized pursuant to the laws of the United Kingdom.
"BUSINESS DAY" means a day other than a Saturday, Sunday, or any other
day on which commercial banks in New York City, United States of America, and
the City of Buenos Aires, Argentina are authorized or required by Applicable Law
to close.
"BUSINESS PLANS" means, collectively, the Borrower Business Plan and the
IMPSAT Business Plan.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or directive
of any central bank or other Governmental Authority, or any other Applicable
Law, whether or not having the force of law, in each case of general
applicability regarding capital adequacy of banks and branches thereof or
corporations controlling banks.
"CAPITAL EXPENDITURES" means, with respect to any Person for any period,
the additions to property, plant and equipment and other capital expenditures of
such Person and its Subsidiaries for such period, as the same are or would be
set forth in a consolidated statement of cash flows of such Person and its
Subsidiaries for such period.
"CAPITAL STOCK" means, with respect to any Person, all shares, interests,
rights to purchase, warrants, options, or other equivalents of or interests in
the common or preferred equity of such Person.
"CENTRAL BANK" means the Banco Central de la Republica Argentina.
"CHANGE OF CONTROL" means an event or circumstance as a result of which:
(i) (a) prior to the occurrence of a Public Market, a "person" or "group"
(within the meaning of Sections 13(d)
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and 14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of Voting Stock representing a
greater percentage of the total voting power of the Voting Stock of IMPSAT, on a
fully diluted basis, than is beneficially owned by the Existing Stockholders on
such date and (b) after the occurrence of a Public Market, a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes
the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of Voting Stock representing more than thirty percent (30%) of the total
voting power of the Voting Stock of IMPSAT on a fully diluted basis and such
ownership represents a greater percentage of the total voting power of the
Voting Stock of IMPSAT, on a fully diluted basis, than is held by the Existing
Stockholders on such date; (ii) individuals who on the date hereof constitute
the board of directors of IMPSAT (together with any new directors whose election
by the board of directors or whose nomination for election by IMPSAT's
stockholders was approved by a vote of at least two-thirds of the members of the
board of directors of IMPSAT then in office who either were members of the board
of directors of IMPSAT on the date hereof 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 of IMPSAT then in office;
(iii) IMPSAT is the "beneficial owner" of less than fifty percent (50%) of the
Voting Stock of the Borrower; or (iv) any of the Indebtedness outstanding under
either of the IMPSAT Indentures is redeemed by IMPSAT prior to its stated
maturity date as a result of a "Change of Control" (as such term is defined in
the respective IMPSAT Indenture) in accordance with the terms of the respective
IMPSAT Indenture.
"CHARTER DOCUMENTS" means, with respect to any Person (other than an
individual), its founding act, charter, certificate of incorporation, by-laws,
memorandum and articles of association, estatutos sociales and other similar
documents regarding its organization or constitution.
"CLOSING DATE" means November 5, 1999 or such other date as the Parties
may agree.
"COMMITMENT" means, with respect to each Lender, such Lender's obligation
to lend its proportional share of the Commitment Amount, subject to the terms
and conditions hereof.
"COMMITMENT AMOUNT" means an amount equal to one hundred forty nine
million one hundred thousand Dollars (US$149,100,000) to be used as provided in
Section 2.2. as such amount is reduced by Disbursements and may be reduced from
time to time pursuant to Section 2.5 or otherwise in accordance with this
Agreement; provided, however, that during the last six (6) months of the
Commitment Period, the Commitment Amount shall be limited to the amount, if any,
that has not theretofore been disbursed for payments of Invoices under the
Supply Agreement pursuant to Section 2.2(ii).
"COMMITMENT PERIOD" means the period commencing on the date hereof and
ending on the Commitment Termination Date.
"COMMITMENT TERMINATION DATE" means the earliest of (a) the date six (6)
months following the second (2nd) anniversary of the date hereof; (b) the first
date on which the sum of
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<PAGE> 6
all Disbursements equals the Commitment Amount; and (c) the date of termination
of the Commitment pursuant to Section 10.2(a).
"CONSOLIDATION DATE" means the date six (6) months after the date of this
Agreement (being the same day of the calendar month) and each successive date
that is six (6) calendar months thereafter (being the same day of the calendar
month), provided, that if such date is not a Business Day, the next succeeding
Business Day unless it falls in the next calendar month, in which case the
Consolidation Date shall be the Business Day immediately preceding such date.
"CONTROL" means: (a) the beneficial ownership of more than fifty percent
(50%) of the total Voting Stock then outstanding of a Person; or (b) even if
less than such percentage of outstanding Voting Stock is owned, the power to
direct the management and policies of such Person, directly or through one or
more intermediaries, whether through the ownership of voting securities, by
contract, or otherwise.
"DEBT SERVICE" means, with respect to any Person for any period, the sum
of (i) the total Interest Expense of such Person and its Subsidiaries during
such period, plus (ii) all amounts of principal and premium, if any, paid or
required to be paid during such period in respect of Total Debt (excluding
Indebtedness in respect of guarantees except to the extent paid by such Person
during such period) of such Person and its Subsidiaries (except principal paid
in respect of Indebtedness contemplated by clauses (b) and (c) of the definition
of "Permitted Indebtedness" where the funds to pay such principal are provided
by a contribution to Paid in Capital and the payment of principal is made within
ten (10) days after receipt of such contribution); provided, however, that
amounts of principal which are paid under revolving credit or similar facilities
and then reborrowed during the same calendar quarter shall be counted without
duplication.
"DEFAULT" means any event, occurrence, factual or legal condition which,
if continued uncured or unchanged would, with the passage of time or the giving
of notice or both, become or constitute an Event of Default.
"DEFAULT INTEREST RATE" means an interest rate per annum equal to (i) the
interest rate then in effect under Section 3.3(a), plus (ii) two hundred fifty
(250) basis points.
"DISBURSEMENT" means any disbursement of Loan proceeds by the Lenders
hereunder.
"DISBURSEMENT DATE" means the date on which a Disbursement is made in
accordance with Section 2.3.
"DISBURSEMENT REQUEST" means a requisition for a Disbursement
substantially in the form of Exhibit B, duly completed and signed by an
Authorized Officer of the Borrower.
"DISPOSAL" means, with respect to any property of the Borrower or any
Subsidiary thereof, any direct or indirect sale, conveyance, transfer,
alienation, lease, IRU, loan, sale-and-repurchase, sale-leaseback or other
transaction or arrangement as a result of which the Borrower or Subsidiary party
to such transaction or arrangement relinquishes all or substantially all
marketable rights in and to such property; and the verb "DISPOSE OF" has a
corresponding meaning.
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"DOLLARS AND US$" means the lawful currency of the United States of
America.
"EBITDA" means, with respect to any Person for any period, the Net Income
of such Person and its Subsidiaries for such period after (a) restoring thereto
amounts deducted for, without duplication, (1) Interest Expense for such period,
(2) taxes based upon net income, (3) depreciation and amortization, and (4)
other non-cash charges and (b) deducting therefrom non-cash income or losses to
the extent included in determining Net Income.
"ELIGIBLE ASSIGNEES" means, (a) a Lender; (b) a commercial bank or
savings and loan association or savings bank organized under the laws of the
United States of America (or any State thereof) or Canada (or any Province
thereof), and having total assets in excess of one hundred million Dollars
(US$100,000,000); (c) a commercial bank organized under the laws of any other
country that is a member of the Basel Accord and the Organization of Economic
Cooperation and Development or has concluded special lending arrangements with
the International Monetary Fund associated with its general arrangements to
borrow, or a political subdivision of any such country, and having total assets
in excess of one hundred million Dollars (US$100,000,000), so long as such bank
is acting through a branch or agency located in the country in which it is
organized or another country that is described in this clause (c); (d) a finance
company, insurance company or other financial institution or fund (whether a
corporation, partnership, trust or other entity) that is principally engaged in
making, purchasing or otherwise investing in commercial loans in the ordinary
course of its business and having total assets in excess of one hundred million
Dollars (US$100,000,000); and (e) any other Person designated by the
Administrative Agent and approved by the Borrower (such approval not to be
unreasonably withheld).
"ENVIRONMENTAL LAWS" means any and all applicable statutes, laws,
judicial decisions, regulations, ordinances, rules, judgments, orders, decrees,
codes, injunctions, permits, concessions, grants, franchises, licenses,
agreements, and other governmental restrictions relating to the environment or
the effect of the environment on human health or to emissions, discharges or
release of pollutants, contaminants, Hazardous Substances, or wastes into the
environment, including (without limitation) ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, Hazardous Substances, or wastes or the clean-up or
other remediation thereof.
"ENVIRONMENTAL LIABILITIES" means all liabilities in connection with, or
relating to, the business, assets, presently or previously owned or leased
property, activities (including, without limitation, off-site disposal) or
operations of the Borrower or any of its Subsidiaries, whether vested or
unvested, contingent or fixed, actual or potential, known or unknown, which
arise under or relate to matters covered by the Environmental Laws.
"EQUIPMENT" has the meaning ascribed to such term in the Nortel
Contracts.
"EQUIPMENT PLEDGE AGREEMENT" means a contract of registered pledge
(contrato de prenda con registro) substantially in the form of Exhibit C to be
entered into between the
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Borrower and the Collateral Agent, pursuant to which the Borrower shall pledge
Equipment to the Collateral Agent for the benefit of the Lenders, as security
for the Loans.
"EQUITY" means, with respect to any Person at any date, the consolidated
stockholders' equity of such Person and its Subsidiaries as of such date,
determined in accordance with U.S. GAAP.
"ESCROW ACCOUNT AGREEMENT" means an agreement substantially in the form
of Exhibit D to be entered into by and among the Borrower, the Administrative
Agent, the bank party thereto and the Escrow Agent.
"ESCROW AGENT" means the escrow agent as defined under the Escrow Account
Agreement.
"EVENT OF SOVEREIGN RISK" means (a) failure by the Central Bank to
exchange or to approve or permit the exchange of Pesos for Dollars, the
unavailability of Dollars in any legal exchange market in Argentina in
accordance with normal commercial practice, or any other action of any Argentine
Governmental Authority that has the effect of restricting such exchange or the
transfer of Pesos for Dollars outside Argentina and (b) a declaration of a
banking moratorium or any suspension of payments by banks in Argentina, or the
imposition by any Argentine Governmental Authority of any moratorium on the
required rescheduling of or required approval of the payment of any indebtedness
in Argentina.
"EXCESS CASH FLOW" means, with respect to any Person, for any period: (a)
such Person's EBITDA for such period; plus (b) the Net Proceeds of any Long Term
Lease received by such Person during such period (excluding the portion, if any,
of such Net Proceeds included in EBITDA for such period); minus (c) the sum of
the following items, determined for such Person and its Subsidiaries on a
consolidated basis: (i) Debt Service for such period, (ii) Capital Expenditures
for such period (but only to the extent permitted by Section 8.3(f) or
contemplated in the IMPSAT Business Plan, as the case may be), (iii) the net
increase (or minus any net decrease) in working capital, excluding cash, from
the opening of business on the first day, to the close of business on the last
day, of such period, and (iv) taxes based upon net income payable with respect
to such period; and minus (d) the portion, if any, included in EBITDA for such
period of the Net Proceeds of any Long Term Lease received by such Person during
any prior period.
"EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934, as
amended.
"EXISTING STOCKHOLDERS" means (i) the Individual Stockholders, (ii) the
estate or any guardian, custodian or other legal representative of any
Individual Stockholder, (iii) any foundation or similar organization organized
under Applicable Law which affords voting Control to such Individual
Stockholder, (iv) any trust for the benefit of any Individual Stockholder or his
family members which affords voting Control to such Individual Stockholder, (v)
British Telecom, and (vi) any Person in which all of the equity interests are
owned directly, or indirectly, by any of the Persons named in clauses (i)
through (v).
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"EXPROPRIATION EVENT" means: (i) any taking by condemnation,
nationalization, seizure, expropriation or other appropriation by any
Governmental Authority of all or any material portion of the Collateral, (ii)
any assumption by any Governmental Authority of control of all or any material
portion of the Collateral or the business operations of the Borrower or any of
its Subsidiaries or any of any such Person's share capital, (iii) any taking of
any action by a Governmental Authority which results in the involuntary
dissolution or disestablishment of the Borrower or any of its Subsidiaries, or
(iv) any taking of any action by any Governmental Authority that prevents the
Borrower and its Subsidiaries, taken as a whole, from carrying on their business
or operations or a material part thereof.
"FACILITY" means the multi-drawdown, non-revolving credit facility in an
aggregate principal amount of up to the Commitment Amount provided by the
Lenders to the Borrower under this Agreement.
"FIBER OPTIC LOAN AGREEMENT" means the loan agreement entered into
between the Borrower and the Fiber Optic Supplier.
"FIBER OPTIC SUPPLIER" means Lucent Technologies Inc. or a wholly-owned
Subsidiary thereof.
"FINANCING DOCUMENTS" means this Agreement, the Notes, all Assignment and
Assumption Agreements, the Security Documents, the IMPSAT Guarantee, the Pledged
Shareholder Notes, the Intercreditor Agreement, the Fiber Optic Loan Agreement
and any other instruments, documents and agreements executed by or on behalf of
the Borrower or for the benefit of the Lenders in connection with the Facility.
"FORCE MAJEURE" means, with respect to any Person, any cause which is
beyond the reasonable control of such Person, including, without limitation, the
elements, riots, civil disturbances, wars, states of belligerency or acts of the
public enemy, labor disputes, or the laws, regulations, acts or failure to act
of any Governmental Authority.
"GLOBAL CROSSING IRU" means the IRU granted by the Borrower to South
American Crossing Ltd. in respect of one duct on the Network between Buenos
Aires and Mendoza in accordance with Article 2 of the TAC Turnkey Construction
and IRU Agreement among the Borrower, IMPSAT S.A. (Chile) and South American
Crossing Ltd. dated September 22, 1999.
"GOVERNMENTAL APPROVALS" means any authorization, consent, license,
approval, grant, franchise, concession, identification number, lease, ruling,
certification, exemption, action, filing, registration, permit, sanction, or
other authorization of any nature to be granted by any Governmental Authority,
as now or hereafter necessary under any Applicable Law.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof (including, but not limited to, federal,
national, state, provincial, regional and municipal) and any entity exercising
executive, legislative, judicial, regulatory, or administrative authority.
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"HAZARDOUS SUBSTANCE" means any substance subject to regulation under
Environmental Laws because of its toxic, radioactive, caustic or otherwise
dangerous or hazardous qualities.
"IMPSAT BUSINESS PLAN" means the 10-year consolidated business plan of
IMPSAT and its Subsidiaries dated August 31, 1999 and not including any
amendments, supplements or replacements thereof (except as contemplated by
Section 6.2(l)).
"IMPSAT GUARANTEE" means a guarantee agreement to be executed by IMPSAT
in favor of the Lenders, in form and substance satisfactory to the Lenders.
"IMPSAT INDENTURES" means the 2003 Indenture and the 2008 Indenture.
"INDEBTEDNESS" means, with respect to any Person at any time and from
time to time, the sum, without duplication, of the following: (a) all
obligations of such Person for money borrowed (whether by loan, the issuance of
debt securities or otherwise); (b) the available amount at such time of all
letters of credit issued for the account of such Person and all outstanding
reimbursement obligations with respect thereto; (c) all liabilities or
obligations secured by any Lien on any property owned by such Person; (d) all
capitalized lease obligations; (e) all Indebtedness of others guaranteed by such
Person; (f) all obligations of such Person to pay the deferred purchase price or
acquisition price of property or services, other than Trade Payables and accrued
expenses incurred, that are not past due by more than sixty (60) days; (g) all
obligations of such Person under trade or bankers' acceptances or under
agreements providing for swaps, ceiling rates, ceiling and floor rates, or
contingent participation or other hedging mechanisms with respect to the payment
of interest; and (h) all indebtedness, liabilities and obligations of such
Person to redeem or retire shares of Capital Stock of such Person.
"INDEPENDENT AUDITOR" means with respect to IMPSAT, Deloitte & Touche
LLP, and with respect to the Borrower, Deloitte & Touche Argentina or such other
internationally recognized firm of certified public accountants as may be
approved by the Administrative Agent.
"INDIVIDUAL STOCKHOLDERS" means, collectively, Pescarmona, Verdaguer and
Vivo, and each an "INDIVIDUAL STOCKHOLDER".
"INITIAL DISBURSEMENT DATE" means the date on which the first
Disbursement is made.
"INTERCREDITOR AGREEMENT" means an agreement substantially in the form of
Exhibit E to be entered into by and among the Borrower, the Lenders, the
Administrative Agent, the Collateral Agent and the Fiber Optic Supplier.
"INTEREST EXPENSE" means, with respect to any Person for any period,
interest expense, both expensed and capitalized, of such Person and its
Subsidiaries for such period, including accrued interest and the interest
component of capital lease obligations, all commissions, discounts, fees and
charges.
"INTEREST PAYMENT DATE" means, (a) with respect to any LIBOR Loan, the
last day of each Interest Period; and (b) with respect to any Prime Loan, the
last day of each March, June, September and December.
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"INTEREST PERIOD" means, with respect to each LIBOR Loan, each period
commencing, initially, on the Disbursement Date of such LIBOR Loan, and ending
on the next following Consolidation Date, and thereafter, commencing on the last
day of the preceding Interest Period with respect to such LIBOR Loan, and
ending, except as otherwise provided in Section 3.3 hereof, on the same day in
the sixth (6th) calendar month thereafter; provided, that,
(a) if any Interest Period otherwise would end on a day that is
not a Business Day, such Interest Period shall end on the next succeeding
Business Day; provided, further, that should such next succeeding Business Day
fall in the next calendar month, such Interest Period shall end on the
immediately preceding Business Day,
(b) any Interest Period that begins on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period shall end on the last Business Day of the calendar month at the
end of such Interest Period (e.g., March 31 to September 30 for a six (6) month
Loan), and
(c) no Interest Period shall extend beyond the next Principal
Repayment Date.
"INVESTMENT" means the acquisition of any Capital Stock, evidence of
Indebtedness, securities (including any option, warrant or other right to
acquire any of the foregoing) of, the making of any loans or advances to, the
guaranteeing of any obligations of any Person, or the purchase or other
acquisition (in one transaction or a series of transactions) of any assets
constituting a business unit.
"IRU" means the creation of an usufructo under Argentine law of any
portion of the Network by the Borrower or any Subsidiary thereof.
"LENDING OFFICE" means, with respect to any Lender, the office of that
Lender designated as its Lending Office by notice to the Administrative Agent
and the Borrower.
"LIBOR" means, with respect to any Interest Period for any LIBOR Loan,
the per annum interest rate (rounded upward, if necessary, to the nearest 1/16
of one percent) equal to the arithmetic mean of the rates per annum at which
Dollar deposits are offered in an amount substantially equal to the outstanding
principal amount of the Loan and for a period approximately equal to the
duration of such Interest Period appearing on the display page designated as
page "LIBOR" on the Reuters Monitor Money Rates Service, or such other page as
may replace the LIBOR page on that service for the purpose of displaying London
Interbank Offered Rates for Dollar deposits of leading banks at or about 11:00
a.m. (London time) two (2) London business days prior to the commencement of
such Interest Period. For purposes hereof, a "LONDON BUSINESS DAY" shall mean
any day on which dealings in deposits in Dollars are conducted in the London
Euro-currency market.
"LIBOR LOAN" means a Loan that bears interest at LIBOR.
"LICENSES" means the Spectrum Authorization and the other licenses listed
in Schedule 7.15 and such other licenses, concessions, authorizations, permits,
or the like (including any
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additions or amendments thereto) issued or granted by the SC or any other
Governmental Authority from time to time in favor of the Borrower or any of its
Subsidiaries and required for the completion of the Project, the operation of
the Network and the conduct of the Telecommunications Business.
"LIEN" means, with respect to any Person, any security interest, lien,
pledge, mortgage, charge, or encumbrance (including any agreement to give any of
the foregoing), title retention agreement, finance lease or trust receipt, or a
consignment or bailment for security purposes, or other security arrangement or
any other arrangement on or with respect to any asset or revenue of such Person.
"LONG TERM LEASE" means any lease or similar agreement or arrangement
pursuant to which the Borrower or a Subsidiary thereof grants the right to use
any portion of the Network to any Person for a period of time of five (5) or
more years in exchange for consideration payable in a form other than periodic
payments at quarterly or more frequent intervals.
"MATERIAL ADVERSE CHANGE" means an event, circumstance or development of
whatever nature that has had or could reasonably be expected to have a Material
Adverse Effect; provided, however, that clause (f) of the definition of Material
Adverse Effect shall not apply to the determination of either an Event of
Default under Section 10.1 or a condition to any Disbursement under Section
6.3(h), other than the initial Disbursement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, assets, results of operations, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries, taken as a whole, or IMPSAT; (b)
the ability of the Borrower or IMPSAT to perform their respective obligations
under any of the Project Agreements; (c) the rights and remedies of the Lenders
or the Agents under the Financing Documents; (d) the validity or enforceability
of this Agreement or any of the other Project Agreements; (e) the Licenses or
the rights of the Borrower and its Subsidiaries thereunder; (f) Argentine, U.S.
or international loan syndication, financial or capital markets or in the
economic, political or regulatory conditions in Argentina which in the
Administrative Agent's opinion in its sole discretion could impair the
assignment or syndication of the Facility; or (g) the ability of the Lenders to
make funds available to the Borrower in Dollars.
"MATURITY DATE" means the seventh (7th) anniversary of the date hereof.
"MORTGAGE DEEDS" means one or more deeds pursuant to which the Borrower
or its Subsidiaries shall grant mortgages from time to time in favor of the
Collateral Agent for the benefit of the Lenders to secure the repayment of the
Loans, substantially in the form of Exhibit F.
"NEGATIVE CASH FLOW" means, if the amount resulting from the calculation
described in the definition of Excess Cash Flow is a negative amount, such
negative amount.
"NET INCOME" means, for any period, the net income (loss) of a Person and
its Subsidiaries, determined on a consolidated basis, for such period in
accordance with U.S. GAAP.
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<PAGE> 13
"NET PROCEEDS" means, with respect to any event (a) the proceeds received
in respect of such event in the form of cash and Temporary Cash Investments,
including (i) any cash received in respect of any non-cash proceeds, but only as
and when received, (ii) in the case of an insured casualty event, insurance
proceeds, and (iii) in the case of an Expropriation Event or similar event,
expropriation awards and similar payments, net of (b) the sum of (i) all
reasonable fees and out-of-pocket expenses paid by the Borrower and its
Subsidiaries to third parties other than Affiliates of Borrower (except Morgan
Stanley Dean Witter in the case of a public offering or private placement) in
connection with such event, (ii) in the case of a Disposal, the amount of all
payments required to be made by the Borrower and its Subsidiaries as a result of
such event to repay Indebtedness (other than Indebtedness secured under the
Security Documents) secured by the asset or property Disposed of or otherwise
subject to mandatory prepayment as a result of such event, (iii) the amount of
all taxes paid (or reasonably estimated to be payable) by the Borrower and its
Subsidiaries in connection with such event, and (iv) the amount of any reserves
established by the Borrower and its Subsidiaries to fund contingent liabilities
reasonably estimated to be payable, in each case during the year that such event
occurred or the next succeeding year and that are directly attributable to such
event (as determined reasonably and in good faith by the chief financial officer
of the Borrower).
"NET PROCEEDS ACCOUNT" means the net proceeds account to be established
in accordance with the Escrow Account Agreement.
"NETWORK" has the meaning ascribed to such term in the Turnkey Contract.
"NOTE" means a promissory note of the Borrower, substantially in the form
of Exhibit G, provided, however, that at the request of any Lender, all Loans to
be made by such Lender may be evidenced by promissory notes of the Borrower in a
form different from Exhibit G if the purpose of such request is that such Notes
be capable of characterization as executive instruments ("titulos ejecutivos")
under Argentine law and if the alternate form of Note is approved by the Agents,
which approval shall not be unreasonably withheld.
