<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
EL SITIO, INC.
(Exact name of Registrant as specified in its charter)
THE SITE, INC.
(Translation of Registrant's name into English)
<TABLE>
<S> <C> <C>
BRITISH VIRGIN ISLANDS 7379 NOT APPLICABLE
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
Incorporation or organization) Classification Code Number) Number)
</TABLE>
------------------------
EL SITIO, INC.
AVENIDA BELGRANO 845
1092 BUENOS AIRES, ARGENTINA
(011) 5411-4343-6700
(Address, including zip code, and telephone number of registrant's principal
executive offices)
--------------------------
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 664-1666
(Name, address, including zip code, and telephone number, of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
NEIL A. TORPEY, ESQ. GLENN M. REITER, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER LLP SIMPSON THACHER & BARTLETT
399 PARK AVENUE 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017
TELEPHONE: (212) 318-6000 TELEPHONE: (212) 455-2000
</TABLE>
--------------------------
Approximate date of commencement of proposed sale of the securities to the
public:
AS SOON AS PRACTICABLE 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, please 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED(1)(2) OFFERING PRICE (1) REGISTRATION FEE(1)
<S> <C> <C> <C>
Common Shares, 9,430,000
par value $.01 per share Common Shares $122,590,000 $36,777
</TABLE>
(1) The filing fee has been calculated pursuant to Rule 457(o) promulgated under
the Securities Act of 1933.
(2) Includes 1,230,000 common shares which the underwriters have the option to
purchase to cover over-allotments, if any.
THE REGISTRANT HEREBY AMENDS THIS 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 SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 19, 1999
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY U.S. FEDERAL SECURITIES LAW TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE>
PROSPECTUS
8,200,000 SHARES
[LOGO]
WWW.ELSITIO.COM
EL SITIO, INC.
(INCORPORATED IN THE BRITISH VIRGIN ISLANDS)
COMMON SHARES
----------------------------------------------------------------
This is our initial public offering of common shares. We are offering 8,200,000
common shares. No public market currently exists for our common shares.
We propose to list the common shares on the Nasdaq National Market under the
symbol "LCTO." We expect the public offering price to be between $11.00 and
$13.00 per share.
INVESTING IN THE COMMON SHARES INVOLVES RISKS. RISK FACTORS BEGIN ON PAGE 12.
<TABLE>
<CAPTION>
Per Share Total
--------- -----------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to us............................ $ $
</TABLE>
We have granted the underwriters a 30-day option to purchase up to 1,230,000
additional common shares from us on the same terms and conditions set forth
above solely to cover over-allotments, if any.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
We expect to deliver the common shares on or about December , 1999.
- --------------------------------------------------------------------------------
JOINT LEAD MANAGERS
CREDIT SUISSE FIRST BOSTON LEHMAN BROTHERS
--------------------
MERRILL LYNCH & CO. SALOMON SMITH BARNEY
WIT CAPITAL CORPORATION FIDELITY CAPITAL MARKETS
a division of National Financial
Services Corporation
December , 1999
<PAGE>
[Artwork consisting of El Sitio's medallion, a pre-Colombian stone, and a brief
description of El Sitio.]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................... 5
RISK FACTORS.......................... 12
USE OF PROCEEDS....................... 28
DIVIDEND POLICY....................... 28
CAPITALIZATION........................ 29
DILUTION.............................. 31
SELECTED FINANCIAL DATA............... 33
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 35
BUSINESS.............................. 50
MANAGEMENT............................ 71
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRINCIPAL SHAREHOLDERS................ 77
RELATED PARTY TRANSACTIONS............ 80
SHARES ELIGIBLE FOR FUTURE SALE....... 82
DESCRIPTION OF SHARE CAPITAL.......... 84
TAXATION.............................. 87
UNDERWRITING.......................... 92
NOTICE TO CANADIAN RESIDENTS.......... 94
LEGAL MATTERS......................... 95
EXPERTS............................... 95
WHERE YOU CAN FIND ADDITIONAL
INFORMATION......................... 95
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
NEITHER WE NOR ANY UNDERWRITER HAS AUTHORIZED ANY PERSON TO PROVIDE YOU WITH
DIFFERENT OR ADDITIONAL INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR
IS IT SEEKING AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE SUCH
OFFER OR SALE IS NOT PERMITTED.
DEALER PROSPECTUS DELIVERY REQUIREMENT
UNTIL JANUARY , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
3
<PAGE>
[This Page Intentionally Left Blank.]
4
<PAGE>
SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND OUR CONSOLIDATED FINANCIAL STATEMENTS APPEARING ELSEWHERE IN
THIS PROSPECTUS.
EXCEPT AS OTHERWISE INDICATED OR AS THE CONTEXT MAY OTHERWISE REQUIRE, ALL
INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION AND ASSUMES THAT ALL OF OUR OUTSTANDING CLASS A
CONVERTIBLE PREFERRED SHARES HAVE CONVERTED INTO OUR COMMON SHARES, WHICH WILL
AUTOMATICALLY OCCUR UPON THE CLOSING OF THIS OFFERING.
ALL INFORMATION IN THIS PROSPECTUS, UNLESS OTHERWISE INDICATED, GIVES EFFECT
TO A 2-FOR-1 SHARE SPLIT WHICH WILL BE COMPLETED PRIOR TO THE CLOSING OF THIS
OFFERING.
"EL SITIO" AND THE MEDALLION DESIGN ARE TRADEMARKS OF EL SITIO, INC. THIS
PROSPECTUS ALSO INCLUDES TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF OTHER
COMPANIES.
EL SITIO, INC.
OUR BUSINESS
We are an Internet network providing country-specific and regional content
for Spanish- and Portuguese-speaking audiences in Latin America and the United
States. Recognizing that the countries in the Americas are diverse, we have
designed our network to consist of country Websites as well as a global Website.
We currently have country Websites for, and sales and content production offices
in, Argentina, Brazil, Mexico, the United States and Uruguay. We plan to
establish sales and content production offices in Colombia before the end of
1999, and sales and content production offices in Chile and Venezuela during
2000. By offering content and interactive resources designed to be responsive to
our users' preferences, we seek to make our network their "home on the Internet"
and, in so doing, to create communities of users, develop user loyalty and
increase traffic on our Websites. The launch of each country Website represents
a potential new community of users. By building substantial communities of
users, we are developing a platform for generating revenues from advertising,
branded retail dial-up Internet access, or "connectivity", service and, in the
future, e-commerce. We recently began to offer connectivity services in
Argentina and Brazil and expect to offer similar services in Colombia before the
end of 1999. We are also beginning to develop e-commerce services for Spanish-
and Portuguese-speaking audiences in Latin America and the United States.
Our founders believed that a scarcity of Spanish- and Portuguese-language
content was the principal factor limiting the growth of Internet usage in Latin
America. As a result, from our inception in mid-1997, we initially concentrated
on the development of a pilot Website for Argentina with quality content and
interactive resources in Spanish and, at the same time, carried out extensive
market testing to understand users' preferences. We then began to roll-out our
network of country Websites during 1998 and, most recently, launched our Website
in the United States in September 1999. Our registered users (meaning users who
have provided personal information such as name, e-mail address and address)
grew from 54,132 persons in June 1998 to 291,567 persons in July 1999. From
June 1998 to July 1999, the number of pages viewed by our users increased from
3.0 million to 21.0 million per month. On August 1, 1999, we launched our first
mass media-based branding and advertising campaign in Argentina, Brazil, Mexico
and Uruguay and, on September 9, 1999, launched the campaign in the United
States. In the first three months of this campaign (through October 31, 1999),
our registered users increased by approximately 69% to 498,515 at October 31,
1999 and the number of pages viewed per month by our users increased by over
250% to 73.9 million in that month. In March 1999, we also commenced measuring
unique visitors (meaning users who visit our Websites multiple times but who are
counted in the relevant period as having visited the Websites only one time).
The number of unique visitors has increased from 174,800 in March 1999 to
approximately 1.6 million in October 1999. We
5
<PAGE>
attribute this recent growth principally to our mass media-based branding and
advertising campaign, and cannot predict whether such growth will continue.
Our network is located at WWW.ELSITIO.COM for all of our Spanish-language
Websites and at WWW.OSITE.COM.BR for our Portuguese-language Website. An on-line
user accessing our network in any of the countries for which we operate a
country Website is directly linked to our Website for that user's home country;
other users are linked to our global Website. Our users encounter appealing
content and interactive resources in their native language and organized
according to eleven themes, which we call channels. These channels include,
among others, movies, music, news, parenting, relationships, shows, sports and
technology. Our users also receive access to free e-mail, chat rooms, bulletin
boards, personal home pages, contests and prizes. We regularly enhance our
Websites' features in response to user suggestions and our own service, content
and product developments. We provide content and community features on our
Websites to our users (including our registered users) free of charge.
Each of our country Websites is supported by a team of management,
marketing, sales and content production personnel based in the relevant country.
Each team is responsible for providing country-specific content and community
features adapted to the cultural and other tastes of the relevant market. Our
in-country teams are supported by our global team, which provides technical and
design support and global content for our network. This structure affords our
users the dual advantages of, first, the size and resources of our network and,
second, the country-specific content and community features most useful to them.
Operationally, it permits us to maximize economies of scale to efficiently
support multiple markets with differing content and features from a single
global platform.
In order to offer our users a broader range of Internet services and to
further foster user loyalty, we recently acquired IMPSAT Corporation's retail
dial-up access customers in Argentina and Brazil and are in the process of
acquiring its retail dial-up access customers in Colombia. The aggregate
purchase price for these acquisitions is $21.5 million. As a result of these
acquisitions, we expect to receive approximately 73,000 dial-up customers in the
three countries. These acquisitions should enable us to utilize our Websites in
Argentina, Brazil and Colombia as portals for our dial-up access customers, as
our connectivity customers will be directly linked to our Websites upon
connecting to the Internet, and to cross-market connectivity services to the
users of our network of Websites. To subscribe to our connectivity services, a
user pays a monthly fee to us in exchange for connectivity to the Internet. A
dial-up access subscriber automatically becomes a registered user of El Sitio's
network, although not vice versa. We will not acquire the telecommunications
infrastructure required to provide these services, but will instead outsource
that infrastructure from third-party providers--initially, under three-year
agreements with subsidiaries of IMPSAT Corporation. In conjunction with these
acquisitions, IMPSAT Corporation, which is a provider of private networks of
integrated data and voice communications systems in a number of countries of
Latin America, has become one of our major shareholders. We do not now offer or
intend to offer connectivity services in countries other than Argentina, Brazil
and Colombia.
Our results of operations for the nine months ended September 30, 1999
reflect that we continue to be in an early stage of operations. We continue to
build sales and marketing teams, establish advertising and sales offices, and
implement our media-based branding and advertising campaigns. We incurred
increased expenses that more than offset revenue growth during the nine months
ended September 30, 1999. We recorded net revenues of $1.5 million and a net
loss of $13.9 million in the nine months ended September 30, 1999, compared to
net revenues of $609,000 and a net loss of $1.8 million in the corresponding
period of 1998. Our increased net losses for the nine-month period ended
September 30, 1999 were primarily attributable to an increase in personnel and
other expenses necessary to support the roll-out or expansion of offices and
Websites in Brazil, Mexico and the United States and in anticipation of the
launch of commercial operations in these and other countries during the period.
For the nine months ended September 30, 1999, El Sitio generated 46.9%, 29.9%
and 22.2% of its revenues from Argentina, Uruguay and Mexico, respectively.
After taking into account our
6
<PAGE>
acquisitions of the three dial-up access businesses, approximately 50% of our
revenues in this nine-month period would have been generated from Brazil, 31%
from Argentina, 12% from Colombia, 4% from Uruguay and 3% from Mexico.
We were incorporated in July 1997 in the British Virgin Islands. We are a
holding company with operating subsidiaries in Argentina, Brazil, Mexico, the
United States and Uruguay. Our principal executive offices are located at
Avenida Belgrano 845, 1092 Buenos Aires, Argentina, and our telephone number is
011-5411-4343-6700.
OUR MARKET OPPORTUNITY
The Spanish- and Portuguese-speaking audiences in Latin America and the
United States together represent one of the fastest growing user groups on the
Web today. While we do not expect to have country Websites or operations for
every country in Latin America, our network is targeted to the entire Latin
American region. In the United States, we are currently targeting the
Spanish-speaking populations in Chicago, Houston, Los Angeles, Miami, New York,
San Antonio and San Diego. We are primarily targeting individual users, although
we anticipate that business and other entities will become important
participants in our communities of users.
We believe a large and growing market consisting of Spanish- and
Portuguese-speaking audiences exists in Latin America and the United States for
content, connectivity and e-commerce services, and that this market presents us
with a significant opportunity. Latin America had a total population at the end
of 1998 of 492.4 million people, of whom more than two-thirds are under
35 years of age. The region had an aggregate gross domestic product in 1998 of
$2.0 trillion, of which Brazil, Mexico and Argentina accounted for more than
three-fourths. The wealthiest 20% of the Latin American population accounts for
approximately two-thirds of the overall buying power in the region and
constitutes our primary target market in Latin America. Internet use in Latin
America is expected to increase from an estimated 4.8 million users in 1998 to
19.1 million users in 2003. Internet advertising targeting Latin America is
projected to grow from approximately $23.6 million in 1998 to approximately
$948.9 million in 2003. Similarly, on-line sales in Latin America are projected
to increase from approximately $166.8 million in 1998 to approximately
$8.0 billion in 2003. As of May 1999, Internet penetration rates were 1.5% in
Argentina, 2.0% in Brazil, 6.0% in Colombia, 1.0% in Mexico and 2.9% in Chile.
The United States has a total Hispanic population of approximately
31.4 million people, which has grown at a compound annual rate of 3.7% between
1996 and 1999. By 2000, the U.S. Hispanic population is expected to constitute
approximately 11% of the total U.S. population. Advertising targeting U.S.
Hispanics was $1.7 billion in 1998. As of January 1, 1998, U.S. Hispanics
represented $273.2 billion in annual buying power. As of May 1999, the Internet
penetration rate for the U.S. Hispanics was approximately 19.0%.
OUR STRATEGY
Our goal is to become the leading Internet network for Spanish- and
Portuguese-speaking audiences in Latin America and the United States. To achieve
our goal, and to take advantage of our market opportunity, we continue to
implement a strategy consisting of the following principal elements:
- BUILDING A MARKET-LEADING NETWORK. We seek to build a leading Internet
network by:
V further developing country-specific and regional content;
V incorporating additional community-building features; and
V strengthening our brand identity.
7
<PAGE>
- GENERATING REVENUES FROM OUR NETWORK. We seek to increase substantially
revenues from our network by:
V forging one-on-one relationships with advertisers;
V integrating connectivity services into our network; and
V developing our e-commerce business.
- LEVERAGING STRATEGIC RELATIONSHIPS. We intend to leverage our existing
relationships with shareholders and enter into new strategic relationships
to expand our network and enhance our content, marketing and sales.
OUR SHAREHOLDERS
Roberto Vivo-Chaneton, our chairman, and Roberto Cibrian-Campoy, our chief
executive officer, founded our company in 1997. Mr. Vivo is a co-founder and
deputy chief executive officer of IMPSAT Corporation. Mr. Cibrian was the
founder and the president of Cibrian-Campoy Creativos, S.A., an Argentine
company which engaged in electronic arts, computer animation and multimedia and
which was the predecessor entity for our Argentine subsidiary.
In July 1999, we completed a private placement of 6,334,004 Class A
convertible preferred shares for a gross purchase price of $44.4 million,
consisting of 5,477,088 shares sold for $38.4 million in cash and 856,916 shares
to be issued on a quarterly basis through January 2001 in exchange for
$6.0 million in non-cash advertising time credits. Each Class A convertible
preferred share will, after giving effect to a 2-for-1 share split, convert
automatically into two common shares upon completion of this offering.
Our principal shareholders, in addition to Mr. Vivo and Mr. Cibrian,
include:
- IAMP (El Sitio) Investments Ltd., an investment fund jointly controlled by
Hicks, Muse, Tate & Furst Incorporated and the Cisneros Group of
Companies;
- SLI.Com, an investment fund controlled by Guillermo Liberman, an Argentine
entrepreneur with interests in agribusiness, fisheries, telecommunications
and hotel development;
- GCC Investments, LLC, an indirect subsidiary of GC Companies Inc., which
owns and operates General Cinema Theatres; and
- IMPSAT Corporation, a Latin American telecommunications company.
In mid-November 1999, we completed a private placement of 1,111,111 Class B
convertible preferred shares for a purchase price of $10.0 million in cash, or
$9.00 per Class B convertible preferred share. Purchasers of the Class B
convertible preferred shares consisted of Intel Atlantic, Inc., a subsidiary of
Intel Corporation, and Latinvest Asset Management do Brasil, Ltda., an affiliate
of Globalvest Management Company, L.P. The Class B convertible preferred shares
have an annual dividend rate of 8%. Each Class B convertible preferred share
will automatically convert, on the date six months after the closing of this
offering, into one common share. The difference between the initial public
offering price per common share and $9.00 price per Class B convertible
preferred share will be amortized as a deemed dividend during the same six-month
period.
8
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common shares offered..................... 8,200,000 shares
Common shares outstanding immediately
after this offering..................... 38,574,460 shares (1)
Underwriters' over-allotment option....... Common shares offered and common shares outstanding
after this offering would each increase by 1,230,000
shares if the underwriters' over-allotment option is
exercised in full.
Use of proceeds........................... We intend to use the net proceeds from this offering as
follows:
- approximately $48.0 million to fund our sales and
marketing, and branding and advertising
activities;
- approximately $20.0 million to develop new
services and products, and to develop our network
infrastructure;
- approximately $1.3 million to pay dividends in
respect of our Class A convertible preferred shares
accrued as of the closing date of this offering;
and
- the balance for general corporate and working
capital requirements.
We have not definitively allocated any portion of the
net proceeds for the above specified purposes. We will
retain complete discretion in applying the proceeds of
this offering.
Proposed Nasdaq National Market symbol.... "LCTO"
</TABLE>
- ------------------------
(1) Excludes the following:
- 2,268,600 common shares reserved for issuance upon exercise of options
granted under our 1999 share option plan at a weighted average exercise
price of $5.73 per share;
- 971,400 common shares reserved for issuance upon the exercise of options
that we may grant under our 1999 share option plan;
- 1,713,832 common shares issuable upon conversion of our Class A
convertible preferred shares, which will be issued on a quarterly basis
through January 2001 in exchange for $6.0 million of non-cash advertising
time credits;
- 239,936 common shares issuable upon exercise of a warrant issued to Bear,
Stearns & Co. Inc. as part of its fee in connection with the July 1999
private placement of our Class A convertible preferred shares; and
- 1,111,111 common shares issuable upon conversion of our Class B
convertible preferred shares, which were sold in a private placement in
mid-November 1999 for an aggregate purchase price of $10.0 million in
cash.
9
<PAGE>
SUMMARY FINANCIAL DATA
The following financial data should be read in conjunction with the
consolidated financial statements and the unaudited pro forma financial
information, "Selected Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in this prospectus.
The pro forma financial information reflects:
- our acquisitions of the retail dial-up access customers in Argentina and
Brazil from IMPSAT Corporation, and our pending acquisition of its retail
dial-up access customers in Colombia, for approximately $21.5 million in
the aggregate and the related purchase by IMPSAT Corporation of 3,070,615
of our Class A convertible preferred shares for $21.5 million; and
- the private placement in mid-November 1999 of 1,111,111 Class B
convertible preferred shares for an aggregate purchase price of
$10.0 million in cash.
The selected pro forma as adjusted balance sheet data give effect to the
sale of the common shares in, and the receipt of the net proceeds from, this
offering. We have assumed an initial public offering price of $12.00 per share,
which is the mid-point of the estimated range of offering prices presented on
the cover page of this prospectus. The pro forma as adjusted data also assume
that all of our outstanding Class A convertible preferred shares have been
converted into our common shares, which will automatically occur upon the
closing of this offering.
We prepare our consolidated financial statements and the pro forma financial
information in U.S. dollars in accordance with generally accepted accounting
principles in the United States, which is commonly called "U.S. GAAP."
Results of operations for the periods presented are not necessarily
indicative of results of our operations for future periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------- ---------------------------------------
1997 1998 1998 1999
----------- ------------------------- ----------- -------------------------
ACTUAL ACTUAL PRO FORMA ACTUAL ACTUAL PRO FORMA
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues............... $ 267 $ 780 $ 17,287 $ 609 $ 1,524 11,541
Total costs and expenses... 1,171 4,277 22,784 2,371 14,909 27,068
Operating income (loss).... (904) (3,497) (5,497) (1,762) (13,385) (15,527)
Net loss attributable to
common shareholders...... (1,014) (3,517) (11,370) (1,792) (13,903) (21,268)
Basic and diluted net loss
per common share......... (10.14) (1.15) (3.73) (.87) (1.18) (1.81)
Shares used in computing
basic and diluted loss
per common share......... 100,000 3,050,000 3,050,000 2,066,667 11,777,516 11,777,516
</TABLE>
10
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<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30, 1999
------------------- ----------------------------------
PRO FORMA
1997 1998 ACTUAL PRO FORMA AS ADJUSTED
-------- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 89 $ 246 $ 24,393 $ 34,493 $123,505
Working capital (deficit).................... (1,146) (42) 20,257 29,851 118,863
Total assets................................. 396 1,481 33,120 64,776 153,788
Total liabilities............................ 1,360 712 6,349 7,305 7,305
Class A convertible preferred shares......... -- -- 38,327 59,827 --
Class B convertible preferred shares......... -- -- -- 9,200 9,200
Total shareholder's equity (deficit)......... (964) 769 (11,556) (11,556) 137,283
</TABLE>
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RISK FACTORS
AN INVESTMENT IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND THE OTHER INFORMATION
IN THIS PROSPECTUS BEFORE PURCHASING OUR SHARES.