"OBLIGATIONS" means all present and future obligations, liabilities and
other amounts, whether or not contingent, owing to any Lender pursuant to this
Agreement or any other Financing Document, including principal, accrued interest
and fees.
"PAID IN CAPITAL" means, with respect to any Person, at any time, the
aggregate amount of capital contributed to such Person in the form of cash or
capitalized Indebtedness.
"PARTY" means the Borrower, each Lender, the Administrative Agent and the
Collateral Agent, individually, and "PARTIES" means two (2) or more of them.
"PERMITTED INDEBTEDNESS" means (a) Indebtedness pursuant to the Financing
Documents; (b) Indebtedness of the Borrower to IMPSAT or to any Subsidiary of
the Borrower or of any such Subsidiary to the Borrower, in each case for money
borrowed; (c) Indebtedness of the Borrower for money borrowed from financial
institutions which Indebtedness is either fully collateralized by cash deposits
of IMPSAT or fully funded by IMPSAT through the acquisition of one hundred
percent (100%) participation in such Indebtedness from such financial
institution;
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<PAGE> 14
(d) guarantees by the Borrower of obligations of any Subsidiary thereof or
guarantees by any such Subsidiary of obligations of the Borrower; (e) contingent
Indebtedness in respect of bonds or letters of credit provided to guarantee bids
or performance under contracts in the ordinary course of business; (f)
Indebtedness of the Borrower which is in existence on the date hereof and set
forth on Schedule 7.11; (g) Quasi Equity; (h) Indebtedness for money borrowed
having an original stated final maturity of three (3) years or less up to a
maximum aggregate amount at any time outstanding not to exceed fifty million
Dollars (US$50,000,000); (i) Indebtedness for money borrowed having a stated
final maturity not earlier than the first anniversary of the Maturity Date; (j)
Indebtedness of the Borrower (A) in an amount not to exceed twelve million
Dollars (US$12,000,000) to Citibank N.A. in respect of equipment financing to be
guaranteed by Eximbank and otherwise substantially on the terms and conditions
contemplated in the letter dated August 26, 1999 from Citibank N.A., (B) in an
amount not to exceed fifteen million Dollars (US$15,000,000) under an equipment
lease facility between the Borrower and El Camino Resources de America Latina,
Inc. substantially on the terms and conditions contemplated in the letter dated
May 20, 1999 from El Camino Resources de America Latina, Inc. and (C) in respect
of guarantees by the Borrower of the Indebtedness of IMPSAT Brazil to ABN AMRO
Bank, N.V. and El Camino Resources de Latin America, Inc., permitted under the
Brazil Financing Agreement; and (k) Indebtedness incurred and applied to
refinance Indebtedness permitted by each of clauses (a), (b), (c), (f), (g),
(h), and (j) above; provided, with respect to any such refinancing Indebtedness,
that (i) the principal amount of such refinancing Indebtedness does not exceed
the principal amount of the Indebtedness so refinanced; (ii) such refinancing
Indebtedness has a final maturity date equal to or later than the final maturity
date of, and has an average life to maturity equal to or greater than the
average life to maturity of, the Indebtedness being refinanced; and (iii) such
Indebtedness is incurred and/or guaranteed by the Borrower and any Subsidiary
which had incurred or guaranteed, as the case may be, the Indebtedness to be
refinanced.
"PERMITTED INVESTMENTS" means: (a) Temporary Cash Investments; (b)
Investments in the form of inter-company Indebtedness which constitutes
Permitted Indebtedness; (c) accounts receivable owing to the Borrower or any
Subsidiary thereof if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; (d) payroll,
travel and similar advances and advances to suppliers to cover matters that are
expected at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business; (e)
stock, obligations or securities received in satisfaction of judgments,
work-outs, assignments for the benefit of creditors or other similar judicial
proceedings; and (f) investments in Capital Stock of the International
Telecommunications Satellite Organization ("INTELSAT") or New Skies Satellites
N.V. ("NEW SKIES") to the extent permitted by the IMPSAT Indentures.
"PERMITTED LIENS" means:
(a) Liens under the Financing Documents;
(b) Liens securing taxes not yet due or being contested in good
faith by appropriate proceedings for which adequate reserves determined in
accordance with Argentine
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<PAGE> 15
GAAP have been established (and as to which the property subject to any such
Lien is not yet subject to foreclosure, seizure, arrest, sale, collection, levy
or loss on account thereof);
(c) nonconsensual statutory Liens which are imposed by
Applicable Law arising in the ordinary course of business and securing
obligations which are not yet due and payable or which are being contested in
good faith by appropriate proceedings for which adequate reserves determined in
accordance with Argentine GAAP have been established (and as to which the
property subject to any such Lien is not yet subject to foreclosure, sale or
loss on account thereof);
(d) pledges or deposits made in the ordinary course of business
to secure payment of worker's compensation insurance, unemployment insurance,
pensions or social security programs;
(e) easements, rights-of-way, restrictions and other similar
encumbrances on real property which, in the aggregate, are not substantial in
amount and which do not in any case materially detract from the value of the
property to the Borrower or materially interfere with the ordinary conduct of
the business of the Borrower or a Subsidiary;
(f) Liens arising by virtue of any Applicable Law in favor of
banks or other financial institutions on cash or rights of setoff or similar
rights as to deposit accounts or other funds maintained with a creditor
depository institution;
(g) the shared Liens pursuant to the Intercreditor Agreement;
(h) Liens on goods (and the documents of title relating
thereto) the purchase price, shipment or storage of which is financed by a
documentary letter credit issued for the account of the Borrower or a Subsidiary
thereof in the ordinary course of business, provided that such Lien secures only
the obligations of the Borrower or such Subsidiary in respect of such letter of
credit;
(i) any interest or title of a lessor or vendor in the property
subject to any lease or installment sale;
(j) 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 in the ordinary course of business (and as to which the
property subject to any such Lien is not yet subject to foreclosure, seizure,
arrest, sale, collection, levy or loss on account thereof);
(k) Liens on the Borrower's interests in Intelsat and New Skies
in favor of Credit Lyonnais in an amount not to exceed nine million six hundred
thousand Dollars (US$9,600,000);
(l) 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
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<PAGE> 16
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money);
(m) Liens (including extensions and renewals thereof) upon real
or personal property, in each case other than in respect of the Network;
provided that (i) such Lien is created solely for the purpose of securing
Indebtedness incurred (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 (6) 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, (ii) the principal amount of the Indebtedness secured by
such Lien does not exceed one hundred percent (100%) of such cost and (iii) 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;
(n) Liens arising from the rendering of a final judgment or
order against the Borrower or any of its Subsidiaries that does not give rise to
an Event of Default;
(o) Liens existing on the date hereof and listed on Schedule
7.12; and
(p) Liens arising (i) in respect of the Global Crossing IRU and
(ii) under any other IRU approved by the Administrative Agent under Section
8.2(j).
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a trust, a limited liability company, an unincorporated
organization or a Governmental Authority.
"PESCARMONA" means Mr. Enrique Pescarmona.
"PESOS" means the lawful currency of Argentina.
"PLEDGED SHAREHOLDER NOTE" means a promissory note of the Borrower
endorsed and delivered in pledge to the Administrative Agent, in form and
substance satisfactory to the Lenders, evidencing Indebtedness of the Borrower
for money borrowed from IMPSAT, (i) the principal amount of which is payable in
a single payment not earlier than the first anniversary of the Maturity Date and
(ii) the interest on which is payable at a per annum rate no greater than the
rate payable on the securities issued under the 2008 Indenture.
"PREPAYMENT EVENT" means (a) any Disposal (other than an IRU or a Long
Term Lease) of all or part of the Network or the Collateral; (b) any
Expropriation Event; and (c) any casualty or other insured damage to any
material asset of the Borrower or any Subsidiary thereof.
"PRIME LOAN" means a Loan that bears interest at the Prime Rate.
"PRIME RATE" means the per annum rate of interest announced publicly from
time to time by the Toronto Dominion Bank (or such other bank as the Borrower
and the Administrative Agent may agree) as the prime rate in effect on such date
at its principal office in New York City, which rate may not be the lowest rate
of interest charged by the Toronto Dominion Bank (or such other agreed bank) to
its customers. Each change in any interest rate provided for herein
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<PAGE> 17
resulting from a change in the Prime Rate shall take effect on the beginning of
the day of such change in the Prime Rate.
"PRINCIPAL REPAYMENT DATE" means, initially, the second (2nd) anniversary
of the date hereof (being the same day of the calendar month) and each
successive date that is six (6) calendar months thereafter (being the same day
of the calendar month) until the Maturity Date.
"PROJECT AGREEMENTS" means the Financing Documents, the Nortel Contracts
and the other agreements entered into by the Borrower and its Subsidiaries in
connection with the Project, as listed in Exhibit H.
"PROJECT PARTY" means any party to a Project Agreement.
"PUBLIC EQUITY OFFERING" means an underwritten primary public offering of
common stock of IMPSAT pursuant to an effective registration statement under the
Securities Act.
"PUBLIC MARKET" shall be deemed to exist if (i) a Public Equity Offering
has been consummated and (ii) at least fifteen percent (15%) of the total issued
and outstanding common stock of IMPSAT immediately prior to the consummation of
such Public Equity Offering has been distributed by means of an effective
registration statement under the Securities Act or sales pursuant to Rule 144
under Securities Act.
"QUASI EQUITY" means the aggregate principal amount of all Pledged
Shareholder Notes or, in the case of IMPSAT Brazil, of all Brazil Pledged
Shareholder Notes.
"REQUIRED LENDERS" means, at any time, Lenders holding more than fifty
percent (50%) in aggregate principal amount of the Loans then outstanding or, if
no Loan is outstanding, of the total Commitment Amount.
"REVENUES" means, with respect to any Person for any period, the
consolidated revenues of such Person and its Subsidiaries.
"SC" means the Argentine Secretariat of Communications ("Secretaria de
Comunicaciones").
"SECURED PARTIES" means, collectively, the Agents and the Lenders, and
each a "SECURED PARTY".
"SECURITIES ACT" means the U.S. Securities Act of 1933, as amended.
"SECURITY DOCUMENTS" means the Mortgage Deeds, the Equipment Pledge
Agreements, the Escrow Account Agreement, and any other agreements entered into
pursuant to Section 9.
"SPECTRUM AUTHORIZATION" means the authorization granted by the SC,
revocable in nature, to use the radioelectric spectrum in accordance with the
Argentine Telecommunications Law 19,798, as it may be amended from time to time.
"SUBSIDIARY" means, with respect to any Person, any other Person that is
directly or indirectly Controlled by the first Person.
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<PAGE> 18
"TELECOMMUNICATIONS BUSINESS" means telecommunications services, value
added telecommunications services, radio paging, mobile telecommunications,
personal telecommunications services, trunking, transport of broadcasting
signals, information technology, Internet services and related and ancillary
services in Argentina in which the Borrower or any of its Subsidiaries is from
time to time engaged.
"TEMPORARY CASH INVESTMENT" means any of the following: (a) 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, (b) time deposit accounts, certificates of deposit and money
market deposits maturing within one year of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of fifty million Dollars
(US$50,000,000) (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, (c) repurchase obligations
with a term of not more than thirty (30) days for underlying securities of the
types described in clause (a) above entered into with a bank meeting the
qualifications described in clause (b) above, (d) commercial paper, maturing not
more than one year after the date of acquisition, issued by a corporation (other
than an Affiliate of the Borrower) 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 the time as of which
any investment therein is made of "P-1" (or higher) according to Moody's
Investor Service, Inc. ("Moody's") or "A-1" (or higher) according to Standard &
Poor's Ratings Services ("S&P"), (e) securities with maturities of six (6)
months or less from the date of acquisition issued or fully and unconditionally
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or Moody's, and (f) certificates of deposit maturing not
more than one (1) year after the acquisition thereof by the Borrower or a
Subsidiary thereof and issued by any of the ten (10) largest banks (based on
assets as of the last December 31) organized under the laws of Argentina,
provided that such bank is not under intervention, receivership or any similar
arrangement at the time of the acquisition of such certificates of deposit.
"TOTAL DEBT" means, with respect to any Person at any time and from time
to time, the aggregate amount of any and all Indebtedness of such Person and its
Subsidiaries then outstanding.
"TOTAL EQUITY" means, with respect to any Person at any date, the sum of
(a) the Equity of such Person as of such date, plus (b) the Quasi Equity of such
Person as of such date.
"TRADE PAYABLES" means, with respect to any Person, any accounts payable
or any other indebtedness or monetary obligation to trade creditors created,
assumed or guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services and required to be paid within one year.
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<PAGE> 19
"U.S. GAAP" means generally accepted accounting principles as adopted by
the American Institute of Certified Public Accountants, consistently applied.
"VERDAGUER" means Mr. Ricardo Verdaguer.
"VIVO" means Mr. Robert Vivo.
"VOTING STOCK" means, with respect to any Person, Capital Stock
ordinarily having the power to vote for the election of directors, managers or
other voting members of the governing body of such Person.
"2003 INDENTURE" means the Indenture dated as of July 30, 1996 among
IMPSAT, as Issuer, the Borrower, as Guarantor, and The Bank of New York, as
Trustee, relating to the 12 1/8% Senior Guaranteed Notes due 2003 of IMPSAT.
"2008 INDENTURE" means the Indenture dated as of June 17, 1998 between
IMPSAT, as Issuer, and The Bank of New York, as Trustee, relating to the 12 3/8%
Senior Notes due 2008 of IMPSAT.
SECTION 1.2 OTHER DEFINITIONS.
The following terms shall have the meaning given to them in the Section
indicated below:
<TABLE>
<CAPTION>
TERM SECTION
<S> <C>
Administrative Agent Preamble
Agreement Preamble
Bankruptcy Code 10.1(g)
Bonex 4.2(a)
Borrower Preamble
Borrower Capital Increase 6.2(d)
Brazil Financing Agreement Fifth Recital
Brazil Nortel Contracts Fifth Recital
Brazil Turnkey Contract Fifth Recital
Collateral 9.1
Collateral Agent Preamble
Commitment Fee 3.4(a)
Deferred Payment Date 4.2(c)
Deposit Account 3.6(a)
Event of Default 10.1
Excluded Taxes 5.1(a)
FRBs 4.2(b)
</TABLE>
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<PAGE> 20
<TABLE>
<S> <C>
Funding Breakage Costs 5.2
IMPSAT Third Recital
IMPSAT Brazil Fifth Recital
IMPSAT Capital Contribution 6.2(d)
Indemnitees 11.2
Information 16.11
Intelsat "Permitted Investments" definition
Invoices 2.2
Lenders Preamble
Loan(s) 2.1(a)
New Skies "Permitted Investments" definition
Nortel Preamble
Nortel Argentina First Recital
Nortel Brazil Fifth Recital
Nortel Contracts First Recital
Note(s) 2.4(a)
Par Bonds 4.2(b)
Placement Agent 16.12
Prepayment 3.2(a)
Project First Recital
Reference Dealers 4.2(b)
Register 2.3(d)
Release 9.3(b)
Released Collateral 9.3(b)
Release Instruments 9.3(b)
Release Notice 9.3(b)
Replacement Notes 13.1
Second Currency 4.1
Sovereign Event Deferral Period 4.2(c)
Specified Place of Payment 4.1
Supply Agreement First Recital
Syndication Agents 16.12
Taxes 5.1(a)
Turnkey Contract First Recital
</TABLE>
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<PAGE> 21
SECTION 1.3 INTERPRETATION.
In this Agreement: (a) the singular includes the plural and the plural
the singular; (b) words importing any gender include the other gender; (c)
references to statutes or regulations are to be construed as including all
statutory or regulatory provisions consolidating, amending or replacing the
statute or regulation referred thereto; (d) references to "writing" include
printing, typing, lithography and other means of reproducing words in a tangible
visible form; (e) references to articles, sections (or subdivisions of
sections), exhibits, annexes or schedules are to this Agreement unless otherwise
indicated; (f) references to agreements and other contractual instruments shall
be deemed to include all schedules and exhibits to such agreements and all
subsequent amendments and other modifications to such agreements and contractual
instruments, but only to the extent such amendments and other modifications are
not prohibited by the terms hereof; and (g) references to Persons include their
respective permitted successors and assigns and, in the case of Governmental
Authorities, Persons succeeding to their respective functions and capacities.
SECTION 1.4 ACCOUNTING PRINCIPLES AND TERMS.
Except as otherwise provided in this Agreement: (a) all computations and
determinations as to financial matters, and all financial statements to be
delivered under this Agreement, shall be made or prepared in accordance with
U.S. GAAP (including principles of consolidation where appropriate) applied on a
consistent basis; (b) all accounting terms used in this Agreement shall have the
meanings respectively ascribed to such terms by U.S. GAAP.
SECTION 2. THE CREDIT FACILITY
SECTION 2.1 LOANS.
(a) LENDERS' AGREEMENT TO LEND. Each Lender severally agrees, upon the
terms and conditions set forth herein, to make loans to the Borrower from time
to time during the Commitment Period, in an aggregate principal amount not to
exceed the amount of such Lender's Commitment (each such loan a "LOAN" and
collectively the "LOANS").
(b) FACILITY NOT REVOLVING. Each Lender's Commitment and the Facility
are not revolving in nature. Any amounts that are repaid or prepaid may not be
reborrowed, and the amount of the Facility shall be reduced by the amount of any
repayment or prepayment. The aggregate principal amount of all Loans shall not
at any time exceed the Commitment Amount.
SECTION 2.2 USE OF PROCEEDS.
The proceeds of the Loans shall be used as follows:
(i) up to one hundred twenty-four million one hundred thousand
Dollars (US$124,100,000) to pay invoices issued from time to time to the
Borrower or its Affiliates in respect of products or services purchased
under the Turnkey Contract;
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<PAGE> 22
(ii) up to twenty million Dollars (US $20,000,000) to pay
invoices issued from time to time to the Borrower or its Affiliates in
respect of products or services purchased under the Supply Agreement; and
(iii) up to five million Dollars (US $5,000,000) to pay invoices
in respect of real property to be purchased for use in the Network.
The invoices to be issued under items (i) through (iii) above are
collectively referred to as the "INVOICES".
SECTION 2.3 PROCEDURE FOR BORROWING; DISBURSEMENTS.
(a) DISBURSEMENTS. During the Commitment Period, the Borrower may
request a Disbursement of a Loan by delivering to the Administrative Agent a
Disbursement Request, duly completed with all required information and executed
by an Authorized Officer of the Borrower, together with copies of or proper
references or identification to the Invoices to be paid with the proceeds of
such Loan, not later than 10:00 a.m., New York time, at least three (3) Business
Days prior to the Disbursement Date requested in such Disbursement Request. Each
Disbursement Request shall specify the Disbursement Date for such Disbursement
and the principal amount to be disbursed. During any one calendar month of the
Commitment Period, the Borrower shall not request, and the Lenders shall not
make, more than one (1) Disbursement. Each Disbursement shall be in an amount of
not less than One Million Dollars (US$1,000,000).
(1) Upon receipt of the corresponding documentation and subject
to the limitations set forth herein, the Administrative Agent shall promptly
give each Lender notice of such proposed Disbursement, of such Lender's
proportionate share thereof and of the other matters required by Section 2.3(a)
to be specified in the Disbursement Request.
(2) Not later than 10:00 a.m. (New York time) on the date
specified in each Disbursement Request, each Lender shall make available in
Dollars and in immediately available funds at the office of the Administrative
Agent its pro rata share of each Disbursement requested.
(3) Not later than 3:00 p.m. (New York time) (to the extent of
funds actually received by the Administrative Agent at or prior to 12:00 noon),
the Administrative Agent shall disburse the funds in accordance with Section
2.3(b).
(4) In the event that any Lender shall fail to make available
to the Administrative Agent such Lender's portion of any Disbursement as
provided in Section 2.3(a)(2), the Administrative Agent shall disburse the funds
it has received from other Lenders pursuant to the procedures set forth in
Section 2.3(b); provided, that nothing in this Section 2.3(a)(4) shall relieve
or be deemed to relieve such defaulting Lender or any other Lender from their
respective obligations to make Loans hereunder or to prejudice any rights which
the Borrower may have against any Lender as a result of any failure by such
Lender to make Loans hereunder.
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<PAGE> 23
(b) PAYMENT. Except as otherwise provided in Section 6.2(h) and in the
Escrow Account Agreement, the proceeds of each Disbursement shall be paid for
the account of the Borrower by wire transfer of such amounts to the account
designated by Nortel or Nortel Argentina which shall be set forth in the
Disbursement Request relating to such Disbursement. The Borrower hereby
acknowledges that the Borrower shall be deemed to have received the funds upon
the disbursement by the Administrative Agent of such funds pursuant to the
procedures set forth in this Section 2.3.
(c) CONSOLIDATION. On each Consolidation Date, all Loans disbursed
since the immediately preceding Consolidation Date (or, in the case of the first
Consolidation Date, all Loans disbursed prior thereto) shall be consolidated
into a single Loan. To this end, the Borrower shall deliver to the
Administrative Agent, before 10:00 a.m., New York time, at least six (6)
Business Days prior to each Consolidation Date a notice of consolidation
substantially in the form of Exhibit I, which notice shall indicate the amount
of the Loans to be consolidated.
(d) REGISTER. The Administrative Agent shall maintain at its address a
register (the "REGISTER") on which it shall record, from time to time, the names
and addresses of the Lenders, the Commitment of each Lender, the amount of the
Loans made by each Lender and each repayment and prepayment in respect of the
Loans of each Lender. The entries made on the Register shall, to the extent
permitted by Applicable Law, be prima facie evidence of the existence and
amounts of the Obligations therein recorded, and the Borrower, the Agents and
the Lenders shall treat each Person whose name is recorded in the Register as
the owner of a Loan or Note hereunder as the owner thereof for all purposes of
this Agreement, notwithstanding any notice to the contrary; provided, however,
that the failure of the Administrative Agent to maintain the Register or any
error therein shall not in any manner affect the obligation of the Borrower to
repay (with applicable interest) the Loans of such Lender in accordance with the
terms of this Agreement. The Register shall be available for inspection by the
Borrower and any Lender at any reasonable time and from time to time upon
reasonable prior notice.
SECTION 2.4 NOTES.
(a) EXECUTION AND DELIVERY. The Borrower's obligation to pay the
principal of, and interest on, each Loan made by each Lender shall be evidenced
by a Note duly executed and delivered by the Borrower to the Administrative
Agent and payable to the order of the relevant Lender. Each Note shall be
entitled to the benefits of this Agreement and the other Financing Documents and
(subject to variations in form approved by the Agents as provided in the
definition of "NOTE" contained herein) shall (1) be dated the respective
Disbursement Date; (2) be in a stated principal amount equal to such Lender's
pro rata share of the requested Disbursement; (3) be payable in installments as
provided in Section 3.1; and (4) bear interest as provided in Section 3.3. The
Administrative Agent shall deliver to each Lender each Note payable to such
Lender.
(b) DELIVERY OF EXECUTION COPIES. By 10:00 a.m. New York time on the
day three (3) Business Days prior to each Disbursement Date and each
Consolidation Date, the Administrative Agent shall provide the Borrower with
execution copies of all Notes required to
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be issued by the Borrower on such Disbursement Date or Consolidation Date which
Notes shall contain the dates, denominations and payees of the Notes evidencing
the corresponding Loans.
(c) FAILURE TO DELIVER EXECUTION COPIES. If the Administrative Agent
shall fail to timely deliver to the Borrower the execution copies of any Notes
required to be issued by the Borrower in accordance with Section 2.4(b), then,
notwithstanding the provisions of Section 6.3(b), the Borrower shall be required
to promptly sign and return copies of such Notes by facsimile to the
Administrative Agent and to deliver the executed originals of such Notes for the
Administrative Agent's receipt by 10:00 a.m. New York time on the day two (2)
Business Days following the receipt by the Borrower of execution copies of such
Notes.