FOR PURPOSES OF THIS "RISK FACTORS" SECTION OF THIS PROSPECTUS, WHEN WE
STATE THAT A RISK, UNCERTAINTY OR PROBLEM MAY, COULD OR WOULD HAVE AN "ADVERSE
EFFECT ON OUR COMPANY," WE MEAN THAT THE RISK, UNCERTAINTY OR PROBLEM MAY, COULD
OR WOULD HAVE AN "ADVERSE EFFECT ON THE BUSINESS, RESULTS OF OPERATIONS,
FINANCIAL CONDITION, CASH FLOW OR PROSPECTS OF OUR COMPANY," IN EACH CASE EXCEPT
AS OTHERWISE INDICATED OR AS THE CONTEXT MAY OTHERWISE REQUIRE. YOU SHOULD VIEW
SIMILAR EXPRESSIONS IN THIS SECTION AS HAVING A SIMILAR MEANING.
RISKS RELATED TO OUR COMPANY
WE HAVE ONLY BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME, SO YOUR BASIS FOR
EVALUATING OUR COMPANY IS LIMITED.
We commenced operations in July 1997 and began the roll-out of our network
during 1998. We commenced our first mass media-based branding and advertising
campaign in August 1999 in an effort to generate a high volume of user traffic
on our Websites. Accordingly, we have a limited operating and financial history
upon which you can base your evaluation of an investment in our common shares.
We are subject to the risks, uncertainties and problems frequently
encountered by companies in early stages of operations, particularly companies
in new and rapidly developing markets, such as the Internet industry.
These risks, uncertainties and problems include, among others, the
following:
- any inability to maintain and increase levels of traffic on our Websites;
- any failure to continue to develop and extend the EL SITIO (in Brazil, O
SITE) brand;
- any inability to meet minimum guaranteed impressions under our advertising
agreements;
- any failure to anticipate and adapt to developing markets;
- any inability to upgrade and develop our systems and infrastructure and
attract new personnel in a timely and effective manner;
- any failure of our network to handle efficiently our Web traffic;
- any inability to generate significant revenues from e-commerce;
- any failure to manage rapidly expanding operations; and
- the level of use of the Internet and online services and consumer
acceptance of the Internet and other online services.
We cannot assure you that we will be successful or that we will be able
effectively to compete and achieve market acceptance or otherwise address the
risk factors disclosed in this prospectus.
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WE HAVE A HISTORY OF LOSSES AND EXPECT TO CONTINUE TO INCUR INCREASING LOSSES IN
THE NEXT SEVERAL YEARS.
We have not achieved profitability to date, and we anticipate that we will
incur substantial and increasing losses through 2002. We expect to incur a net
loss of approximately $30 million in 1999. Our business plan contemplates that
we will first become profitable in 2003. We believe that our revenues, chiefly
from advertising and connectivity services, will exceed our expenses in 2003 as
a result of our branding and advertising campaigns and related marketing efforts
prior to that year and the further development of our communities of users.
Until that year, we will continue to incur losses and negative cash flow as we
fund operating and capital expenditures in areas such as content and service
development, marketing and brand promotion, additional personnel and network
infrastructure. The extent of these losses will depend, in part, on the amount
of growth in our revenues. We cannot assure you that our losses will not further
increase in the future or that we will ever achieve or sustain profitability.
WE MAY FAIL TO IMPLEMENT SUCCESSFULLY OUR BUSINESS STRATEGY.
Our business strategy relies upon the creation of high quality content for
our Website for each country in which we operate and for each of our targeted
metropolitan areas in the United States. Our strategy assumes that consumers
will be attracted to the country-specific content and community features on our
Websites, which will, in turn, allow us to sell advertising, sponsorships and
connectivity services and, in the future, to develop relationships with
merchants for e-commerce designed to reach those consumers. Our strategy remains
unproven and, among other things, could entail higher operating expenses than
are or may be incurred by competitors which are pursuing a more pan-Latin
American approach with limited country-specific content.
Our strategy may not be successful, and if not successful, we may not be
able to modify it in a timely and successful manner in the rapidly evolving
Internet industry. In addition, we could fail to develop strategies to
capitalize on opportunities in new and unproven areas.
WE WILL NOT BECOME PROFITABLE IF WE DO NOT ATTRACT A SUBSTANTIAL NUMBER OF USERS
AND ADVERTISERS.
We must continually enhance and improve our Website content and services to
attract, and to meet the expectations of, our users and advertisers. We also
must continue to:
- improve the features and functionality of our Websites and our dial-up
access businesses; and
- develop other services and products to attract users, advertisers and
e-commerce partners.
In the countries for which we establish new Websites, we believe we will
encounter the same challenges in attracting users and advertisers as in the
countries where we currently conduct operations.
We constantly seek to deliver the content, features and functionality
desired by our target audience. If other Websites or networks, or Internet
service providers, present more desirable content, features or functionality,
our user traffic could be adversely affected. We cannot assure you that we can
successfully identify new service opportunities and develop and bring new
services and products to market in a cost-efficient and timely manner. Any
failure to develop and introduce new services and service enhancements that are
compatible with industry standards and satisfy customer requirements would have
a material adverse effect on our company.
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WE MUST DEVELOP OUR BRAND AND GENERATE INCREASED ADVERTISING REVENUES IN ORDER
TO CREATE A VIABLE BUSINESS.
We must continue to establish and develop our EL SITIO (in Brazil, O SITE)
brand. Brand loyalty is critical to our ability to expand our user base and our
advertising, connectivity services and e-commerce revenues. We believe that the
importance of brand recognition will increase as the number of Spanish-and
Portuguese-language Websites targeting Latin America and the U.S.
Spanish-speaking market increases. We intend to devote considerable resources
for marketing campaigns, both on-line and in traditional media, to promote our
brand. However, unlike our on-line advertising, which gives us immediate
feedback and allows us to adjust promptly our marketing messages, the
effectiveness of advertising in traditional print and broadcast media is more
difficult to assess. If our marketing efforts are unsuccessful, we may fail to
establish EL SITIO and O SITE as leading brands in our markets. We cannot assure
you that our brand building initiatives and expenditures for this purpose will
prove effective.
Our success in promoting and enhancing our brand will also depend on our
ability to provide high quality content, features and functionality. If we fail
to promote successfully our brand, if users of our Websites, or our connectivity
services or if advertisers or e-commerce partners do not perceive our services
to be of high quality, the value of our brand could be diminished, which would
have a material adverse effect on our company.
OUR GROWTH AND EXPANSION MAY STRAIN OUR ABILITY TO MANAGE OUR OPERATIONS AND OUR
FINANCIAL RESOURCES.
We are undergoing rapid growth and plan to continue to grow rapidly, both in
existing markets and by means of expansion into new geographic markets. Rapid
growth places significant strains on our network infrastructure, our managerial,
technical and editorial personnel, and our financial and other resources. To
support growth, we must implement new or upgraded operating and financial
systems, procedures and controls for our existing operations in Argentina,
Brazil, Mexico, the United States and Uruguay, as well as in additional
countries in which we may seek to develop our business. Any failure to expand
and integrate these areas in an efficient manner could have a material adverse
effect on our company.
We have acquired the retail dial-up access customers of IMPSAT Corporation
in Argentina and Brazil and are in the process of acquiring its retail dial-up
access customers in Colombia. We expect to complete the Colombia acquisition by
the end of 1999. Prior to these acquisitions, our company had no experience in
operating a connectivity services business. In addition, any failure to
integrate these acquisitions, or any other acquired business, could have an
adverse effect on our company.
The aggregate $21.5 million purchase price for the acquisitions of these
retail dial-up access customers has been allocated principally to an intangible
asset consisting of the newly acquired customer base. This intangible asset will
be amortized over the next five years and, as such, will be reflected as an
expense in our statement of operations in future periods. To the extent that we
fail to retain this customer base during this period, this intangible asset
could be deemed to be impaired, in which case an amount in excess of the
anticipated amortization expense would be charged to our results of operations
and could result in substantially increased losses or, in later years, reduced
profits. As a result, our future financial performance could be materially and
adversely affected if we are not successful in preserving and developing our
newly acquired connectivity customer base.
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Our ability to achieve and to manage planned growth will depend upon, among
other factors, our success in:
- hiring and retaining qualified management, technical and marketing
personnel;
- maintaining the high levels of customer service required to retain users
while undertaking expansion; and
- expanding our network infrastructure to service a growing user base.
If we fail to achieve and manage growth, our company, as well as the market
price of our common shares, could be adversely affected.
WE MUST INCREASE OUR ADVERTISING AND OTHER REVENUES IN CASH IN ORDER TO EXPAND
OUR BUSINESS.
As a network of Websites, our business model is predicated upon our ability
to increase significantly our advertising revenues. Although we will derive
subscriber-based revenues from our acquisitions of the retail dial-up access
customers of IMPSAT Corporation in Argentina and Brazil and our pending
acquisition of its retail dial-up access customers in Colombia, our branded
connectivity services are complementary to the development of communities of
users. Our business model emphasizes growth in advertising revenues through
country-specific and regional advertising agreements. Our growth of advertising
revenues will depend, among other factors, on:
- the level of acceptance that Internet advertising achieves in Latin
America, and the growth of the aggregate amount spent on Internet
advertising in our markets;
- the market recognition and prestige of our brand and trademarks;
- the attractiveness of our advertising pricing schedules;
- the effectiveness of our advertising sales personnel in each of our
markets; and
- our ability to generate and continue to grow a large community of loyal
users in our markets.
Our five largest advertisers accounted for approximately 40.7% of our total
revenues in the nine months ended September 30, 1999 and approximately 77% of
our total revenues for the nine months ended 1998. Our largest advertiser alone
accounted for approximately 12.8% and 20.4% of our total revenues in the first
nine months of 1999 and 1998, respectively. The loss of any of our major
existing advertisers, unless replaced by other advertisers, could have a
material adverse effect on our company.
We have received a significant portion of our historical net revenues from
reciprocal services arrangements, pursuant to which we exchange advertising
space on our network for advertising space on television and radio or for
telecommunications services, in lieu of cash payments. In the nine months ended
September 30, 1999, we derived advertising revenues valued at approximately
$554,000, or 36% of our total net revenues for this period, from these non-cash
reciprocal services arrangements. For the year ended December 31, 1998, we
derived approximately $180,000, or 23% of our total net revenues, from these
arrangements. We expect that non-cash revenues from reciprocal services
arrangements will continue to account for a significant portion of our revenues
in the foreseeable future.
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WE MUST MAINTAIN ACCESS TO QUALITY CONTENT PROVIDED BY THIRD PARTIES IN ORDER TO
DEVELOP OUR SUBSCRIBER BASE.
Although we seek to produce or edit a substantial portion of the content for
our Websites, we continue to rely upon third parties, such as Reuters, Agence
France-Presse and CBS Sportsline, to provide global content to complement our
own content and thus make our Websites more attractive to users and, by
extension, advertisers. Most of our arrangements with third-party providers of
content are not exclusive, are short-term and may be terminated at the
discretion of the other party. Any termination of any of our arrangements with
some of these providers of content could have an adverse effect on our company.
OUR BUSINESS DEPENDS UPON STABLE RELATIONSHIPS WITH KEY SUPPLIERS.
We have no long-term contracts with our suppliers. We are dependent on
third-party suppliers for our leased-line connections and bandwidth. Some of
these suppliers are or may become competitors of our company, and they are not
subject to any contractual restrictions upon their ability to compete with us.
If these suppliers change their pricing structures, we may be adversely
affected. Moreover, any failure or delay on the part of our network providers to
deliver bandwidth to us or to provide operations, maintenance and other services
with respect to such bandwidth in a timely or adequate fashion could adversely
affect our company.
In connection with our acquisitions of retail dial-up access customers from
IMPSAT Corporation, we are not acquiring the telecommunications infrastructure
to provide these services and will instead outsource that infrastructure from
third-party providers--initially, under three-year services agreements with
subsidiaries of IMPSAT Corporation. Our agreements with these subsidiaries of
IMPSAT Corporation, pursuant to which they will provide telecommunications
infrastructure for our dial-up access customers, do not restrict IMPSAT
Corporation from competing directly with us or providing better rates to other
dial-up access providers. These agreements, however, permit us to terminate the
agreements without any penalties after one year if we receive an offer from a
lower-price service provider and IMPSAT Corporation does not match that service
provider's price. If IMPSAT Corporation competes directly with us, charges us
above-market rates for telecommunications infrastructure or offers cut-rate
telecommunications infrastructure to our competitors in the retail dial-up
access business, our business could be adversely affected.
WE MUST FURTHER DEVELOP STRATEGIC RELATIONSHIPS TO STRENGTHEN OUR COMPETITIVE
POSITION.
In our initial stage of operations, we focused upon understanding our target
markets and delivering high quality services and products designed for such
markets. More recently, we have sought to establish strategic relationships with
leading content providers, dial-up access providers, e-commerce partners, and
technology and infrastructure providers. To date, our principal strategic
relationships have been with our shareholders and their affiliates, such as
Hicks, Muse, Tate & Furst Incorporated, the Cisneros Group of Companies, and
IMPSAT Corporation. We may depend, in part, upon strategic relationships to help
to develop our business. Our future growth will depend upon maintaining our
existing strategic relationships as well as our ability to establish new
relationships.
WE COULD EXPERIENCE CAPACITY CONSTRAINTS AND UNEXPECTED SYSTEM INTERRUPTIONS,
WHICH COULD IMPEDE THE DEVELOPMENT OF OUR BUSINESS.
The number of pages of information transmitted over our network, commonly
referred to as "page views," has continued to increase over time. We are
actively trying to increase our level of page views.
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As a result, our network must accommodate a high volume of traffic, often at
unexpected times. We have, to date, experienced limited capacity constraints in
terms of our ability to serve our increasing user volumes. We are in the process
of improving our network infrastructure to ensure that we will be able to handle
future increases in traffic. We are migrating our platform and our applications
to a Unix platform using Sun Microsystems servers. We do not anticipate that
this migration process, which is expected to be completed before the end of
1999, will affect the continuous operations of our network. However, any break
in the continuous operations of our network could have a material adverse effect
on our company.
We make our Websites available using 17 Microsoft Windows NT servers and 3
Linux servers as our central production servers, which servers are currently
located at the server farm facilities of Exodus Communications in New Jersey. We
also have a redundant server located at the Miami, Florida server farm
facilities of IMPSAT Corporation. Any failure by Exodus Communications or IMPSAT
Corporation to protect our systems against damage from fire, weather, power
loss, telecommunications failure, break-ins or other events could have a
material adverse effect on our company.
We may also, from time to time, experience interruptions due to hardware
failures, unsolicited bulk e-mail and operating system failures. Because our
revenues depend on the number of users of our network, we will be adversely
affected if we experience frequent or long system delays or interruptions. If
delays or interruptions continue to occur:
- our users could perceive our network as being unreliable;
- traffic on our Website could deteriorate; and
- our brand could be adversely affected.
Any failure on our part to minimize or prevent capacity constraints or
system interruptions could have an adverse effect on our company.
WE MAY HAVE DIFFICULTY IN OBTAINING THE ADDITIONAL FINANCING REQUIRED TO DEVELOP
OUR BUSINESS.
As a company in an early stage of operations, and in order to develop and
expand our business, we anticipate that we will require substantial additional
equity and debt financing after this offering. Under our business plan, we
currently estimate that we will require additional financing between early 2001
and 2003 in the amount of approximately $50 million to provide sufficient
working capital until we become profitable, which is anticipated in the latter
year. Obtaining additional financing will be subject to a number of factors,
including, without limitation, the following:
- the stage of operations of our company;
- our actual or anticipated results of operations, financial condition and
cash flow;
- investor sentiment towards companies conducting business in Latin America;
and
- generally prevailing market conditions.
These factors may make the timing, amount, terms and conditions of additional
financing unattractive for us.
If additional funds are raised through the issuance of equity securities,
the percentage ownership of our then current shareholders will be reduced, and
the new equity securities may have rights,
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preferences or privileges senior to those of the holders of our common shares.
If additional funds are raised through the issuance of debt securities, these
securities would have some rights, preferences and privileges senior to those of
the holders of our common shares, and the terms of this debt could impose
restrictions on our operations and result in significant interest expense to us.
In the event that we are unable to raise sufficient financing on
satisfactory terms and conditions in the future, our company would be adversely
affected.
WE MUST RETAIN KEY MANAGERS AND REQUIRE ADDITIONAL QUALIFIED PERSONNEL TO
DEVELOP OUR BUSINESS IN AN INDUSTRY IN WHICH IT IS DIFFICULT TO ATTRACT AND
RETAIN QUALIFIED PERSONNEL.
Our future performance depends, in large part, on the continued service of
our senior management. We rely, in particular, on the strategic guidance of
Roberto Vivo-Chaneton, co-founder and chairman of our company, and on the
services of Roberto Cibrian-Campoy, co-founder and chief executive officer of
our company. The loss, for any reason, of the services of either of these
individuals could have a material adverse effect on our company.
Our strategy of emphasizing country-specific content and advertising also
requires the hiring and retention of highly qualified personnel in each market.
After they are employed, the knowledge, expertise and relationships of our
personnel makes their retention important to our success. We expect to continue
to enter into share option and non-competition agreements with key personnel.
However, we cannot assure you that we will be able to retain our key personnel
or that we will be able to attract and retain such additional highly qualified
technical and managerial personnel in the future. Any inability to attract and
retain the personnel necessary to support the growth of our business could have
an adverse effect on our company.
WE WILL BE CONTROLLED AFTER THIS OFFERING BY A SMALL GROUP OF EXISTING
SHAREHOLDERS, WHOSE INTERESTS MAY DIFFER FROM THOSE OF OTHER SHAREHOLDERS.
Prior to this offering, our directors and officers and their respective
affiliates beneficially owned, in the aggregate, a significant majority of our
issued and outstanding share capital. We expect that these shareholders will
continue to own a significant portion of our share capital after this offering.
As a result, these shareholders will be able to control the outcome of all
matters requiring shareholder approval, including the election of directors and
approval of mergers, acquisitions and other significant corporate transactions.
You should understand that there may be circumstances in which interests of
these shareholders may conflict with your interests.
Commercial and other transactions between our company, on the one hand, and
our directors, officers and controlling shareholders and their affiliates, on
the other, create the potential for, or could result in, conflicting interests.
For example, Roberto Vivo-Chaneton, Ricardo Verdaguer and Sofia Pescarmona,
three of our directors, also serve as directors and senior officers of IMPSAT
Corporation. These relationships may give rise to conflicts of interest from
time to time relating to contracts, such as the telecommunications services
agreements that we are entering into with IMPSAT Corporation, corporate
opportunities and use of directors' time and expertise. We also have acquired
IMPSAT Corporation's retail dial-up access customers in Argentina and Brazil and
are in the process of acquiring its retail dial-up access customers in Colombia,
which are transactions involving our company and this related party. Our board
of directors is in the process of developing procedures with a view to
minimizing such potential conflicts of interest and has adopted guidelines
regarding related party transactions. We intend to enter into all related party
transactions on an arm's length basis (measured against terms that would be
offered by an unaffiliated third party). We cannot assure you, however, that all
of these future transactions will be free of conflicting interests.
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WE MUST PRESERVE OUR INTELLECTUAL PROPERTY RIGHTS, WHICH ARE ESSENTIAL TO THE
DEVELOPMENT OF OUR BUSINESS.
We consider our EL SITIO, O SITE and medallion design trademarks and service
marks to be important to our success. We are pursuing the registration of our
trademarks and service marks in the United States and in key countries of Latin
America as well as in Spain and Portugal. Although some of these countries have
registered our marks, we cannot predict with certainty whether the trademark
offices of the remaining countries will do the same. If we are unable to obtain
a registration in a particular country, we would have trademark or service mark
rights to the extent that we use the mark, but the rights would not be as strong
as if they were registered. Some companies, including other participants in the
Internet industry, use and/or may use trademarks or service marks in English or
other languages which, when translated, are similar or identical to certain of
our core marks. Usage of these marks by other parties could hinder our ability
to build a unique brand identity and may possibly lead to trademark disputes, in
that we may be sued for trademark infringement in court or we may have the
validity of our applications and/or registrations challenged at government
agencies. Although we do not believe that any proceedings against us ultimately
would be meritorious, we cannot provide any assurances to you in this regard. A
judgment against us in an intellectual property-based proceeding could result in
the loss of our ability to use one or more of our marks, as well as the
imposition of monetary damages. Should we lose the right to use a trademark or
service mark, we may be forced to adopt a new mark, which would result in the
loss of substantial resources and brand identity. In any event, whether
successful or not, litigating a trademark dispute would result in the
expenditure of monetary resources and the diversion of executives' time. Any
inability to protect, enforce or use our trademarks, service marks or other
intellectual property may have a material adverse effect on our company.
We also depend upon technology licensed from third parties for chat,
homepage, search and related Web services. Any dispute with a licensor of the
technology may result in our inability to continue to use that particular
technology. Additionally, there may be patents issued or pending that are held
by third parties and that cover significant parts of the technology, products,
business methods or services used to conduct our business. We cannot be certain
that our technology, products, business methods or services do not or will not
infringe valid patents or other intellectual property rights held by third
parties. In the event that a third party alleges infringement, we may be forced
to take a license, which we may not be able to obtain on commercially reasonable
terms. We may also incur substantial expenses in defending our company against
third-party infringement claims regardless of the merit of these claims.
Successful infringement claims against us could result in substantial monetary
liability and/or being prevented by a court from conducting all or a part of our
business that falls within the scope of the asserted patent, leading to
substantial expenditures to redesign and/or license technology.
OUR RESULTS OF OPERATIONS MAY FLUCTUATE DUE TO SEASONALITY.
The level of use of our network may be seasonal in nature. Historically,
telecommunications use in Latin America has been significantly lower during the
first calendar quarter of the year because:
- it includes the summer months in much of Latin America;
- affluent segments of the population tend to take extended vacations during
these months; and
- schools and universities are generally closed.
Our advertising revenues may also be subject to seasonal fluctuations.
Advertisers in traditional media have spent less in the first and second
calendar quarters. We believe that these seasonal trends may affect our results
of operations.