(d) EXCHANGE. Notes evidencing Loans consolidated under Section 2.3(c)
shall be executed and delivered to the Administrative Agent, but shall only be
released to any Lender upon the exchange of the existing Notes held by such
Lender.
(e) RELEASE. Subject to Section 2.4(d), each Note shall be surrendered
to the Borrower against final payment thereof on the Maturity Date or such
earlier date as the Loans are paid in full.
(f) INTERPRETATION. In the event of any inconsistencies between this
Agreement and any Note, the terms of this Agreement shall control; provided,
however, that nothing in this clause (f) shall limit the rights of any Lender to
bring any action or enforce its rights or remedies under any Note.
SECTION 2.5 VOLUNTARY TERMINATION OR REDUCTION OF THE COMMITMENT.
The Borrower may, upon not less than three (3) Business Days' (but not
more than thirty (30) days') prior notice to the Administrative Agent, terminate
or permanently reduce the Commitment Amount by an aggregate amount of ten
million Dollars (US$10,000,000) or a higher integral multiple of one million
Dollars (US$1,000,000); provided, that any such reduction or termination shall
be subject to the Administrative Agent's receipt of a certificate of the
Borrower evidencing that the Borrower has sufficient funds available to complete
the Project. Once reduced in accordance with this Section 2.5, the Commitment
Amount may not be reinstated. Any reduction of the Commitment Amount shall be
applied pro rata to each Lender's Commitment. All accrued and unpaid Commitment
Fees corresponding to the amount of the Commitment Amount reduced or terminated
to the effective date of any such reduction or termination shall be paid by the
Borrower on the effective date of such reduction or termination.
SECTION 3. PAYMENT OF PRINCIPAL , INTEREST AND FEES
SECTION 3.1 REPAYMENT OF PRINCIPAL.
The principal amount of each Loan shall be repaid by the Borrower in
eleven (11) consecutive equal semi-annual installments on the Principal
Repayment Dates, provided that the final installment shall be payable on the
Maturity Date.
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<PAGE> 25
SECTION 3.2 PREPAYMENTS.
(a) MANDATORY PREPAYMENTS.
The Borrower shall prepay the principal amount of the Loans, in whole or
in part, together with interest accrued thereon to the date of prepayment (each
such prepayment, a "PREPAYMENT") upon the occurrence of any of the following
events, as follows:
(1) ILLEGALITY. The Borrower shall make Prepayments on the
dates and in the amounts specified in Section 5.3(b) if so required pursuant to
such Section.
(2) PREPAYMENT EVENTS. The Borrower shall make Prepayments upon
the receipt of Net Proceeds in respect of any Prepayment Event in an amount
equal to such Net Proceeds; provided, however, that in the case of a Prepayment
Event consisting of a casualty or other insured damage, the Borrower shall not
be subject to such prepayment obligation if within the period of thirty (30)
days following the receipt of such Net Proceeds the Borrower (i) notifies the
Administrative Agent that it intends to reinvest such Net Proceeds within the
six (6) months thereafter in the payment of the costs of repairing, restoring,
rebuilding or replacing the portion of the property that was the subject of such
casualty or damage; and (ii) certifies that such repair, restoration, rebuilding
or replacement will be completed within a period of six (6) months from the
occurrence of the relevant casualty event; and provided further, that if the Net
Proceeds from such a casualty event or damage exceed ten million Dollars
(US$10,000,000), the full amount thereof shall be paid to the Escrow Agent to be
held by the Escrow Agent in the Net Proceeds Account and shall be released by
the Escrow Agent to or at the direction of the Borrower as and when required for
payment of such costs of repair, restoration, rebuilding or replacement.
(3) PREPAYMENT UNDER IMPSAT INDENTURES. Concurrently with the
making of any voluntary or mandatory prepayment in respect of the securities
issued pursuant to the 2003 Indenture or the 2008 Indenture (not including any
voluntary or mandatory prepayment made in connection with the refinancing of the
aggregate principal and interest due under such securities), the Borrower shall
make a Prepayment in an amount which bears to the aggregate principal amount of
the Loans then outstanding the same ratio as the amount of the prepayment of the
relevant securities bears to the aggregate principal amount of such securities
then outstanding.
(4) EXCESS CASH FLOW OF THE BORROWER. Within fifteen (15)
Business Days after the Borrower shall have submitted to the Administrative
Agent its annual financial statements pursuant to Section 8.1(a) in respect of
any fiscal year of the Borrower ending after the Commitment Termination Date,
the Borrower shall make a Prepayment in an aggregate amount equal to fifty
percent (50%) of the Borrower's Excess Cash Flow, if any, for such fiscal year,
minus the aggregate principal amount of the Loans prepaid during such fiscal
year pursuant to Sections 3.2(a)(5), 3.2(a)(6) or 3.2(b).
(5) BORROWER CAPITAL MARKETS TRANSACTIONS. The Borrower shall
make a Prepayment upon its receipt of the Net Proceeds of any public offering or
private placement or other capital markets transaction by the Borrower of debt
securities in an amount equal to fifty
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<PAGE> 26
percent (50%) of (i) such Net Proceeds plus the Borrower's projected Excess Cash
Flow or (ii) such Net Proceeds minus the Borrower's projected Negative Cash
Flow, calculated, in each case, on a pro forma basis, for the four (4) fiscal
quarters following the fiscal quarter during which such Net Proceeds are
received; provided, however, that such percentage shall be twenty-five percent
(25%) until January 1, 2003. The Prepayment contemplated in this paragraph shall
not apply to an offering or placement of debt securities which are purchased and
held exclusively by IMPSAT, but shall apply to any secondary offering or
placement of such securities.
(6) IMPSAT CAPITAL MARKETS TRANSACTION. The Borrower shall make
a Prepayment upon IMPSAT's receipt of the Net Proceeds of any public offering or
private placement or other capital markets transaction by IMPSAT of debt
securities (i) in the amount of such Net Proceeds specified in Section 13.4 in
the case of the offering or placement of the Replacement Notes and (ii) in all
other cases, in an amount equal to fifty percent (50%) of (1) such Net Proceeds
plus IMPSAT's projected Excess Cash Flow or (2) such Net Proceeds minus IMPSAT's
projected Negative Cash Flow, calculated, in each case, on a pro forma basis,
for the four (4) fiscal quarters following the fiscal quarter during which such
Net Proceeds are received; provided, however, that such percentage shall be
twenty-five percent (25%) until January 1, 2003.
(7) IRUs. Except in respect of the Global Crossing IRU,
promptly after the Administrative Agent's approval of the creation of an IRU
pursuant to Section 8.2(j), the Borrower shall make a Prepayment upon its
receipt of the Net Proceeds of such IRU in an amount equal to the sum of (i) the
cost (including the cost of design, development, construction, improvement,
installation and integration) of the item of property or assets in respect of
which the IRU is granted plus (ii) an amount of up to fifty percent (50%) of
such cost, such amounts to be agreed by the Administrative Agent and the
Borrower as a condition to the Administrative Agent's approval.
All amounts required to be prepaid under this Section 3.2(a) shall be
paid to the Administrative Agent promptly (but in any case within ten (10)
Business Days) after the Borrower's receipt of such amount.
(b) OPTIONAL PREPAYMENTS. Upon not less than seven (7) Business Days
prior written notice to the Administrative Agent, the Borrower may make a
Prepayment without premium or penalty, on any Interest Payment Date, subject to
the limitations imposed by Applicable Law, if any, provided that such Prepayment
shall only be allowed if the amount thereof is equal to one million Dollars
(US$1,000,000) or an integral multiple thereof, except that if the aggregate
principal amount of the Loans then outstanding is less than one million Dollars
(US$1,000,000), the Borrower may prepay such aggregate principal amount. Upon
receipt of such notice by the Administrative Agent, the Borrower's obligation to
make such Prepayment shall be irrevocable and binding.
(c) ORDER OF APPLICATION. All Prepayments under this Section 3.2 shall
be applied in inverse order of scheduled future installment repayments of the
Loans.
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SECTION 3.3 INTEREST.
(a) INTEREST RATE. The Borrower shall pay to the Lenders interest on
the outstanding principal amount of each Loan on each Interest Payment Date, for
the period commencing on the Disbursement Date of such Loan until such Loan is
paid in full, at a rate per annum equal to LIBOR determined for each Interest
Period of such Loan, plus the number of basis points indicated below or, if such
Loan shall have been converted to a Prime Loan pursuant to Section 3.3(b), at a
rate per annum equal to the Prime Rate plus the number of basis points indicated
below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
INTEREST PERIOD LIBOR LOAN BASIS PRIME LOAN BASIS POINTS
POINTS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First through sixth 525 311
- -------------------------------------------------------------------------------------------------------------------
Seventh and eighth 600 386
- -------------------------------------------------------------------------------------------------------------------
Ninth and tenth 625 411
- -------------------------------------------------------------------------------------------------------------------
Eleventh and thereafter 650 436
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(b) CONVERSION FROM LIBOR TO PRIME RATE. Notwithstanding, anything
herein to the contrary, if, on or prior to the determination of LIBOR for any
Interest Period, (1) the Administrative Agent reasonably determines (which
determination shall be conclusive absent manifest error) that by reason of any
event affecting the relevant market, quotations of interest rates for the
relevant deposits are not being provided for purposes of determining LIBOR for
such Interest Period; or (2) the Administrative Agent receives notice from the
Required Lenders that by reason of any event generally affecting the London
interbank market the LIBOR determined or to be determined for such Interest
Period does not adequately and fairly reflect the cost to such Lenders of making
or maintaining their affected Loans during such Interest Period (as conclusively
certified by such Required Lenders), then the Administrative Agent shall give
the Borrower and the Lenders prompt written notice thereof. If such notice is
given, any LIBOR Loans requested to be made on the first day of such Interest
Period shall be made as Prime Loans. The Administrative Agent shall use
reasonable efforts to determine whether the circumstances which have caused such
notice to be given continue to exist, and, if the Administrative Agent shall at
any time determine that such circumstances no longer exist, it shall, as soon as
practicable thereafter, notify the Borrower and the Lenders that the
Administrative Agent is withdrawing such notice whereupon any then outstanding
Prime Loan shall be converted to a LIBOR Loan.
(c) DEFAULT INTEREST. Notwithstanding the provisions of Section
3.3(a), the Borrower shall pay to the Lenders interest at the Default Interest
Rate on the unpaid principal amount, and
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<PAGE> 28
on any other amount payable by the Borrower hereunder or under the Notes, which
has not been paid in full when due (whether at stated maturity, by acceleration,
prepayment or otherwise), for the period from and including the due date thereof
to and including the date the same is paid in full (both before and after
judgment), whether or not any notice of default in the payment thereof has been
delivered. Interest payable under this Section 3.3(c) shall be compounded on any
overdue amount at three (3) month intervals commencing on the date on which the
default occurred.
(d) COMPUTATION. Interest on all LIBOR Loans shall be computed on the
basis of three hundred sixty (360) days and actual days elapsed (including the
first day but excluding the last) in the period for which payable. Interest on
all Prime Loans shall be computed on the basis of a year of three hundred
sixty-five/sixty-six (365/366) days and actual days elapsed (including the first
day but excluding the last).
SECTION 3.4 FEES.
(a) COMMITMENT FEE. The Borrower shall pay to the Administrative Agent
for the account of the Lenders a non-refundable per annum fee ("COMMITMENT FEE")
equal to three quarters of one percent (0.75%) of the daily average of the
undisbursed portion of the Commitment Amount during the Commitment Period,
computed on the basis of a year of three hundred sixty (360) days and actual
days elapsed (including the first day but excluding the last day other than the
Commitment Termination Date) and payable in arrears on the last Business Day of
each calendar quarter.
(b) FRONT-END FEE. The Borrower shall pay to the Administrative Agent
for the account of the Lenders on the Initial Disbursement Date a non-refundable
one-time fee in an amount equal to one and one half percent (1.50%) of the
Commitment Amount.
(c) MANAGEMENT FEES. The Borrower shall pay to (i) the Administrative
Agent an annual fee in an amount equal to sixty thousand Dollars (US$60,000),
(ii) the Collateral Agent an annual fee in an amount equal to thirty five
thousand Dollars (US$35,000), and (iii) the Escrow Agent an annual fee in an
amount equal to five thousand Dollars (US$5,000), all such fees payable in
advance to the respective parties.
SECTION 3.5 NATURE OF PAYMENTS.
All payments under this Agreement and under the Notes shall be paid on
the dates when due without presentment, demand, protest, or notice of any kind,
all of which are hereby expressly waived. Such payments shall be made in Dollars
and in immediately available funds, without setoff, recoupment, counterclaim, or
any other deduction of any nature.
SECTION 3.6 PAYMENT PROCEDURES.
(a) DEPOSIT ACCOUNT. All payments hereunder and under the Notes shall
be made to the Administrative Agent for the ratable account of each Lender
entitled thereto, in Dollars by
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<PAGE> 29
wire transfer of immediately available funds to the Administrative Agent's
account indicated below, or such other account as the Administrative Agent may
designate to the Borrower in writing (the "DEPOSIT ACCOUNT"), not later than
1:00 P.M. New York time on the date when due.
Administrative Agent's Deposit Account:
Citibank N.A. New York
Swift Number CITIUS33
ABA # 021000089
For Credit to the account of Nortel Networks Corporation
Account #38545364
Any payments under this Agreement that are made later than 1:00 p.m. (New
York time) shall be deemed to have been made on the next succeeding Business
Day.
(b) BUSINESS DAYS. Whenever any payment to be made hereunder or under
any Note shall be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day, provided, that should
such next succeeding Business Day fall in the next calendar month, such due date
shall be the immediately preceding Business Day.
SECTION 3.7 ADMINISTRATIVE AGENT'S DETERMINATION.
Any determination made by the Administrative Agent as to the interest
rate, the Default Interest Rate, and the amounts of interest, principal and
other amounts due hereunder shall be conclusive in the absence of manifest
error.
SECTION 3.8 PAYMENTS PRO RATA.
(a) PRO RATA. The Administrative Agent agrees that promptly after its
receipt of each payment from or on behalf of the Borrower in respect of any
amount due and payable by the Borrower hereunder, except as otherwise expressly
provided herein, it shall distribute such payment to the Lenders pro rata based
upon their respective shares, if any, of the Obligations with respect to which
such payment was received.
(b) EXCESS PAYMENTS. Each of the Lenders agrees that, if it should
receive any payment hereunder (either by voluntary payment, by realization upon
security, by the exercise of the right of setoff or banker's lien, by
counterclaim or cross action, or otherwise), which is applicable to the payment
of the principal of or interest on the Loans or the fees, with the result that
such Lender receives a greater proportion of the amount then due to it hereunder
than any other Lender receives in respect of the amount due to such other Lender
hereunder, then such Lender receiving such excess payment shall purchase for
cash without recourse or warranty from the other Lenders an interest in the
Obligations of the Borrower to such other Lenders in such amount as shall result
in a proportional participation by all the Lenders in such payment; provided,
however, that if all or any portion of such excess amount is thereafter
recovered from such Lender, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, without interest.
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<PAGE> 30
SECTION 4. PAYMENT IN DOLLARS; EVENT OF SOVEREIGN RISK
SECTION 4.1 OBLIGATION TO PAY IN DOLLARS; JUDGMENT CURRENCY.
This is an international transaction in which the specification of
Dollars and payment in the place specified pursuant to this Agreement (the
"SPECIFIED PLACE OF PAYMENT"), is of the essence, and Dollars shall be the
currency of account in all events. The Obligations of the Borrower shall not be
discharged by an amount paid in another currency or in another place, whether
pursuant to a judgment or otherwise, to the extent that the amount so paid on
conversion to Dollars and transferred to the Specified Place of Payment under
normal banking procedures does not yield the amount of Dollars in the Specified
Place of Payment due hereunder. If for the purpose of obtaining judgment in any
court it is necessary to convert a sum due hereunder in Dollars into another
currency (the "SECOND CURRENCY"), the rate of exchange which shall be applied
shall be that at which in accordance with normal banking procedures the Lenders
could purchase Dollars with the Second Currency on the Business Day next
preceding that on which judgment is rendered. The obligation of the Borrower in
respect of any such sum due to the Lenders hereunder or under the Notes shall,
notwithstanding the rate of exchange actually applied in rendering such
judgment, be discharged only to the extent that on the Business Day following
receipt by the Lenders of any sum adjudged to be due hereunder or under the
Notes in the Second Currency, the Lenders may in accordance with normal banking
procedures purchase and transfer to the Specified Place of Payment Dollars with
the amount of the Second Currency so adjudged to be due; and the Borrower
hereby, as a separate obligation and notwithstanding any such judgment, agrees
to indemnify the Lenders against, and to pay the Lenders on demand in Dollars,
any difference between the sum originally due to the Lenders in Dollars and the
amount of Dollars so purchased and transferred.
SECTION 4.2 EVENT OF SOVEREIGN RISK.
Without prejudice to Section 4.1, in the event that not less than three
(3) Business Days before any payment is due hereunder any Lender notifies the
Administrative Agent that an Event of Sovereign Risk has occurred and is
continuing, the Administrative Agent shall notify the Borrower and each Lender
of the occurrence of such event and the Borrower shall at its own expense and at
each Lender's sole option (which option shall be deemed to be that set forth in
Section 4.2(b) below unless notice shall have been received from such Lender as
described in Section 4.2(b) or (c) below):
(a) DOLLARS. Obtain the required amount of Dollars through (1) the
sale of Bonos Externos de la Republica Argentina, Series 1989 ("BONEX") or of
any other public or private bond or tradable security, (2) the purchase of
Dollars in New York, with whatever legal tender, or (3) failing both (1) and
(2), any other legal mechanism for the acquisition of Dollars in any exchange
market; or
(b) BEST FIRM BID PRICE. If a Lender shall have notified the
Administrative Agent and the Borrower prior to a date of payment that its option
shall be that set forth in this Section
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<PAGE> 31
4.2(b), make the required payment in the city of Buenos Aires, Argentina, by the
delivery of, at such Lender's sole option, (1) Bonex, (2) Argentine Floating
Rate Bonds ("FRBs"), (3) Argentine Par Bonds ("PAR BONDS") or (4) any other
securities exchangeable for Bonex, FRBs or Par Bonds in accordance with
Argentine regulations, which, in any of cases (1) through (4) if sold at the
best firm bid price quoted, for the relevant amount, on the date of payment in
New York by the Reference Dealers would cause such Lender to receive, after
taxes, fees, commissions and any other costs, an amount of Dollars equal to the
amount required to be paid by the Borrower for the account of such Lender on
such payment date (for purposes of this Section 4.2(b), the "best firm bid
price" shall be determined on the basis of quotes obtained from the Reference
Dealers and, if only one quote is obtained, on the basis of such quote; and
"REFERENCE DEALERS" shall mean The Chase Manhattan Bank, Banque Nationale de
Paris, JP Morgan and Merrill Lynch & Co. or, if none of the foregoing is quoting
a firm bid price for such payment date, then the "Reference Dealers" shall be
those dealers (which may be as few as one dealer) selected by such Lender to be
Reference Dealers for the purposes of this Section 4.2(b)); or
(c) DEFERRAL. If a Lender shall have notified the Administrative Agent
and the Borrower prior to a date of payment that its option shall be that set
forth in this Section 4.2(c), defer payment of the amount due as specified in
such notice until the earlier of (1) the date which is one Business Day
following the date on which such Lender shall, in its sole discretion, notify
the Administrative Agent and the Borrower that such Event of Sovereign Risk is
no longer in effect, or (2) the date (which date shall be not more than ninety
(90) calendar days following the date on which the payment was originally due)
on which such Lender shall notify the Administrative Agent and the Borrower that
payment is to be made in accordance with the procedure outlined in either
Section 4.2(a) or (b) above, as such Lender shall elect. If a payment obligation
of the Borrower is so deferred pursuant to this Section 4.2(c), then the period
between the original payment date and the deferred date for payment determined
in accordance with the first sentence of this Section 4.2(c) (the "DEFERRED
PAYMENT DATE") shall be the "SOVEREIGN EVENT DEFERRAL PERIOD", which shall also
constitute an "Interest Period" for purposes of such Lender's Loan(s) and
Note(s). If such Lender shall subsequently provide notice that the Borrower is
to make payment as specified in (x) Section 4.2(c)(1) above or (y) Section
4.2(c)(2) above pursuant to an election to apply the mechanism set forth in
Section 4.2(a) above (which subsequent notice shall specify the Dollar amount
due on the Deferred Payment Date concerned), then the Borrower shall make
payment in Dollars of all outstanding amounts due hereunder (including, without
limitation, interest accrued during the Sovereign Event Deferral Period) on such
Deferred Payment Date in accordance with the terms of this Agreement.
Alternatively, if such Lender shall subsequently provide notice that the
Borrower is to make payments pursuant to the mechanism set forth in Section
4.2(b) above (which subsequent notice shall specify the Dollar amount due on the
Deferred Payment Date concerned, as well as the securities to be used for
payment and the account in Argentina to which such securities are to be
delivered), then the Borrower shall make payment of all outstanding amounts due
hereunder (including, without limitation, interest accrued during the Sovereign
Event Deferral Period) on such Deferred Payment Date in accordance with such
Lender's notice.
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<PAGE> 32
(d) ACCRUAL OF INTEREST UNAFFECTED. Payments made in accordance with
this Section 4.2 shall include any amounts required to be paid under Section
5.2. Any undertaking of operations to obtain Dollars according to this Section
4.2 shall not affect the accrual of interest (including default interest) in
accordance herewith. Nothing in this Section 4.2 shall impair any of the rights
of the Agents or the Lenders under this Agreement or be construed to entitle the
Borrower to refuse to make payments hereunder in Dollars for any reason
whatsoever, including, without limitation, any of the following:
(1) the purchase of Dollars in Argentina by any means
becomes more onerous or burdensome for the Borrower than as of the date hereof;
and
(2) the exchange rate in force in Argentina for the
conversion of Pesos to Dollars changes significantly from that in effect as of
the date hereof.
SECTION 5. FUNDING AND YIELD PROTECTION
SECTION 5.1 TAXES.
(a) PAYMENT NET OF TAXES. Any and all payments by the Borrower in
respect of amounts due under this Agreement, the Notes and any other Financing
Document shall be made free and clear of, and without withholding or deduction
for or on account of, any present or future taxes (including, without
limitation, income taxes, value added taxes, sales taxes, use taxes, stamp or
documenting taxes, excise taxes, property taxes and asset taxes), duties,
levies, fees, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto, of whatever nature now or hereafter imposed, assessed or
levied by any Argentine Governmental Authority or by any other Governmental
Authority from or through which any payment is made hereunder or under the other
Financing Documents ("TAXES"), except income or franchise taxes imposed on any
Lender by the laws of the jurisdiction, whether federal, state or local, in
which it is resident or organized ("EXCLUDED TAXES"). If any Taxes, other than
any Excluded Taxes, are required by Applicable Law to be withheld or deducted
from or in respect of any sum payable under this Agreement, the Notes or any
other Financing Document:
(1) the Borrower shall pay such additional amount as may be
necessary to ensure that after reduction for all required withholdings or
deductions for Taxes, other than Excluded Taxes (including withholdings or
deductions applicable to additional sums payable under this Section 5.1), the
net amount actually received by the Lenders free and clear of such withholding
or deduction is equal to the amount the Lenders would have received had no such
withholdings or deductions been made;
(2) the Borrower shall make such withholdings or deductions;
and
(3) the Borrower shall pay the full amount withheld or deducted
to the relevant Governmental Authorities in accordance with the Applicable Laws
and prior to the date on which penalties attach thereto.