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THE MULTI-COUNTRY NATURE OF OUR BUSINESS EXPOSES US TO ADDITIONAL
INTERNATIONAL-BASED RISKS.
We are subject to a broad range of risks inherent in businesses with
operations in multiple countries, including, among others, the following:
- unexpected changes in governmental laws and regulations;
- difficulties and costs of staffing and managing international operations;
- potentially adverse tax consequences;
- uncertain protection for intellectual property rights;
- trade barriers for goods which may be sold over our network;
- difficulties in maintaining and upgrading our systems;
- export restrictions and controls;
- currency fluctuation and exchange risks; and
- economic, political and other conditions in the countries in which we
currently, or may seek to, conduct business.
Any of these factors, many of which are outside our control, could have a
material adverse effect on our company.
RISKS RELATED TO OUR INDUSTRY
WE OPERATE IN AN EXTREMELY COMPETITIVE MARKET AND FACE COMPETITION FROM MORE
DEVELOPED COMPANIES WITH GREATER RESOURCES.
Many companies already provide Website and on-line destinations targeted to
Spanish- and Portuguese-speaking audiences in Latin America, the United States
and elsewhere. Competition for users, advertisers and e-commerce partners is
intense and is expected to increase significantly in the future, particularly
because there are no substantial barriers to entry in our industry.
We face competition on both country and regional levels. Our primary
competitors include, among others, StarMedia and Terra Networks (in most of
Latin America and the United States), Quepasa.com and Yupi (in the United
States), Clarin Digital (in Argentina) and Universo Online (in Brazil). We also
face competition from Spanish- and/or Portuguese-language versions of services,
such as Yahoo!, America Online and Prodigy Communications. Our competitors may
develop content that is better than ours or that achieves greater market
acceptance. It is also possible that new competitors may emerge and acquire
significant market share. Some of our established competitors and potential new
competitors may have better brand recognition and significantly greater
financial, technical, and marketing resources than our company. Any significant
loss of users to our competitors could have a material adverse effect on our
company.
As a result of our completed or pending acquisitions of the retail dial-up
access customers in Argentina, Brazil and Colombia of IMPSAT Corporation, we
will be entering the connectivity services market, which is extremely
competitive and is characterized by rapidly changing technology and evolving
standards. As a result of these acquisitions, we will be amortizing an
intangible asset relating to our customer base in subsequent periods. To the
extent that we fail to retain this customer base, this intangible asset could be
deemed to be impaired, in which case we could sustain substantially increased
losses or, in later years, reduced profits. We also do not own
telecommunications assets and will, therefore, depend upon telecommunications
providers to carry our Internet traffic. Increased competition could require us
to lower our prices, increase our selling and marketing expenses, and raise
subscriber acquisition costs. New technologies permitting faster connectivity
may make our newly acquired retail dial-up access businesses obsolete. We may
not be able to retain our subscribers or, if we do, we may not be able to offset
the effect of increased costs through an increase in subscribers, subscriber
revenues or revenues from other sources.
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If low-cost or free connectivity is offered in Latin America, our
subscribers will have cost-effective alternatives to our service, and they may
have more than one Internet account or may switch to another dial-up access
provider in their country if they are unable to gain access to our service. As a
result, usage of our services by subscribers may decrease; our customer
turnover, which is known as "churn," could increase; and we may be compelled to
reduce our prices further.
Recently, various cable and telephone companies have made announcements
regarding the planned deployment of broadband services for high-speed Internet
access. These services would include new technologies, such as cable modems,
wireless communications and digital subscriber line, commonly known as DSL. In
addition, a number of free Internet access services have recently been
introduced, particularly in non-U.S. markets, and some Internet access providers
are now offering subsidized or free personal computers to their subscribers.
These trends, if they materialize in Latin America or the U.S., could have a
material adverse effect on our company.
WE WILL BE ADVERSELY AFFECTED IF THE INTERNET DOES NOT BECOME WIDELY ACCEPTED AS
A MEDIUM FOR ADVERTISING AND E-COMMERCE.
Advertising revenues will continue to be an important component of our total
revenues. In order for us to generate these revenues, advertisers and
advertising agencies must direct a portion of their advertising budgets to the
Internet and, specifically, to our network. Many of our current or potential
advertising and e-commerce partners have limited experience using the Internet
to advertise or to sell their products and services and have not devoted a
significant portion of their budgets to Internet-based advertising and commerce.
The adoption of Internet advertising, particularly in Latin America, requires
the acceptance of a new method of conducting business and exchanging
information. Advertisers that have invested substantial resources in other media
forms may be reluctant to adopt a new method that may limit or compete with
their existing efforts. These businesses may find Internet advertising to be
less effective for promoting and selling their products and services than is
traditional print and broadcast media. We will be adversely affected if Internet
advertising and e-commerce fail to develop or develop slowly in Latin America.
CHANGES IN THE LEGAL AND REGULATORY ENVIRONMENT FOR OUR INDUSTRY COULD INCREASE
OUR COSTS AND LENGTHEN THE PERIOD FOR US TO BECOME PROFITABLE.
Government regulation has not materially restricted use of the Internet in
our markets to date. However, the legal and regulatory environment pertaining to
the Internet remains relatively undeveloped and may change. New laws and
regulations could be adopted, and existing laws and regulations could be applied
to the Internet and, in particular, to e-commerce. New and existing laws and
regulations could cover issues, including, among others, the following:
- sales and other taxes;
- user privacy;
- pricing controls;
- characteristics and quality of products and services;
- consumer protection;
- cross-border commerce;
- libel and defamation;
- copyright, trademark and patent infringement; and
- other claims based on the nature and content of Internet materials.
Changes in government regulation in any of the countries in which we operate
could increase our costs and prevent us from delivering our services and
products over the Internet. It could also slow the
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growth of the Internet, which could, in turn, delay growth in demand for our
network and adversely affect our company.
WE MAY BECOME SUBJECT TO LEGAL LIABILITY BASED ON THE CONTENT PROVIDED THROUGH,
AND THE PRODUCTS SOLD OVER, OUR NETWORK.
The laws in the United States and in Latin American countries relating to
the liability of on-line service providers, such as our company, for activities
of their users remains unsettled. Claims have been made against other on-line
service providers for defamation, negligence, copyright or trademark
infringement, obscenity or other grounds based on the nature and content of
information that was posted on-line by these providers or their visitors. We
could become subject to similar claims. It is also possible that, if information
provided through our services contains errors, third parties could make claims
against us for losses incurred in reliance on the information. Finally, we could
face personal injury or other product liability claims arising from the use of
products sold through our Website.
We offer e-mail services, which expose us to potential liabilities or claims
resulting from:
- unsolicited e-mail;
- lost or misdirected messages;
- illegal or fraudulent use of e-mail; or
- interruptions or delays in e-mail service.
Investigating and defending these claims may involve substantial expenses, even
if they do not result in liability.
Although we carry general liability insurance, our insurance may not cover
all potential claims to which we are exposed or may not be adequate to indemnify
us for all liabilities that may be imposed. Any imposition of liability that is
not covered by insurance or is in excess of insurance coverage could have a
material adverse effect on our company. In addition, the increased attention
focused on liability issues as a result of these lawsuits and legislative
proposals could impact the overall growth of Internet use.
WE WILL BE ADVERSELY AFFECTED IF WE FAIL TO RESPOND EFFECTIVELY AND ON A TIMELY
BASIS TO RAPID TECHNOLOGICAL CHANGE.
The Internet industry is characterized by rapidly changing technology,
evolving industry standards, frequent new product and service announcements,
introductions and enhancements, and changing consumer demands. Our future
success will depend on our ongoing ability to improve the performance, features
and reliability of our Internet services and products in response to competitive
product, feature and service offerings and the evolving demands of the
marketplace. New services, products and technologies may be superior to the
services and technologies that we use, and may render our services and
technologies obsolete or require us to incur substantial expenditures to modify
or adapt our services, products or technologies.
OUR NETWORK OPERATIONS MAY BE VULNERABLE TO HACKING, VIRUSES AND OTHER
DISRUPTIONS.
Internet usage could decline if any well-publicized compromise of security
occurs. "Hacking" involves efforts to gain unauthorized access to information or
systems or to cause intentional malfunctions or loss or corruption of data,
software, hardware or other computer equipment. Hackers, if successful, could
misappropriate proprietary information or cause disruptions in our services. In
August 1999, the Microsoft Windows NT operating system employed by our servers
was subject to a disruption, which may have been caused by either unusually
heavy traffic on our network or a hacking attack. This disruption, which
occurred intermittently over a two-day period, caused a significant
22
<PAGE>
reduction in the speed at which our servers could transmit data, resulting in
delays for our users in accessing our Websites and features on our Websites. To
address this particular situation, we implemented a number of general security
measures, including migrating our operating system to a Unix platform that we
consider more stable and hiring an Internet security company. We cannot assure
you that these measures will be effective. Security breaches could have a
material adverse effect on our business. In addition, the inadvertent
transmission of computer viruses could expose us to a material risk of loss or
litigation and possible liability.
OUR COMPUTER SYSTEMS AND THOSE OF OUR BUSINESS PARTNERS MAY NOT BE YEAR 2000
COMPLIANT, WHICH MAY CAUSE SYSTEM FAILURES AND DISRUPTIONS OF OPERATIONS.
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These systems
and software products will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, computer systems and/or
software used by many companies and governmental agencies need to be upgraded to
comply with such Year 2000 requirements or risk system failure or
miscalculations which may cause disruptions to normal business activities.
We have conducted an inventory, and developed testing procedures, for all
software and other systems that we believe might be affected by Year 2000
issues. We have tested our computers, servers and other equipment. If we
discover any Year 2000 issues with our equipment or the equipment acquired from
IMPSAT, we expect to replace the necessary hardware and/or software with
versions that will resolve the difficulties. Because third parties developed and
currently support many of these systems that we use, a significant part of this
effort is directed to ensuring that these third-party systems are Year 2000
compliant. We are unable to test certain systems, such as our telephone centers
and routers. We are seeking certification from these third parties as to the
Year 2000 compliance status of their products. We anticipate that we will have
the certification of all relevant third parties in December 1999.
The failure of any of our systems or systems maintained by third parties to
be Year 2000 compliant could:
- cause us to incur major expenses to remedy any problems;
- affect the availability and performance of our network; or
- otherwise significantly damage our operations.
Year 2000-related disruptions to our network could cause our users,
advertisers or e-commerce partners to become dissatisfied with our network or
could impose an unmanageable burden on our technical support staff. Any failure
by us to correct a major Year 2000 problem would have a material adverse effect
on our company.
RISKS RELATED TO LATIN AMERICA
OUR FUTURE SUCCESS DEPENDS UPON SUBSTANTIAL GROWTH IN USE OF THE INTERNET IN
LATIN AMERICA.
The timing and the degree of our future success will depend on the continued
growth of the market for on-line content, services and e-commerce in Latin
America. The market in the region for our services has only recently begun to
develop and is evolving. The commercial potential for the Internet in Latin
America also remains uncertain. Major issues concerning the use of the Internet,
such as security, intellectual property rights, reliability, cost, ease of
deployment and administration, and quality of service, remain largely unresolved
and may adversely affect our growth and market acceptance.
23
<PAGE>
Each country in Latin America has its own telephone rate tariff regime
which, if too costly, may make consumers less likely to sign up for and access
the Internet. As a result of broad privatization and deregulation of the
telecommunications industry in Latin America and increased competition, tariffs
have been reduced recently in some countries. However, we cannot assure you that
this trend will continue. Unfavorable tariff developments could have a material
adverse effect on our company.
E-COMMERCE TRANSACTIONS IN LATIN AMERICA CONTINUE TO BE IMPEDED BY THE LACK OF
SECURE PAYMENT METHODS, HIGH CUSTOMS DUTIES AND UNRELIABLE PARCEL DELIVERY
SYSTEMS.
Unlike in the United States, consumers and merchants in Latin America can be
held fully liable for credit card and other losses due to third-party fraud. As
secure methods of payment for e-commerce transactions have not been widely
adopted in Latin America, both consumers and merchants generally have a
relatively low confidence level in the integrity of e-commerce transactions. In
addition, many banks and other financial institutions have generally been
reluctant to give merchants the right to process on-line transactions due to
these concerns about credit card fraud. Unless consumer fraud laws in Latin
American countries are modified to protect e-commerce merchants and consumers,
and until secure, integrated on-line payment processing methods are fully
implemented across the region, our ability to generate revenues from e-commerce
may be limited, which could have a material adverse effect on our company.
Heavy customs duties and taxes are imposed on deliveries of international
parcels in many countries in Latin America. Many countries also do not have
systems in place to ensure speedy and reliable delivery of parcels once they
have cleared customs. These problems may deter many merchants and consumers from
engaging in e-commerce transactions. For example, merchants who are familiar
with these barriers to the development of e-commerce may not seek to advertise
or sell their products and services until these problems are addressed. If
governmental authorities in Latin American countries fail to deregulate customs
duties, or if deregulation occurs slowly, our ability to generate meaningful
revenues from e-commerce will be reduced, which could have a material adverse
effect on our company.
ADVERSE LATIN AMERICAN POLITICAL AND ECONOMIC CONDITIONS COULD AFFECT OUR
FINANCIAL PERFORMANCE.
We currently operate in Argentina, Brazil, Mexico, the United States and
Uruguay. We are planning to expand into Chile, Colombia and Venezuela in the
near future, and we are also considering other markets in Latin America. Our
financial performance and the market price for our common shares may be affected
generally by inflation, exchange rates and controls, price controls, interest
rates, changes in governmental economic policy, taxation and other political,
economic or other developments in or affecting the Latin American countries in
which we operate.
LOCAL CURRENCIES USED IN THE CONDUCT OF OUR BUSINESS ARE SUBJECT TO DEPRECIATION
AND VOLATILITY.
The currencies of many countries in Latin America have experienced
substantial depreciation and volatility, particularly against the U.S. dollar,
in recent years. Currency movements, as well as higher interest rates, have
materially and adversely affected the economies of many Latin American
countries, including countries which account or are expected to account for a
significant portion of our revenues.
Our reporting currency is the U.S. dollar. However, customers of our
connectivity services and some advertisers in Latin America may be billed in
local currencies. In Brazil, for example, commercial billing is required to be
in REAIS, the local currency. Our accounts receivable from these subscribers and
advertisers will decline in value if the local currencies depreciate relative to
the U.S. dollar. Similarly, any decline in the value of local currencies
relative to the U.S. dollar is likely to reduce the U.S. dollar prices that we
will be able to charge our advertisers. In addition, we may be subject to
exchange control
24
<PAGE>
regulations which might restrict our ability to convert local currencies into
U.S. dollars. Any imposition of exchange controls could adversely affect our
company.
RISKS RELATED TO OUR COMMON SHARES
MARKET PRICES OF, AND TRADING VOLUMES IN, OUR COMMON SHARES MAY BE VOLATILE.
This offering constitutes the initial public offering of our common shares,
and no public market for our common shares currently exists. We cannot assure
you that an active trading market will develop or be sustained after the
offering is completed. The initial public offering price will be determined
through negotiations between us and the underwriters based on several factors
and may not be indicative of the market price for the common shares after the
offering.
The market price of our common shares may be significantly affected by,
among others, the following factors:
- our actual or anticipated results of operations;
- new services or products offered, or new contracts entered into, by our
company or our competitors;
- changes in, or our failure to meet, securities analysts' expectations;
- legislative and regulatory developments affecting the Internet industry;
- developments in the Internet industry and technological innovations;
- investor perceptions of investments relating to Latin America; and
- general market conditions and other factors beyond our control.
U.S. and non-U.S. stock markets have periodically experienced significant
price and volume fluctuations that have especially affected the market prices of
common shares of Internet companies. These changes have often been unrelated to
the financial performance of particular companies. These broad market
developments may also adversely affect the market price of our common shares.
WE WILL RETAIN COMPLETE DISCRETION AS TO THE USE OF THE NET PROCEEDS OF THIS
OFFERING.
We intend to use the net proceeds from this offering for a broad range of
corporate purposes to support and accelerate the development of our company. We
will retain complete discretion in using the net proceeds, including uses with
which shareholders may disagree. Any failure to apply the net proceeds of this
offering in an effective manner could adversely affect our company.
OUR SHAREHOLDERS MAY FACE DIFFICULTIES IN PROTECTING THEIR INTERESTS BECAUSE WE
ARE A BRITISH VIRGIN ISLANDS COMPANY.
Corporate governance matters for our company are principally determined by
our memorandum of association and articles of association and the International
Business Companies Act, 1984 (Cap. 291) of the British Virgin Islands. The
rights of shareholders and the fiduciary responsibilities of directors, officers
and controlling shareholders under British Virgin Islands law have not been
extensively developed, particularly when compared with statutes and judicial
precedents of most states and other jurisdictions in the United States. As a
result, our shareholders may have more difficulty in protecting their interests
in the case of actions by our directors, officers or controlling shareholders
than would shareholders of a corporation incorporated in a state or other
jurisdiction in the United States.
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<PAGE>
YOU MAY EXPERIENCE DIFFICULTY IN ENFORCING CIVIL LIABILITIES AGAINST OUR
COMPANY.
We are a British Virgin Islands company, and a substantial portion of our
assets is located outside of the United States. In addition, most of our
directors and executive officers, as well as other persons controlling our
company, reside or are located outside of the United States. As a result, it may
not be possible for investors to effect service of process within the United
States upon us or these persons or to enforce judgments obtained against us or
these persons in U.S. courts predicated solely upon the civil liability
provisions of the U.S. federal or state securities laws. We have been advised by
Conyers Dill & Pearman, our British Virgin Islands counsel, that there is doubt
as to the enforceability in the British Virgin Islands in original actions or in
actions for enforcement of judgments of U.S. courts, of civil liabilities
predicated upon the U.S. federal or state securities laws. There is also doubt
as to enforceability of judgments of this nature in several of the jurisdictions
in which we operate and our assets are located.
FUTURE SALES OF OUR COMMON SHARES COULD ADVERSELY AFFECT MARKET PRICES OF OUR
COMMON SHARES.
Upon the closing of this offering, we will have outstanding 38,574,460
common shares, or 39,804,460 common shares if the underwriters' over-allotment
option is exercised in full. Of these shares, the common shares sold in this
offering will be freely tradeable except for any shares purchased by our
"affiliates" as defined in Rule 144 under the Securities Act of 1933. Of the
remaining common shares held by our existing shareholders, 27,121,294 common
shares will be subject to 180-day "lock-up" agreements with the underwriters
and, in addition, will be eligible for sale only if registered or if they
qualify for an exemption from registration under the Securities Act of 1933.
After the 180-day lockup period, these shares may be sold in the public market,
subject to prior registration or qualification for an exemption from
registration and, in the case of shares held by affiliates, to compliance with
applicable volume restrictions. Some of our shareholders are entitled, pursuant
to contractual provisions providing for registration rights, to require our
company to register our securities owned by them for public sale. Sales of a
large number of shares could have an adverse effect on the market price of our
common shares.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
Investors purchasing our common shares in this offering will suffer
immediate and substantial dilution of their investment. The initial public
offering price per share will significantly exceed the net tangible book value
per share. You will, in other words, pay a higher price per share than the
amount of our total tangible assets, minus our total liabilities, divided by the
total number of outstanding shares. In addition, you and other investors
participating in this offering will provide approximately 60.7% of the total
equity contributions made to our company, but will own only approximately 21.3%
of our total outstanding shares. If we issue additional common shares in the
future for any reason, or if outstanding or future options or warrants to
purchase our common shares are exercised, you could suffer further dilution.
DATA REGARDING USAGE OF, AND GROWTH PROSPECTS FOR, THE INTERNET MAY NOT BE
ACCURATE.
The general market and similar data in this prospectus relating to the
Internet industry in Latin America and the United States, including with respect
to projected increases in users of, and advertising and e-commerce on, the
Internet, have been based upon information published by or obtained from
independent market research firms, in each case, except as otherwise indicated.
These research firms include International Data Corporation and Forrester
Research. The market forecasts by these firms are based to a large extent upon
assumptions, including assumptions about the growing acceptance of the Internet
as a medium for commercial activity and continuing advances in computing and
telecommunications technology. We cannot assure you that these assumptions will
prove to be correct or, even if they do, that the forecasts will prove to be
accurate.
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<PAGE>
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS MAY NOT BE REALIZED.
This prospectus contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements relate to, among other things,
our business model, strategy, plans and timing for the introduction or
enhancement of our services and products, plans for entering into strategic
relationships and joint ventures, and other expectations, intentions and plans
contained in this prospectus that are not historical fact.
When used in this prospectus, the words "expects," "anticipates," "intends,"
"plans," "may," "believes," "seeks," "estimates" and similar expressions
generally identify forward-looking statements. These statements reflect our
current expectations. They are subject to a number of risks and uncertainties,
including but not limited to, changes in technology and changes in the Internet
marketplace. In light of the many risks and uncertainties surrounding the
Internet marketplace, you should understand that we cannot assure you that the
forward-looking statements contained in this prospectus will be realized.
27
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the common shares in this offering are
estimated to be approximately $89.0 million (after deduction of underwriting
discounts and estimated transaction expenses). This estimate is based on an
assumed initial public offering price of $12.00 per share, which is the
mid-point of the estimated range of offering prices presented on the cover page
of this prospectus. The term "net proceeds" represents the amount that we will
receive after payment of underwriting discounts and commissions and other
transaction expenses related to this offering.
We also received net proceeds (after payment of a private placement fee to
the agent and transaction expenses) of $9.2 million from the private placement
of our Class B convertible preferred shares in mid-November 1999.
We intend to use the net proceeds from this offering and the private
placement as follows:
- approximately $48.0 million to fund our sales and marketing, and
branding and advertising activities;
- approximately $20.0 million to develop new services and products, and
our network infrastructure;
- approximately $1.3 million to pay dividends in respect of the Class A
convertible preferred shares accrued as of the closing date of this
offering; and
- the balance for general corporate and working capital requirements,
including strategic investments.
We have not definitively allocated any portion of these net proceeds for the
above specified purposes. Instead, we will retain complete discretion in
applying the proceeds of this offering. Pending any use, we intend to invest the
net proceeds in short-term money market and other market-rate instruments.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common shares. We
currently intend to retain our future earnings, if any, to fund the development
and growth of our business and, therefore, do not anticipate paying any cash
dividends on common shares in the foreseeable future.
The declaration and payment of any dividends on our common shares, whether
in cash or shares, will be subject to the discretion of our board of directors.
We anticipate that any future dividends would be paid in U.S. dollars. Any
future determination to pay dividends, will depend on our results of operations,
financial condition, capital requirements, contractual restrictions and other
factors considered relevant by our board of directors.
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<PAGE>
CAPITALIZATION
The following table presents our capitalization:
- at September 30, 1999;
- at September 30, 1999 on a pro forma basis to give effect to:
V our acquisitions from IMPSAT Corporation of its retail dial-up access
customers in Argentina and Brazil and our pending acquisition of its
retail dial-up access customers in Colombia for an aggregate purchase
price of $21.5 million and the related purchase by IMPSAT Corporation
of 3,070,615 of our Class A convertible preferred shares for
$21.5 million; and
V the private placement in mid-November 1999 of 1,111,111 Class B
convertible preferred shares for an aggregate purchase price of
$10.0 million; and
- at September 30, 1999 on a pro forma basis as adjusted to give effect to:
V the sale of 8,200,000 common shares in, and the receipt of the net
proceeds from, this offering. We have assumed an initial public
offering price of $12.00 per share, which is the mid-point of the
estimated range of offering prices presented on the cover page of this
prospectus; and
V the conversion of all of our outstanding Class A convertible preferred
shares into common shares. Each Class A convertible preferred share
will convert automatically into two common shares upon completion of
this offering.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1999
--------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
-------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 24,393 $ 34,493 $123,505
======== ======== ========
Long-term debt, installment loan............................ $ 22 $ 472 $ 472
======== ======== ========
Class A convertible preferred shares--redeemable, $.01 par
value, 40,000,000 shares authorized, 5,832,566 shares
outstanding on an actual basis and 8,903,181 shares
outstanding on a pro forma basis.......................... 38,327 59,827 --
Class B convertible preferred shares--redeemable, $.01 par
value, 1,888,889 shares authorized, no shares outstanding
on an actual basis and 1,111,111 shares outstanding on a
pro forma and pro forma as adjusted basis................. -- 9,200 9,200
Shareholders' equity (deficit):
Common shares, $.01 par value, 200,000,000 shares
authorized, 12,568,098 outstanding on an actual and pro
forma basis and 38,574,460 outstanding on a pro forma as
adjusted basis............................................ 126 126 386
Additional paid-in capital.................................. 13,943 17,276 165,855
Deferred share-based compensation........................... (7,286) (7,286) (7,286)
Accumulated other comprehensive income...................... 95 95 95
Accumulated deficit......................................... (18,434) (18,434) (18,434)
Discount on Class B convertible preferred shares............ -- (3,333) (3,333)
-------- -------- --------
Total shareholders' equity (deficit).................. $(11,556) $(11,556) $137,283
-------- -------- --------
Total capitalization (Class A convertible preferred
shares, Class B convertible preferred shares plus
shareholders' equity (deficit))..................... $ 26,771 $ 57,471 $146,483
======== ======== ========
</TABLE>
The deferred share-based compensation in the above table relates to share
options that were granted in August and September 1999. This deferred
compensation will be amortized for financial reporting purposes over the vesting
periods for these options. See note 11 to our consolidated financial statements.
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<PAGE>
Each Class B convertible preferred share will automatically convert, on the
date six months after the closing date of this offering, into one common share.
The difference between the initial public offering price per common share and
the $9.00 price per Class B convertible preferred share will be amortized as a
deemed dividend during the same six-month period.
The above table assumes that none of the options outstanding at
September 30, 1999 or proposed to be granted prior to the closing of this
offering has been or will be exercisable prior to the closing of this offering.
See "Management--1999 Share Option Plan."
The above table should be read in conjunction with the financial statements
and pro forma financial information included elsewhere in this prospectus.
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<PAGE>
DILUTION
Dilution is the amount by which the initial public offering price paid by
the purchasers of common shares in this offering exceeds the net tangible book
value per share after this offering. Net tangible book value per share is
determined by subtracting our total liabilities from the total book value of our
tangible assets and dividing the difference by the number of common shares
deemed to be outstanding on the date as of which the book value is determined.
The pro forma net tangible book value deficit at September 30, 1999 has been
determined as follows (dollars in thousands):
<TABLE>
<S> <C>
Historical book value (deficit)............................. $(11,556)
Less: licenses and permits held by us....................... (98)
--------
Historical net tangible book value (deficit)................ $(11,654)
Less: intangible assets acquired or to be acquired from
IMPSAT Corporation........................................ (21,440)
--------
Pro forma net tangible book value (deficit)................. $(33,094)
========
</TABLE>
Pro forma net tangible book value per share is determined by using
12,568,098 common shares outstanding on a pro forma basis and before giving
effect to this offering and the conversion of our Class A convertible preferred
shares into common shares. Pro forma as adjusted net tangible book value per
share is determined by using 38,574,460 common shares outstanding, which is the
sum of:
- the common shares outstanding on a pro forma basis;
- the 8,200,000 common shares to be sold in this offering; and
- the 17,806,362 common shares issuable upon conversion of all of our
outstanding Class A convertible preferred shares.
The pro forma net tangible book value deficit of our shares at
September 30, 1999 was approximately $2.63 per share. After giving effect to the
receipt of the net proceeds of this offering based upon an initial public
offering price of $12.00 per share (which is the mid-point of the estimated
range of offering prices on the cover of this prospectus) and the conversion of
the Class A convertible preferred shares into common shares, our pro forma as
adjusted net tangible book value at September 30, 1999 would have been
$115.7 million, or $3.00 per share. These transactions represent an immediate
increase in net tangible book value of $5.63 per share to existing holders of
common shares and an immediate dilution of $9.00 per share to new public
investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per common share...... $12.00
Pro forma net tangible book value (deficit) per share at
September 30, 1999...................................... $(2.63)
Increase attributable to new public investors............. 5.63
------
Pro forma as adjusted net tangible book value............... 3.00
------
Dilution to new public investors............................ $ 9.00
======
</TABLE>
If the underwriters' over-allotment option is exercised in full, the pro
forma as adjusted net tangible book value per common share after giving effect
to this offering would be $3.25 per share. After deducting underwriting
discounts and commissions and estimated transaction expenses, the increase in
the net tangible book value per share to existing shareholders would be $5.88,
and the dilution to new public investors would be $8.75 per share.
After giving further effect to the conversion of all of our Class B
convertible preferred shares into common shares (which will automatically occur
on the date six months after the closing date of this
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<PAGE>
offering), the pro forma as adjusted net tangible book value per common share
would be $3.39 per share and the dilution to new investors would be $8.61 per
share.
The following table summarizes, on a pro forma as adjusted basis, at
September 30, 1999, after giving effect to the sale of common shares in this
offering, the number of common shares purchased from our company, the total
consideration paid and the average price per share paid by the existing
shareholders and new public investors:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
--------------------- ----------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Existing shareholders....................... 30,374,460 78.7 $ 63,654,000 39.3% $ 2.10
New public investors........................ 8,200,000 21.3 98,400,000 60.7% $12.00
---------- ----- ------------ -----
Total................................... 38,574,460 100.0% $162,054,000 100.0%
========== ===== ============ =====
</TABLE>
After giving effect to the conversion of all of our Class B convertible
preferred shares into common shares (which will automatically occur on the date
six months after the closing date of this offering), the number of common shares
purchased by existing shareholders, including the holders of the converted Class
B convertible preferred shares, would increase to 31,485,572 shares, the total
consideration paid by them would increase to $72,854,000 and the average price
per share paid by them would increase to $2.31 per share.
The above tables and calculations assume that none of the options
outstanding at November 1, 1999 have been or will be exercised prior to
completion of this offering and exclude common shares reserved for future
issuance under our 1999 share option plan. At November 1, 1999, there were
2,268,600 options outstanding to purchase a total of common shares with a
weighted average exercise price of $5.73 per share. To the extent that any of
these options are exercised, there will be further dilution to new investors.
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<PAGE>
SELECTED FINANCIAL DATA
The following financial data should be read in conjunction with the
consolidated financial statements, the unaudited pro forma consolidated
financial information, "Summary Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in this prospectus.
The selected balance sheet data at December 31, 1997 and 1998 and
September 30, 1999 and the selected statement of operations data for the period
from July 16, 1997 (date of inception) through December 31, 1997, the year ended
December 31, 1998 and the nine months ended September 30, 1999 have been derived
from our audited consolidated balance sheets and statements of operations
included elsewhere in this prospectus. The statement of operations data for the
nine months ended September 30, 1998 have been derived from our unaudited
consolidated statement of operations included elsewhere in this prospectus. The
unaudited financial statements include all adjustments, consisting only of
normal recurring adjustments, which in the opinion of management, are necessary
for the fair presentation of our consolidated financial condition and results of
operations for those periods. Results of operations for the nine months ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the entire year or for any future period.
The selected pro forma balance sheet data and the pro forma statement of
operations data at and for the nine months ended September 30, 1999 and at and
for the year ended December 31, 1998 have been derived from the unaudited pro
forma consolidated financial information included elsewhere in this prospectus.
The pro forma financial information reflects:
- our recent acquisitions of retail dial-up access customers of IMPSAT
Corporation in Argentina and Brazil and our pending acquisition of its
retail dial-up access customers in Colombia from IMPSAT Corporation for an
aggregate purchase price of $21.5 million and the related purchase by
IMPSAT Corporation of 3,070,615 of our Class A convertible preferred
shares for $21.5 million; and
- the private placement in mid-November 1999 of 1,111,111 Class B
convertible preferred shares for an aggregate purchase price of
$10.0 million.
The selected pro forma as adjusted balance sheet data give effect to the
sale of the common shares in, and the receipt of the net proceeds from, this
offering. We have assumed an initial public offering price of $12.00 per share,
which is the mid-point of the estimated range of offering prices presented on
the cover page of this prospectus. The pro forma as adjusted data also assume
that all of our outstanding Class A convertible preferred shares have been
converted into our common shares. The conversion will automatically occur upon
the closing of this offering.
We prepare our financial statements and the pro forma financial statements
in U.S. dollars in accordance with generally accepted accounting principles in
the United States, which is commonly called "U.S. GAAP."
33
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------ ------------------------------------
1997 1998 1998 1999
---------- ----------------------- ---------- -----------------------
ACTUAL ACTUAL PRO FORMA ACTUAL ACTUAL PRO FORMA
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................. $ 267 $ 780 $ 17,287 $ 609 $ 1,524 $ 11,541
Costs and expenses:
Product, content and
technology............... 221 1,556 10,988 848 3,181 9,608
Marketing and sales........ 142 674 2,815 320 7,157 8,614
Corporate, general and
administrative........... 727 1,940 4,574 1,144 3,736 4,786
Depreciation and
amortization............. 81 107 4,407 59 336 3,561
Share-based compensation... -- -- -- -- 499 499
---------- ---------- ---------- ---------- ---------- ----------
Total costs and
expenses............. 1,171 4,277 22,784 2,371 14,909 27,068
---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)...... (904) (3,497) (5,497) (1,762) (13,385) (15,527)
Total other income
(expense).................. (110) (20) (20) (30) 266 266
Dividends on Class A and
Class B convertible
preferred shares (1)....... -- -- (5,853) -- (784) (6,007)
---------- ---------- ---------- ---------- ---------- ----------
Net loss attributable to
common shareholders........ $ (1,014) $ (3,517) $ (11,370) $ (1,792) $ (13,903) $ (21,268)
========== ========== ========== ========== ========== ==========
Basic and diluted net loss
per common share........... $ (10.14) $ (1.15) $ (3.73) $ (.87) $ (1.18) $ (1.81)
Shares used in computing
basic and diluted loss per
common share............... 100,000 3,050,000 3,050,000 2,066,667 11,777,516 11,777,516
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30, 1999
------------------- ---------------------------------
PRO
PRO FORMA
1997 1998 ACTUAL FORMA AS ADJUSTED
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 89 $ 246 $ 24,393 $ 34,493 $123,505
Working capital (deficit).................... (1,146) (42) 20,257 29,851 118,863
Total assets................................. 396 1,481 33,120 64,776 153,788
Total liabilities............................ 1,360 712 6,349 7,305 7,305
Class A convertible preferred shares......... -- -- 38,327 59,827 --
Class B convertible preferred shares (1)..... -- -- -- 9,200 9,200
Total shareholder's equity (deficit)......... (964) 769 (11,556) (11,556) 137,283
</TABLE>
- ------------------------
(1) The difference between the initial public offering price per common share
and the $9.00 price per Class B convertible preferred share will be
amortized as a deemed dividend during the six-month period after the closing
of this offering.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated
financial statements, the unaudited pro forma financial information and the
other information appearing elsewhere in this prospectus.
OVERVIEW
We are an Internet network providing country-specific and regional content
for Spanish- and Portuguese-speaking audiences in Latin America and the United
States. Recognizing that the countries in the Americas are diverse, we have
designed our network to consist of country Websites as well as a global Website.
We currently have country Websites for, and sales and content production offices
in, Argentina, Brazil, Mexico, the United States and Uruguay. We plan to
establish sales and content production offices in Colombia before the end of
1999, and sales and content production offices in Chile and Venezuela during
2000. By offering content and interactive resources designed to be responsive to
our users' preferences, we seek to make our network their "home on the Internet"
and, in so doing, to create communities of users, develop user loyalty and
increase traffic on our Websites. The launch of each country Website represents
a potential new community of users. By building substantial communities of
users, we are developing a platform for generating revenues from advertising,
branded retail dial-up Internet access, or "connectivity", service and, in the
future, e-commerce. We recently began to offer connectivity services in
Argentina and Brazil and expect to offer similar services in Colombia before the
end of 1999. We are also beginning to develop e-commerce for Spanish- and
Portuguese-speaking audiences in Latin America and the United States.
We were incorporated in the British Virgin Islands, and commenced commercial
operations in Argentina, in 1997. For the period from inception through
October 1998, we focused our activities on developing our network of Websites
and opening content production and sales offices in Brazil, Mexico, the United
States and Uruguay.
Prior to the commercial roll-out of our network of Websites in
November 1998, we did not generate meaningful revenues, but achieved growth in
terms of registered users and monthly page views by users. Since that time, we
have focused on developing our network to incorporate new content channels and
value-added and interactive resources, recruiting sales and marketing staff,
raising capital, preparing our first mass media-based branding and advertising
campaign and expanding our technological infrastructure. Our registered users
(meaning users who have provided personal information such as name, e-mail
address and address) grew from 54,132 persons in June 1998 to 291,567 persons in
July 1999. From June 1998 to July 1999, the number of pages viewed by our users
increased from 3.0 million to 21.0 million per month. On August 1, 1999, we
launched our first mass media-based branding and advertising campaign in
Argentina, Brazil, Mexico and Uruguay and, on September 9, 1999, in the United
States. In the first three months of this campaign, our registered users
increased by approximately 69% to 498,515 on October 31, 1999 and the number of
pages viewed per month by our users increased by over 250% to 73.9 million pages
in that month. In addition, we commenced measuring unique visitors in March
1999. The number of unique visitors has increased from 174,800 in March 1999 to
approximately 1.6 million in October 1999. We attribute this recent growth
principally to our media-based branding and advertising campaign and cannot
predict whether such growth will continue.
In July 1999, we completed a private placement of 6,334,004 Class A
convertible preferred shares for a gross purchase price of $44.4 million in
cash, consisting of 5,477,088 shares sold for $38.4 million in cash and an
additional 856,916 shares to be issued on a quarterly basis through
January 2001 in exchange for $6.0 million in non-cash advertising time credits.
Strategic investors in the private placement included Hicks, Muse, Tate & Furst
Incorporated and the Cisneros Group of Companies (through IAMP (El Sitio)
Investments Ltd.) and GC Companies Inc. (through GCC Investments, LLC).
35
<PAGE>
Some of our founders purchased $6.5 million of our Class A convertible preferred
shares in the private placement.
In August 1999, we entered into a framework agreement with IMPSAT
Corporation, a provider of private networks of integrated data and voice
communications systems in a number of countries in Latin America, to acquire its
retail dial-up access customers in Argentina, Brazil and Colombia. Under this
agreement, we have acquired or will acquire these customers for an aggregate of
$21.5 million, which is based on a price of approximately $294 per subscriber.
IMPSAT Corporation will be purchasing a total of 3,070,615 Class A convertible
preferred shares for an aggregate purchase price of $21.5 million. The Argentine
and Brazilian acquisitions were consummated in November and October 1999,
respectively, and we expect to close the acquisition in Colombia before the end
of 1999. We are not acquiring the telecommunications infrastructure required to
provide connectivity services, which we intend to outsource from third-party
telecommunications providers--initially, under services agreements with
subsidiaries of IMPSAT Corporation under which they will provide us with
telecommunications infrastructure for a three-year term for agreed-upon fees.
Our connectivity customers subscribe to our dial-up operations by paying a
monthly fee to us in exchange for connectivity to the Internet.
In August 1999, we also entered into an arrangement with TV Azteca, S.A. de
C.V., the second leading television network in Mexico, under which we issued to
TV Azteca 355,478 shares of our Class A convertible preferred shares, then
valued at approximately $2.5 million, in exchange for $3.5 million in
advertising time on TV Azteca. This advertising time will be made available over
a three-year period.
In mid-November 1999, we completed a private placement of 1,111,111 Class B
convertible preferred shares for a purchase price of $10.0 million in cash, or
$9.00 per Class B convertible preferred share. Purchasers of the Class B
convertible preferred shares consisted of Intel Atlantic, Inc., a subsidiary of
Intel Corporation, and Latinvest Asset Management do Brasil, Ltda., an affiliate
of Globalvest Management Company, L.P. The Class B convertible preferred shares
have an annual dividend rate of 8%. Each Class B convertible preferred share
will automatically convert, on the date six months after the closing date of
this offering, into one common share. The difference between the initial public
offering price per common share and the $9.00 price per Class B convertible
preferred share will be amortized as a deemed dividend during the same six-month
period.
We have a limited operating and financial history for you to use as a basis
for evaluating an investment in our common shares. We are subject to the risks,
uncertainties and problems frequently encountered by companies in early stages
of development, particularly companies in new and rapidly developing markets,
such as the Internet industry. Our historical results of operations are not
necessarily indicative of the results of operations to be expected in the
future.
INTRODUCTION TO RESULTS OF OPERATIONS
NET REVENUES
We expect to derive our future net revenues from three principal sources:
- advertising on our network of Websites;
- connectivity to the Internet; and
- e-commerce.
ADVERTISING. To date, we have derived substantially all of our net revenues
from the sale of advertisements and sponsorships on our network. Advertising
revenues are received principally from:
- advertising arrangements under which we receive fixed fees for banners
placed on our Websites for specified periods of time;
- reciprocal services arrangements, under which we exchange advertising
space on our network for advertising or services from other parties;
36
<PAGE>
- sponsorship arrangements which allow advertisers to sponsor an area on our
network in exchange for a fixed payment; and
- Web design and Web hosting services.
As the Latin American Internet market continues to develop, we believe that an
increasing proportion of our advertising revenues will be derived from
cost-per-thousand impression-based arrangements, under which advertisers will
pay us a specified amount for every 1,000 times their advertisements are viewed
on our network. We expect that our revenues derived from Web design or hosting
activities for other companies will decline significantly beginning in the
fourth quarter of 1999. In future periods, we expect to outsource these
activities and, in any event, intend to offer these services only to customers
purchasing at least $120,000 in yearly advertising on our Websites.
Advertising revenues are recognized ratably in the period in which the
advertisement is displayed, so long as no significant obligations remain and
collection of the resulting receivable is probable. To the extent that minimum
guaranteed impression levels are not met, we defer recognition of the
corresponding revenues until guaranteed levels are achieved. Payments received
from advertisers prior to displaying their advertisements on our network are
recorded as deferred revenues. Revenues from exclusive sponsorship arrangements
are also recognized ratably. Our contracts with advertisers and advertising
agencies range from one to twelve months in length.
We have entered into reciprocal services arrangements with various media
companies, such as MGM Networks Latin America, pursuant to which we exchange
advertising on our network for advertising or other services from these media
companies. We do not receive any cash payments pursuant to these arrangements.
Revenues and expenses relating to these arrangements are recorded at the
estimated fair value of the goods or services received or the estimated fair
value of the advertisements given, whichever is more readily determinable.
Expenses are recorded when services are received, which is typically in the same
period as the advertisements are run on our network. These expenses are included
in our marketing and sales expenses.
CONNECTIVITY. We have recently taken steps to expand our revenue base
through our acquisitions of the retail dial-up access customers of IMPSAT
Corporation in Argentina and Brazil and our pending acquisition of its retail
dial-up access customers in Colombia. Under these acquisitions, we have a total
of approximately 66,000 dial-up access customers in Argentina and Brazil and
expect to acquire approximately 7,000 customers in Colombia. We expect to derive
revenues from monthly access fees charged to our dial-up access subscribers.
Approximately 70% of our dial-up access subscribers are expected to be billed on
a monthly basis to subscribers' credit cards, which should result in automatic
payment to us by the relevant credit card provider of the billed amounts.
E-COMMERCE. We currently do not derive revenues from e-commerce. We are
evaluating several joint venture opportunities with e-commerce merchants in the
United States and Latin America to develop electronic retail operations in the
flower, gifts, books, music and software and hardware businesses. We recently
added a "shopping channel" to our Websites, through which a limited offering of
books, flowers, music, gifts and technology products will be made available from
local and U.S.-based e-merchants. Despite our pending e-commerce initiatives, we
do not expect to derive meaningful revenues from e-commerce activities until at
least 2001.