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<PAGE> 33
(b) INDEMNITY. The Borrower shall indemnify and hold the Agents and
the Lenders harmless from and against, and shall reimburse the Lenders on demand
for, the full amount of Taxes (including, without limitation, any Taxes imposed
on amounts payable under this Section 5.1) paid by the Lenders other than
Excluded Taxes, and for any loss, liability, claim or expense (including
penalties, interest, and legal fees) arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally asserted, and which the
Agents or the Lenders may incur at any time arising out of, or in connection
with, any failure of the Borrower to make any payment of such Taxes when due.
(c) OTHER TAXES. The Borrower shall pay all Taxes (including notary
public and filing fees), other than Excluded Taxes, associated with the
execution, delivery, filing, recording, or registration of, or foreclosure with
respect to, this Agreement, the Notes and the other Financing Documents, and
shall indemnify and hold the Agents and the Lenders harmless from and against
any and all liabilities with respect to, or resulting from, any failure or delay
in paying such Taxes.
(d) SURVIVAL. Without prejudice to the survival of any other agreement
of the Borrower hereunder, the Obligations of the Borrower under this Section
5.1 shall survive the payment in full of all principal and interest hereunder
and under the Notes.
(e) TAX RECEIPTS. Within thirty (30) days after the date of any
payment of Taxes required to be made under this Section 5.1, the Borrower shall
furnish to the Administrative Agent a copy of any official tax receipts
evidencing such payment.
SECTION 5.2 FUNDING BREAKAGE COSTS.
If the Lenders incur any costs, expenses or losses as a result of (a) any
failure by the Borrower to borrow after giving the Administrative Agent a
Disbursement Request; (b) any payment, including any payment due on
acceleration, by the Borrower on a date other than an Interest Payment Date; or
(c) any failure by the Borrower to make any Prepayment after the Borrower has
given the notice required hereunder regarding such Prepayment, then, in any such
event, the Borrower shall pay or cause to be paid, in Dollars, to the
Administrative Agent for the account of the Lenders the amount which the
Administrative Agent shall notify the Borrower as being the aggregate of such
costs, expenses and losses (collectively, the "FUNDING BREAKAGE COSTS"). The
certificate of the Administrative Agent setting forth in reasonable detail the
amount of Funding Breakage Costs for which demand is made shall, in the absence
of manifest error, be conclusive and binding as to the amount of such Funding
Breakage Costs for all purposes.
SECTION 5.3 ILLEGALITY.
(a) NOTICE AND SUSPENSION. If the introduction of any Applicable Law,
or any change in any Applicable Law, or any change in the interpretation or
administration of any Applicable Law, makes or has made it unlawful for a Lender
or its applicable Lending Office to make or fund its Loans, then the Lender
shall give notice thereof to the Borrower through the Administrative Agent, and
the obligation of that Lender to make or fund its Loans shall be
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suspended until such Lender shall notify the Administrative Agent and the
Borrower that the circumstances giving rise to such determination no longer
exists.
(b) PREPAYMENT. If, as a result of any circumstances set forth in
Section 5.3(a) it is unlawful for a Lender to maintain any Loan, the Borrower
shall, upon receipt of notice of such determination and demand from such Lender
(with a copy to the Administrative Agent), prepay in full the Loan of such
Lender then outstanding, together with any accrued and unpaid interest thereon
and any fees required to be paid under Section 3.4, on the next Interest Payment
Date for such Loan following the date the notice is given; provided, however,
that if such Lender notifies the Borrower that earlier Prepayment is necessary
in order to enable such Lender to comply with such Applicable Law or change and
specifies an earlier date for the Prepayment, the Borrower shall make the
Prepayment on the date so specified together with any amounts required to be
paid under Section 5.2.
(c) LENDER'S DUTY TO MITIGATE. Before giving notice to the
Administrative Agent under this Section 5.3, the affected Lender shall endeavor
to designate a different Lending Office with respect to its Loan or endeavor in
good faith to provide another structure for its Loan if such designation or
alternative structure will avoid the need for giving such notice or making such
demand and will not, in the Lender's sole determination, be illegal or cause
such Lender to suffer any economic, legal, regulatory or other disadvantage.
SECTION 5.4 INCREASED COSTS AND YIELD PROTECTION.
(a) NOTICE; ADDITIONAL PAYMENTS. If due to either (1) the introduction
of, any change in, or any change in the interpretation or administration by any
competent authority of, any Applicable Law, or (2) the compliance by a Lender
with any guideline or request from any central bank or any other Governmental
Authority (whether or not having the force of law), in each case, made
subsequent to the date of this Agreement, there shall be any increase in the
cost to such Lender of agreeing to make or making, funding or maintaining its
Loan, then such Lender shall notify the Administrative Agent and the Borrower
accordingly, and the Borrower shall pay to the Administrative Agent for the
account of such Lender, such additional amounts as are sufficient to compensate
such Lender for such increased costs; provided, that any such additional amounts
shall not duplicate any amounts payable by the Borrower under Section 5.3.
(b) CAPITAL ADEQUACY REGULATIONS. If (1) the effectiveness of any
Capital Adequacy Regulation, (2) any change in any Capital Adequacy Regulation,
(3) any change in the interpretation or administration of any Capital Adequacy
Regulation by any competent authority, including with respect to compliance by a
Lender (or its Lending Office) or any corporation controlling the Lender with
any Capital Adequacy Regulation, in each case, made subsequent to the date of
this Agreement, affects the amount of capital required or expected to be
maintained by such Lender (or its Lending Office) or any corporation controlling
such Lender and, after taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy and otherwise
anticipated return on capital, such Lender determines that the amount of such
capital is increased as a consequence of its Commitment, Loans and other
obligations under this Agreement, then the Borrower, upon receipt from such
Lender (through the Administrative
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Agent) of a demand for payment of additional amounts, shall pay to such Lender
additional amounts sufficient to compensate such Lender, the Lending Office or
the corporation for the increased cost to such Lender, Lending Office or other
corporation or the reduction in the rate of return to such Lender, Lending
Office or other corporation on its capital caused by its compliance with such
Capital Adequacy Regulation, provided, however, that any such additional amounts
shall not duplicate any amounts payable by the Borrower under Section 5.4(a).
(c) LENDER'S DUTY TO MITIGATE. Before giving notice to the
Administrative Agent under this Section 5.4, the affected Lender shall endeavor
to designate a different Lending Office with respect to its Loan if such
designation will avoid the need for giving such notice or making such demand and
will not, in the Lender's sole determination, be illegal or cause such Lender to
suffer any economic, legal, regulatory or other disadvantage.
SECTION 6. DELIVERIES; CONDITIONS PRECEDENT
SECTION 6.1 CONCURRENT DELIVERIES.
Concurrently with the execution of this Agreement, the Borrower has
delivered, or caused to be delivered to the Administrative Agent an original or
certified copy of each of (a) the executed Turnkey Contract, (b) the Business
Plans, (c) the executed Brazil Financing Agreement and (d) the executed Brazil
Turnkey Contract.
SECTION 6.2 CONDITIONS PRECEDENT TO INITIAL DISBURSEMENT; CLOSING.
The obligations of the Lenders to make the initial Disbursement is
subject to (i) the conditions precedent contained in Section 6.3 and (ii) the
delivery to the Administrative Agent on the Closing Date of the following
documents, each in form and substance satisfactory to the Administrative Agent:
(a) PROJECT DOCUMENTS. An original executed counterpart of each of (1)
the IMPSAT Guarantee, (2) the Escrow Account Agreement, (3) the Intercreditor
Agreement and (4) the Supply Agreement.
(b) BRAZIL FINANCING DOCUMENTS. An original or certified copy of each
of (1) the executed Brazil Guarantee and (2) the executed Brazil Escrow Account
Agreement.
(c) OFFICER'S CERTIFICATES. Certificates, dated the Closing Date,
signed by an Authorized Officer of IMPSAT and the Borrower, respectively, and
certifying the authenticity of IMPSAT's and the Borrower's respective Charter
Documents and corporate resolutions attached thereto and indicating IMPSAT's and
the Borrower's current officers, their respective signatures and their corporate
authority.
(d) CAPITALIZATION. A certificate dated the Closing Date signed by an
Authorized Officer of the Borrower certifying that, as of the Closing Date, the
Borrower's Paid in Capital is
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equal to or greater than the equivalent in Pesos of twenty six million four
hundred forty five thousand Dollars (US$26,445,000) (determined according to
U.S. GAAP), such certificate to be accompanied by original or certified copies
of the following documents: (i) evidence of the Borrrower's receipt of an
irrevocable contribution on account of a future capital increase made by IMPSAT
in the amount of US$50,000,000 (fifty million Dollars) (the "IMPSAT CAPITAL
CONTRIBUTION"); (ii) the minutes of the Borrower's Board of Directors accepting
the IMPSAT Capital Contribution and calling for a shareholders meeting to
consider the Borrower's capital increase in the amount of the IMPSAT Capital
Contribution (the "BORROWER CAPITAL INCREASE") and (iii) the written undertaking
of IMPSAT containing its irrevocable commitment not to withdraw, in whole or in
part, or transfer or encumber any rights in respect of the IMPSAT Capital
Contribution prior to the effective date of the Borrower Capital Increase.
(e) IMPSAT BRAZIL CAPITALIZATION. The certificate of an Authorized
Officer of IMPSAT Brazil required by Section 6.2(e) of the Brazil Financing
Agreement.
(f) LICENSES. Documents which evidence, to the satisfaction of the
Administrative Agent, the Borrower's ownership of the Licenses and that the
Licenses are in full force and effect.
(g) OPINIONS OF COUNSEL. An opinion addressed to the Administrative
Agent, the Collateral Agent and each of the Lenders and dated the Closing Date
from each of:
(1) Arnold & Porter, special U.S. Counsel to the Borrower, and
(2) Nicholson & Cano, Argentine Counsel to the Borrower.
Such opinions to be in form and substance satisfactory to the Lenders and to
address the matters identified in Exhibit J and Exhibit K, respectively.
(h) PAYMENT OF FEES. A letter of instruction dated the Closing Date
addressed to the Administrative Agent and signed by an Authorized Officer of the
Borrower (1) setting forth a statement of all costs, fees, out-of-pocket
expenses and other compensations and payments (including under any fee letters)
due by the Borrower to Nortel or any other Lender on or before the initial
Disbursement Date under or with respect to the Financing Documents and the
Collateral, including all reasonable legal fees and expenses incurred by Nortel
or its Affiliates under Section 11.1 (2) acknowledging and consenting to the
payment of all such amounts, and (3) directing the payment of all such amounts
by the Administrative Agent from the proceeds of the first Disbursement.
(i) GOVERNMENTAL APPROVALS. Evidence that the following Governmental
Approvals have been obtained and are in full force and effect, and all
registrations, applications, tariffs, reports and other documents in connection
therewith required to be filed and/or registered with any Person have been filed
and registered:
(1) All Governmental Approvals, if any, then necessary in
connection with the execution, delivery or performance by the Borrower of this
Agreement and any other Financing Documents to which the Borrower is a party;
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(2) All Governmental Approvals, if any, then necessary in
connection with the exercise by the Administrative Agent, the Collateral Agent
or any Lender of its rights or remedies under this Agreement or any other
Financing Documents; and
(3) All material Governmental Approvals (other than the
Applicable Permits), if any, then necessary in connection with the continuing
operation of the Telecommunications Business by the Borrower and its
Subsidiaries and the implementation of the Project.
(j) PROCESS AGENT. A letter from CT Corporation System, currently
located at 111 Eighth Avenue, New York, New York 10011, in a form satisfactory
to the Administrative Agent in its sole discretion, indicating its consent to
its appointment as agent for service of process by the Borrower; and evidence
that the fees of such agent have been paid in full for the period commencing on
the date hereof until six (6) months after the Maturity Date.
(k) INSURANCE. Certificates of all insurance required by Section
8.1(d), which certificates (1) state the names of the insurance companies, the
amounts of the insurance, the dates of the expiration thereof and the properties
and risks covered thereby, (2) have been executed by an Authorized Officer of
the respective insurer, and (3) certify that all premiums and other payments
have been timely paid and that such insurance is otherwise not subject to
cancellation by the insurer during its term, except for nonpayment of premiums,
in which case at least fifteen (15) days prior written notice of termination
must be given to the Administrative Agent.
(l) BUSINESS PLANS. Copies of the Business Plans as revised through
the Closing Date to reflect the debt and capital structure contemplated by this
Agreement, but not otherwise materially revised.
SECTION 6.3 CONDITIONS PRECEDENT TO ALL DISBURSEMENTS.
The obligation of the Lenders to make any and all Disbursements
(including the initial Disbursement) is subject to the satisfaction of the
following conditions precedent on the relevant Disbursement Date to the
satisfaction of the Administrative Agent:
(a) DISBURSEMENT REQUEST. The Borrower shall have delivered to the
Administrative Agent a duly completed and executed Disbursement Request.
(b) NOTES. The Borrower shall have duly completed, executed, and
delivered to the Administrative Agent a Note or Notes dated the applicable
Disbursement Date and payable to the order of each Lender participating in such
Disbursement, in the principal amount of the Loan to be made by such Lender on
such date.
(c) SECURITY DOCUMENTS. All Security Documents theretofore executed
and delivered shall be in full force and effect and the Borrower shall have
executed and delivered one or more Equipment Pledge Agreements and Mortgage
Deeds over the Equipment and real property, if any, that has been acquired by
the Borrower since the last Disbursement Date and is required to become part of
the Collateral in accordance with this Agreement and all of such
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agreements and deeds which require registration with a Governmental Authority in
order to perfect the Liens provided therein shall have been duly registered or
filed for registration and a certified copy of the registered agreement or deed
or of the official receipt or other document evidencing such filing, as the case
may be, shall have been delivered to the Administrative Agent.
(d) REPRESENTATIONS AND WARRANTIES. All representations and warranties
made by the Borrower, any Subsidiary thereof or IMPSAT in the Financing
Documents shall be true and correct in all material respects on and as of such
Disbursement Date with the same force and effect as if made on and as of such
Disbursement Date (except to the extent that such representations and warranties
expressly refer to an earlier date, in which case they shall have been true and
correct as of such earlier date).
(e) COVENANTS. The Borrower shall be in compliance with all covenants
contained in Section 8 as of such Disbursement Date.
(f) LITIGATION. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority shall be pending, or to the
knowledge of the Borrower, threatened by or against the Borrower or any of its
Subsidiaries or against any of its or their respective properties or revenues
which challenges the validity or legality of this Agreement or any other Project
Agreement or any of the transactions contemplated hereby or thereby.
(g) NO DEFAULTS. No Default or Event of Default shall exist hereunder
and no default or event of default shall exist under any of the Brazil
Agreements (regardless of whether or not there has been a notice of default or
acceleration thereunder) on or as of such Disbursement Date.
(h) MATERIAL ADVERSE CHANGE. Since the last Disbursement Date (or, in
the case of the initial Disbursement, since the date hereof), no Material
Adverse Change shall have occurred and be continuing.
(i) INSURANCE. All insurance required to be maintained by the Borrower
or its Subsidiaries pursuant to Section 8.1(d) shall be in full force and effect
and all premiums due and payable as of such Disbursement Date shall have been
paid in full.
(j) LICENSES AND GOVERNMENTAL APPROVALS. All Licenses and all
Governmental Approvals referred to in Section 6.2(i) shall be in full force and
effect as of such Disbursement Date.
(k) OTHER DOCUMENTS; OPINIONS. The Administrative Agent shall have
received: (1) such other documents and evidence as the Administrative Agent may
reasonably request in connection with the transactions contemplated hereby; and
(2) if requested by the Required Lenders, a legal opinion or opinions, in form
and substance satisfactory to the Administrative Agent, of counsel acceptable to
the Administrative Agent, with respect to any matters incident to such
Disbursement, including without limitation as to the due registration of the
Security Documents then in effect.
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SECTION 6.4 ENGLISH TRANSLATIONS.
All Charter Documents and other documents and resolutions required to be
delivered pursuant to this Agreement, the other Project Agreements, and the
Licenses shall, if not in English, and if the Administrative Agent so requests,
be accompanied by an English translation (which, if the Administrative Agent so
requests, shall be a certified translation prepared by an Argentine certified
translator) which the Administrative Agent shall have the right to rely upon for
all purposes hereof and the other Project Agreements. All costs of translation
shall be payable by the Borrower.
SECTION 6.5 TERMINATION BY THE LENDERS.
In the event the conditions precedent to the initial Disbursement shall
not have occurred on or before November 6, 1999, the Required Lenders shall have
the right, by notice to the Borrower through the Administrative Agent, to
terminate this Agreement, without prejudice to the rights of the Lenders under
Section 11 hereof. Any fees and expenses payable hereunder by the Borrower to
the Lenders shall thereupon become immediately due and payable.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
The Borrower hereby represents and warrants to each Agent and each Lender
that the statements contained in this Section 7 are true, correct and complete
as of the date hereof and shall be true, correct and complete as of each
Disbursement Date.
SECTION 7.1 CORPORATE STATUS.
Each of the Borrower and its Subsidiaries and IMPSAT (a) is a sociedad
anonima or corporation, as the case may be, duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, and
(b) has the power and authority to own its property and assets, to carry on its
business in each jurisdiction in which it operates, and to incur Indebtedness
and to create or suffer to exist Liens on its properties created under the
Security Documents. IMPSAT is the holder, directly or indirectly, of at least
ninety-five (95%) of the Capital Stock of the Borrower. Set forth on Schedule
7.1 hereto is a complete list of the Subsidiaries of IMPSAT and the Borrower,
the jurisdiction of organization of each such Subsidiary and the amount and
percentage of Capital Stock of each such Subsidiary owned by IMPSAT and the
Borrower.
SECTION 7.2 CORPORATE POWER.
(a) AUTHORITY. Each of the Borrower and IMPSAT and their respective
Subsidiaries has full power and authority to enter into the Project Agreements
to which it is a party or, when executed and delivered, it will become a party,
all of which have been duly authorized by all proper and necessary corporate
action, and has duly executed and delivered each such Project
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Agreement which has been entered into as of the date hereof or the applicable
Disbursement Date, as the case may be.
(b) VALIDITY AND ENFORCEABILITY. Assuming due execution and delivery
thereof by the other parties thereto, each such Project Agreement constitutes,
or when executed and delivered will constitute, a legal, valid and binding
obligation of the Borrower, IMPSAT and their respective Subsidiaries, as the
case may be, enforceable against them in accordance with its terms, except, in
each case, to the extent such enforceability may be restricted by bankruptcy,
insolvency or similar Applicable Laws affecting the enforcement of creditors'
rights generally or by general principles of equity.
SECTION 7.3 GOVERNMENTAL APPROVALS.
(a) FINANCING DOCUMENTS. All Governmental Approvals that are
required by the Borrower or any other party in connection with the execution,
delivery or performance by, or enforcement against, the Borrower and any other
party of this Agreement and all other Financing Documents to which the Borrower
or such other party is a party have been obtained, are in full force and effect,
and the Borrower and each such party is in compliance in all material respects
with such Governmental Approvals.
(b) OPERATIONS. All Governmental Approvals (other than the
Applicable Permits) that are required by the Borrower or any other party to the
Financing Documents in connection with the business, operations and activities
of the Borrower and its Subsidiaries as now conducted or as contemplated by the
Borrower Business Plan have been obtained.
(c) NO PROCEEDINGS. There is no proceeding pending or, to the
knowledge of the Borrower or any of its Subsidiaries, threatened against the
Borrower or any other party to the Financing Documents that seeks to rescind,
terminate, suspend, modify or otherwise affect any Governmental Approvals, in
each case that would have a Material Adverse Effect.
SECTION 7.4 NO VIOLATION.
Neither the execution, delivery or performance by the Borrower, IMPSAT or
any of their respective Subsidiaries of any Project Agreement to which it is a
party, nor the use by the Borrower of the proceeds of the Loans as contemplated
by this Agreement:
(a) will violate or conflict with any term or condition of any
License;
(b) will contravene any material provision of any Applicable
Law binding on the Borrower, IMPSAT or any of their respective Subsidiaries or
any of their assets;
(c) will conflict with, or be inconsistent with, or result in
any breach of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien (other than
Permitted Liens) upon any of the properties or assets of the Borrower, IMPSAT or
any of their respective Subsidiaries pursuant to the terms of any indenture,
mortgage, credit agreement, loan agreement or any other agreement, contract or
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instrument to which the Borrower, IMPSAT or any such Subsidiary is a party or by
which each such Person or any of its respective properties or assets are bound
or to which they may be subject; or
(d) will violate any provision of the Charter Documents of the
Borrower, IMPSAT or any of their respective Subsidiaries;
except to the extent that any of the violations contained in clauses (c) and (d)
above could not reasonably be expected to have a Material Adverse Effect.
SECTION 7.5 PROCEEDINGS.
(a) NO PROCEEDINGS. Except as disclosed in Schedule 7.5, there is no
litigation, investigation or proceeding pending or, to the knowledge of the
Borrower or IMPSAT after reasonable inquiry, threatened before any arbitrator or
Governmental Authority, nor, to the knowledge of the Borrower after reasonable
inquiry, any circumstances or conditions that might give rise to any such
proceedings, which could reasonably be expected to have a Material Adverse
Effect.
(b) NO ORDERS. No injunction, writ, temporary restraining order or any
order of any nature has been issued by any court or Governmental Authority (1)
purporting to enjoin or restrain the execution, delivery or performance of this
Agreement or any other Financing Documents, or (2) which could reasonably be
expected to have a Material Adverse Effect.
SECTION 7.6 TAXES.
The Borrower, IMPSAT and their respective Subsidiaries have timely filed
all required returns and have paid all applicable taxes shown thereon to be due
and payable except for such taxes, if any, as are being contested in good faith
by appropriate proceedings and as to which (a) adequate reserves have been
established in accordance with U.S. or Argentine GAAP, as applicable, on the
books of the Borrower, IMPSAT and such Subsidiaries, as the case may be, or (b)
the aggregate amount of such unpaid taxes, assessments and charges is less than
five hundred thousand Dollars (US$500,000).
SECTION 7.7 FINANCIAL STATEMENTS.
(a) BALANCE SHEETS, ETC. Except as indicated in Schedule 7.16, the
consolidated balance sheet of the Borrower and its Subsidiaries and the
consolidated balance sheet of IMPSAT and its Subsidiaries as of December 31,
1998 and June 30, 1999 and the related consolidated statements of income or
operations, retained earnings and changes in financial position (or of cash
flow, as the case may be) of each of the Borrower and IMPSAT for the fiscal year
or period then ended, with the opinion thereon of the Independent Auditor (in
the case of the balance sheets for December 31, 1998) are correct and fairly
present the financial condition of the Borrower or IMPSAT and their respective
Subsidiaries, as the case may be; and results of operations for the period
covered thereby. The financial statements to be delivered pursuant to
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Section 8.1 hereof shall be correct and shall fairly present in all such cases
the financial condition of the Borrower or IMPSAT, as the case may be, as of the
dates thereof and the results of its operations for the periods ended on said
dates, and all are or shall be prepared in accordance with U.S. GAAP.
(b) NO LIABILITIES. Neither the Borrower nor IMPSAT had or will have
on the dates of the financial statements referred to in Section 7.7(a) any
material contingent liabilities, liabilities for taxes, or material losses from
any commitments, except as specifically referred to, or reflected, or provided
for, in said financial statements as at said dates.
SECTION 7.8 THE PROJECT.
(a) BUSINESS PLANS. The Business Plans accurately state in all
material respects all costs and expenses incurred and to be incurred in order to
construct and finance the construction of the Network and the carrying out of
the Project in the manner contemplated by the Project Agreements. All
projections and budgets furnished or to be furnished to the Lenders by or on
behalf of the Borrower and IMPSAT and the summaries of significant assumptions
related thereto, including (without limitation) all information in the Business
Plans: (1) have been and will be prepared with due care; (2) fairly present, and
will fairly present, in all material respects, the expectations of the Borrower
and IMPSAT as to the matters covered thereby, (3) are based on, and will be
based on, reasonable assumptions as to all factual and legal matters relative to
the estimates therein; and (4) are and will be in all material respects
consistent with the provisions of the Project Agreements and the Business Plans.