OPERATING EXPENSES
Our principal operating costs and expenses consist of:
- product, content and technology expenses;
- marketing and sales expenses;
- corporate, general and administrative expenses; and
- depreciation and amortization expenses.
37
<PAGE>
PRODUCT, CONTENT AND TECHNOLOGY EXPENSES. Product, content and technology
expenses consist of personnel costs associated with the development, testing and
upgrading of our network of Websites and systems, purchases of content and
specific technology, particularly software, and telecommunications links and
access charges. As a result of our recent acquisitions of the retail dial-up
access customers in Argentina and Brazil from IMPSAT Corporation and our pending
acquisition of its retail dial-up access customers in Colombia, we expect to
incur, in the future, significant expenses relating to telecommunications. In
connection with these acquisitions, we have entered into services agreements
with subsidiaries of IMPSAT Corporation under which, in exchange for an access
fee linked to a number of dial-up access customers and levels of usage, IMPSAT
Corporation will provide the connections and the telecommunication
infrastructure necessary for our users to connect to the Internet. We currently
estimate that the aggregate fee payable to subsidiaries of IMPSAT Corporation
for these services will be approximately $500,000 per month. Except for hardware
(which is depreciated), we expense product, content and technology costs and
telecommunications infrastructure as they are incurred. We believe that
increased investment in new and enhanced features and technology is critical to
attaining our strategic objectives and remaining competitive. Accordingly, we
intend to continue recruiting and hiring experienced product, content and
technology personnel and to make additional investments in product, content and
technology development. We expect that product, content and technology expenses
will continue to increase significantly in future periods.
MARKETING AND SALES EXPENSES. Our marketing and sales expenses consist
primarily of salaries and expenses of marketing and sales personnel,
commissions, and sales force and other marketing-related expenses including,
most significantly, our mass media-based branding and advertising activities. We
expect these marketing and sales expenses to continue to increase significantly
for the foreseeable future as a result of:
- our mass media-based branding and advertising strategy; and
- the expansion of our sales force and marketing personnel.
CORPORATE, GENERAL AND ADMINISTRATIVE EXPENSES. Corporate, general and
administrative expenses consist primarily of costs related to corporate
personnel, occupancy costs, general operating costs and corporate professional
fee expenses, such as legal and accounting fees. We expect that we will incur
additional corporate, general and administrative expenses as we hire additional
personnel and incur additional costs related to the growth of our business and,
after this offering, our operation as a public company. Accordingly, we
anticipate that these expenses will continue to increase significantly in future
periods.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
consist primarily of depreciation of servers and other computer equipment,
office furniture and leasehold improvements. Investments in property, plant and
equipment are recorded at cost and depreciated using the straight-line method
over the following estimated useful lives:
<TABLE>
<S> <C>
- - computers, software and other equipment 3 years
- - leasehold improvements 5 years (lease term)
- - furniture, fixtures and other fixed assets 5 - 10 years
</TABLE>
As a result of our recent acquisitions of retail dial-up access customers of
IMPSAT Corporation in Argentina and Brazil and our pending acquisition of its
retail dial-up access customers in Colombia, we expect to incur significant
amortization expense related to intangible assets, consisting primarily of the
newly acquired customer base. The aggregate $21.5 million purchase price for the
acquisitions of these retail dial-up access customers has been allocated
principally to this intangible asset. This intangible asset will be amortized
over the next five years on a straight-line basis and, as such, will be
reflected as an expense in our statement of operations in future periods. To the
extent that we fail to retain this customer base during this period, this
intangible asset could be deemed to be impaired, in which case
38
<PAGE>
an amount in excess of the anticipated amortization expense would be charged to
our results of operations and could result in substantially increased losses or,
in later years, reduced profitability. As a result, our future financial
performance could be materially and adversely affected if we are not successful
in preserving and developing our newly acquired connectivity customer base.
SHARE-BASED COMPENSATION. Our share-based compensation expense relates to
share options granted in August and September 1999. These options were granted
at an exercise price based on the purchase price paid by investors in our July
1999 private placement of Class A convertible preferred shares. Because this
exercise price is well below the initial public offering price for this
offering, we recorded total deferred share-based compensation expense of
$7.8 million, which we will amortize over the respective three-year vesting
periods for these options. See note 11 to our consolidated financial statements.
The total deferred share-based compensation amount and the expense for future
periods may increase depending upon the exercise prices and other terms for
subsequent grants of options. See note 14 to our consolidated financial
statements.
OTHER INCOME (EXPENSE)
Other income (expenses) consists primarily of interest expense, net of
interest earned, foreign exchange losses, net of any gains, and other
miscellaneous income and expense items. As a result of the net proceeds of the
offering, we expect that for the foreseeable future our interest income will
exceed our interest expense. Immediately after this offering most of our assets
will be in cash or cash equivalents, which we expect to principally maintain in
U.S. dollars. As our assets in each country of operation increase, so will our
exposure to foreign exchange losses on the translation of assets into U.S.
dollars.
NET LOSSES
We have incurred net losses and have experienced negative cash flow from
operations in each quarterly and annual period since our inception. Our overall
strategy is to develop our position as a full-service Internet network providing
country-specific content, connectivity services and e-commerce targeting
Spanish- and Portugese-speaking audiences in Latin America and the United
States. This strategy contemplates that we will make significant expenditures
for, among other things, marketing and sales, equipment, customer support and
personnel. This strategy also envisions that we may make significant investments
involving acquisitions, strategic relationships and joint ventures. Because of
this strategy, we expect that our net losses and negative cash flows from
operations on a quarterly and annual basis will increase significantly for at
least the next several years.
HISTORICAL RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
Our results of operations for the nine months ended September 30, 1999 were
characterized by increased expenses that more than offset revenue growth during
the period. We recorded a net loss of $13.9 million for the nine months ended
September 30, 1999, compared to a net loss of $1.8 million for the corresponding
period of 1998. During the first nine months of 1999, in addition to the
continued development of quality, content and interactive resources, we expanded
our operations and hired additional personnel to support the roll-out of offices
and Websites in Brazil, Mexico and the United States and the launch of our first
mass media-based branding and advertising campaign. We plan to establish new
sales and content production offices in Chile and Venezuela during 2000. We have
recently acquired a total of approximately 66,000 retail dial-up access
customers from IMPSAT Corporation in Argentina and Brazil, and expect to acquire
approximately 7,000 customers in Colombia by the end of 1999. We anticipate that
these recent developments will contribute to an increase in our revenues in
future periods.
39
<PAGE>
NET REVENUES
Our net revenues increased by 146% to $1.5 million for the nine months ended
September 30, 1999 from $609,000 for the corresponding period in 1998. Of our
net revenues for the first nine months of 1999, approximately 78% was comprised
of advertising and the balance to Web design or hosting services. We expect that
our revenues derived from Web design or hosting activities for other companies
will decline significantly in the fourth quarter of 1999. In future periods, we
expect to outsource these activities and, in any event, will offer these
services only to customers who agree to purchase at least $120,000 in yearly
advertising on our Websites. Although most of our advertising revenues are
currently derived from fixed banners and page sponsorships, we believe that an
increasing portion of our advertising revenues will be derived from
cost-per-thousand impression-based arrangements. Under these arrangements
advertisers pay us a specified amount for every 1,000 times their advertisements
are viewed on our network.
We attribute the increase in advertising revenues principally to the growth
of our network in terms of registered users and page views together with the
expansion of our marketing and sales force. Of these revenues 47% was derived
from Argentina, 22% from Mexico and 30% from Uruguay, as our operations in other
countries were still in the early stages of operations. In the future, we also
expect to derive significant revenues from Brazil, Mexico and the United States
where we have launched commercial operations during 1999. In the nine months
ended September 30, 1999, our largest client, TV Azteca, accounted for 13% of
total net revenues. During this period, 36% of our total revenues was derived
from reciprocal services arrangements compared to 22% of total net revenues in
the corresponding period in 1998. We do not receive any cash payments from these
arrangements.
COSTS AND EXPENSES
PRODUCT, CONTENT AND TECHNOLOGY EXPENSES. Our product, content and
technology expenses increased to $3.2 million for the nine months ended
September 30, 1999 from $848,000 for the corresponding period in 1998. Our
product, content and technology expenses as a percentage of revenues increased
to 209% for the nine months ended September 30, 1999 from 139% in the
corresponding period in 1998. The period-to-period increase was principally
attributable to:
- an increase in personnel costs relating to the development of content and
technological support to $2.2 million in the nine months ended
September 30, 1999 from $600,000 in the corresponding period in 1998;
- an increase in expenses for telecommunications links to $385,000 in the
nine months ended September 30, 1999 from $165,000 in the corresponding
period in 1998; and
- an increase of third-party content expenses to $130,000 in the nine months
ended September 30, 1999 from no such expense in the corresponding period
in 1998.
We believe that continued development of, and increased investment in, new
and enhanced features and technology is critical to attaining our strategic
objectives and remaining competitive. Accordingly, we intend to continue
recruiting and hiring experienced product, content and technology personnel and
to make additional investments in product, content and technology development.
We expect that product, content and technology expenses will continue to
increase significantly in future periods.
MARKETING AND SALES EXPENSES. Our marketing and sales expenses increased to
$7.2 million for the nine months ended September 30, 1999 from $320,000 for the
corresponding period in 1998. Our marketing and sales expenses as a percentage
of net revenues increased to 470% for the nine months ended September 30, 1999
from 53% in the corresponding period in 1998. This increase was principally
attributable to:
- $5.9 million in costs of our initial mass media-based branding and
advertising campaign; and
40
<PAGE>
- an increase in marketing and sales personnel costs to $784,000 in the nine
months ended September 30, 1999 from $34,000 in the corresponding period
in 1998, due mainly to opening or expanding offices in Mexico, Brazil and
the United States.
We expect these sales expenses to continue to increase significantly for the
foreseeable future as a result of:
- our mass media-based branding and advertising strategy; and
- the expansion of our sales force and marketing personnel.
CORPORATE, GENERAL AND ADMINISTRATIVE EXPENSES. Our corporate, general and
administrative expenses increased to $3.7 million for the nine months ended
September 30, 1999 from $1.1 million for the corresponding period in 1998. Our
corporate, general and administrative expenses as a percentage of net revenues
increased to 245% for the nine months ended September 30, 1999 from 188% in the
corresponding period in 1998. This increase was principally attributable to:
- an increase in corporate and administrative personnel costs to
$1.3 million in the nine months ended September 30, 1999 from $320,000 in
the corresponding period in 1998, which resulted primarily from the
expansion of our network and financing activities; and
- an increase in overhead costs to support the expansion of our business
activities.
We expect that we will incur additional corporate, general and
administrative expenses as we hire additional personnel and incur additional
costs related to the growth of our business. Accordingly, we anticipate that
these expenses will continue to increase significantly in future periods.
DEPRECIATION AND AMORTIZATION. Our depreciation and amortization expenses
increased to $336,000 for the nine months ended September 30, 1999 from $59,000
for the corresponding period in 1998. Our depreciation and amortization expenses
as a percentage of net revenues increased to 22% for the nine months ended
September 30, 1999 from 9.7% in the corresponding period in 1998. This increase
was principally attributable to an increase of $1.7 million in fixed assets
(principally servers and personal computers).
As a result of our acquisitions of retail dial-up access customers of IMPSAT
Corporation in Argentina and Brazil and our pending acquisition of its retail
dial-up access customers in Colombia, we expect to incur significant
amortization expense related to intangible assets, consisting primarily of this
newly acquired customer base.
SHARE-BASED COMPENSATION. We incurred share-based compensation expense of
$499,000 for the nine months ended September 30, 1999. This amount represents
the amortization in this period of our total deferred share-based compensation
relating to share options granted in August and September 1999. See notes 11 and
14 to our consolidated financial statements.
OTHER INCOME (EXPENSE)
Other income (expense), which consists of net interest income (expense),
foreign exchange gain or loss, and other income (expense), net, consisted of
income of $266,000 for the nine months ended September 30, 1999 compared with a
loss of $30,000 for the corresponding period in 1998. This change resulted
primarily from interest income earned on the proceeds of the July 1999 private
placement. We expect that for the foreseeable future our interest income will
exceed our interest expense. As our assets in each country of operation
increase, so will our exposure to foreign exchange losses on the translation of
assets into U.S. dollars.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO PARTIAL YEAR 1997 (FROM INCEPTION IN
JULY 1997 THROUGH DECEMBER 31, 1997)
Following our inception in July 1997 until the roll-out of our network of
country Websites during 1998, we concentrated on the development of quality
content and interactive resources in Spanish, and
41
<PAGE>
on market testing to understand users' preferences. As a result, our results of
operations for 1998 were characterized by increasing expenses and mostly flat
revenues on a quarter-to-quarter basis. We recorded a net loss of $3.5 million
for 1998, compared to a net loss of $1.0 million for 1997. Our results of
operations for 1997 reflect a partial year consisting of six months.
NET REVENUES
Our net revenues increased 192% to $780,000 for 1998 from $267,000 for
partial year 1997. The increase in revenues resulted from the expansion of our
marketing efforts and sales force, as well as the increase in the number of
channels and services available on our network. For 1998, we had four customers,
Arcor S.A., Compaq Corporation, IMPSAT S.A. and Antel (Uruguay), which each
exceeded 10% of total revenues and in the aggregate represented 72% of total
revenues. By contrast, for partial year 1997, we had five customers, Miniphone,
Compaq Corporation, Arcor S.A., Telam S.A., and IMPSAT S.A., which each exceeded
10% of total revenues and in the aggregate represented 89% of total revenues.
Non-cash reciprocal services arrangements accounted for approximately 23% of our
total revenues in 1998 as compared with approximately 14% for partial year 1997.
COST AND EXPENSES
PRODUCT, CONTENT AND TECHNOLOGY EXPENSES. Our product, content and
technology expenses increased to $1,556,000 for 1998 from $221,000 for partial
year 1997. Our product, content and technology expenses as a percentage of net
revenues increased to 200% for 1998 from 83% for partial year 1997. The
year-to-year increase was principally attributable to:
- an increase in personnel costs dedicated to the development of content and
technological support to $1.1 million in 1998 from $167,000 in partial
year 1997; and
- an increase in expenses for telecommunications links for our network to
$284,000 in 1998 from $30,000 in partial year 1997.
MARKETING AND SALES EXPENSES. Our marketing and sales expenses increased to
$674,000 for 1998 from $142,000 for partial year 1997. Our marketing and sales
expenses as a percentage of revenues increased to 86% for 1998 from 53% for
partial year 1997. The year-to-year increase was principally attributable to:
- an increase in personnel costs dedicated to marketing and sales to
$274,000 in 1998 from $7,000 in partial year 1997; and
- an increase in advertising expenses and sales commissions to $209,000 in
1998 from $29,000 in partial year 1997.
CORPORATE, GENERAL AND ADMINISTRATIVE EXPENSES. Our corporate, general and
administrative expenses increased to $1.9 million for 1998 from $727,000 for
partial year 1997. Our corporate, general and administrative expenses as a
percentage of net revenues amounted to 249% for 1998 from 272% for partial year
ended 1997. The year-to-year increase was principally attributable to:
- an increase in personnel costs in corporate and administrative functions
to $480,000 in 1998 from $61,000 in partial year 1997; and
- increases to $627,000 from $362,000 in professional fees, to $373,000 from
$104,000 in rent and utilities and to $215,000 from $40,000 in travel and
entertainment expenses.
42
<PAGE>
DEPRECIATION AND AMORTIZATION. Our depreciation and amortization expenses
increased to $107,000 for 1998 from $81,000 for partial year 1997. However, our
depreciation and amortization expenses as a percentage of net revenues decreased
to 14% for 1998 from 30% for partial year 1997. The absolute increase in these
expenses was principally attributable to an increase of $508,000 in fixed assets
(principally servers and personal computers). The relative decrease in
depreciation and amortization expenses was attributable to a more substantial
increase in net revenues when compared with the absolute increase in these
expenses.
OTHER INCOME (EXPENSE).
Other expenses decreased to $20,000 for 1998 from $110,000 for partial year
1997. This decrease primarily reflected a decrease in interest expense in 1998
due to a decrease in the debt.
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth unaudited consolidated statement of
operations data for each of the seven quarters ended September 30, 1999. This
data has been derived from unaudited interim consolidated financial statements
prepared on the same basis as the audited consolidated financial statements
contained in this prospectus. In the opinion of management, this data includes
all adjustments, consisting only of normal recurring adjustments, that are
considered necessary for a fair presentation of this information when read in
conjunction with the consolidated financial statements appearing elsewhere in
this prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED (UNAUDITED)
-------------------------------------------------------------------------------
1998 1999
-------------------------------------------- --------------------------------
MARCH JUNE SEPTEMBER DECEMBER MARCH JUNE SEPTEMBER
31 30 30 31 31 30 30
-------- -------- ---------- --------- -------- -------- ----------
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net revenues.................................... $ 196 $ 229 $ 184 $ 171 $ 276 $ 488 $ 760
Costs and expenses:
Product, content and technology............... 156 237 455 708 616 1,066 1,499
Marketing and sales........................... 38 93 189 354 355 672 6,130
Corporate, general and administrative......... 186 373 585 796 740 1,013 1,983
Depreciation and amortization................. 16 19 24 48 66 101 169
Share-based compensation...................... -- -- -- -- -- -- 499
----- ----- ------- ------- ------- ------- -------
Total costs and expenses........................ 396 722 1,253 1,906 1,777 2,852 10,280
----- ----- ------- ------- ------- ------- -------
Loss from operations............................ (200) (493) (1,069) (1,735) (1,501) (2,364) (9,520)
Total other income (expense) net................ (6) (8) (16) 10 (14) 56 224
----- ----- ------- ------- ------- ------- -------
Net loss before dividends on Class A convertible
preferred shares.............................. $(206) $(501) $(1,085) $(1,725) $(1,515) $(2,308) $(9,296)
===== ===== ======= ======= ======= ======= =======
</TABLE>
The results of operations for any quarter are not necessarily indicative of
the results of operations for any future period. In particular, because of our
limited operating and financial history, we have limited meaningful financial
data to estimate revenues and operating expenses.
OVERVIEW OF RESULTS OF OPERATIONS FOR NEWLY-ACQUIRED CONNECTIVITY OPERATIONS
We have acquired IMPSAT Corporation's retail dial-up access customers in
Argentina and Brazil and are in the process of acquiring its retail dial-up
access customers in Colombia. The aggregate purchase price of these three
acquisitions is $21.5 million. As a result of these acquisitions, we recently
began to provide connectivity services in Argentina and Brazil and expect to
provide connectivity services in Colombia by the end of 1999. In connection with
these acquisitions, we have acquired approximately 66,000 retail dial-up access
customers in Argentina and Brazil and expect to acquire an aggregate of
approximately 7,000 dial-up customers in Colombia. We hired a total of 48
employees who previously worked for IMPSAT Corporation in Argentina and Brazil
and expect to hire an additional
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five employees from IMPSAT Corporation in Colombia. These employees will perform
tasks which they previously performed for IMPSAT Corporation and which are not
currently performed by our employees. Because of the significance of these
acquisitions relative to our company's current assets and results of operations,
we have included the following brief discussion of the results of operations for
these acquisitions for 1998 and for the nine months ended September 30, 1999.
The stand-alone financial information for these businesses included in this
prospectus was derived from IMPSAT Corporation's accounting records and based
upon the estimates of IMPSAT Corporation's management. This discussion should be
read in conjunction with the stand-alone audited financial information for the
acquired businesses and the unaudited pro forma consolidated financial
information included elsewhere in this prospectus. The historical results of
operations of these businesses are not necessarily indicative of the results of
operations to be expected in the future. However, in the brief period (since
October 7, 1999) during which we have provided connectivity services to our
retail dial-up access customers, we have generated net revenues and incurred
costs and expenses which are consistent with those reflected in the audited
financial information for the acquired dial-up access businesses included in
this prospectus.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
NET REVENUES.
For the three dial-up access businesses of IMPSAT Corporation, total net
revenues decreased to $10.0 million for the nine months ended September 30, 1999
from $12.1 million for the corresponding period in 1998.
In Argentina, net revenues for the dial-up access business increased to
$2.9 million for the nine months ended September 30, 1999 from $2.3 million for
the corresponding period in 1998. This increase resulted from the following
factors:
- an increase in paying subscribers to 15,646 at September 30, 1999 from
13,223 at September 30, 1998; and
- a partially offsetting decline in the average gross subscription fee per
customer to $24.80 for the month of September 1999 from $33.29 for the
month of September 1998.
The number of paying subscribers in Argentina increased by 36% during the course
of the nine months ended September 30, 1999 (as measured from the beginning to
the end of such nine-month period) as compared with a 67% increase during the
course of the corresponding period of 1998.
In Brazil, net revenues for the dial-up access business decreased to
$5.8 million for the nine months ended September 30, 1999 from $8.0 million for
the corresponding period in 1998. This decrease resulted from the following
factors:
- a decline in the average gross subscription fee per customer (in U.S.
dollar terms) to $12.39 for the month of September 1999 from $22.19 for
the month of September 1998, which decline was largely due to a 63%
decline in the value of the Brazilian REAL to 1.94 REAIS per U.S. dollar
at September 30, 1999 from 1.19 REAIS per U.S. dollar at September 30,
1998; and
- a partially offsetting increase in paying subscribers to 55,449 at
September 30, 1999 from 48,960 at September 30, 1998.
The number of paying subscribers in Brazil increased by 14% during the course of
the nine months ended September 30, 1999 (as measured from the beginning to the
end of such nine-month period) as compared with a 57% increase during the course
of the corresponding period of 1998.
In Colombia, net revenues for the dial-up access business decreased to
$1.4 million for the nine months ended September 30, 1999 from $1.7 million for
the corresponding period in 1998. This decrease resulted from the following
factors:
44
<PAGE>
- a decline in the average gross subscription fee per customer (in U.S.
dollar terms) to $19.95 for the month of September 1999 from $25.80 for
the month of September 1998, partially due to a 29.3% decline in the value
of the Colombian PESO to 2005 PESOS per U.S. dollar at September 30, 1999
from 1550 PESOS per U.S. dollar at September 30, 1998; and
- a decrease in paying subscribers to 6,817 at September 30, 1999 from 6,899
at September 30, 1998.