(b) MATERIAL INFORMATION. There are no statements or conclusions in
any of the projections or budgets which are based upon or include information
known to the Borrower or IMPSAT to be misleading or which fail to take into
account material information regarding the matters reported therein. Attached to
this Agreement as Exhibit H is a true and complete list of the Project
Agreements executed on or before the date hereof and, to the best knowledge of
each of the Borrower and IMPSAT, no default has occurred thereunder.
SECTION 7.9 ENVIRONMENTAL MATTERS.
Each of the Borrower, its Subsidiaries and IMPSAT has duly complied with,
and its business, operations, assets, equipment, property, leaseholds, and other
facilities are in compliance with, all applicable Environmental Laws. None of
the Borrower, its Subsidiaries or IMPSAT has, nor to the knowledge of the
Borrower or IMPSAT after reasonable inquiry, has any other Person, released,
discharged, generated, manufactured, produced, stored, or disposed of in, on,
under, or about any sites of the Borrower, or transported thereto or therefrom,
any hazardous material or Hazardous Substance that could reasonably be expected
to subject the Lenders to any liability or the Borrower, its Subsidiaries or
IMPSAT to any liability that could have a Material Adverse Effect. There is no
proceeding pending against the Borrower, its Subsidiaries or IMPSAT, and to the
best knowledge of the Borrower or IMPSAT after reasonable inquiry, no
investigation or inquiry by any Governmental Authority is threatened or
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contemplated, with respect to the presence or release of hazardous materials or
Hazardous Substances in, on, from, or to the sites of the Borrower.
SECTION 7.10 TRANSACTIONS WITH AFFILIATES.
Except as disclosed in Schedule 7.10, none of the Borrower, IMPSAT or any
of their respective Subsidiaries are parties to any contract, agreement or
arrangement (whether or not in the ordinary course of business) with the
Borrower, IMPSAT or another Subsidiary of the Borrower or IMPSAT that is not on
an arms-length basis.
SECTION 7.11 INDEBTEDNESS.
As of September 30, 1999, none of the Borrower, IMPSAT or their
respective Subsidiaries is a party to or bound by any note or agreement with
respect to Indebtedness other than the Indebtedness arising under this Agreement
and the Indebtedness set forth in Schedule 7.11, which is a complete and
accurate list of all Indebtedness of the Borrower, IMPSAT and their respective
Subsidiaries, showing as of such date the outstanding (or potential) principal
amount thereof, and there has been no material change in the amount or status of
such Indebtedness as of such date.
SECTION 7.12 PROPERTIES.
(a) TITLE. The Borrower or a Subsidiary of the Borrower (1) has good
record and marketable title in fee simple (or the Argentine equivalent thereof)
or valid leasehold interests in or rights of use with respect to, all real
property used in the ordinary conduct of the Telecommunications Business, except
for such defects in title as could not, individually or in the aggregate,
reasonably be expected to interfere with the Borrower's ability to conduct such
business as currently conducted or to utilize such properties for their intended
purposes; and (2) is, or will be upon its acquisition thereof in accordance with
the Nortel Contracts, the owner of the Collateral. The property of the Borrower,
its Subsidiaries and IMPSAT is not subject to any Liens other than Permitted
Liens (including those described on Schedule 7.12). The Borrower and the
Subsidiaries have not created and are not contractually obligated to create any
Lien, other than Permitted Liens or Liens to be created or permitted to be
created under the Financing Documents to which they are a party, on or with
respect to any of their assets, rights or revenues.
(b) CONDITION. All assets material to the Telecommunications Business
are in good repair, working order and condition (ordinary wear and tear
excepted).
(c) BANK ACCOUNTS. Each of IMPSAT, the Borrower and its Subsidiaries
has full right and title to each of its bank accounts, and each such bank
account is not subject to any Lien other than (1) banker's liens, rights of
setoff or similar rights as to such deposit accounts or other funds maintained
with such creditor depository institution or (2) Permitted Liens.
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SECTION 7.13 INTELLECTUAL PROPERTY.
The Borrower or IMPSAT owns all of the patents, trademarks, permits,
service marks, trade names, copyrights, franchises and formulas, or rights with
respect to the foregoing, used in the marketing of any of the Borrower's and its
Subsidiaries' services (a list of which is attached as Schedule 7.13, as updated
from time to time by notice to the Administrative Agent) and the Borrower owns
or has obtained assignments of all such and other rights of whatever nature
necessary for the present conduct of the Telecommunications Business, without
any known conflict with the rights of others other than as set forth in Schedule
7.13 and except as could not reasonably be expected to have a Material Adverse
Effect.
SECTION 7.14 BOOKS AND RECORDS.
Each of IMPSAT, the Borrower and its Subsidiaries maintains its books and
records (including appropriate copies, backups and archives of such books and
records) in accordance with standard industry practice, Applicable Law and U.S.
GAAP or Argentine GAAP, as applicable.
SECTION 7.15 THE LICENSES.
Schedule 7.15 contains a true and complete list of all Licenses owned by
or granted to the Borrower or its Subsidiaries. Each License is legally valid,
in full force and effect, duly registered, not subject to any administrative
review or appeal, or subject to any proceeding the outcome of which could result
in the revocation, in whole or in part, for any reason not within the control of
the Borrower or IMPSAT. The Borrower has paid when due all amounts required to
be paid and otherwise has complied with all conditions the compliance with which
is required in order to preserve its rights under the Licenses. No Licenses
other than those listed in Schedule 7.15 are required in order for the Borrower
and its Subsidiaries to install, exploit and operate the Network and to engage
in the Telecommunications Business as it is currently conducted by them, and as
contemplated by the Borrower Business Plan.
SECTION 7.16 NO MATERIAL ADVERSE CHANGE.
Except as indicated in Schedule 7.16, there has been no Material Adverse
Change since December 31, 1998.
SECTION 7.17 INSURANCE.
The insurance policies and coverage required by Section 8.1(d) are in
full force and effect, all premiums and other payments required thereunder have
been timely paid and such policies and coverage are otherwise not subject to
cancellation by the insurer during the respective terms thereof, except for
nonpayment of premiums, in which case at least fifteen (15) days prior written
notice of termination must be given to the Administrative Agent.
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SECTION 7.18 COLLATERAL.
As of each Disbursement Date, all actions necessary for the establishment
and perfection of the Collateral Agent's Lien on the Collateral to be acquired
by the Borrower as of such date, including any required consents,
acknowledgments, filings, registration, notarization or recordation thereof, and
the payment of all related fees, taxes and expenses shall have been completed,
and the Collateral Agent (on behalf of the Secured Parties) shall have an
effective, valid, legally binding and enforceable Lien on the Collateral, which
Lien is superior and prior to the Liens of all third parties (other than the
Permitted Liens).
SECTION 7.19 INVESTMENT COMPANY ACT.
None of the Borrower, IMPSAT or any of their respective Subsidiaries is
an investment company within the meaning of the Investment Company Act of 1940,
as amended, or, directly or indirectly, controlled by or acting on behalf of any
Person that is an investment company, within the meaning of said Act.
SECTION 7.20 IMMUNITY.
The execution, delivery, and performance of the Financing Documents and
the other Project Agreements constitute private and commercial acts rather than
governmental or public acts. Under Applicable Law, neither the Borrower, IMPSAT,
nor any of their respective Subsidiaries nor any of their respective revenues or
properties has any right of immunity from suit, court jurisdiction, attachment
prior to judgment, attachment in aid of execution of a judgment, execution of a
judgment or from set-off, Liens, counterclaim or any other legal process or
remedy with respect to its obligations under the Financing Documents or the
other Project Agreements.
SECTION 7.21 TRUE AND COMPLETE DISCLOSURE.
All information heretofore or hereafter furnished by or on behalf of the
Borrower or IMPSAT or any of their respective Subsidiaries to the Agents or the
Lenders, and all representations and warranties made herein, are true and
correct in all material respects, and do not contain any material misstatement
of fact or omit to state a material fact necessary to make the statements
contained therein not misleading at such time.
SECTION 8. COVENANTS.
SECTION 8.1 AFFIRMATIVE COVENANTS.
Until payment in full of the Obligations and so long as this Agreement
remains in effect, the Borrower shall, and shall cause its Subsidiaries to,
comply with each of the following covenants and agreements:
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(a) ANNUAL AND QUARTERLY REPORTING REQUIREMENTS. The Borrower shall
deliver to the Administrative Agent:
(1) as to the Borrower:
(i) within ninety (90) days of the close of each fiscal
year of the Borrower, a copy of the consolidated annual financial statements of
the Borrower and its Subsidiaries (including its consolidated balance sheet as
at the close of such calendar year, consolidated statements of income, retained
earnings and changes in financial position or of cash flow, as the case may be,
for such fiscal year with related notes specifying significant accounting
practices and their impact on such financial statements and with related
schedules), and accompanied by an opinion thereon of the Independent Auditor
that is satisfactory to the Administrative Agent, which opinion shall state,
subject to no qualifications, that said financial statements fairly present the
financial condition and results of operations of the Borrower and its
Subsidiaries, as at the end of, and for, such fiscal year and that said
financial statements have been prepared in accordance with Argentine GAAP or
U.S. GAAP. Such annual financial statements shall be in the English language
and, in the case that such financial statements have been prepared in accordance
with Argentine GAAP, shall be accompanied by a reconciliation to U.S. GAAP of
the Borrower's net income and shareholders' equity and convenience translations
to Dollars. From time to time, at the request of the Administrative Agent, the
Borrower shall deliver to the Administrative Agent such additional financial
information as the Administrative Agent may request; and
(ii) as soon as practicable, and in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Borrower, the unaudited consolidated financial
statements of the Borrower and its Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
quarterly period and the related balance sheets at the end of such period,
setting forth in each case in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year accompanied by a certificate
of the Chief Financial Officer of the Borrower, which certificate shall state
that such financial statements fairly present the financial condition and
results of operations, as the case may be, of the Borrower in accordance with
Argentine GAAP or U.S. GAAP, as at the end of, and for, such period (subject to
normal year end audit adjustments), and, in the case that such financial
statements have been prepared in accordance with Argentine GAAP, by a
reconciliation to U.S. GAAP of the Borrower's net income and shareholders'
equity and convenience translations to Dollars.
(2) as to IMPSAT:
(i) within ninety (90) days of the close of each fiscal
year of IMPSAT, a copy of the annual consolidated financial statements of IMPSAT
and its Subsidiaries (including its balance consolidated sheet as at the close
of such calendar year, consolidated statements of income, retained earnings and
changes in financial position or of cash flow, as the case may be, for such
fiscal year with related notes specifying significant accounting practices and
their impact on such financial statements and with related schedules), and
accompanied by an opinion thereon
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of the Independent Auditor that is satisfactory to the Administrative Agent,
which opinion shall state, subject to no qualifications, that said financial
statements fairly present the financial condition and results of operations of
IMPSAT and its Subsidiaries, as at the end of, and for, such fiscal year and
that said financial statements have been prepared in accordance with U.S. GAAP.
Such annual financial statements shall be in the English language. From time to
time, at the request of the Administrative Agent, IMPSAT shall deliver to the
Administrative Agent such additional financial information as the Administrative
Agent may request; and
(ii) as soon as practicable, and in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of IMPSAT, the consolidated unaudited financial statements of
IMPSAT and its Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such quarterly period and
the related balance sheets at the end of such period, setting forth in each case
in comparative form the corresponding figures for the corresponding period in
the preceding fiscal year accompanied by a certificate of the Chief Financial
Officer of IMPSAT which certificate shall state that such financial statements
fairly present the financial condition and results of operations, as the case
may be, of IMPSAT and its Subsidiaries in accordance with U.S. GAAP, as at the
end of, and for, such period (subject to normal year end audit adjustments).
(b) ADDITIONAL REPORTING REQUIREMENTS.
(1) Without prejudice to the requirement to have such documents
approved by the Administrative Agent, promptly upon the execution and delivery
thereof, the Borrower shall provide the Administrative Agent with copies of all
Project Agreements (including any amendments, additions or replacements).
(2) Promptly upon the completion thereof and in no event later
than thirty (30) days thereafter, the Borrower shall provide the Administrative
Agent with a copy of any material amendment, addition or revised version of each
of the Business Plans.
(3) Promptly upon the execution and delivery thereof, the
Borrower shall provide the Administrative Agent with copies of all agreements
regarding leases and similar transactions contemplated by Section 8.2(n);
provided that the Administrative Agent shall maintain the confidentiality of the
parties, terms and conditions of such agreements subject to the exceptions
contained in the first paragraph of Section 16.11.
(4) From time to time, the Borrower shall deliver to the
Administrative Agent such other information regarding the business of the
Borrower, its Subsidiaries, IMPSAT, the Project, the Network and the
Telecommunications Business as the Administrative Agent may reasonably request.
(c) NOTICES. The Borrower shall promptly, but in no event later than
three (3) Business Days after (unless otherwise indicated below) the Borrower
obtains knowledge of the occurrence of the following events, give notice to the
Administrative Agent of the occurrence of any of the following:
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(1) a Default or an Event of Default;
(2) a default by the Borrower, IMPSAT or any of their
Affiliates under any Project Agreement;
(3) except as disclosed in Schedule 7.5 or which could not
reasonably be expected to have a Material Adverse Effect, any (i) (A)
commencement or Material Adverse Change in respect of any litigation,
investigation or proceeding of or before any arbitrator or Governmental
Authority; or (B) any material litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority which, to the knowledge of the
Borrower is threatened by or against the Borrower, IMPSAT, any of their
respective Subsidiaries, or against any of their properties or revenues which:
(x) purport to affect or pertain to this Agreement or any of the other Project
Agreements or any of the transactions contemplated hereby or thereby, or (y) if
determined adversely, could reasonably be expected to have a Material Adverse
Effect; (ii) issuance by any Governmental Authority of an injunction, writ,
temporary restraining order or any order of any nature purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Project Agreements, or directing that the transactions contemplated hereunder or
thereunder not be consummated as herein or therein provided; or (iii) issuance
by any Governmental Authority of any injunction, order, decision or other
restraint purporting to enjoin, restrain, prohibit (or which would have the
effect of prohibiting) the making of the Loans, or invalidate (or which would
have the effect of invalidating) any provision of this Agreement or any of the
other Project Agreements, including provisions regarding the granting of Liens
on the Collateral or the priority of such Liens;
(4) during the Commitment Period, any Material Adverse Change
as determined by the Borrower in its reasonable judgment;
(5) thirty (30) days prior to the movement of any Equipment or
any other Collateral outside of Argentina having, in the aggregate, at any time,
a replacement value in excess of five million Dollars (US$5,000,000); and
(6) thirty (30) days prior thereto in writing, the movement of
the principal place of business of the Borrower or IMPSAT to any location other
than as set forth in the Security Documents;
(7) ten (10) days prior thereto in writing, of any intention on
the part of the Borrower or its Subsidiaries to incur additional Indebtedness
for money borrowed (other than Indebtedness to IMPSAT) in one or more
transactions in an aggregate principal amount exceeding thirty million Dollars
(US$30,000,000) in any given fiscal year.
The Administrative Agent and the Collateral Agent shall have the right to
request, with respect to any such notice, a statement of an Authorized Officer
of the Borrower setting forth reasonable details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.
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(d) INSURANCE. The Borrower shall:
(1) maintain or cause to be maintained in full force and effect
to the satisfaction of the Administrative Agent in its sole discretion, at all
times on and after the date hereof and continuing until the Maturity Date, with
responsible insurance companies having a Best Insurance Reports rating of A or
better and a financial size category of "10" or higher (or other companies
reasonably acceptable to the Administrative Agent and in an amount not less than
the amount of all the Loans, and in any event, not less than the full
replacement cost of all Collateral):
(i) all first risk property insurance, including
earthquake, windstorm and flood, with a limit of loss per occurrence acceptable
to the Administrative Agent in its sole discretion from time to time;
(ii) equipment and machinery breakdown insurance covering
breakdown and resulting damage including rotating equipment such as generators
and electrical equipment (including transformers, switch gear and electrical
apparatus) for their full replacement value;
(iii) business interruption insurance covering risk of
loss as a result of the cessation or material interruption of the
Telecommunications Business resulting from an insured loss under the Borrower's
property policy for an indemnity period of six (6) months or any part thereof,
the initial amount of such insurance to provide for the payment during the six
(6) months commencing from the date hereof of not less than the gross revenues
to be earned by the Borrower for such six (6) month period, calculated based on
the Business Plans and to be adjusted by the Borrower semiannually from the date
hereof thereafter, less any non-continuing costs and expenses during the
relevant indemnity period; and
(iv) third party liability insurance, including bodily
injury and property damage, with a limit of no less than two million Dollars
(US$2,000,000) per occurrence.
(2) within sixty (60) days after receipt by the Borrower of a
written request from the Administrative Agent, accompanied by a pro forma
political risk insurance policy which contains terms and conditions commercially
reasonable under then current market conditions, and the obtention of which will
not increase the "all-in" financing cost of the Facility to the Borrower, obtain
such a policy and maintain such political risk insurance in full force and
effect until the Maturity Date.
(3) file with the Administrative Agent not more than seven (7)
days after each policy anniversary, certificates of all insurance then in
effect, stating the names of the insurance companies, the amounts of the
insurance, the dates of the expiration thereof and the properties and risks
covered thereby and specifically listing the special provisions enumerated for
such insurance required by this Section 8.1(d).
The certificates of insurance referred to in clause (3) hereof shall be
executed by an authorized representative of each insurer, and certify that all
premiums and other payments
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required in respect of such insurance have been timely paid and that such
insurance is otherwise not subject to cancellation by the insurer during its
term, except for nonpayment of premiums, in which case at least fifteen (15)
days prior written notice of termination must be given to the Administrative
Agent. Upon request, the Borrower will promptly furnish the Agents with evidence
of such insurance relating to the Collateral and all information relating to the
replacement cost and location of the same.
In each case, the insurance policies shall designate the Administrative
Agent as additional insured in respect of the liability insurance related to the
Equipment and the sole loss payee in respect of the property insurance related
to the Equipment. All amounts payable to the Administrative Agent according to
the foregoing under property insurance policies shall be paid to an account of
the Administrative Agent (i) upon the occurrence of an Event of Default; or (ii)
if the insured loss materially impairs the Borrower's ongoing operations. In
such event, funds received by the Administrative Agent under such property
insurance policies shall be made available to the Borrower for application to
the costs of repairing, restoring, rebuilding or replacing the portion of the
Collateral with respect to which such proceeds were obtained; provided that,
subject to the provisions of Sections 3.2 and 9.1 hereof, such repaired,
restored, rebuilt or replaced asset shall be or become a part of the Collateral.
The Administrative Agent shall at the request of the Required Lenders pay any
insurance premiums directly, on Borrower's behalf, and Borrower shall reimburse
Lenders through the Administrative Agent promptly for any such payment made by
Lenders.
(e) COMPLIANCE WITH APPLICABLE LAW. The Borrower shall, and shall
cause its Subsidiaries to comply in all material respects with the requirements
of all Applicable Law, including obtaining and maintaining all Governmental
Approvals.
(f) CONSTRUCTION OF THE NETWORK. The Borrower shall (1) cause the
construction and development of the Network to be completed in accordance with
the Business Plans and otherwise with due diligence and continuity (except for
interruptions due to Force Majeure), in a good and workmanlike manner and in
accordance with the Licenses, the Applicable Permits, Applicable Law, and the
Project Agreements, and (2) operate and maintain the Network, and retain and
maintain the staff sufficient to operate and maintain the Network, in accordance
with the Project Agreements and the Business Plans, and otherwise comply in all
material respects with, and satisfy the requirements of, all Licenses, the
Project Agreements and Applicable Laws. Not later than ten (10) days after the
first day of each calendar quarter, the Borrower shall submit to the
Administrative Agent, upon the Administrative Agent's request, a progress report
on the Project. Such report shall identify, and provide the details of, any
delays or variances from the Business Plans and shall contain such other
information in connection therewith as the Administrative Agent may reasonably
request.
(g) TAXES, ETC. The Borrower shall pay, or arrange for payment, prior
to the date when due of all (1) taxes imposed on the Borrower and its
Subsidiaries, and (2) present and future claims, levies, or liabilities
(including, without limitation, claims for labor, service, materials and
supplies) for sums which have become due and payable and which, if unpaid, might
by law become a Lien or otherwise have a Material Adverse Effect, except for any
such tax, claim, levy or liability the payment of which is being contested in
good faith by proper
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proceedings for which adequate reserves determined in accordance with Argentine
GAAP have been established and are being maintained, (and as to which it or its
property is not yet subject to foreclosure, seizure, arrest, sale, collection,
levy or loss on account thereof). The Borrower shall make timely filings of all
tax returns and material governmental reports required to be filed or submitted
under any Applicable Laws.
(h) MAINTENANCE OF BOOKS AND RECORDS; ACCESS. The Borrower shall, and
shall cause each of its Subsidiaries to, keep adequate books and records of
account, in which complete entries will be made in accordance with Argentine
GAAP, reflecting the financial condition of the Borrower and its Subsidiaries
and shall permit the Administrative Agent and the Lenders, at all reasonable
times and with prior notice to the Borrower, at the expense of the Lenders prior
to an Event of Default but at the Borrower's expense thereafter, to inspect and
have access to the books and records of such Person and make copies thereof, and
to discuss such books and records with the representatives, employees and
accountants of such Person and with the Independent Auditor.
The Borrower shall promptly supply to the Administrative Agent copies of
any reports on its or its Subsidiaries' business and activities which are
publicly distributed as well as any other reports thereon and reports made to
any Governmental Authority as the Administrative Agent may from time to time
reasonably request.
The Borrower shall maintain an adequate billing, software and accounting
system, including books, accounts and records, and shall prepare all financial
statements required hereunder in accordance with Argentine GAAP, consistently
applied, and in compliance with all Applicable Laws.
(i) RANK OF DEBT. The Borrower shall take any and all action necessary
to ensure that the Loans at all times continue to be the direct and
unconditional obligation of the Borrower and rank at least pari passu (in
respect of priority of payment, security or otherwise) to all other secured or
unsecured Indebtedness of the Borrower, except that such ranking shall not apply
to the rights of secured Indebtedness over collateral subject to Permitted
Liens.
(j) PAYMENT OF OBLIGATIONS. The Borrower shall pay, and shall cause
each of its Subsidiaries to pay its obligations that, if not paid, could result
in a Material Adverse Effect, before the same shall become delinquent or in
default, except where: (1) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (2) adequate reserves have been
established with respect thereto in accordance with Argentine GAAP, and (3) the
failure to make payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect.
(k) ENVIRONMENTAL MATTERS. The Borrower shall promptly give to the
Administrative Agent notice in writing if the Borrower or any Subsidiary thereof
(1) receives any complaint, order, citation or other written communication from
any Person with respect to, or (2) otherwise acquires actual knowledge of (i)
the existence or alleged existence of any Environmental Liability or any actual
or alleged violation of any applicable Environmental Law arising at, upon,
under, within or in connection with any property now or previously owned,
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leased, operated or used by the Borrower, IMPSAT or any of their respective past
or present Subsidiaries, or any part thereof, or due to the operations or
activities of any such Person, on or in connection with such property or any
part thereof (including receipt by the Borrower or its Affiliates of any notice
of the happening of any event involving the release of a reportable quantity of
any Hazardous Substance under any applicable Environmental Law or cleanup of any
Hazardous Substance), (ii) any release of any Hazardous Substance on such
property or any part thereof in a quantity that is reportable under any
applicable Environmental Law, (iii) the commencement of any cleanup pursuant to
or in accordance with any applicable Environmental Law of any Hazardous
Substances on or about such property or any part thereof, and (iv) any pending
or threatened proceeding for the termination, suspension or non-renewal of any
permit required under any applicable Environmental Law.