We anticipate that our connectivity services business will experience
declining average subscription fees in the future. We cannot predict the rate of
decline. However, we believe that our connectivity services business will
benefit from our overall mass media-based branding and advertising campaigns. We
also intend to dedicate significant resources to increasing our base of
connectivity customers. Accordingly, we believe that the rate of growth in
paying subscribers should increase within the next few months. We also
anticipate that the cost of telecommunications infrastructure services provided
by third parties should decrease in future periods. We believe that the retail
dial-up access businesses were not core businesses of IMPSAT Corporation and, as
a result, did not receive managerial focus during the months leading up to our
acquisition of these businesses. We cannot predict the actual rate of increase
in paying customers or whether any increase will occur or, if it occurs, will
continue.
DIRECT COSTS AND EXPENSES.
The principal direct costs and expenses of our dial-up access businesses
consist of product, content and technology costs and marketing and sales
expenses. These costs and expenses together include costs of telecommunications
infrastructure to provide the services, personnel costs, outsourced product
support, such as a 24-hour help desk, and administrative costs. Direct costs and
expenses for these businesses decreased to $8.9 million for the nine months
ended September 30, 1999 from $10.3 million for the corresponding period in
1998. Direct costs and expenses as a percentage of total net revenues was 88%
for the nine months ended September 30, 1999 and 85% for the corresponding
period in 1998.
EXCESS OF NET REVENUES OVER DIRECT COSTS AND EXPENSES.
Excess of net revenues over direct costs and expenses decreased to
$1.2 million for the nine months ended September 30, 1999 from $1.8 million for
the corresponding period in 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO PARTIAL YEAR ENDED DECEMBER 31, 1997.
NET REVENUES. Total net revenues for the three dial-up access businesses of
IMPSAT Corporation increased to $16.5 million for 1998 from $11.5 million in
partial year 1997. Total paying subscribers increased to 68,646 at December 31,
1998, representing a 40% increase from 48,909 at December 31, 1997.
In Argentina, net revenues for the dial-up access business increased to
$3.0 million in 1998 from $2.6 million for partial year 1997. This increase
resulted from the following factors:
- an increase in paying subscribers to 14,329 at December 31, 1998 from
6,626 at December 31, 1997; and
- a partially offsetting decline in the average gross subscription fee per
customer to $37.49 for the year ended December 1998 from $66.99 for
partial year 1997.
In Brazil, net revenues for the dial-up access business increased to
$11.4 million for 1998 from $7.0 million for partial year 1997. This increase
resulted from the following factors:
- an increase in paying subscribers to 48,603 at December 31, 1998 from
31,119 at December 31, 1997;
- a partially offsetting decline in the average gross subscription fee (in
U.S. dollar terms) per customer to $23.31 for December 1998 from $27.79
for December 1997, partially due to a 8.0%
45
<PAGE>
decline in the value of the Brazilian REAL to 1.21 REAIS per U.S. dollar
at December 31, 1998 from 1.12 REAIS per U.S. dollar at December 31, 1997.
In Colombia, net revenues for the dial-up access business increased to
$2.1 million for 1998 from $1.8 million for partial year 1997. This decrease was
primarily attributable to the following factors:
- a decline in the average gross subscription fee per customer to $25.80 for
December 1998 from $32.43 for December 1997 partially due to a 20% decline
in the value of the Colombian PESO to 1,550 PESOS per U.S. dollar at
December 31, 1998 from 1,295 PESOS per U.S. dollar at December 31, 1997;
and
- a decrease in paying subscribers to 5,714 at December 31, 1998 from 6,122
at December 31, 1997.
DIRECT COSTS AND EXPENSES. Direct costs and expenses for these businesses
increased to $14.1 million for 1998 from $9.7 million for partial year 1997.
Direct costs and expenses as a percentage of total net revenues was 86% for 1998
as compared to 84% in partial year 1997.
EXCESS OF NET REVENUES OVER DIRECT COSTS AND EXPENSES. Due to the factors
noted above, the excess of net revenues over direct costs and expenses was
$2.4 million for 1998 as compared to $1.8 million for partial year 1997.
LIQUIDITY AND CAPITAL RESOURCES
We continue to be a company in an early stage of operations. We have
substantial liquidity and capital resource requirements, but limited sources of
liquidity and capital resources. We have generated net losses and negative cash
flows from our inception and anticipate that we will experience substantial and
increasing net losses and negative cash flows for at least the next several
years. As we implement our strategy and seek to take advantage of our market
opportunity, we anticipate that our liquidity and capital resource requirements
will increase significantly.
From our inception to date, we have relied principally upon equity
investments to support the development of our business. We expect to continue to
rely mainly on further equity offerings to provide financing, including this
offering which constitutes, by far, the major capital-raising initiative in our
history.
We received total capital contributions of approximately $1.2 million in
1997 and $4.1 million in 1998. In the nine months ended September 30, 1999 we
received total capital contributions in cash of $36.8 million, which consisted
primarily of the proceeds of a private placement of 6,334,004 Class A
convertible preferred shares for a total purchase price of $44.4 million. This
private placement consisted of 5,477,088 shares sold for $38.4 million in cash
in July 1999 and 856,916 shares to be issued on a quarterly basis through
January 2001 in exchange for $6.0 million in non-cash advertising time credits.
In addition, in connection with our recent acquisitions of retail dial-up access
customers from IMPSAT Corporation in Argentina and Brazil and our pending
acquisition of its retail dial-up access customers in Colombia, IMPSAT
Corporation will purchase approximately $21.5 million of our Class A convertible
preferred shares. Furthermore, in connection with our arrangement with TV
Azteca, S.A. de C.V., we issued to TV Azteca 355,478 Class A convertible
preferred shares in exchange for approximately $3.5 million of advertising time,
which will be made available over a three-year period beginning on July 1999.
As part of the July 1999 private placement, we entered into an agreement
with Washburn Enterprises, an affiliate of one of our shareholders, under which
we also agreed to purchase at least $4.0 million of advertising time on the
media networks owed by Washburn's affiliate Ibero-American Media Partners
II Ltd. and its affiliates, and Washburn agreed that it and its affiliates would
purchase as least $2 million of advertising time on our network, all during the
period through January 2001.
In mid-November 1999, we completed a private placement of 1,111,111 Class B
convertible preferred shares for a purchase price of $10.0 million in cash, or
$9.00 per Class B convertible
46
<PAGE>
preferred share. Purchasers of the Class B convertible preferred shares
consisted of Intel Atlantic, Inc., a subsidiary of Intel Corporation, and
Latinvest Asset Management do Brasil, Ltda., an affiliate of Globalvest
Management Company, L.P. Each Class B convertible preferred share will
automatically convert, on the date six months after the closing date of this
offering, into one common share. The difference between the initial public
offering price per common share and the $9.00 price per Class B convertible
preferred share will be amortized as a deemed dividend during the same six-month
period.
Net cash used in operating activities was $11.2 million for the nine months
ended September 30, 1999, $3.2 million for the year ended December 31, 1998 and
$875,000 for the partial year ended December 31, 1997. We have experienced and
expect to continue to experience significant negative cash flows from operating
activities. Net cash used in operating activities resulted primarily from our
net operating losses.
Net cash used in investing activities was $1.5 million for the nine months
ended September 30, 1999, $733,000 for the year ended December 1998 and $261,000
for the partial year ended December 31, 1997. Net cash used in investing
activities resulted primarily from purchases of capital assets.
Net cash provided by financing activities was $36.8 million for the nine
months ended September 30, 1999, $4.1 million for the year ended December 31,
1998 and $1.2 million for the partial year ended December 31, 1997. Net cash
provided by financing activities consisted primarily of the net proceeds from
short-term borrowings and the sale of our common shares.
We expect to make capital expenditures of approximately $3.0 million in
1999, including $1.5 million spent in the nine months ended September 30, 1999,
and a total of approximately $5.0 million for 2000 and 2001. The capital
expenditures in 1999 principally consist of purchases of, or investments in,
technical equipment. We expect that our capital expenditures will increase
significantly in the future as we make technological improvements to our network
of Websites and technical infrastructure and enter into strategic joint ventures
or acquisitions.
We expense many of our expenditures related to improvements to our Websites
such as new channels and interactive features. These expenditures are estimated
to be approximately $4.0 million during 2000. We expect to spend a total of
$1.0 million in 2001 on the development of content with respect to our country
Websites for Chile, Colombia and Venezuela. We have not projected any
expenditures related to business combinations other than content and marketing
alliances, which are included in the product, content and technology expenses
and the marketing and sales expenses.
Our liquidity and capital resource requirements will depend on numerous
factors, including:
- market acceptance of our services and products;
- the level of resources that we devote to investments in our network;
- marketing and sales of our services and products; and
- our branding and advertising activities.
We believe that the net proceeds of this offering and of our mid-November
1999 private placement of our Class B convertible preferred shares, together
with our current cash and cash equivalents balance of $24.4 million at
September 30, 1999 (which includes the remaining unused net proceeds from our
July 1999 private placement of our Class A convertible preferred shares) will be
sufficient to meet our liquidity and capital resource requirements through early
2002. We expect to require up to an additional $50 million of additional
financing during the period through 2003, when we expect to achieve
profitability. If our cash resources prove to be insufficient to satisfy these
requirements, we may seek to sell additional equity or debt securities or to
obtain a credit facility. The sale of additional equity or convertible debt
securities could result in additional dilution to our shareholders. The
incurrence of indebtedness would result in increased fixed obligations and most
likely would subject us to covenants that would restrict our operations. We
cannot assure you that financing will be available in amounts or on terms
acceptable to us, if at all.
47
<PAGE>
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These systems
and software products will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, computer systems and/or
software used by many companies and governmental agencies may need to be
upgraded to comply with such Year 2000 requirements or risk system failure or
miscalculations which may cause disruptions to normal business activities.
We are in the process of conducting an internal review to ensure that our
services and products are Year 2000 compliant. Year 2000 problems may originate
within our own systems and products or within the systems of our third party
suppliers or our customers. Some of our non-information technology systems, such
as equipments or machinery, may also be affected by Year 2000 problems.
Our internal verification process consists of:
- component inventory and assessment, including vendor and third party
evaluation;
- component remediation;
- component testing;
- system testing; and
- contingency planning.
We have conducted an inventory, and developed testing procedures, for all
software and other systems that we believe might be affected by Year 2000
issues. We have tested our computers, servers and other equipment. We have
sought written confirmation from each of our third-party suppliers and service
providers as to their respective readiness. We expect to complete upgrades and
testing by the end of 1999. We also expect to receive confirmation as to Year
2000 compliance from all key vendors and suppliers in December 1999. In
connection with our acquisitions of the retail dial-up access customers of
IMPSAT Corporation in Argentina and Brazil and our pending acquisition of its
retail dial-up access customers in Colombia, we are in the process of verifying
Year 2000 compliance of these businesses.
We have also identified and have begun assessing non-information technology
embedded systems such as voice mail, office security, fire prevention and other
systems. We generally believe that our non-information technology embedded
systems do not present significant Year 2000 issues.
To date, we have spent an immaterial amount on Year 2000 compliance issues,
but may incur up to approximately $350,000 in connection with identifying and
solving any Year 2000-related problems. We anticipate that most of our expenses
will relate to personnel costs associated with time spent by employees in the
assessment process and Year 2000 compliance matters.
As discussed above, we are engaged in an ongoing Year 2000 assessment and
have developed no contingency plans to address the worst-case scenario that
might occur if the technologies we are dependent on actually are not Year 2000
compliant. The results of our Year 2000 simulation testing and the responses
received from all third-party suppliers and service providers will be taken into
account in determining the need for, and the nature and extent of, any
contingency plans.
To the extent that our assessment is finalized without identifying any
additional material non-compliant information technology systems operated by us
or by third parties, the most reasonably likely worst case Year 2000 scenario is
a systemic failure beyond our control, such as a prolonged communications or
electrical failure. Any failure of this type could prevent us from accessing our
network, or change the behavior of advertising customers or persons accessing
our network. We believe that the primary business risks, in the event of such
failure, would include but not be limited to, lost advertising revenues,
increased operating costs, loss of customers or persons accessing our network,
and other business interruptions of a material nature, as well as claims of
mismanagement, misrepresentation or breach of contract.
48
<PAGE>
MARKET RISKS
We have not had meaningful interest rate exposure because we have maintained
small debt balances to date. Our Class A convertible preferred shares, which
carried an annual dividend rate of 8%, will be automatically converted into
common shares upon completion of this offering. We will pay accumulated
dividends in cash on or about the date of conversion. Our Class B convertible
preferred shares will also carry an annual dividend rate of 8%. We should not,
however, experience significant interest rate risks until such time as we have
material balances of indebtedness or preferred shares.
Our principal foreign currency exposure has related to our asset base, which
has consisted principally of monetary assets and liabilities, in the countries
in which we operate. Our company's asset base in countries with foreign currency
exposures is summarized as follows:
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1999
---------------------
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C>
Argentina.......................................... $ 2,906
Brazil............................................. 13,109
Mexico............................................. 4,956
Uruguay............................................ 345
-------
$21,316
=======
</TABLE>
Our subsidiaries have generally used the U.S. dollar as their functional
currency because the sale of advertising has historically been priced and billed
in U.S. dollars. As a result, the financial statements of the subsidiaries have
been remeasured, or translated into U.S. dollars. The effects of foreign
currency transactions and of remeasuring our subsidiaries' financial condition
and results of operations into U.S. dollars have been included as net gain or
loss on foreign exchange. However, our Brazilian subsidiary uses the REAL as its
functional currency and, as such, the effects of foreign currency transactions
and remeasuring are included as an adjustment to shareholders' equity. The
method of accounting for the effects of foreign currency transactions and of
remeasuring for our subsidiaries' financial condition and results of operations
will change in the event that the functional currencies for our subsidiaries
change. For example, due to our recent acquisitions of IMPSAT Corporation's
retail dial-up access customers in Argentina and Brazil and our pending
acquisition of its retail dial-up access customers in Colombia, the principal
source of revenues for several of our subsidiaries will be connectivity services
which will generally be priced and billed in local currency.
We do not currently hedge against currency exchange transaction risks, but
could in the future engage in hedging activities against specific foreign
currency transaction risks. Because of uncertainties involving exchange rate
movements, we cannot quantify the effect of exchange rate movements on our
future financial condition or results of operations.
In June 1998, the Financial Accounting Standards Board, which is commonly
called FASB, issued Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standard for derivative instruments,
including derivative instruments embedded in other contracts, and for hedging
activities. In June 1999, FASB issued SFAS 137, "Accounting for Derivative
Instruments and Hedging Activities Deferral of Effective Date of FASB Statement
No. 133," which deferred the effective date of SFAS 133 to all fiscal quarters
of fiscal years beginning after June 15, 2000. We are currently evaluating the
effect that adoption of SFAS No. 133 will have on our financial statements.
49
<PAGE>
BUSINESS
OVERVIEW
We are an Internet network providing country-specific and regional content
for Spanish- and Portuguese-speaking audiences in Latin America and the United
States. Recognizing that the countries in the Americas are diverse, we have
designed our network to consist of country Websites as well as a global Website.
We currently have country Websites for, and sales and content production offices
in, Argentina, Brazil, Mexico, the United States and Uruguay. We plan to
establish sales and content production offices in Colombia before the end of
1999, and sales and content production offices in Chile and Venezuela during
2000. By offering content and interactive resources designed to be responsive to
our users' preferences, we seek to make our network their "home on the Internet"
and, in so doing, to create communities of users, develop user loyalty and
increase traffic on our Websites. The launch of each country Website represents
a potential new community of users. By building substantial communities of
users, we are developing a platform for generating revenues from advertising,
branded retail dial-up Internet access, or "connectivity", service and, in the
future, e-commerce. We recently began to offer connectivity services in
Argentina and Brazil and expect to offer similar services in Colombia before the
end of 1999. We are also beginning to develop e-commerce for Spanish- and
Portuguese-speaking audiences in Latin America and the United States.
Our founders believed that a scarcity of Spanish- and Portuguese-language
content was the principal factor limiting the growth of Internet usage in Latin
America. As a result, from our inception in mid-1997, we initially concentrated
on the development of a pilot Website for Argentina with quality content and
interactive resources in Spanish and, at the same time, carried out extensive
market testing to understand users' preferences. We then began to roll-out our
network of country Websites during 1998 and, most recently, launched our Website
in the United States in September 1999. Our registered users (meaning users who
have provided personal information such as name, e-mail address and address)
grew from 54,132 persons in June 1998 to 291,567 persons in July 1999. From
June 1998 to July 1999, the number of pages viewed by our users increased from
3.0 million to 21.0 million per month. On August 1, 1999, we launched our first
mass media-based branding and advertising campaign in Argentina, Brazil, Mexico
and Uruguay and, in September 1999, in the United States. In the first three
months of this campaign (through October 31, 1999), our registered users
increased by approximately 69% to approximately 498,515 at October 31, 1999 and
the number of pages viewed by our users increased by over 250% to approximately
73.9 million pages in that month. In March 1999, we also commenced measuring
unique visitors. The number of unique visitors has increased from 174,800 in
March 1999 to approximately 1.6 million in October 1999. We attribute this
recent growth principally to our mass media-based branding and advertising
campaign, and cannot predict whether such growth will continue.
OUR MARKET OPPORTUNITY
The Spanish- and Portuguese-speaking audiences in Latin America and the
United States together represent one of the fastest growing user groups on the
Web today. While we do not expect to have country Websites or operations for
every country in Latin America, our network is targeted to the entire Latin
American region. In the United States, we are currently targeting the
Spanish-speaking populations in Chicago, Houston, Los Angeles, Miami, New York,
San Antonio and San Diego. We are primarily targeting individual users, although
we anticipate that business and other entities will become important
participants in our communities of users.
We believe a large and growing market consisting of Spanish- and
Portuguese-speaking audiences exists in Latin America and the United States for
content, connectivity and e-commerce services, and that this market presents us
with a significant opportunity. Latin America had a total population at the end
of 1998 of 492.4 million people, of whom more than two thirds are under
35 years of age. The
50
<PAGE>
region had an aggregate gross domestic product in 1998 of $2.0 trillion, of
which Brazil, Mexico and Argentina accounted for more than three-fourths. The
wealthiest 20% of the Latin American population accounts for approximately
two-thirds of the overall buying power in the region and constitutes our primary
target market. As a result, we believe that the Latin American market has a
highly desirable demographic profile for advertisers and businesses.
Internet usage has only begun to penetrate Latin America, but its growth is
expected to be dramatic. Internet users in Latin America have grown from
approximately 2.3 million at year-end 1997 to 4.8 million at year-end 1998, and
are projected to increase to 19.1 million by year-end 2003, representing an
increase in Internet penetration of 0.6% to 3.7% (measured in relation to the
total population of the region). According to industry reports, the Internet
penetration rate in 1998 was 0.8% in Argentina, 1.1% in Brazil, 0.4% in
Colombia, 0.6% in Mexico and 1.9% in Chile.
The United States has a total Hispanic population of approximately
31.4 million people, which has grown at a compound annual rate of 3.7% from 1996
to 1999. By 2000, the U.S. Hispanic population is expected to constitute
approximately 11% of the total U.S. population. Advertising targeting U.S.
Hispanics was $1.7 billion in 1998. As of May 1999, the Internet penetration
rate for U.S. Hispanics was approximately 19.0%.
ADVERTISING. Latin America represents an attractive market for advertisers.
Internet advertising in Latin America continues to grow as an advertising medium
because the Internet is being increasingly used by a desirable segment of the
Latin American population. Although Internet advertising is still in an
incipient stage in Latin America, it is expected to account for an increasing
share of total advertising expenditures in the region. Internet advertising in
Latin America totaled $23.6 million in 1998 and is projected to grow to
$948.9 million in 2003.
CONNECTIVITY. Connectivity services permit customers to access the Internet
through a local telephone call. At year-end 1998, there were approximately
3.0 million Internet subscriber accounts in Latin America, a number which is
projected to grow to 14.8 million by year-end 2003.
Dial-up access charges have been declining in Latin America and at year-end
1998 averaged $31.48 per month. In addition to dial-up access charges, Internet
users are required to pay per minute telephone charges to connect to the
Internet. While per minute charges have not declined as rapidly as monthly
charges, we believe that they will trend downward as the effects of
telecommunications deregulation spread. Nonetheless, the all-in cost of dial-up
access remains significantly higher in Latin America than in the United States.
We believe that this cost has been a factor in limiting Internet penetration in
Latin America. However, the declining cost of dial-up access in Latin America is
a contributor to the projected growth of Internet use in Latin America.
E-COMMERCE. We believe that Latin America will, in the long-term, adopt
e-commerce as an increasing number of businesses and consumers embrace the
Internet as a viable method of selling and purchasing goods and services.
On-line expenditures in Latin America totaled $166.8 million in 1998 and are
expected to increase to $8.0 billion for 2003.
THE EL SITIO VISION
Our founders envisioned an Internet network that would provide quality
country-specific content to Spanish- and Portuguese-speaking audiences in the
countries of Latin America, the United States and elsewhere. From our inception,
our philosophy has been to "Think regional, be local." Consistent with this
philosophy, we have opened offices in five countries in Latin America and in the
United States and have, to date, launched country Websites in each of these
countries. We believe that the combination of country Websites supported by
in-country management, marketing, sales and content production personnel will
enable us to implement the EL SITIO vision and to build the premier Internet
network for
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Spanish- and Portuguese-speaking audiences in Latin America, the United States
and, over the long-term, Spain and Portugal.
We believe our network should provide access for our users to a broad range
of Internet services as a means of further fostering our users' loyalty to our
network. Accordingly, we recently acquired the retail dial-up access customers
of IMPSAT Corporation in Argentina and Brazil, and expect to acquire its retail
dial-up access customers in Colombia by the end of 1999. We intend to utilize
our Websites as gateways to the Internet for subscribers to our connectivity
services. To further enhance the appeal of our network, we are also
incorporating a Web search engine into our network so that our users can utilize
our Websites as portals to search the Web.
We believe our network provides a platform for generating revenues from the
following principal sources:
- advertising;
- connectivity services; and
- e-commerce.
To implement the EL SITIO vision, we have assembled a management team
experienced in building and operating pan-Latin American businesses. Our
management team is comprised largely of Latin Americans who provide us with
essential market knowledge and cultural insights. We believe that our local
presence allows us to better understand the needs of local Internet users,
advertisers and businesses, and to maintain strong relationships with them. Our
management team is drawn from diverse fields and includes professionals with
backgrounds in computer technology and design, sales, marketing and finance.
OUR STRATEGY
Our goal is to become the leading Internet network for Spanish- and
Portuguese-speaking audiences in Latin America and the United States. To achieve
our goal, and to take advantage of our market opportunity, we continue to
implement a strategy consisting of the following principal elements:
- BUILDING A MARKET-LEADING NETWORK
Our strategy is driven by our views, first, that the countries in Latin
America are diverse and, second, that the scarcity of Spanish- and
Portuguese-language content has been the principal factor limiting the growth of
Internet usage in Latin America. As a result, we seek to build a leading
Internet network by:
V FURTHER DEVELOPING COUNTRY-SPECIFIC AND REGIONAL CONTENT. From our
inception, we have focused on developing quality country-specific and
regional Spanish- and Portuguese-language content. At September 30,
1999, we had 67 employees dedicated to content development in the five
countries in which we currently operate. During 2000, we expect to
commence production of content for our planned country Websites for
Chile, Colombia and Venezuela. We also provide content to our viewers
under agreements with well-known content providers such as CBS
Sportsline, Reuters and The Weather Channel. In addition, the
community features on our Websites are designed to encourage our users
to contribute content to our network. By continuously expanding and
enhancing our production of proprietary and user-generated content,
and, by entering into arrangements with leading third-party content
providers we intend to maintain our position as a market leader in
Spanish- and Portuguese-language content.
V INCORPORATING ADDITIONAL COMMUNITY-BUILDING FEATURES. Our experience
indicates a strong preference on the part of Latin American users for
community-building features, such as chat,
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CUPIDO NET, e-mail and other interactive resources. Consistent with
our user-focused business philosophy, prior to the roll-out of our
network, we launched a pilot Website and engaged in an extensive
period of market testing to identify the preferences of Internet users
in each of our target markets. In response to those preferences, we
have developed and continuously seek to enhance our content channels
and interactive resources in order to further build our community of
users and foster their loyalty to our network. One recent example is
the launch of CUPIDO NET, an interactive meeting place for users,
which at September 30, 1999, three months after its inception, had
43,924 members. We continue to seek to better understand the needs and
preferences of our users through on-line surveys and analysis of
traffic patterns and usage of services.
V STRENGTHENING OUR BRAND IDENTITY. After first dedicating our resources
to develop our content and network, we launched our first mass
media-based branding and advertising campaign on August 1, 1999. We
expect to spend approximately $15.5 million through December 31, 1999
and approximately $40.0 million in 2000 on this campaign. We seek to
create the leading network brand among Spanish- and
Portuguese-speaking Internet users and to expand our presence as a
mass market Internet network by building strong brand awareness. We
have positioned our image as user-friendly, informative and
entertaining. We believe that the essence of our brand is summed up in
our marketing campaign theme: EL SITIO: TU LUGAR EN INTERNET ("EL
SITIO: Your Home on the Internet"). To build upon our brand, we plan
to continue to advertise on the Internet to on-line users, and to
allocate a significant portion of our resources to advertising,
marketing and communications in traditional advertising media.
- GENERATING REVENUES FROM OUR NETWORK
While our country-specific and regional content, community-building features
and brand identity are the building blocks to our becoming the premier Internet
network for Spanish- and Portuguese-speaking audiences, our revenue-generation
strategy is the key to our long-term success. We intend to capitalize on our
network to generate substantial revenues by:
V FORGING ONE-ON-ONE RELATIONSHIPS WITH ADVERTISERS. The market for
advertising on the Internet by Latin American companies is still in
its infancy, with limited market awareness of the benefits of Internet
advertising. As a result, an important part of our sales strategy is
to forge one-on-one relationships with advertisers in which we educate
companies regarding the full commercial advantages of the Internet as
an advertising medium, emphasizing the attractive demographics of
Latin American Internet users, and thereby attract advertisers to our
network. With offices in each of our principal markets, at
September 30, 1999, we had a total of 83 sales and marketing personnel
dedicated to developing long-term relationships with potential
advertisers and expanding our advertising revenues. Our structure
permits us to develop relationships not only with multinationals
purchasing advertising on all of our Websites, but also with
country-specific advertisers interested in advertising targeted to
users in their country. We are generating advertising revenue
currently in Argentina, Brazil, Mexico, the United States and Uruguay.
V INTEGRATING CONNECTIVITY INTO OUR NETWORK. In order to broaden the
services that we offer and to foster user loyalty, we have acquired
from IMPSAT Corporation its retail dial-up access customers in
Argentina and Brazil and are in the process of acquiring its retail
dial-up access customers Colombia. We believe that offering EL
SITIO-branded connectivity services will increase user loyalty to our
network. We intend to utilize our Websites as the gateways to the
Internet for our subscribers. To further enhance the appeal of our
network, we are incorporating a Web search engine into our network so
that our users can utilize our Websites as portals to search the Web.
By establishing a commercial relationship with our users, particularly
through billing their monthly dial-up access fees to their credit
cards, we expect
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that resistance to commercial purchases on our network will decline.
We are currently generating subscription fee-based revenue in
Argentina and Brazil from the provision of connectivity services.
V DEVELOPING OUR E-COMMERCE BUSINESS. We believe our e-commerce
opportunities will, over the long term, expand as an increasing number
of Latin American businesses and consumers embrace the Internet as a
viable method of purchasing goods and services, and we intend to
capitalize on these opportunities. We recently added an e-shopping
channel to our network. We also concluded a non-exclusive agreement
with From2.com, a Miami-based e-commerce logistics company, which will
provide logistics and fulfillment services for international
e-commerce transactions conducted on our network. We are pursuing
several revenue-sharing relationships and joint venture opportunities
with e-commerce merchants in the United States and Latin America to
develop e-commerce retail operations in the flower, gifts, books,
music and software and hardware areas. We do not expect to derive
meaningful revenues from e-commerce activities until at least 2001.
- LEVERAGING STRATEGIC RELATIONSHIPS
We intend to leverage our existing relationships with shareholders and enter
into new strategic relationships to expand our network and enhance our content,
marketing and sales. In the months following our July 1999 private placement,
our key strategic shareholders, Hicks, Muse, Tate & Furst Incorporated, the
Cisneros Group of Companies and GC Companies Inc., have facilitated a variety of
new commercial relationships, including introduction to potential advertising
customers and e-commerce partners.
OUR NETWORK
We are an Internet network providing country and regional content for
Spanish- and Portuguese-speaking audiences in Latin America and the United
States. Our network currently consists of a global Website and five
country-specific Websites focused upon Argentina, Brazil, Mexico, the United
States and Uruguay. We believe we are distinguished by our strong focus on
country-specific and regional content. We have grown our network by opening
local offices and hiring staff to develop content that is specific to the
countries in which we operate.
We commenced operations in Argentina in mid-1997 and shortly thereafter
launched a pilot Website for that country. We opened our Montevideo office in
November 1997 and our Mexico City office in May 1998. After extensive market
testing and development of our content production capacity, we launched the
ELSITIO.COM network in November 1998 in Argentina, Mexico and Uruguay. We
currently have 148 employees in Buenos Aires, 58 in Mexico City and 16 in
Montevideo. We opened our office in Brazil in September 1998, launched the
Brazilian OSITE.COM.BR Website in the Portuguese language in July 1999 and now
have 35 employees in Sao Paulo. We opened our office in Miami in May 1998,
launched our U.S. Website in September 1999 and now have 28 employees in Miami.
We believe our local presence allows us to better understand the needs of local
advertisers and businesses. We plan to establish sales and content production
offices in Colombia before the end of 1999 and sales and content production
offices in Chile and Venezuela during 2000. We will hire a total of 53 employees
who previously worked for IMPSAT Corporation or its subsidiaries in connection
with our acquisitions of its retail dial-up access customers in Argentina,
Brazil and Colombia.
Our offices and country-specific content afford our users the dual
advantages of, first, the size and resources of a regional network and, second,
the country-specific content and community features most useful to them.
Operationally, this structure permits us to maximize economies of scale to
support efficiently multiple markets with differing content and features from a
single global platform.
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Our global content and design team, in consultation with our country
offices, designs our homepage and community features, acquiring or developing
software required to offer the features that our market research indicates will
most appeal to our users. This global team also generates a large volume of
global content, both proprietary and from third-party providers such as Agence
France Presse, Reuters, CBS Sportsline and The Weather Channel. Technological,
financial and administrative functions are also carried out at the global level.
The content and community features prepared by our global team provides the
starting point from which our in-country production teams adapt our global
Website to their local market preferences. Our local and regional production
offices in Buenos Aires, Mexico City, Miami, Montevideo and Sao Paulo cultivate
our users' preferences by adapting the content and community features on our
channels to local preferences. Local managers and their staff have autonomy to
select the stories and features that are headlined on our channels, to add
country-specific proprietary or third-party content and to add channels or
features with a local focus. For example, the editorial manager of EL SITIO
Mexico might select news items specific to Mexico or enhance a story without a
Mexican focus by including reactions in Mexico to the news item. Similarly, the
editorial manager of O SITE in Brazil might provide reviews of local restaurants
in Sao Paulo or Rio de Janeiro and might add, during February of each year, a
channel on CARNAVAL.
PRODUCT DESCRIPTION
We have developed a network of country Websites that provide original
proprietary and third-party content and user-friendly interactive resources,
including free e-mail, auctions, chat rooms, personal home pages, bulletin
boards, contests and prizes, that bring our own style to our user base.
Based on our market research activities, we believe there are four key areas
of interest that attract our targeted users: interactive news; relationships;
technology; and entertainment. These four areas of interest are reflected in our
core channels in each country Website.
We believe that our core channels define the personality and vision of our
products. Our core channels currently are:
- INTERACTIVE NEWS--Our staff transforms relevant daily news in each country
into an interactive experience for our users. User interest is encouraged
through presentation of the news in an entertaining style. News articles
include debates, polls, forums and trivia, which allow our readers and
editors to become part of the articles. In addition to our daily news, we
have global and local third-party news coverage.
- RELATIONSHIPS--We cover relationship topics that interest our users, such
as love, family, friendship, society, sex, politics. We want our users to
communicate and share important life experiences with our community of
users. In addition to interactive responses that we generate from polls
and forums, we typically receive over 500 narratives each day from our
users from which we select some responses to display on our channels.
- TECHNOLOGY--Our staff produces technology-related content with both the
new and the experienced Internet user in mind. Tutorials, guides and news
about technology and the Internet are provided to assist new users in
learning how to navigate the Internet. We also cater to more experienced
users through, among other things, sophisticated materials, software and
application downloads and technology-related news. Our free technology
newsletter, which now has over 100,000 subscribers, gives us an
opportunity to interact with our users on a weekly basis.
- ENTERTAINMENT--We provide our users with entertainment-related content in
areas such as music, fashion, TV and movies. We also create an interactive
environment for our users through interviews, polls and forums. For
example, our users act as journalists and moderators during
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interviews with top models or TV stars. We also provide our users a
variety of games, contests and prizes on a daily basis.
In addition to our four core channels, we recently began to provide an
e-shopping channel:
- E-SHOPPING--We anticipate that e-shopping opportunities will originate
from our core channels. Once in the e-shopping channel, our users will
encounter a user-friendly environment that helps them shop, provides them
with merchant and product comparisons, and gives them shopping ideas.
We also provide a series of general and country-specific channels. Our
general channels include:
- NOTICIAS/NOTICIAS ("NEWS")--provides news sources by a variety of
strategic partners. Third-party content is complemented by editorials,
opinion articles and columns produced with local flavor by our journalists
and staff members in Buenos Aires, Mexico City, Miami, Montevideo and Sao
Paulo. Our strategic partners in News include Reuters, Agence France
Presse, Notimex and Infosic.
- COMUNIDAD/COMUNIDADE ("COMMUNITY")--encourages interaction of our users
through a series of user-friendly resources that allow them to chat, voice
their opinions and express their creativity through their own pages on the
Internet.
- SERVICIOS/SERVICOS ("SERVICES")--provides a local experience for our users
through restaurant, hotel and movie recommendations, as well as local
listings of theaters, museums and the arts in Buenos Aires, Mexico City,
Miami, Montevideo and Sao Paulo. We expect to develop similar content for
other major Latin American cities and our targeted cities in the United
States that have large Spanish-speaking populations.
- JUEGOS/JOGOS ("GAMES")--offers users a variety of multimedia, action,
arcade and promotional games, in which users compete for prizes awarded by
many of the companies advertising on our Websites. Our local writers
contribute to the channel by providing editorials on Web games. Our users
have the ability to download games directly from this channel.
- DEPORTES/ESPORTES ("SPORTS")--provides up-to-date news, analysis,
interviews and opinions on a broad range of sports. Through an arrangement
with CBS Sportsline (which excludes Brazil), we receive English-language
information, which our editorial staff then develops into Spanish-
language articles, in exchange for Spanish-language articles (also
displayed on our Website) about sports in Latin America. This year, users
will able to watch live sports events utilizing our multimedia
capabilities. Users will also be able to search a reference library with
features, statistics and other information about sports personalities in
Latin America.
- PADRES/PAIS ("PARENTS")--gives information to our users on the subject of
parenting. This channel is co-produced with a group of specialized
psychologists who participate in editorial support and respond to the
confidential mail of users.
- NEGOCIOS/NEGOCIOS ("BUSINESS")--through a short-term agreement with Zona
Financiera, a major Latin American producer of business and financial
information, our users currently have access to the latest business news
and services such as stock market quotations, exchange rates, interest
rates, mortgage and car loan rates, and insurance rates. In addition to
Zona Financiera, we have an agreement with Patagon.com, a leading business
content site in the region, under which Patagon.com will pay us to be a
non-exclusive provider of co-branded business content inside our Website
after the Zona Financiera agreement ends in the first quarter of 2000.
- EL TIEMPO/O TEMPO ("THE WEATHER")--offers our users comprehensive and
up-to-the minute weather information, including weather conditions and
forecasts for over 4,700 cities worldwide. The content is provided through
an agreement with The Weather Channel.
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We also provide our users in each country with a list of country-specific
channels that are available on some of our country Websites, including the
following:
- HOMETOWN (USA)--provides local news for each of our targeted cities with
large Spanish-speaking populations in the United States. News articles are
produced by our own writers for our targeted markets: Chicago; Houston;
Los Angeles; Miami; New York; San Antonio; and San Diego.
- BELEZA (BRAZIL)--is a channel devoted to men and women with interests in
fashion and beauty topics. Users can find articles that deal with issues
usually found in fashion magazines. This channel is created with
interactivity in mind so users can share their ideas and experiences on
these topics.
- GEOSFERA (BRAZIL)--is devoted to extreme sports, including hiking,
skydiving, trekking, mountain climbing and other rigorous outdoor sports.
- GASTRONOMIA (URUGUAY)--provides news and forums regarding local and
international cuisine. Users can read and share experiences and recipes
and also learn about the latest developments in the gastronomical world.
- ASTROWELS (MEXICO)--is a channel on astrology topics. It includes studies
and analysis on birth, early childhood, karma, horoscopes and
compatibility.
- VIDA (USA)--consists of a compilation of proprietary articles that deal
with day-to-day issues and concerns of Hispanic populations in the United
States. This channel covers topics such as race and identity, sex and
politics, health, art, literature, second generation issues, food and
nutrition, and others.
Our user-friendly interactive resources include:
- CHAT--provides entry to a "virtual community" in which our users interact
in real-time group or one-on-one discussions. Users may voice their
opinions on a variety of topics, such as sports, politics, relationships
and current events. Our users create special interest chat rooms and can
also participate in moderated chat rooms. On average, each chat user stays
in our chat rooms for approximately 20 minutes.
- CUPIDO NET--is an interactive meeting place on our network where users can
search for new friends or special relationships. Users from different
backgrounds and experiences share their interests through CUPIDO NET. As
of September 30, 1999, three months after its launch, CUPIDO NET has
generated approximately 43,924 members.
- E-MAIL--permits users to sign up for free e-mail services in Spanish,
Portuguese and English through our recently signed agreement with USA.Net,
a leading provider of e-mail and messaging services. As part of this
alliance, users will benefit from enhanced customization tools that will
offer them control over their e-mail account, including customization of
their e-mail interface. Since access to e-mail requires user registration,
e-mail is expected to be a significant source of registered users and user
data in the future. As of September 30, 1999, which is three months after
its launch, we have generated approximately 46,790 EL SITIO e-mail
accounts and 8,860 O SITE e-mail accounts.
- AUCTIONS--enables sellers in Latin America and the United States to post
their products inside our channel and take advantage of our expanding user
base. Buyers and sellers give us their personal information in order to
register as users of our auctions channel. We act as a meeting place for
sellers and bidders, while final transactions are executed outside the El
Sitio network. We closely monitor the information from our sellers. Our
company does not receive any fee for
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transactions, but benefits from increased traffic to our network and from
advertising revenues generated from the channel.
- BUSCADOR/BUSCADOR ("SEARCH")--is an internal search engine which enables
users to search our library of over 90,000 pages. To further improve the
functionality and appeal of our network, we recently reached an agreement
with Inktomi, a leader in search technology with a library of over
110 million sites, in which we use their search engine software and have
access to their database. These search features will enable our users to
utilize our network to surf the Web.
- TU SITIO PERSONAL/SEU SITE PESSOAL ("PERSONAL HOME PAGE")--offers our
users the ability to create their own content through their personalized
home pages in Spanish and Portugese. We provide the proprietary tools that
help our users create their own ideas on the Web in order to share their
content with others. We believe that affinity between us and our users
increases as they share their own experiences through our network.
- BULLETIN BOARDS--offer our users the ability to post their own views and
opinions on a variety of topics to be read by other users on our Websites.
In that way, our users promote dialogue on relevant issues, topics or
events of interest to other users on our network.
- PREMIOS/PREMIOS ("CONTESTS")--uses contests as a marketing tool to attract
visitors to our network. A recent campaign with nearly 12,000 registered
users participating is "SUBETE AL TREN DE EL SITIO" ("Climb Aboard the EL
SITIO Train") in which e-mail users provide us with the e-mail addresses
of their friends who ride with them in their "trains," thereby increasing
their chances of winning a trip to one of many destinations in Latin
America.
Our network of Websites is designed to be the home of our users on the
Internet. We are positioning ourselves as the friendly Internet network that
informs and entertains. As a result, we are able to develop communities of
interest, fostering user loyalty, increased usage and longer stays at our
Websites. In addition, the interactive resources on our Websites help us to
create communities of interest which are valuable to advertisers and e-commerce
merchants seeking to attract customers with specific interests.
OUR COMMUNITY
We are developing a substantial community of users, based in large part on
the content and community features of our network.
Users accessing our Websites are encouraged to register with us on either a
full or partial basis. Full registration requires users to provide us with the
user's name, e-mail address, home address, telephone number, occupation and
other personal information. A partial registration requires a user to provide
only a name and e-mail address. To encourage full registration, some of our
network's most popular features require prior registration, such as private chat
rooms, CUPIDO NET, our interactive meeting place, free e-mail and participation
in games and other promotions. Once a user is registered with our network, we
are able to communicate with the user by e-mail and otherwise seek to involve
the user in our community. Although historically we have been unable to track
the frequency with which a particular user accesses our Websites, we have
recently implemented technology that will permit us to measure more precisely
the activity levels of our registered users.
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We track our user traffic principally on the following basis:
- REGISTERED USERS--measures the cumulative number of users that have
registered with our network by providing information such as name, e-mail
address and address. Some of these registered users may no longer be
active users. Most of our users have not yet registered with our network.
- PAGE VIEWS--measures the number of pages opened by our users in a given
period and is a useful indicator for advertisers.
- VISITS--measures the number of visits to our Websites in a given period.
- UNIQUE VISITORS--measures the number of individual visitors in a given
period, such that an individual user that visits our Websites multiple
times in the relevant period is only counted one time.
We have generated statistics concerning our registered users. Our page view
data is supplied by I/Pro Netline reports. Our unique visitor numbers are
audited by I/Pro. In November 1999, we retained ABC Interactive, which has
commenced auditing our traffic statistics.
The table below sets forth, on a monthly basis over the last thirteen months
(September 1998 through October 1999) the evolution in our registered user base
and page views on a monthly basis:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MONTHLY PAGE VIEWS REGISTERED USERS
<S> <C> <C>
Sept 3,071,700 86,173
Oct 3,317,900 95,515
Nov 2,558,400 100,360
Dec 3,125,500 107,118
Jan 8,656,800 234,030
Feb 9,316,300 242,975
Mar 12,896,100 251,343
Apr 18,057,500 261,113
May 17,634,900 269,797
Jun 18,273,400 281,255
Jul 21,011,200 294,363
Aug 42,500,000 379,812
Sept 69,000,000 440,000
Oct 73,900,000 498,000
</TABLE>
We increased our registered user base from approximately 54,132 persons in
June 1998 to 291,567 in July 1999. From June 1998 to October 1999, the number of
pages viewed by our users increased from 3.0 million to 73.9 million per month.