(l) LICENSES. The Borrower shall, and shall cause its Subsidiaries (1)
to maintain the Licenses in full force and effect, at all times on and after the
date hereof; and (2) upon receipt of any notification from any Governmental
Authority that the Borrower is in breach of any License: (i) promptly notify the
Administrative Agent thereof, providing copies of all relevant documents and
other information; and (ii) take prompt and adequate remedial action to remedy
such breach, which action shall be taken within the cure period, if any, set out
in such notification.
(m) REGULATORY FILINGS. The Borrower shall, and shall cause its
Subsidiaries to, deliver to the Administrative Agent, promptly after the sending
or filing thereof, copies of all non-confidential reports filed by the Borrower,
any of its Subsidiaries or IMPSAT with the SC, the United States Securities and
Exchange Commission, the Central Bank, the Argentine National Securities
Commission (Comision Nacional de Valores) or the Buenos Aires Stock Exchange and
all non-confidential reports filed with any other Governmental Authority,
except, in all such cases, reports the failure of which to be filed could not
reasonably be expected to have a Material Adverse Effect.
(n) CONTINUANCE OF BUSINESS. The Borrower shall, and shall cause its
Subsidiaries to, do or cause to be done all things necessary to maintain, renew
and keep in full force and effect (i) the Licenses, (ii) their respective
corporate existence and (iii) all other rights and privileges and franchises
related to Telecommunications Business, except in the case of clauses (ii) and
(iii) to the extent that the failure to do so would not have a Material Adverse
Effect.
SECTION 8.2 NEGATIVE COVENANTS.
Until the Maturity Date, and so long as this Agreement remains in effect,
the Borrower shall comply in all respects with each of the following covenants
and agreements:
(a) FUNDAMENTAL CHANGES. The Borrower shall not, and shall not permit
its Subsidiaries to, dissolve, liquidate, merge with another Person or, except
as permitted by Section 8.2(k), create any new Subsidiary without the prior
written consent of the Administrative Agent on behalf of the Required Lenders.
(b) LIENS. The Borrower shall not, and shall not permit its
Subsidiaries to, create, incur, assume or suffer to exist, any Lien upon or with
respect to such Person's accounts
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receivable, the Collateral, any rights under the Licenses or in and to the
Network or the Project Agreements other than any Permitted Lien.
(c) RESTRICTED PAYMENTS. The Borrower agrees, effective as of the date
that such agreement will not cause IMPSAT to violate its obligations under the
IMPSAT Indentures, not to, and to cause its Subsidiaries not to:
(1) reduce or increase such Person's capital, except to the
extent that any such action is required for the Borrower to comply with the
covenants contained in Section 8.3; or
(2) declare or pay any dividends or make any distributions or
other payments or delivery of property or cash in respect of:
(i) the interest of such Person's shareholders or other
equity owners; or
(ii) any Indebtedness which is by its terms subordinate
or junior in right of payment to the Loans.
Notwithstanding any provision herein to the contrary, the Borrower shall not,
and shall not permit its Subsidiaries to, make any distributions or other
payments or delivery of property or cash in respect of any Pledged Shareholder
Note other than as expressly permitted therein.
(d) GUARANTEES. The Borrower shall not, and shall not permit its
Subsidiaries to, enter into or become bound by any agreements guaranteeing the
Indebtedness of another Person, except as permitted by clauses (d), (e), (f) and
(j)of the definition of "Permitted Indebtedness."
(e) DOCUMENT AMENDMENTS. The Borrower shall not, and shall not permit
its Subsidiaries to, agree to any modification, amendment, waiver, supplement,
rescission or termination (collectively, "AMENDMENT") of any (i) License, (ii)
Governmental Approval (other than Licenses) or (iii) Project Agreement, without,
in each case, the prior written approval of the Administrative Agent on behalf
of the Required Lenders, except to the extent that such Amendment could not
reasonably be expected to have a Material Adverse Effect; provided, however,
that in the case of clause (i), the Borrower shall give the Administrative Agent
no less than five (5) Business Days' prior written notice of such Person's
proposed Amendment during which period the Administrative Agent shall have the
exclusive right (which it shall not exercise unreasonably) to reject such
Amendment.
(f) TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by
this Agreement, the Borrower shall not, and shall not permit its Subsidiaries
to, directly or indirectly, enter into any transaction with an Affiliate, except
in the ordinary course of and pursuant to the reasonable requirements of the
business of the Borrower and upon commercially reasonable terms no less
favorable to the Borrower than those that could be obtained on an arm's length
basis from a Person which is not an Affiliate.
(g) INDEBTEDNESS. The Borrower shall not, and shall not permit its
Subsidiaries to, incur, create, assume or suffer to exist, or permit to incur,
create, assume or suffer to exist, or
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become or remain liable, for or on account of any Indebtedness except (1)
Indebtedness hereunder, and (2) Permitted Indebtedness in an amount such that
the Borrower remains in compliance with the covenants set forth in Section
8.3(a) and Section 8.3(b).
(h) NON-RELATED ACTIVITIES. The Borrower shall not, and shall not
permit its Subsidiaries to, engage, directly or indirectly, in any activity,
unless such activity is, directly or indirectly, related to the
Telecommunications Business without the prior written consent of the
Administrative Agent on behalf of the Required Lenders.
(i) CORPORATE ACTIONS. The Borrower shall not, and shall not permit
its Subsidiaries to, (i) change or otherwise alter the end of such Person's
fiscal year or such Person's corporate purpose, or (ii) otherwise amend such
Person's Charter Documents in any manner without the prior written consent of
the Administrative Agent on behalf of the Required Lenders; except in the case
of clause (ii) as could not reasonably be expected to have a Material Adverse
Effect.
(j) DISPOSALS. Except in respect of the Global Crossing IRU, the
Borrower shall not, and shall not permit its Subsidiaries to (whether by a
single transaction or a number of related or unrelated transactions and whether
at one time or over a period of time) (A) grant an IRU in respect of any of such
Person's property or assets or (B) Dispose of (1) the Collateral, (2) any rights
under the Licenses or in and to the Network, (3) such Person's accounts
receivable, (4) any of the Equipment (whether or not it is part of the
Collateral) or (5) all or a substantial part of such Person's assets without, in
the case of each of (A) and (B), the prior written consent of the Administrative
Agent on behalf of the Required Lenders. Clause (5) of this Section 8.2(j) shall
not apply to (i) any Disposal on normal commercial terms in the ordinary course
of business of property or of obsolete property or (ii) the return of Equipment
in accordance with the Nortel Contracts.
(k) INVESTMENTS. The Borrower shall not, and shall not permit any of
its Subsidiaries to make any Investment other than (i) Permitted Investments or
(ii) Investments in one or more Persons which will, upon the making of such
Investment, become a Subsidiary or be merged or consolidated with or into or
transfer or convey all or substantially all its assets to, the Borrower or a
Subsidiary thereof; provided that (1) such Person's primary business is related,
ancillary or complementary to the Telecommunications Business, (2) immediately
before and immediately after the date of such Investment, the Borrower is in
compliance with the covenants contained in Section 8.3 as determined on a pro
forma basis, and (3) such Person (except where such Person is merged into the
Borrower or a Subsidiary thereof) agrees in writing to be bound by the terms of
the Financing Documents; and provided further that an Investment will not be
permitted under this clause (ii) if the sum of the consideration to be paid in
respect of such Investment plus the consideration paid in respect of all
previous Investments made under this clause (ii) exceeds forty percent (40%) of
the Borrower's net worth immediately preceding such Investment.
(l) CHANGE IN ACCOUNTING POLICIES. The Borrower shall not, and shall
not permit any of its Subsidiaries to, make any change in accounting policies or
reporting practices (including changing its fiscal year) which, individually or
in the aggregate, materially affects any determination as to the Borrower's
compliance with its Obligations, including any financial covenants, without the
prior written consent of the Administrative Agent on behalf of the
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<PAGE> 55
Required Lenders; provided, that if such change is required by Argentine GAAP,
the Borrower shall, prior to making such change, only be required to notify the
Administrative Agent of such change and the effect thereof.
(m) CAPITAL MARKETS TRANSACTIONS. The Borrower shall not, and shall
not permit any of its Subsidiaries to issue, or offer to issue any debt or
equity securities of Borrower or any Subsidiary thereof in a public offering,
private placement or other capital markets transaction prior to January 1, 2000.
(n) LEASES. The Borrower shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of the Administrative Agent
on behalf of the Required Lenders, enter into any lease (including a Long Term
Lease) or similar transaction with any Person for the use of any part of the
Network except leases or similar transactions in respect of which the lessee
acknowledges in writing, after the Lien on the property to be leased has been
perfected under the applicable Security Document, the existence of such Lien and
the right of the Collateral Agent, upon the occurrence of certain events, to
assume the rights of the Borrower under the lease, including the right to
receive payment thereunder.
SECTION 8.3 FINANCIAL COVENANTS.
(a) BORROWER'S NET DEBT TO PAID IN CAPITAL. The Borrower shall not at
any time permit the ratio of (i) the Borrower's Net Debt outstanding on the last
day of any calendar quarter set forth below to (ii) the Borrower's Paid in
Capital on such date, to exceed the ratio set forth opposite such date:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------- ---------------------
CALENDAR QUARTER RATIO
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
The first calendar quarter of 2000 and each calendar quarter thereafter through the
second calendar quarter of 2003. 2.0:1
- ------------------------------------------------------------------------------------------- ---------------------
</TABLE>
(b) BORROWER'S NET DEBT TO TOTAL EQUITY. The Borrower shall not at any
time permit the ratio of (i) the Borrower's Net Debt outstanding on the last day
of any calendar quarter set forth below to (ii) the Borrower's Total Equity on
such date, to exceed the ratio set forth opposite such date:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------- ---------------------
CALENDAR QUARTER RATIO
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
The third calendar quarter of 2003 and each calendar quarter thereafter through the
fourth quarter of 2004. 2.0:1
- ------------------------------------------------------------------------------------------- ---------------------
The first calendar quarter of 2005 and each calendar quarter thereafter. 1.5:1
- ------------------------------------------------------------------------------------------- ---------------------
</TABLE>
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<PAGE> 56
(c) DEBT SERVICE COVERAGE RATIO. The Borrower shall not at any time
permit the ratio of (i) the Borrower's EBITDA for the four (4) consecutive
calendar quarters ending on the date set forth below to (ii) the Borrower's Debt
Service for such four (4) consecutive calendar quarter period, to be less than
the ratio set forth opposite such date:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------- ---------------------
DATE RATIO
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
December 31, 1999 and the last day of each calendar quarter of 2000. 0.50:1
- ------------------------------------------------------------------------------------------- ---------------------
The last day of each calendar quarter of 2001. 1.00:1
- ------------------------------------------------------------------------------------------- ---------------------
The last day of each calendar quarter of 2002 through 2006. 1.30:1
- ------------------------------------------------------------------------------------------- ---------------------
</TABLE>
(d) INTEREST SERVICE COVERAGE RATIO. The Borrower shall not at any
time permit the ratio of (i) the Borrower's EBITDA for the four (4) consecutive
calendar quarters ending on the date set forth below to (ii) the Borrower's
Interest Expense for such four (4) consecutive calendar quarter period, to be
less than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------- ---------------------
DATE RATIO
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
December 31, 1999 and the last day of the first, second and third calendar quarters of
2000. 0.75:1
- ------------------------------------------------------------------------------------------- ---------------------
The last day of the fourth calendar quarter of 2000 and the last day of each calendar
quarter of 2001. 1.00:1
- ------------------------------------------------------------------------------------------- ---------------------
The last day of each calendar quarter of 2002. 1.55:1
- ------------------------------------------------------------------------------------------- ---------------------
The last day of each calendar quarter of 2003. 2.50:1
- ------------------------------------------------------------------------------------------- ---------------------
The last day of each calendar quarter of 2004, 2005 and 2006. 3.50:1
- ------------------------------------------------------------------------------------------- ---------------------
</TABLE>
(e) NET DEBT COVERAGE RATIO. The Borrower shall not at any time permit
the ratio of (i) the Borrower's Net Debt outstanding on the last day of any
calendar quarter set forth below to (ii) the Borrower's EBITDA for the four (4)
consecutive calendar quarters ending on such date, to exceed the ratio set forth
opposite such date:
-55-
<PAGE> 57
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------- ---------------------
CALENDAR QUARTER RATIO
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Each calendar quarter of 2000. 9.00:1
- ------------------------------------------------------------------------------------------- ---------------------
The first and second calendar quarters of 2001. 8.00:1
- ------------------------------------------------------------------------------------------- ---------------------
The third and fourth calendar quarters of 2001. 6.00:1
- ------------------------------------------------------------------------------------------- ---------------------
The first and second calendar quarters of 2002. 6.00:1
- ------------------------------------------------------------------------------------------- ---------------------
The third and fourth calendar quarters of 2002. 5.00:1
- ------------------------------------------------------------------------------------------- ---------------------
The first and second calendar quarters of 2003. 5.00:1
- ------------------------------------------------------------------------------------------- ---------------------
The third and fourth calendar quarters of 2003. 3.00:1
- ------------------------------------------------------------------------------------------- ---------------------
Each calendar quarter of 2004, 2005 and 2006. 2.50:1
- ------------------------------------------------------------------------------------------- ---------------------
</TABLE>
(f) MAXIMUM ANNUAL CAPITAL EXPENDITURES. The Borrower shall not at any
time permit the Borrower's Capital Expenditures (excluding Capital Expenditures
funded by contributions to Paid in Capital other than contributions required to
maintain the Borrower's compliance with the covenants contained in Sections
8.3(a) and 8.3(b)) for the calendar years set forth below, to exceed the amount
set forth opposite such year:
<TABLE>
<CAPTION>
- ------------------------------- --------------------------------------------------------------
CALENDAR YEAR MAXIMUM CAPITAL EXPENDITURES
- ------------------------------- --------------------------------------------------------------
<S> <C> <C>
1999 US$115,000,000
- ------------------------------- --------------------------------------------------------------
2000 US$147,000,000
- ------------------------------- --------------------------------------------------------------
2001 US$24,000,000
- ------------------------------- --------------------------------------------------------------
2002 US$33,000,000
- ------------------------------- --------------------------------------------------------------
2003 US$45,000,000
- ------------------------------- --------------------------------------------------------------
2004 US$46,000,000
- ------------------------------- --------------------------------------------------------------
2005 US$47,000,000
- ------------------------------- --------------------------------------------------------------
2006 US$47,000,000
- ------------------------------- --------------------------------------------------------------
</TABLE>
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<PAGE> 58
provided, however, that Capital Expenditures permitted in any period which are
not used in such period may be carried forward to, and expended in, the next
period.
SECTION 8.4 OPERATIONAL COVENANT.
The Borrower shall not at any time permit Revenues for any calendar year
set forth below to be less than the amount set forth opposite such date below:
<TABLE>
<CAPTION>
- ------------------------------- --------------------------------------------------------------
CALENDAR YEAR MINIMUM REVENUES
- ------------------------------- --------------------------------------------------------------
<S> <C> <C>
1999 US$90,000,000
- ------------------------------- --------------------------------------------------------------
2000 US$120,000,000
- ------------------------------- --------------------------------------------------------------
2001 US$143,000,000
- ------------------------------- --------------------------------------------------------------
2002 US$200,000,000
- ------------------------------- --------------------------------------------------------------
2003 US$295,000,000
- ------------------------------- --------------------------------------------------------------
2004 US$400,000,000
- ------------------------------- --------------------------------------------------------------
2005 US$530,000,000
- ------------------------------- --------------------------------------------------------------
2006 US$623,000,000
- ------------------------------- --------------------------------------------------------------
</TABLE>
SECTION 9. SECURITY
SECTION 9.1 GRANT OF SECURITY INTEREST.
To secure the prompt payment of the Obligations, and to secure the
performance of and compliance with all the agreements, covenants and provisions
of the Financing Documents, the Borrower shall and shall cause its Subsidiaries,
pursuant to the Security Documents, to grant, assign, pledge and convey to the
Collateral Agent for the benefit of each Secured Party a first-priority security
interest, subject only to Permitted Liens, in all Equipment, real property and
other tangible and intangible property and rights to be acquired by the Borrower
and its Subsidiaries pursuant to the Nortel Contracts (all such property and
rights, together with the cash and cash equivalents held from time to time in
the Net Proceeds Account, collectively, the "COLLATERAL"). Each of the Equipment
Pledge Agreements and Mortgage Deeds shall state as the maximum secured
obligation such amount as shall be designated by the Administrative Agent in its
sole discretion; provided, however, that the aggregate maximum secured amount
stated in all such Security Documents shall not exceed one hundred fifteen
percent (115%) of the amount of
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<PAGE> 59
the Commitment Amount as of the date hereof (as reduced, if applicable, in
accordance with Section 2.5). The Borrower hereby confirms to the Secured
Parties that it shall, and shall cause each of its Subsidiaries to, take all
actions required by the Security Documents or otherwise deemed reasonably
necessary or reasonably desirable by the Collateral Agent in order to create,
perfect and maintain the perfection of the Secured Parties' first-priority Lien
in the Collateral, subject only to Permitted Liens.
SECTION 9.2 ESCROW ACCOUNTS.
To secure the prompt payment of principal of and interest on the Loans,
the Borrower, pursuant to the Escrow Account Agreement, shall establish and
maintain the Net Proceeds Account and grant to the Administrative Agent for the
benefit of the Secured Parties a first-priority security interest in the Net
Proceeds Account and each other escrow account, if any, and in all funds
deposited therein.
SECTION 9.3 RELEASE OF COLLATERAL.
(a) SECURITY INTEREST. The Borrower hereby further agrees and confirms
that, except for any Collateral released pursuant to Section 9.3(b), the Secured
Parties' security interest in the Collateral shall not be released by the
Collateral Agent until and unless (1) the Borrower shall have paid in full all
amounts due and payable under this Agreement and under any Security Document and
shall have performed all of its Obligations or (2) the Required Lenders shall
have consented to such release, in their sole discretion.
(b) RELEASE INSTRUMENTS. In connection with any Disposal of Collateral
permitted by the terms hereof, the Borrower may request a release of such
Collateral (the "RELEASED COLLATERAL") by delivering to the Collateral Agent a
notice (each, a "RELEASE NOTICE"), which shall refer to this Section, describe
in reasonable detail the proposed Released Collateral and be accompanied by (1)
an officer's certificate of the Borrower certifying that no Event of Default has
occurred and is continuing and that the officers of the Borrower executing any
and all documents in connection with the release were duly authorized to do so
and (2) the proposed instrument of release (the "RELEASE") executed by all
necessary parties thereto other than the Collateral Agent (collectively, the
"RELEASE INSTRUMENTS").
(c) COUNTERPARTS. The Collateral Agent shall execute, acknowledge, if
applicable, and deliver to the Borrower counterparts of the documents described
in Sections 9.3(b)(1) and 9.3(b)(2) within five (5) Business Days of receipt by
the Collateral Agent of a Release provided that the conditions set forth in the
Release Instruments and herein with respect to dispositions of Collateral have
been satisfied. The Borrower at its own expense shall execute, deliver, obtain
and record such instruments as the Collateral Agent may reasonably require,
including, without limitation, amendments to the Security Documents or this
Agreement necessary to reflect such release. The Borrower shall reimburse the
Collateral Agent upon demand for all reasonable costs and expenses (including
reasonable attorneys' fees and expenses) incurred by the Collateral Agent in
connection with any actions taken by it pursuant to this Section.
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<PAGE> 60
SECTION 10. EVENTS OF DEFAULT
SECTION 10.1 EVENTS OF DEFAULT.
Each of the following events shall constitute an "EVENT OF DEFAULT" hereunder:
(a) NON-PAYMENT. The Borrower shall fail to pay:
(1) any installment of the principal amount of any Loan as and
when the same becomes due and payable hereunder (whether at stated maturity, by
acceleration, mandatory prepayment or otherwise) ; or
(2) any interest on any Loan or any other amount payable
hereunder or under any Note, when and as the same shall become due and payable
(whether at stated maturity, by acceleration, mandatory prepayment or otherwise)
and such failure shall continue unremedied for three (3) Business Days.
(b) REPRESENTATIONS AND WARRANTIES. Any representation, warranty,
certification or statement made by or on behalf of the Borrower, any Subsidiary
thereof or IMPSAT in any Financing Document or any amendment thereof or in any
certificate, report, or opinion delivered pursuant to or otherwise in connection
with any Financing Document shall prove to have been false, incorrect, or
misleading in any material respect as of the time made, delivered or deemed made
or delivered.
(c) COVENANTS. The Borrower, any Subsidiary thereof or IMPSAT shall
fail to perform or observe in any material respect any term, covenant, condition
or agreement:
(1) contained in this Agreement (other than the covenants
contained in Section 8.1 or paragraphs (f), (g) and (h) of Section 8.2) or any
other Financing Document and such default shall continue beyond any cure or
grace period specifically applicable thereto pursuant to the terms of such
Financing Document; or
(2) contained in Section 8.1 or paragraphs (f), (g) and (h) of
Section 8.2) hereof and such default shall continue unremedied for a period of
ten (10) Business Days after the earlier of (i) the date on which the Borrower
obtains knowledge of such default or (ii) the date on which notice thereof shall
have been received by the Borrower from the Administrative Agent (which notice
will be given at the request of any Lender).
(d) IMPSAT INDENTURES. IMPSAT or any of its Subsidiaries shall default
in:
(1) any payment of any Indebtedness under the IMPSAT
Indentures; or
(2) the observance or performance of any agreement, covenant or
condition under the IMPSAT Indentures or any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the Trustee (under either IMPSAT Indenture), to
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<PAGE> 61
cause any such Indebtedness to become due or subject to mandatory repurchase or
repayment prior to its stated maturity.
(e) BRAZIL AGREEMENTS. Declaration of default or notice of
acceleration shall have occurred under the Brazil Financing Agreement or any
other of the Brazil Agreements.
(f) DEFAULT UNDER OTHER INDEBTEDNESS. The Borrower, any Subsidiary
thereof or IMPSAT shall default in:
(1) any payment of any Indebtedness (other than the Loans under
this Agreement or the loans under the Brazil Financing Agreement) aggregating in
excess of five million Dollars (US$5,000,000); or
(2) the observance or performance of any agreement or condition
relating to any Indebtedness (other than the Financing Documents or the IMPSAT
Indentures) aggregating in excess of five million Dollars (US$5,000,000), or
contained in any instrument or agreement evidencing, securing, or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder of such
Indebtedness (or a trustee or agent on behalf of such holder) to cause any such
Indebtedness to become due or subject to mandatory repurchase or repayment prior
to its stated maturity.
(g) BANKRUPTCY. The Borrower, any Subsidiary thereof or IMPSAT shall
commence a voluntary case concerning itself under any bankruptcy law of
Argentina (including, without limitation, Argentine Law No. 24.522) or any other
jurisdiction or Title 11 of the United States Code entitled "Bankruptcy," as now
or hereafter in effect, or any successor thereto (the "BANKRUPTCY CODE"); or an
involuntary case is commenced against the Borrower, any Subsidiary thereof or
IMPSAT under any such laws, and the petition is not contested within 10 days, or
is not dismissed within 30 days, after commencement of the case; or a custodian
(as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Borrower, any Subsidiary thereof or
IMPSAT or the Borrower, any Subsidiary thereof or IMPSAT commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower, any
Subsidiary thereof or IMPSAT, or there is commenced against the Borrower, any
Subsidiary thereof or IMPSAT any such proceeding which remains undismissed for a
period of thirty (30) days; or the Borrower, any Subsidiary thereof or IMPSAT is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Borrower, any
Subsidiary thereof or IMPSAT suffers any appointment of any custodian or the
like for it or any substantial part of its property to continue undischarged or
unstayed for a period of thirty (30) days; or the Borrower, any Subsidiary
thereof or IMPSAT makes a general assignment for the benefit of creditors; or
the Borrower, any Subsidiary thereof or IMPSAT shall generally not pay its debts
as they become due or there shall otherwise occur a cesacion de pagos (within
the meaning of Argentine law); or any corporate action is taken by the Borrower,
any Subsidiary thereof or IMPSAT for the purpose of effecting any of the
foregoing.
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<PAGE> 62
(h) FINANCING DOCUMENTS. Any Financing Document shall cease to be in
full force and effect, or shall cease to give the Lenders the Liens and the
material rights, powers and privileges purported to be created thereby
(including, without limitation, a perfected security interest in, and Lien on,
all of the Collateral described therein in favor of the Lenders, superior to and
prior to the rights of all third Persons, and subject to Permitted Liens only).
(i) NORTEL CONTRACTS. The Borrower shall breach or otherwise fail to
perform any material obligation under any of the Nortel Contracts or any of the
Nortel Contracts shall cease to be in full force and effect for any reason
imputable to the Borrower or an Affiliate thereof except at the stated
termination date thereof or shall be assigned or otherwise transferred,
terminated, or rescinded without the approval of Nortel.
(j) OTHER PROJECT AGREEMENTS. The Borrower or any Project Party (other
than Nortel) shall breach or otherwise fail to perform any material obligation
under the Project Agreements (other than the Turnkey Contract) or such other
Project Agreements shall cease for any reason (other than for a reason
attributable to Nortel) to be in full force and effect except at the stated
termination date thereof, or shall be assigned or otherwise transferred,
terminated, or rescinded by any Project Party thereto; provided that it shall
not be an Event of Default if, not later than one hundred twenty (120) days of
any breach or failure by such other Project Party, or the effective date of any
termination or rescission in respect of such other Project Agreement (other than
a termination or rescission based on a breach or failure by the Borrower), such
breach or failure is cured or a substitute vendor enters into a new written
agreement with the Borrower to continue to provide the equipment, systems and
services contemplated under such other Project Agreement on terms that conform
to and will not result in a deviation from the then current Business Plans.
(k) LICENSES. Any License necessary for the Project shall cease to be
in full force and effect. A License shall be deemed to cease to be in full force
and effect (1) when an order revoking or terminating said License shall be
issued and such order is no longer subject to further administrative and
judicial review, or (2) when any Governmental Authority having jurisdiction over
any such License shall, prior to the termination thereof, decide not to renew
such License and such decision shall not be subject to further administrative or
judicial review.
(l) GOVERNMENTAL ACTIONS. Any Governmental Authority shall have (1)
condemned, nationalized, seized, compulsorily acquired, or otherwise
expropriated all or any material part of the property or other assets of the
Borrower or any of its Subsidiaries or of any capital stock of the Borrower or
any of its Subsidiaries, or (2) assumed custody or control either of such
property or other assets or of the business or operations of the Borrower or any
of its Subsidiaries or of their capital stock, or shall have taken any action
for the dissolution of the Borrower or any of its Subsidiaries or any other
action that would prevent the Borrower or any of its Subsidiaries or their
respective officers from carrying on the business or operations of the Borrower
or any such Subsidiary in all material respects; provided, however, that this
paragraph shall not apply to any Subsidiary of the Borrower (i) the property or
assets of which do not comprise part of the Network or the Collateral, (ii)
which is not a party to any of the Project Documents and (iii) the
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<PAGE> 63
total Equity of which is less than one hundred thousand Dollars (US$100,000),
unless the Governmental Action in question is reasonably likely to have a
Material Adverse Effect.
(m) JUDGMENTS. A final judgment, award, decree, fine or penalty for
the payment of money in excess of five million Dollars (US$5,000,000)
individually or in the aggregate shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against the
Borrower or IMPSAT or any of their respective Subsidiaries and the same shall
not be discharged (or provision satisfactory to the Administrative Agent shall
not be made for such discharge), or a stay of execution thereof shall not be
procured, within thirty (30) days from the date of entry thereof, and the
Borrower, within such thirty (30) day period or such longer period during which
the execution of such judgment or judgments shall have been stayed, shall not
have appealed therefrom and caused the execution thereof to be stayed during
such appeal.
(n) CURRENCY RESTRICTIONS. Argentina or any Governmental Authority
thereof shall impose restrictions on the free transferability of Dollars to or
from Argentina or Dollars shall, in the reasonable judgment of the Required
Lenders, be unavailable within Argentina at a commercially reasonable rate of
exchange, and the Borrower shall not, within ten (10) Business Days after notice
from the Administrative Agent, have demonstrated to the satisfaction of the
Administrative Agent that such restrictions will not have a Material Adverse
Effect on the ability of the Borrower to perform its Obligations or on the
availability of Dollars for purposes of paying any amounts required to be paid
pursuant to this Agreement or the other Financing Documents.
(o) IMPSAT GUARANTEE. IMPSAT shall breach any covenant or agreement in
the IMPSAT Guarantee.
(p) CHANGE IN CONTROL. A Change in Control shall have occurred.
(q) LEGAL EXISTENCE; TAXES. The Borrower or IMPSAT shall have failed
to maintain its legal existence or the Borrower, any Subsidiary thereof or
IMPSAT shall have failed to pay taxes as they come due.
(r) IMPAIRMENT OF COLLATERAL. The Collateral Agent shall fail at any
time to have a valid and perfected Lien on, subject to no prior or equal Liens
other than Permitted Liens, any material portion of the Collateral.
(s) MATERIAL ADVERSE CHANGE. A Material Adverse Change shall have
occurred.
(t) CAPITALIZATION. (1) The Borrower shall make any distribution or
payment or transfer any property to IMPSAT or any other Person, directly or
indirectly, in respect of the IMPSAT Capital Contribution or (2) the resolution
of a duly-convened shareholders meeting of the Borrower, in form and content
satisfactory to the Administrative Agent, authorizing the Borrower Capital
Increase shall not have been duly adopted on or before December 31, 1999.
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<PAGE> 64
ECTION 10.2. REMEDIES UPON EVENT OF DEFAULT.
(a) RIGHTS AND REMEDIES. If any Event of Default (other than the Event
of Default referred to in Section 10.1(g)) has occurred and is continuing, the
Administrative Agent shall, at the request of, or may, with the consent of the
Required Lenders (1) terminate the Commitment, whereupon the obligation of the
Lenders to make Loans hereunder shall immediately be terminated and/or (2)
declare all of the Loans to be due and payable, whereupon the Loans, together
with interest accrued thereon and all other amounts due under this Agreement and
the Notes, shall immediately mature and become due and payable, without
presentment, demand, diligence, protest, notice of acceleration, or other notice
of any kind, all of which the Borrower hereby expressly waives; or (3) exercise
on behalf of itself and the Lenders all other rights and remedies available to
it and the Lenders under this Agreement and the other Financing Documents. Upon
the occurrence of any Event of Default, the Lenders and the Agents shall have,
in addition to any other rights and remedies contained in this Agreement and the
other Financing Documents, all of the rights and remedies of a secured party
under the laws of Argentina or other Applicable Laws, all of which rights and
remedies shall be cumulative and non-exclusive, to the extent permitted by
Applicable Law.
(b) BANKRUPTCY. Upon the occurrence of an Event of Default referred to
in Section 10.1(g) of this Agreement:
(1) the Commitment shall automatically be terminated and the
obligation of the Lenders shall immediately terminate;
(2) the Loans, together with all interest accrued thereon and
all other amounts due under this Agreement and the Notes, shall immediately
mature and become due and payable, without any other presentment, demand,
diligence, protest, notice of acceleration, or other notice of any kind, all of
which each of the Borrower hereby expressly waives; and
(3) the Administrative Agent may, or at the request of the
Required Lenders shall, exercise (or shall direct the Collateral Agent to
exercise) on behalf of itself and the Lenders all other rights and remedies
available to it and the Lenders under this Agreement and the other Financing
Documents.
(c) OTHER REMEDIES. In addition to such remedies as are provided for
in this Agreement and the other Financing Documents, the Lenders' remedies upon
the occurrence and during the continuance of an Event of Default shall include,
to the extent permitted by Applicable Law, (1) a right to apply or require the
Borrower to apply for any necessary orders, permits or licenses in connection
with the operation or abandonment of the Network, the Telecommunications
Business or any part thereof; and (2) a right to have a receiver appointed by a
court of competent jurisdiction in order to manage, protect and preserve the
Network, the Telecommunications Business and the Collateral and to continue the
operation of the Telecommunications Business, and to collect the revenues and
profits thereof and apply the same to the payment of all expenses and other
charges of such receivership until the sale or other final disposition of the
Collateral.
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<PAGE> 65
(d) ACTIONS. In connection with the foregoing remedies, the Borrower
shall take such further actions and execute all such instruments as the
Administrative Agent or the Collateral Agent deems necessary. The Borrower
agrees that the Administrative Agent or the Collateral Agent may enforce any
obligation of the Borrower as set forth in this Agreement by an action for
specific performance.
(e) ADVANCES. The Lenders may (but shall not be obligated to) make
advances from their own funds to preserve, protect or obtain any of the
Collateral, including amounts to pay Taxes, insurance and the like, and all such
advances shall become part of the Obligations and shall be repayable to the
Lenders with interest thereon from the date of such advances until paid at the
Default Interest Rate.
SECTION 10.3 CUMULATIVE RIGHTS.
No failure or delay on the part of the Lenders, the Administrative Agent
or the Collateral Agent in exercising any right, power, or remedy accruing to
them hereunder shall impair any such right, power, or remedy, nor shall such
failure or delay in exercising any right, power, or remedy with respect to any
particular occurrence of an Event of Default be construed as a waiver of any
such right, power, or remedy for any other or future occurrence of an Event of
Default, nor shall any single or partial exercise of any such right or power
preclude any other or further exercise thereof or the exercise of any other
right or power hereunder. To the fullest extent permitted by Applicable Law, all
remedies, either under this Agreement or by Applicable Law otherwise afforded
the Lenders, shall be cumulative and not alternative.
SECTION 11. EXPENSES AND INDEMNIFICATION
SECTION 11.1 EXPENSES.
The Borrower agrees to pay on demand (a) all reasonable costs and
expenses of the Administrative Agent in connection with the preparation,
execution, delivery, administration, modification, amendment, protocolization
and registration of the Financing Documents, including the reasonable fees and
expenses of counsel for the Agents with respect thereto, with respect to
advising the Agents as to their rights and responsibilities or the perfection,
protection or preservation of their and the Lenders' rights or interests under
the Financing Documents, with respect to negotiations with the Borrower, IMPSAT
or with other creditors of the Borrower or IMPSAT arising out of any Default or
any events or circumstances that may give rise to an Event of Default, and with
respect to presenting claims in or otherwise participating in or monitoring any
bankruptcy, insolvency or other similar proceeding involving creditors' rights
generally and any proceeding ancillary thereto, and (b) all reasonable costs and
expenses of the Agents and the Lenders in connection with the enforcement of the
Financing Documents, including in any action, suit or litigation, any
bankruptcy, insolvency or other similar proceeding affecting creditors' rights
(including, without limitation, the reasonable fees and expenses of counsel for
each Agent and the Lenders with respect thereto).
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SECTION 11.2 INDEMNIFICATION.
Without regard to whether the Borrower or any other Person has disclosed
any fact to Nortel, the Administrative Agent, the Collateral Agent or any
Lender, the Borrower hereby agrees to indemnify and hold harmless each of the
Agents and Lenders and each of their respective officers, directors, employees,
consultants and advisors (collectively, the "INDEMNITEES") from and against any
and all actions, suits, claims, damages, demands, judgments, losses,
liabilities, costs or expenses whatsoever, including reasonable attorneys' fees,
which any Indemnitee may sustain or incur (or which may be claimed against any
Indemnitee by any Person whatsoever) to the extent arising by reason of or in
connection with:
(a) the Loans or the proposed use of the proceeds thereof;
(b) the payment or failure to pay the Obligations;
(c) the occurrence of an Event of Default;
(d) the pursuit by either Agent or any Lender of any legal remedy in
connection with an Event of Default;
(e) the entering into any Financing Document by either Agent or any
Lender, or enforcing their remedies hereunder or thereunder; or
(f) any Environmental Law as a result of the past, present or future
operations of the Borrower any of its Subsidiaries or IMPSAT (or any predecessor
in interest to any such Persons);
provided, however, that, the Borrower shall not be required to indemnify any
Indemnitee for any actions, suits, claims, damages, demands, judgments, losses,
liabilities, costs or expenses to the extent caused by such Indemnitee's willful
misconduct or gross negligence.
SECTION 12. ASSIGNMENT AND PARTICIPATION
SECTION 12.1 ASSIGNMENT.
(a) REQUIREMENTS. Each Lender may assign to one or more Eligible
Assignees all or any portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment, the Loans
owing to it and the Note or Notes held by it); provided, however, that (1) each
such assignment shall be of a uniform, and not a varying, percentage of all
rights and obligations under and in respect of all rights and obligations under
this Agreement, (2) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all of a
Lender's rights and obligations under this Agreement, the amount of any
Commitment proposed to be assigned (determined as of the date of the Assignment
and Assumption Agreement with respect to such assignment) shall in no
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event be less than one million Dollars (US$1,000,000), and (3) the parties to
each such assignment shall execute and deliver an Assignment and Assumption
Agreement.
(b) NOTICE. Promptly following an assignment described in (a) above,
the parties to such assignment shall deliver the executed Assignment and
Assumption Agreement entered into between the assignor Lender and the assignee
to the Administrative Agent for its acknowledgment and recording in the Register
together with a non-refundable processing and recordation fee of three thousand
five hundred Dollars (US$3,500). The assigning Lender shall also deliver a
notice to the Borrower in respect of such assignment (unless such notice has
already been given) and the assignee shall furnish the Administrative Agent with
a completed administrative details questionnaire.
(c) RECORDING. Upon its receipt of an Assignment and Assumption
Agreement executed by the assignor Lender and the assignee, the Administrative
Agent shall promptly acknowledge such Assignment and Assumption Agreement and
record the information contained therein in the Register in accordance with the
provisions of Section 2.3(d) and give notice of such acknowledgment and
recordation to the Lenders and the Borrower. Any assignment of any Loan or Note
hereunder shall become effective on the day when the relevant Assignment and
Assumption Agreement is recorded by the Administrative Agent in the Register.
(d) EXCHANGE OF NOTES. Concurrently with the delivery of an Assignment
and Assumption Agreement to the Administrative Agent pursuant to (c) above, or
as soon thereafter as practicable, the assignor Lender shall surrender the Note
evidencing the Loan being assigned thereunder for cancellation against delivery
to the assignor Lender and/or the assignee of one or more new Notes executed by
the Borrower in the same aggregate principal amount.
(e) RELEASE. From and after the date on which an Assignment and
Assumption Agreement is effective and solely to the extent of such assignment,
the assignor Lender shall be released of its commitments and obligations under
this Agreement and the assignee shall thereupon become a Party and shall have
the same rights and interest and assume the same obligations and liabilities as
having been assigned to it by the assignor Lender.
SECTION 12.2 PARTICIPATION.
Any Lender may sell participations to any Person in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Loans owing to it and the
Note or Notes held by it), provided, however, that (a) such Lender's obligations
under this Agreement (including, without limitation, its Commitment) shall
remain unchanged, (b) such Lender shall remain solely responsible to the other
Parties for the performance of such obligations, (c) such Lender shall remain
the holder of any such Note for all purposes of this Agreement, and (d) the
Borrower, the Agents and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement.
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SECTION 13. OPTION TO REVISE STRUCTURE.
SECTION 13.1 OPTION TO REVISE.
Subject to Applicable Law, at any time after January 1, 2000 (but
excluding the six (6) month period ending on July 31, 2003) the Administrative
Agent on behalf of the Required Lenders shall have the right, upon giving not
less than sixty (60) days' prior written notice to the Borrower, to cause the
structure of the Commitments and the Loans to be revised to facilitate access to
all financial markets, including banks, insurance companies, investment
companies, other financial institutions or governmental agencies, to sell or
refinance the Commitment and/or Loans, including by requiring a portion of the
Loans and Commitment to be replaced by an issuance of debt securities in the
capital markets ("REPLACEMENT NOTES") in an aggregate principal amount of not
less than one hundred twenty five million Dollars (US$125,000,000) (or in the
case of a second or third issuance of Replacement Notes, the lesser of one
hundred twenty five million Dollars (US$125,000,000) and the sum of the Facility
then outstanding hereunder and the Facility then outstanding under the Brazil
Financing Agreement) for the purpose of the prepayment of outstanding Loans of
the Lenders; provided, that any such revisions and/or replacement shall neither
decrease the economic benefit or the term of the Loans or the Commitment to
IMPSAT and the Borrower nor have an "all-in" financing cost in excess of
thirteen percent (13%) per annum. The Lenders and the Borrower shall cooperate
with respect to the determination of the optimal timing for such revisions or
replacement, including for issuance of the Replacement Notes and any other
issuance of debt securities by the Borrower or IMPSAT. Upon receipt of such
notice from the Administrative Agent, the Borrower shall cooperate with the
Placement Agent and Nortel as set forth in Section 16.12 and otherwise provide,
on a best efforts basis, such assistance as is customarily and reasonably
required or desirable to be provided by an issuer to enable the successful
placement of Replacement Notes, under the terms and subject to the conditions
set forth in Sections 13.2 and 13.3 and such other terms and conditions as may
be agreed upon between the Borrower and the Lenders from time to time.
SECTION 13.2 COSTS BORNE BY LENDERS.
Replacement Notes shall be issued by IMPSAT; provided, that all costs and
expenses incurred in connection with the issuance of Replacement Notes,
including underwriting fees, commissions and the Borrower's and IMPSAT's
out-of-pocket costs associated with the issuance of the Replacement Notes
(including, without limitation, the reasonable fees and expenses of its auditors
and counsel), shall be borne solely by the Lenders; provided further, that the
Parties shall seek to structure the transaction to minimize tax costs.
SECTION 13.3 TERMS OF REPLACEMENT NOTES.
The Replacement Notes shall be on terms approved by Nortel and consistent
with market practice in the relevant debt securities market. To the extent
political risk insurance is required by and consistent with relevant market
practice, all costs of such insurance shall be borne by the Borrower. To the
extent the rate of withholding tax applicable to Replacement Notes is
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consistent with relevant market practice, the full rate of withholding tax shall
be borne by the Borrower.
SECTION 13.4 APPLICATION OF PROCEEDS.
A portion of the Net Proceeds of the Replacement Notes shall be applied
to the Prepayment of the Loans in accordance with Section 3.2(a)(6), such
portion to be an amount determined by multiplying such Net Proceeds by a
fraction the numerator of which is the amount of the Facility outstanding
hereunder as of the date of IMPSAT's receipt of such Net Proceeds and the
denominator of which is the sum of the amounts of the Facility outstanding
hereunder and the Facility outstanding under the Brazil Financing Agreement, as
of such date; provided, however, that if the Replacement Notes are issued prior
to the making of any Disbursements under this Agreement or the Brazil Financing
Agreement, the numerator and denominator of the fraction used to determine the
application of the Net Proceeds shall refer to the Commitment Amounts then
available under the respective Financing Agreements, and the Commitment Amount
hereunder shall be reduced by the amount resulting from such calculation; and,
provided, further, that if Disbursements have been made under only one of the
Financing Agreement when the Replacement Notes are issued, the Net Proceeds of
the Replacement Notes shall be applied first in Prepayment of the entire amount
of the Loans under such Financing Agreement, and the Commitment Amount under the
other Financing Agreement shall be reduced by the remaining amount, if any, of
such Net Proceeds.
SECTION 13.5 RELEASE OF OBLIGATIONS.
After the initial Prepayment pursuant to Section 13.4, and provided that
there shall not then exist a Default or an Event of Default, the Net Proceeds of
Long Term Leases shall not be included in the calculation of Excess Cash Flow
for purposes of Prepayments under Section 3.2(a)(4).
SECTION 13.6 TERMINATION OF OPTION.
The right of the Administrative Agent provided in Section 13.1 shall
terminate upon Nortel's ceasing to be the beneficial owner of at least fifty
percent (50%) of all Loans outstanding hereunder and under the Brazil Financing
Agreement, taken as a whole or, if no Loans have yet been disbursed, upon
Nortel's ceasing to be obligated in respect of at least fifty percent (50%) of
the Commitment Amount.
SECTION 14. GOVERNING LAW AND JURISDICTION
SECTION 14.1 GOVERNING LAW.
This Agreement and the Notes shall be governed by, and construed in
accordance with, the laws of the State of New York (not including such state's
conflict of laws provisions).
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SECTION 14.2 WAIVER OF JURY TRIAL.
Each of the Lenders, the Agents and the Borrower hereby knowingly,
voluntarily, and intentionally waives any right it may have to a trial by jury
of any claim, demand, or cause of action under, or in connection with, this
Agreement, the Notes or any other financing document. This provision is a
material inducement for the Lenders to enter into this Agreement and the other
financing documents.
SECTION 14.3 JURISDICTION; VENUE FOR SUIT.
Each of the Borrower, the Lenders and the Agents hereby expressly and
irrevocably (a) waives all right to object to jurisdiction or execution in any
legal action or proceeding relating to this Agreement, the Notes, or any other
Financing Document which such Person may now or hereafter have by reason of such
Person's domicile or by reason of any subsequent or other domicile and hereby
irrevocably consents that any legal action, suit, or proceeding arising out of,
or relating to, any of the Financing Documents and any other document or
instrument required to be executed in relation thereto may be instituted in or
removed to the United States District Court of the Southern District of New York
and the courts of the State of New York sitting in New York, Borough of
Manhattan; (b) submits to and accepts and consents with regard to any such
action or proceeding for itself and in respect of its properties and assets,
generally and unconditionally, the non-exclusive jurisdiction of any such court;
and (c) waives any objection it may now or hereafter have to the laying of the
venue of any such action, suit, or proceeding, and further waives any claim that
any such action, suit, or proceeding brought in any of the aforesaid courts has
been brought in any inconvenient forum.
SECTION 14.4 WAIVER OF IMMUNITY.
To the extent that the Borrower or any of its Subsidiaries or any of
their respective assets has, or hereafter may acquire, any right to immunity
from suit, set-off, legal proceedings generally, attachment prior to judgment,
attachment in aid of execution, or other attachment or execution of judgment on
the grounds of sovereignty or otherwise, the Borrower for itself, and its
Subsidiaries hereby irrevocably waives such rights to immunity in respect of
Obligations. In addition, the Borrower hereby irrevocably waives, to the fullest
extent it may effectively do so, the right to demand that either Agent or any
Lender post a performance bond or guarantee (excepcion de arraigo) in any action
or proceeding against the Borrower or its property in Argentina.
SECTION 14.5 PROCESS AGENT.
The Borrower has appointed CT Corporation System with offices at 111
Eighth Avenue, New York, New York 10011 and its successors as the Borrower's
designee, appointee, and agent to receive, accept and acknowledge, for and on
behalf of the Borrower, service of any and all legal process, summons, notices
and documents which may be served in such action, suit or proceeding relating to
this Agreement or the Notes or any other Financing Document in the case of the
courts of the United States District Court of the Southern District of New York
or of the
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courts of the State of New York sitting in New York, Borough of Manhattan, which
service may be made on any such designee, appointee, and agent in accordance
with legal procedures prescribed for such courts. So long as the Borrower has
any Obligations, the Borrower agrees to take any and all action necessary to
continue such designation in full force and effect and should such designee,
appointee, and agent become unavailable for this purpose for any reason not
attributable to the Borrower, the Borrower shall forthwith grant a similar
special irrevocable power of attorney to a new designee, appointee, and agent
with offices in New York, New York, which shall irrevocably agree to act as
such, with the powers and for purposes specified in this Section 14.5. The
Borrower further irrevocably consents and agrees to service of any and all legal
process, summons, notices, and documents out of any of the aforesaid courts in
any such action, suit or proceeding relating to this Agreement, the Notes, or
any other Financing Document delivered to the Borrower in accordance with this
Section 14.5 or to its then designee, appointee, or agent for service. If
service is made upon such designee, appointee, and agent, a copy of such
process, summons, notice or document shall also be provided to the Borrower, by
registered or certified mail, or overnight express air courier, provided that
failure to provide such copy to the Borrower shall not impair or affect in any
way the validity of such service or any judgment rendered in such action or
proceedings. The Borrower agrees that service upon the Borrower or any such
designee, appointee, and agent as provided for in this Section 14.5 shall
constitute valid and effective personal service upon the Borrower with respect
to matters contemplated in this Section 14.5 and that the failure of any such
designee, appointee, and agent to give any notice of such service to the
Borrower shall not impair or affect in any way the validity of such service or
any judgment rendered in any action or proceeding based thereon. Nothing herein
shall limit or be construed to limit the rights of the Lenders to commence
proceedings against the Borrower in any other venue where assets of the Borrower
may be found.
SECTION 14.6 LEGAL PROCESS IN OTHER JURISDICTIONS.
Nothing in Section 14.3 or in Section 14.5 shall affect the right of any
Lender or Agent to serve legal process in any other manner permitted by law or
affect the right of any Lender or the Administrative Agent to bring any action
or proceeding against the Borrower or its property in the courts of other
competent jurisdictions, including, without limitation, the courts sitting in
the City of Buenos Aires, Argentina.
SECTION 15. THE AGENTS
SECTION 15.1. AUTHORIZATION AND ACTION.
The Lenders hereby appoint and authorize the Administrative Agent and the
Collateral Agent to exercise such powers and discretion under this Agreement and
the other Financing Documents, as are delegated to them, respectively, by the
terms hereof and thereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for in
the Financing Documents (including, without limitation, enforcement or
collection of the Notes), neither Agent shall be required to exercise any
discretion or take any
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action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders; provided, however, that neither Agent shall be required to
take any action that exposes it to personal liability or that is contrary to
this Agreement or Applicable Law. Each Agent hereunder agrees to give to the
Lenders prompt notice of each notice given to it by the Borrower pursuant to the
terms of this Agreement.
SECTION 15.2 AGENT'S RELIANCE.
Neither Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with the Financing Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Agents: (a) may treat the payee of any Note as the holder thereof
until the Administrative Agent receives and accepts an Assignment and Assumption
Agreement entered into by the payee of such Note, as assignor, and an assignee;
(b) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) make no
warranty or representation to the Lenders and shall not be responsible to any
Lender for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (d) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement on the part of the Borrower or
to inspect the property (including the books and records) of the Borrower; (e)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any Lien created or purported to be created under or
in connection with, this Agreement or any other instrument or document furnished
pursuant thereto; and (f) shall incur no liability under or in respect of this
Agreement by acting upon any notice, consent, certificate or other instrument or
writing (which may be by facsimile, electronic mail or telex) believed by it to
be genuine and signed or sent by the proper party or parties.
SECTION 15.3 LENDER CREDIT DECISION.
Each Lender acknowledges that it has, independently and without reliance
upon either Agent and based on the financial statements referred to in Section
7.7 of this Agreement and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon any Agent and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement.
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SECTION 15.4 LENDER INDEMNIFICATION.
The Lenders agree to indemnify each Agent ratably according to the
respective principal amount of the Notes then held by the Lenders (or if no
Notes are at the time outstanding or if any Notes are held by Persons that are
not the Lenders, ratably according to the respective amounts of the Commitment)
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against such Agent in any way relating to or arising out of this Agreement or
any action taken or omitted by such Agent under this Agreement (to the extent
not promptly reimbursed by the Borrower); provided, however, that the Lenders
shall not be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, the Lenders agree to reimburse each Agent promptly
upon demand for its ratable share of any costs and expenses (including, without
limitation, fees and expenses of counsel) payable by the Borrower under Sections
11.1 and 11.2, to the extent that such Agent is not promptly reimbursed for such
costs and expenses by the Borrower.
SECTION 15.5 SUCCESSOR AGENTS.
Either Agent may resign at any time by giving written notice thereof to
the Lenders and the Borrower and may be removed at any time with or without
cause by the Required Lenders. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed, and shall have accepted such
appointment, within thirty (30) days after the retiring Agent's giving of notice
of resignation or the Required Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States or of
any State thereof and having a combined capital and surplus of at least one
hundred million Dollars (US$100,000,000). Upon the acceptance of any appointment
as an Agent hereunder by a successor Agent and, in the case of a successor
Collateral Agent, upon the execution and filing or recording of such instruments
or notices, as may be necessary or desirable, or as the Required Lenders may
request, in order to continue the perfection of the security interests granted
or purported to be granted under the Security Documents, such successor Agent
shall succeed to and become vested with all the rights, powers, discretion,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Agent's resignation or removal hereunder as an Agent, the provisions of
this Section 15 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was an Agent under this Agreement.
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SECTION 16. GENERAL PROVISIONS
SECTION 16.1 NOTICES.
All communications and notices provided for hereunder shall be in writing
and shall be personally delivered, mailed by postage prepaid registered mail
(airmail if international), return receipt requested, or telefaxed (with a
confirmation copy by postage prepaid registered mail, return receipt requested):
If to the Borrower: IMPSAT S.A.
Alferez Pareja 256
(1107) Buenos Aires, Argentina
Attention: President
Fax No.: 54 11 4307 1525
If to IMPSAT: IMPSAT Corporation
c/o IMPSAT USA, Inc.
2040 North Dixie Highway
Wilton Manors, Florida 33305
Attention: President
Fax No.: (954) 779-3766
If to the Lenders: Nortel Networks Corporation
c/o Nortel (CALA) Inc.
1500 Concord Terrace
Sunrise, FL 33323-2815
Attention: Vice President and General Counsel
Fax No. (954) 851-8900
With a copy to: Baker & McKenzie
805 Third Avenue
New York, NY 10022
Attention: Thomas W. Studwell, Esq.
Fax No.: (212) 891-3521
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If to the Administrative Agent:Nortel Networks Corporation
c/o Nortel (CALA) Inc.
1500 Concord Terrace
Sunrise, FL 33323-2815
Attention: Vice President and General Counsel
Fax No. (954) 851-8900
If to the Collateral Agent: Nortel Networks Corporation
c/o Nortel (CALA) Inc.
1500 Concord Terrace
Sunrise, FL 33323-2815
Attention: Vice President and General Counsel
Fax No. (954) 851-8900
Except as otherwise specified herein, all notices shall be deemed duly given on
the date of actual receipt.
SECTION 16.2 SEVERABILITY OF PROVISIONS.
If any one or more of the provisions contained in this Agreement or any
documents executed in connection herewith shall be invalid, illegal, or
unenforceable in any respect, the validity, legality, and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired.
SECTION 16.3 BINDING EFFECT; SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of
each Party and its respective successors and assigns, provided that the Borrower
shall not assign or transfer any of its rights or Obligations hereunder except
with the prior written consent of the Administrative Agent and each Lender.
SECTION 16.4 AMENDMENT; WAIVER.
(a) GENERAL. Neither this Agreement nor any Financing Document may be
amended, waived, discharged, or terminated unless such change, waiver,
discharge, or termination is in writing signed by the Required Lenders, the
Administrative Agent or the Collateral Agent, as applicable, and the Borrower,
provided, however, that no such change, waiver, discharge or termination shall,
without the consent of each Lender affected thereby, (a) extend the final
maturity of any Loan or Note, or reduce the rate or extend the time of payment
of interest or fees thereon, or reduce the principal amount hereof, or increase
the Commitment of any Lender over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default other than a payment
default shall not constitute a change in the terms of any Commitment of any
Lender), (b) release any of the Collateral except as shall otherwise be provided
in any of the Financing Documents, (c) amend, modify or waive any provision of
this
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Section 16.4 or Sections 3, 4, 5, 11, 12, 15.4 and 16.6, (d) reduce the
percentages specified in the definition of Required Lenders, or (e) consent to
the assignment of any of the rights and Obligations of the Borrower under this
Agreement or any Collateral Agreements. The failure of any party to enforce at
any time any provision hereof or under any of the Notes or Security Documents
shall not be construed to be a waiver of such provisions or of the right of such
party thereafter to enforce any such provision or any other provision hereof or
thereof.
(b) DIRECTED CHANGES. In the event that, under the Turnkey Contract,
the Aggregate Price is increased as a result of Directed Changes (as those terms
are defined in the Turnkey Contract), the Parties shall negotiate in good faith
an amendment to this Agreement to increase the Commitment Amount accordingly.
SECTION 16.5 ENTIRE AGREEMENT.
This Agreement and the other Financing Documents constitute the entire
agreement and understanding of the Parties with respect to the subject matter
hereof, and supersede all prior agreements, discussions, and understandings
between the Lenders and the Borrower with respect to the subject matter hereof.
SECTION 16.6 RIGHT OF SET-OFF.
The Borrower's Obligations shall be paid in full in accordance with their
respective terms, and may not be offset against any obligations that Nortel, any
Lender, or any of their respective Affiliates may owe to the Borrower under any
other agreement, including (without limitation) any of the Nortel Contracts.
Each of the Lenders shall, to the fullest extent permitted by Applicable Law,
have the right to apply any and all amounts on deposit or on account (general or
special, time or demand, matured or unmatured, in whatever currency) with it or
with any of its branches, Subsidiaries, or Affiliates in reduction of past due
Obligations (whether such Obligations became due at scheduled maturity, by
acceleration or otherwise) of the Borrower hereunder.
SECTION 16.7 FURTHER ASSURANCES.
The Borrower agrees upon the reasonable request of any Agent or Lender
promptly to take such actions as are necessary to carry out the intent of this
Agreement and the other Financing Documents.
SECTION 16.8 TERM OF AGREEMENT; SURVIVAL.
Each agreement, representation, warranty, and covenant contained in this
Agreement shall survive any investigation made at any time by or on behalf of
the Lenders, and shall survive the Commitment Termination Date. This Agreement
shall continue to be in full force and effect and binding upon the Parties until
all of the Borrower's Obligations have been fully and indefeasibly paid and
performed, whereupon this Agreement shall terminate. Notwithstanding
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the foregoing, all the indemnification provisions in this Agreement shall
survive and all other provisions which by their terms survive termination shall
so survive.
SECTION 16.9 HEADINGS.
The various headings in this Agreement are intended for convenience only,
and shall not affect the meaning or interpretation of this Agreement.
SECTION 16.10 COUNTERPARTS.
This Agreement may be executed in any number of counterparts (including
facsimile transmissions thereof), each of which when so executed shall be an
original but all of which together shall constitute one instrument.
SECTION 16.11 CONFIDENTIALITY.
Each of the Parties hereby agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its Affiliates, directors, officers, employees and professional advisors,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of and will
agree to be bound by this confidentiality provision), (b) to the extent
requested by any regulatory authority, (c) to the extent required by Applicable
Law including in connection with a public offering of equity or debt securities
of the Borrower or IMPSAT or by any subpoena or similar legal process, (d) to
any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (f) subject to the execution and
delivery of an agreement containing provisions substantially the same as those
of this Section 16.11, to any assignee of or participant in, or any prospective
assignee of or participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the other Parties, or (h) to the extent such
Information (1) becomes publicly available other than as a result of a breach of
this Section 16.11 or (2) becomes available to such party on a non-confidential
basis from a source other than the other Parties.
For the purposes of this Section 16.11, "INFORMATION" means all
information received from any of the Parties relating to any of the Lenders, the
Fiber Optic Supplier or their respective businesses, other than any such
information that is available to the Parties on a non-confidential basis prior
to disclosure by any Party. Any Person required to maintain the confidentiality
of Information as provided in this Section 16.11 shall be considered to have
complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential Information.
-76-
<PAGE> 78
SECTION 16.12 COOPERATION.
The Borrower will cooperate (i) with Nortel, the Administrative Agent, if
applicable, and the lead agents for syndication (such lead agents and the
Administrative Agent being referred to collectively as the "SYNDICATION AGENTS")
in the syndication of the Loans and Commitments undertaken by the Syndication
Agents, and (ii) with Nortel and any underwriter or placement agent for the
placement or distribution of the Replacement Notes ("PLACEMENT AGENT") by: (a)
upon reasonable notice making senior officers of the Borrower available for a
meeting with prospective assignees and the Syndication Agents, the Placement
Agent and their respective consultants; and (b) providing such other assistance
as may be reasonably requested by the Syndication Agents and the Placement
Agent, such as responding to questions from prospective assignees with respect
to the operations, business plans, results and other matters relating to the
Borrower, its Affiliates and IMPSAT.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
as of the date first written above.
BORROWER:
IMPSAT S.A.
By:
---------------------------
Name:
---------------------------
Its:
---------------------------
LENDERS:
NORTEL NETWORKS CORPORATION
By:
---------------------------
Name:
---------------------------
Its:
---------------------------
-77-
<PAGE> 79
ADMINISTRATIVE AGENT:
NORTEL NETWORKS CORPORATION
By:
---------------------------
Name:
---------------------------
Its:
---------------------------
COLLATERAL AGENT:
NORTEL NETWORKS CORPORATION
By:
---------------------------
Name:
---------------------------
Its:
---------------------------
-78-
<PAGE> 80
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 1. DEFINITIONS..........................................................................................................2
SECTION 1.1 DEFINED TERMS...........................................................................................2
SECTION 1.2 OTHER DEFINITIONS......................................................................................18
SECTION 1.3 INTERPRETATION.........................................................................................20
SECTION 1.4 ACCOUNTING PRINCIPLES AND TERMS........................................................................20
SECTION 2. THE CREDIT FACILITY................................................................................................20
SECTION 2.1 LOANS. ................................................................................................20
SECTION 2.2 USE OF PROCEEDS........................................................................................20
SECTION 2.3 PROCEDURE FOR BORROWING; DISBURSEMENTS.................................................................21
SECTION 2.4 NOTES. ................................................................................................22
SECTION 2.5 VOLUNTARY TERMINATION OR REDUCTION OF THE COMMITMENT...................................................23
SECTION 3. PAYMENT OF PRINCIPAL, INTEREST AND FEES............................................................................24
SECTION 3.1 REPAYMENT OF PRINCIPAL.................................................................................24
SECTION 3.2 PREPAYMENTS............................................................................................24
SECTION 3.3 INTEREST...............................................................................................26
SECTION 3.4 FEES. .................................................................................................27
SECTION 3.5 NATURE OF PAYMENTS.....................................................................................28
SECTION 3.6 PAYMENT PROCEDURES.....................................................................................28
SECTION 3.7 ADMINISTRATIVE AGENT'S DETERMINATION...................................................................28
SECTION 3.8 PAYMENTS PRO RATA......................................................................................28
SECTION 4. PAYMENT IN DOLLARS; EVENT OF SOVEREIGN RISK........................................................................29
SECTION 4.1 OBLIGATION TO PAY IN DOLLARS; JUDGMENT CURRENCY........................................................29
SECTION 4.2 EVENT OF SOVEREIGN RISK................................................................................30
SECTION 5. FUNDING AND YIELD PROTECTION.......................................................................................31
SECTION 5.1 TAXES. ................................................................................................31
SECTION 5.2 FUNDING BREAKAGE COSTS.................................................................................33
SECTION 5.3 ILLEGALITY.............................................................................................33
SECTION 5.4 INCREASED COSTS AND YIELD PROTECTION...................................................................34
SECTION 6. DELIVERIES; CONDITIONS PRECEDENT...................................................................................35
SECTION 6.1 CONCURRENT DELIVERIES..................................................................................35
SECTION 6.2 CONDITIONS PRECEDENT TO INITIAL DISBURSEMENT; CLOSING..................................................35
SECTION 6.3 CONDITIONS PRECEDENT TO ALL DISBURSEMENTS..............................................................37
SECTION 6.4 ENGLISH TRANSLATIONS...................................................................................38
SECTION 6.5 TERMINATION BY THE LENDERS.............................................................................39
</TABLE>
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<PAGE> 81
TABLE OF CONTENTS
(CONT'D)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 7. REPRESENTATIONS AND WARRANTIES.....................................................................................39
SECTION 7.1 CORPORATE STATUS.......................................................................................39
SECTION 7.2 CORPORATE POWER........................................................................................39
SECTION 7.3 GOVERNMENTAL APPROVALS.................................................................................40
SECTION 7.4 NO VIOLATION...........................................................................................40
SECTION 7.5 PROCEEDINGS............................................................................................41
SECTION 7.6 TAXES .................................................................................................41
SECTION 7.7 FINANCIAL STATEMENTS...................................................................................41
SECTION 7.8 THE PROJECT............................................................................................42
SECTION 7.9 ENVIRONMENTAL MATTERS..................................................................................42
SECTION 7.10 TRANSACTIONS WITH AFFILIATES...........................................................................43
SECTION 7.11 INDEBTEDNESS...........................................................................................43
SECTION 7.12 PROPERTIES.............................................................................................43
SECTION 7.13 INTELLECTUAL PROPERTY..................................................................................44
SECTION 7.14 BOOKS AND RECORDS......................................................................................44
SECTION 7.15 THE LICENSES...........................................................................................44
SECTION 7.16 NO MATERIAL ADVERSE CHANGE.............................................................................44
SECTION 7.17 INSURANCE..............................................................................................44
SECTION 7.18 COLLATERAL.............................................................................................45
SECTION 7.19 INVESTMENT COMPANY ACT.................................................................................45
SECTION 7.20 IMMUNITY...............................................................................................45
SECTION 7.21 TRUE AND COMPLETE DISCLOSURE...........................................................................45
SECTION 8. COVENANTS..........................................................................................................46
SECTION 8.1 AFFIRMATIVE COVENANTS..................................................................................46
SECTION 8.2 NEGATIVE COVENANTS.....................................................................................53
SECTION 8.3 FINANCIAL COVENANTS....................................................................................55
SECTION 8.4 OPERATIONAL COVENANT...................................................................................58
SECTION 9. SECURITY...........................................................................................................59
SECTION 9.1 GRANT OF SECURITY INTEREST.............................................................................59
SECTION 9.2 ESCROW ACCOUNTS........................................................................................59
SECTION 9.3 RELEASE OF COLLATERAL..................................................................................59
SECTION 10. EVENTS OF DEFAULT.................................................................................................60
SECTION 10.1 EVENTS OF DEFAULT......................................................................................60
SECTION 10.2 REMEDIES UPON EVENT OF DEFAULT.........................................................................64
SECTION 10.3 CUMULATIVE RIGHTS......................................................................................65
</TABLE>
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<PAGE> 82
TABLE OF CONTENTS
(CONT'D)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 11. EXPENSES AND INDEMNIFICATION......................................................................................66
SECTION 11.1 EXPENSES...............................................................................................66
SECTION 11.2 INDEMNIFICATION........................................................................................66
SECTION 12. ASSIGNMENT AND PARTICIPATION......................................................................................67
SECTION 12.1 ASSIGNMENT.............................................................................................67
SECTION 12.2 PARTICIPATION..........................................................................................68
SECTION 13. OPTION TO REVISE STRUCTURE........................................................................................68
SECTION 13.1 OPTION TO REVISE.......................................................................................68
SECTION 13.2 COSTS BORNE BY LENDERS.................................................................................69
SECTION 13.3 TERMS OF REPLACEMENT NOTES.............................................................................69
SECTION 13.4 APPLICATION OF PROCEEDS................................................................................69
SECTION 13.5 RELEASE OF OBLIGATIONS.................................................................................70
SECTION 13.6 TERMINATION OF OPTION..................................................................................70
SECTION 14. GOVERNING LAW AND JURISDICTION....................................................................................70
SECTION 14.1 GOVERNING LAW..........................................................................................70
SECTION 14.2 WAIVER OF JURY TRIAL...................................................................................70
SECTION 14.3 JURISDICTION; VENUE FOR SUIT...........................................................................70
SECTION 14.4 WAIVER OF IMMUNITY.....................................................................................71
SECTION 14.5 PROCESS AGENT..........................................................................................71
SECTION 14.6 LEGAL PROCESS IN OTHER JURISDICTIONS...................................................................72
SECTION 15. THE AGENTS........................................................................................................72
SECTION 15.1 AUTHORIZATION AND ACTION...............................................................................72
SECTION 15.2 AGENT'S RELIANCE.......................................................................................73
SECTION 15.3 LENDER CREDIT DECISION.................................................................................73
SECTION 15.4 LENDER INDEMNIFICATION.................................................................................73
SECTION 15.5 SUCCESSOR AGENTS.......................................................................................74
SECTION 16. GENERAL PROVISIONS................................................................................................74
SECTION 16.1 NOTICES................................................................................................74
SECTION 16.2 SEVERABILITY OF PROVISIONS.............................................................................76
SECTION 16.3 BINDING EFFECT; SUCCESSORS AND ASSIGNS.................................................................76
SECTION 16.4 AMENDMENT; WAIVER......................................................................................76
SECTION 16.5 ENTIRE AGREEMENT.......................................................................................77
SECTION 16.6 RIGHT OF SET-OFF.......................................................................................77
</TABLE>
-iii-
<PAGE> 83
TABLE OF CONTENTS
(CONT'D)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 16.7 FURTHER ASSURANCES.....................................................................................77
SECTION 16.8 TERM OF AGREEMENT; SURVIVAL............................................................................77
SECTION 16.9 HEADINGS...............................................................................................78
SECTION 16.10 COUNTERPARTS...........................................................................................78
SECTION 16.11 CONFIDENTIALITY........................................................................................78
SECTION 16.12 COOPERATION............................................................................................79
</TABLE>
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<PAGE> 84
TABLE OF CONTENTS
(CONT'D)
SCHEDULES
7.1 SUBSIDIARIES
7.5 PROCEEDINGS
7.10 TRANSACTIONS WITH AFFILIATES
7.11 INDEBTEDNESS
7.12 EXISTING LIENS
7.13 INTELLECTUAL PROPERTY
7.15 LICENSES
7.16 MATERIAL ADVERSE CHANGE
EXHIBITS
A FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
B FORM OF DISBURSEMENT REQUEST
C FORM OF EQUIPMENT PLEDGE AGREEMENT
D FORM OF ESCROW ACCOUNT AGREEMENT
E FORM OF INTERCREDITOR AGREEMENT
F FORM OF MORTGAGE DEED
G FORM OF NOTE
H LIST OF PROJECT AGREEMENTS
I FORM OF NOTICE OF CONSOLIDATION
J SUBJECT MATTER OF OPINION OF U.S. COUNSEL
K SUBJECT MATTER OF OPINION OF ARGENTINE COUNSEL
-v-
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-88389 of IMPSAT Fiber Networks, Inc. of our report dated March 12, 1999
appearing in the Prospectus, which is part of such Registration Statement, and
to the reference to us under the headings "Selected Consolidated Financial and
Other Data" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
- ------------------------------
Certified Public Accountants
Miami, Florida
January 14, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF IMPSAT CORPORATION AND ITS CONSOLIDATED
SUBSIDIARIES AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 146,078
<SECURITIES> 0
<RECEIVABLES> 46,949
<ALLOWANCES> 18,050
<INVENTORY> 0
<CURRENT-ASSETS> 214,399
<PP&E> 317,219
<DEPRECIATION> 211,430
<TOTAL-ASSETS> 599,192
<CURRENT-LIABILITIES> 133,902
<BONDS> 384,113
145,389
0
<COMMON> 716
<OTHER-SE> 221,013
<TOTAL-LIABILITY-AND-EQUITY> 599,192
<SALES> 0
<TOTAL-REVENUES> 167,129
<CGS> 0
<TOTAL-COSTS> 230,099
<OTHER-EXPENSES> 10,215
<LOSS-PROVISION> 14,660
<INTEREST-EXPENSE> 41,976
<INCOME-PRETAX> (115,161)
<INCOME-TAX> 18,952
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (100,977)
<EPS-BASIC> (1.89)
<EPS-DILUTED> (1.89)
</TABLE>