We achieved a significant increase in registered users and user traffic in
January and February 1999, in part as a result of our purchase for $223,000 in
December 1998 from Mandic S.A. of its chat rooms in Brazil and their integration
into our network. In August 1999, our number of registered users and our user
traffic increased significantly. This latter increase was attributable, in part,
to the launching on August 1, 1999 of our first mass media-based branding and
advertising campaign. In the first three months of this campaign, our registered
users increased by approximately 69% to 498,515 at October 31, 1999 and the
number of pages viewed by our users increased by over 250% to 73.9 million in
the month of October 1999. We commenced
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measuring unique visitors in March 1999. The number of unique visitors has
increased from 174,800 in March 1999 to approximately 1.6 million in
October 1999.
CONNECTIVITY
In order to broaden the services that we offer and to foster user loyalty,
we recently acquired the retail dial-up access subscribers of IMPSAT Corporation
in Argentina and Brazil and are in the process of acquiring its retail dial-up
access subscribers in Colombia. The total purchase price for these acquisitions
will be $21.5 million. As a result of these acquisitions, we have acquired
approximately 52,000 dial-up subscribers in Brazil and 14,000 dial-up
subscribers in Argentina and expect to acquire approximately 7,000 dial-up
subscribers in Colombia, for an aggregate total of approximately 73,000
subscribers.
We believe our connectivity services will enable us to develop an additional
source of revenue and to create closer ties with Internet users in Latin
America. We also anticipate that our dial-up access service will enhance the
content and e-commerce aspects of our business, because we should be able to
attract our dial-up subscribers to our Websites. We believe that increased use
of our Websites will increase advertisers' interest in placing advertisements
and sponsorships on our network and will encourage e-commerce merchants to
partner with us and drive our e-commerce revenues. For example, a substantial
majority of the dial-up subscribers that we expect to acquire from IMPSAT
Corporation currently are not registered users of our network. We intend to
market to these subscribers by, among other things, having our homepage appear
automatically when they connect to the Internet through our dial-up access
service.
We have begun an evaluation process to determine the most effective method
of migrating the IMPSAT Corporation Websites, which are currently used as the
homepages for some of these subscribers, to our Websites. We expect to continue
using the existing IMPSAT Corporation Websites during a transition period of
approximately nine months. During this transition, we anticipate that we will
gradually integrate our brand name and features onto these Websites before
migrating these subscribers entirely to our network of Websites.
We are not acquiring the telecommunications infrastructure, such as
points-of-presence, switches and backhaul capacity, required to provide retail
Internet dial-up access. The acquisitions will be limited to the subscribers and
staff required to provide retail dial-up access. We have entered into three-year
services agreements with subsidiaries of IMPSAT Corporation under which it will
provide to us the necessary telecommunications infrastructure for a fee per port
or "channel" made available to our customers for the transmission of data.
We plan initially to outsource help desk operations and technical support
for our dial-up access businesses. This approach should enable us to minimize
our fixed costs and respond more flexibly to changes in demand.
MARKETING
We depend upon advertising to develop our brand and to attract users to our
Websites and subscribers to our connectivity services. We believe that we have
already achieved significant brand name recognition and market share principally
due to positive word-of-mouth resulting from our country-specific content,
without conducting an aggressive marketing campaign in mass media. From our
inception in June 1997 until September 30, 1999, we spent an aggregate total of
approximately $8.0 million on marketing, sales and advertising (including
advertising received in barter transactions in exchange for advertising on our
network). By contrast, we expect to spend $15.5 million in the five months from
August 1, 1999 to year-end 1999. In the future, we expect our branding and
advertising expenses to represent the largest single component of our expenses
and have budgeted approximately $40 million for 2000.
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MARKETING EFFORTS UP TO AUGUST 1, 1999. During our first two years of
operations, we focused our resources upon the development of quality content in
Spanish and Portuguese and attractive interactive resources for our network. Our
marketing was limited to low-budget initiatives, including:
- targeted e-mail advertising;
- banner advertising on the Web with hyperlinks to our Websites; and
- special games and promotions on our Websites.
Our advertising seeks to position us as the friendly Internet network that
informs and entertains with quality content, ease of use and responsiveness to
user preferences. Our marketing campaigns communicate these values using the
advertising logo with the tag line underneath: EL SITIO: TU LUGAR EN INTERNET
("EL SITIO: Your Home on the Internet"). These brand values, together with our
country-specific content and interactive resources, are designed to personalize
the on-line experience of our users, so that they may develop a one-to-one
relationship with us. We conduct direct marketing to our registered users
through e-mail campaigns.
MARKETING EFFORTS SINCE AUGUST 1, 1999. We launched our first mass
media-based branding and advertising campaign on August 1, 1999. Principally as
a result of this campaign, during the first three months of this campaign
(through October 31, 1999), we experienced an approximately 69% increase in
registered users and an over 250% increase in page views during those three
months. This campaign seeks to build our brand by creating brand recognition in
our target markets, attracting new users to our network and increasing our
exposure and visibility to potential advertisers. To achieve these objectives,
the campaign emphasizes the user friendly attributes of our network with the
theme that EL SITIO SE ADAPTA A VOS ("EL SITIO adapts to you"). The spots and
print media utilize humor to communicate the idea that EL SITIO is a network
that is responsive to its users and provides information and resources useful to
their daily lives.
Our mass media-based branding and advertising campaign is under way in the
five countries for which we have launched country-specific Websites: Argentina,
Brazil, Mexico, Uruguay and the United States. Our campaign utilizes the
following media:
- broadcast media, including both television and radio;
- print media, including general circulation magazines, computer industry
advertising and business magazines and general circulation newspapers;
- on-line banner advertising with hyperlinks to our Websites;
- targeted e-mail;
- advertising and computer industry trade shows;
- billboard and other outdoor advertising; and
- general public relations to generate favorable free news media coverage.
The content and implementation of our branding and advertising campaign is being
coordinated by major advertising agencies in each of our markets under the
umbrella of WPP Group PLC. This campaign is targeting both potential users and
potential advertisers on our network.
In September 1999, we entered into an agreement with Sammy Sosa, the
renowned baseball player, and Player's Choice International L.L.C. under which
we will have the exclusive right to utilize, modify, reproduce, distribute,
display and transmit Sammy Sosa's name in electronic form for use on the
Internet. Sammy Sosa has agreed to use his best efforts to increase awareness of
our Internet portals by wearing clothing and accessories bearing our logo on at
least four nationally televised events during the term of the agreement and by
attending three of our promotional events per year. Sammy Sosa has also agreed
to make himself available for at least one television show, one radio show and
one still photo advertisement, and for at least three chat sessions per year. As
consideration for entering into
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the agreement, Sammy Sosa will receive a total of $1.0 million and 25,000 common
shares of our company, with an option to purchase on or before January 31, 2001
an additional 25,000 common shares at a 25% discount from the closing trading
price of the common shares on January 29, 2001. Additionally, Sammy Sosa and
Player's Choice International L.L.C. will receive a percentage of the
advertising revenues generated and actually received as a result of the
agreement. The initial amount of the discount will be remeasured, on a quarterly
basis, based on the fair value of the common shares at the time they are issued.
Our marketing strategy seeks, among other things, to build advertising
relationships and generate revenues. Our sales force is focused on major
advertisers and advertising agencies. We believe that relationships with Latin
American advertising agencies are important because they influence advertising
buying decisions by companies in the region.
In October 1999, we entered into a letter of intent to establish an
arrangement with J. Walter Thompson Argentina S.A., under which it will purchase
advertising from us on each of our country-specific Websites and on our global
Website. We will advertise J. Walter Thompson's products and services, using
banners, sponsorships and other techniques. J. Walter Thompson has agreed to
purchase $3 million of advertising at a 33 1/3% discount from our normal rates
charged for similar advertising. In addition, we have agreed to obtain
approximately $20 million of the advertising that we intend to purchase during
2000 in Argentina, Brazil, Chile, Colombia, Mexico, the United States and
Venezuela, using J. Walter Thompson as our advertising agency.
SALES
We expect to generate sales from three different sources:
- advertising;
- connectivity; and
- e-commerce.
The following table sets forth, for the periods indicated, our net revenues
by country of operation (in thousands):
<TABLE>
<CAPTION>
EL SITIO EL SITIO EL SITIO EL SITIO EL SITIO CONSOLIDATED
PERIOD OR YEAR ARGENTINA URUGUAY MEXICO BRAZIL USA TOTAL
- -------------- --------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
1997 (partial year)............................ $267 $ -- $ -- $ -- $ -- $ 267
1998........................................... $657 $106 $ 17 $ -- $ -- $ 780
Nine months ended September 30, 1999........... $715 $455 $339 $ 12 $ 3 $1,524
</TABLE>
ADVERTISING. At September 30, 1999, we had an internal sales organization
of 30 professionals, who are based at our offices in Buenos Aires (10 persons),
Sao Paulo (6), Mexico City (6), Miami (6) and Montevideo (2). We plan to open
additional offices in Chile and Colombia during the fourth quarter of 1999 and
in Venezuela in 2000. A significant portion of our sales personnel's income is
commission-based. All of our sales personnel sell advertising exclusively for
us. We are also seeking representation agreements with advertising agencies for
the sale of advertisements on our Websites. Our sales personnel focus on both
selling advertisements on the Websites and developing long-term strategic
relationships with clients.
We seek to attract corporate advertisers by educating and communicating with
them regarding the benefits of the Internet as a business tool. Advertising on
the Internet by Latin American companies is still in an early stage of
development. Many Latin American companies have not developed a Website or an
Internet strategy and need advice on how to implement such a strategy. We help
companies to develop and implement Internet strategies.
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Our relationship with Arcor S.A., the world's largest hard sweets producer,
exemplifies our approach with advertisers. In May 1997, we approached Arcor
regarding an advertising program on the Internet. The plan evolved into a
complete on-line campaign consisting of a tri-lingual Website, Web pages for its
products, games, promotions, and interactive press management and maintenance.
We have produced over 1,400 Web pages for Arcor and have an advertising contract
with Arcor for all of Latin America. Arcor advertisements have appeared on our
Websites in Argentina, Brazil and Mexico.
We offer an assortment of advertising options to our clients, including the
following:
- banner advertising;
- sweepstakes and promotions;
- button advertising and sponsorships;
- content development;
- contextual links to merchandise;
- opt-in direct marketing/lead generation;
- e-mail sponsorship programs;
- pre- and post-campaign market research; and
- celebrity event sponsorships.
We offer our advertisers the option to display their advertisements on one
or more of our country Websites, or on a regional basis. Our advertisers also
have the flexibility to specify the channels on our network and the Website
pages on which they wish their messages to appear.
Some of our advertising clients include:
- MGM Networks Latin America;
- Nortel Networks;
- Lucent Technologies;
- Wall Street Journal Interactive;
- Arcor S.A.;
- Intel Corporation;
- Supermercados Norte;
- Sun Microsystems; and
- Banco de Galicia y Buenos Aires.
We have derived a substantial majority of our revenues to date from the sale
of advertisements and sponsorships. In the nine months ended September 30, 1999,
we had 116 advertisers, representing an increase from 18 advertisers in the
corresponding period of 1998. In the nine months ended September 30, 1999, three
of our customers, Gastardelli, Perez y Gaudio Publicidad, an Argentine publicity
company, IMPSAT S.A. and Gramatur accounted for 7.8%, 7.9% and 6.3%,
respectively, of total revenues. In 1998, each of four advertisers, IMPSAT S.A.,
Arcor, S.A., Compaq Corporation and Antel (Uruguay), accounted for more than 10%
of our revenues. Gastardelli, Perez y Gaudio Publicidad acquired a large block
of advertising to resell to its advertising customers. We intend to pursue
similar relationships with other advertising agencies and brokers.
Prior to November 1998, we sold advertising primarily at a fixed price per
month for a fixed banner. Currently, our markets are evolving and appear to be
developing along the lines of the U.S. Internet industry model, in which
advertising is sold on a cost-per-thousand impressions, or "CPM,"
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basis. The cost of our advertising products varies according to the product. For
example, a banner with "click-through" or "hyper-link" capabilities is more
costly than a simple textual banner. Similarly, sponsorship of a channel or page
is more costly than acquiring a fixed number of CPMs. Our contracts with
advertisers and advertising agencies range from one to twelve months. Our
advertisers have tended to receive a guaranteed number of impressions for a
fixed fee. In the future, we expect that an increasing portion of our
advertising contracts will be long-term CPM-based contracts.
We provide our advertisers with statistics related to the traffic on our
network provided by ABC Interactive. Receipt of audited statistics enables our
advertisers to assess more accurately the market penetration of their
advertising message. We believe our provision of audited statistics to
advertisers gives us a competitive advantage over networks which do not provide
such statistics to advertisers.
CONNECTIVITY. In light of our acquisitions of IMPSAT Corporation's retail
dial-up access customers in Argentina and Brazil and our pending acquisition of
its retail dial-up access customers in Colombia, we are integrating the sales
personnel in each country into our network's existing sales team. We expect to
gain economies of scale as we eliminate overlapping functions and integrate
sales strategies and resources. We are currently assessing our sales strategy
and personnel to determine the best way to integrate our connectivity services
into our mass media-based branding and advertising campaign. By initially
focusing on the connectivity services market in Argentina, Brazil and Colombia
more effectively than IMPSAT Corporation had done before, we hope to increase
our subscriber base. To that end, we expect to expand our sales activities
beyond telemarketing and word-of-mouth advertising to increase our visibility.
We expect to price our connectivity services in response to market
conditions. We are also likely to launch new pricing initiatives in an effort to
increase the loyalty of subscribers to our network. Initially, we anticipate
maintaining the current sales and pricing strategies for our dial-up access
subscribers. Although we will vary pricing and sales strategies by country, the
connectivity businesses that we are acquiring offer a range of plans ranging
from unlimited access with e-mail accounts to e-mail access only plans. The
following illustrates the principal products, each of which includes an e-mail
account, offered at August 31, 1999 in Argentina and Brazil, our two principal
markets for connectivity services:
<TABLE>
<CAPTION>
Argentina Brazil
- --------- ------
<S> <C>
- - unlimited access (with three e-mail - unlimited access;
accounts);
- - unlimited access; - 20 hours per month;
- - 15 hours per month; - ten hours per month;
- - six hours per month; and - one hour per month; and
- - e-mail access only. - e-mail access only.
</TABLE>
For Internet use above the pre-paid access levels, subscribers are charged
per-minute rates. In Argentina, at September 30, 1999, the prices for
connectivity services ranged from $45.00 per month (plus VAT) for unlimited
access with three e-mail accounts to $5.00 per month (plus VAT) for e-mail
access only. In Brazil, at September 30, 1999, the prices for connectivity
services ranged from approximately R$34.90 per month for unlimited access to
approximately R$4.95 per month for e-mail access only. The average monthly
subscription fee in Argentina in September 1999 was $24.80 per month, in Brazil
was $12.41 per month and in Colombia was $19.95 per month. The weighted average
subscription fee in September 1999 for the subscribers to be transferred in
Argentina, Brazil and Colombia was $15.74.
E-COMMERCE. We recently added an e-shopping channel to our network. This
channel provides a limited offering of books, flowers, music, gifts and
technology products which are made available from local and U.S.-based
e-merchants.
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CORPORATE ALLIANCES AND CONTENT AND APPLICATIONS PROVIDERS
In order to increase traffic at our Websites, expand our on-line community
and build our brand, we continue to pursue strategic relationships with business
partners that offer quality content, technology and distribution capabilities as
well as marketing and cross-promotional opportunities.
CONTENT. We have an arrangement with CBS Sportsline, pursuant to which we
receive English-language information, which our editorial staff develops into
Spanish-language articles for us, in exchange for Spanish-language articles
(also displayed on our Website) about sports in Latin America. We have also
entered into agreements with leading content producers such as Reuters, Agence
France Presse, The Weather Channel, Notimex and Infosic, among others, under
which such companies provide content to us for publication on our network in
return for a fixed fee or revenue-sharing arrangement based on minimum page
views.
CONNECTIVITY. In connection with our acquisitions of retail dial-up access
customers of IMPSAT Corporation in Argentina and Brazil, and our pending
acquisition of its retail dial-up access customers in Colombia, we have not
acquired, and will not acquire, the telecommunications infrastructure to provide
these services. Instead, we will outsource that infrastructure from third-party
providers, initially, from IMPSAT Corporation. We have entered into three-year
services agreements with subsidiaries of IMPSAT Corporation in Argentina and
Brazil, according to which, in exchange for a fee per port or "channel" made
available to our customers for the transmission of data, IMPSAT will provide us
with the telecommunications infrastructure and equipment installation and
maintenance services to provide Internet dial-up access to our subscribers on a
24-hour, 365-day basis using equipment owned by subsidiaries of IMPSAT
Corporation. We currently estimate that the aggregate fee payable by us for
these services will be approximately $500,000 per month. The terms of the
service agreements will be automatically extended for another period of three
years unless prior notice is given by either party to the contrary. The service
agreements do not restrict IMPSAT Corporation from providing better rates to
other dial-up access providers. However, each service agreement provides for a
price adjustment if after the first year of the agreement, we receive an offer
from a third party on more favorable terms. If the subsidiary of IMPSAT
Corporation is unable to match or exceed the offer we receive from such
third-party competitor, we have the right to terminate the agreement, with no
penalties for early termination. Each service agreement also contains quality
standards provisions. We plan to enter into a substantially similar agreement in
Colombia by the end of the fourth quarter 1999.
APPLICATIONS. We have recently entered into several important agreements
relating to the provision of a variety of third-party licenses and other
applications. For example, we have entered into an agreement with Inktomi, a
leading Internet company, under which we will acquire the search engine software
and access to the database of Inktomi, a leader in search technology with a
library of over 110 million sites. We also recently concluded a letter of intent
with From2.com, a Miami-based e-commerce logistics company, for it to provide
logistics and fulfillment services for international e-commerce transactions
conducted on our network. Finally, through our recently signed agreement with
USA.Net, a leading provider of e-mail and messaging services, our users will
have access to free e-mail services in Spanish, Portuguese and English.
E-COMMERCE. We are pursuing several revenue-sharing relationships and joint
venture opportunities with e-commerce merchants in the United States and Latin
America to develop electronic retail operations in the flower, gifts, books,
music and hardware and software areas. We do not currently offer e-commerce
products or services and are in the process of developing strategic alliances
and relationships to provide e-commerce in the future. Our agreement with
From2.com will allow our users to calculate the actual cost of Internet
purchases from locations outside of their own country by calculating shipping,
handling, taxes and customs costs required to deliver the product.
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RECENT STRATEGIC INVESTORS. On July 7, 1999, we completed a private
placement of our Class A convertible preferred shares to strategic investors,
including Hicks, Muse, Tate & Furst Incorporated and the Cisneros Group of
Companies (through their jointly owned IAMP (El Sitio) Investments, Ltd.), and
GCC Investments, LLC, an indirect subsidiary of GC Companies, Inc., which owns
and operates General Cinemas Theatres. In connection with our acquisitions of
retail dial-up customers from IMPSAT Corporation, IMPSAT Corporation will
purchase approximately $21.5 million of our Class A convertible preferred
shares. On August 31, 1999, we entered into an agreement with TV Azteca, S.A. de
C.V., pursuant to which we will receive $3.5 million of advertising time on TV
Azteca's television network in return for approximately $2.5 million of Class A
convertible preferred shares.
In mid-November 1999, we completed a private placement of 1,111,111 Class B
convertible preferred shares for a purchase price of $10.0 million in cash, or
$9.00 per Class B convertible preferred share. Purchasers of the Class B
convertible preferred shares consisted of Intel Atlantic, Inc., a subsidiary of
Intel Corporation, and Latinvest Asset Management do Brasil, Ltda., an affiliate
of Globalvest Management Company, L.P. Each Class B convertible preferred share
will automatically convert, on the date six months after the closing date of
this offering, into one common share. The difference between the initial public
offering price per common share and $9.00 price per Class B convertible
preferred share will be amortized as a deemed dividend during the same six-month
period.
We believe these strategic investors present us with opportunities to build
strategic relationships, expand brand awareness and grow our network. For
example, our relationship with Hicks, Muse Tate & Furst Incorporated and the
Cisneros Group of Companies is expected to give us access to media in Latin
America in which these shareholders have significant interests, and on which we
can promote our Websites and build brand awareness, including six radio stations
and one television station in Chile, and a number of pan-Latin American cable
television programming networks including Much Music and the Playboy Channel.
The Cisneros Group of Companies also controls Venevision, the number one
television network in Venezuela, and has an interest in Univision, a leading
Spanish-language television network in the United States. In Argentina, Hicks,
Muse also has interests in Canal 11 and Canal Azul, two television channels; in
Cablevision; and in numerous magazines and various sports programming networks.
GCC Investments, LLC is expected to assist us, among other things, in our
marketing efforts by contributing its extensive retail expertise to help us
develop our e-commerce opportunities. In addition, TV Azteca is the number two
television network in Mexico. We intend to work closely with our strategic
investors in order to take advantage of the synergies created by our
relationships. For example, we have commenced discussions with a number of
potential clients or joint venture partners as a result of contacts established
through our strategic investors.
TECHNOLOGY
NETWORK OF WEBSITES. We make our Websites available using 17 Microsoft
Windows NT servers and three Linux servers as our central production servers,
which are currently located at the server farm facilities of Exodus
Communications in New Jersey. We also have a back-up production server at IMPSAT
Corporation's server farm facilities in Miami, Florida. In each of Argentina,
Brazil, Mexico, Uruguay and the United States, we maintain a data center for
development and staging.
We have implemented an environment in which each server can function
separately. Key components of our server architecture are served by multiple
redundant machines. As part of the Exodus server farm facilities, we have up to
100Mbps of bandwidth access over our Internet connections, which are fully
redundant so that if a failure in the network or equipment of one service
provider occurs, traffic is automatically routed through one of several other
providers. Each of Exodus Communications and IMPSAT Corporation provides
comprehensive facilities management services, including human and technical
monitoring of all production servers 24 hours per day, 7 days per week. All
facilities are protected by multiple power supplies. Our operations will depend
on the ability of IMPSAT Corporation and Exodus Communications to provide
adequate space, air-conditioning,
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telecommunication connectivity and protection of their systems against damage
from fire, hurricanes, power loss, telecommunications failure, break-ins or
other events.
We employ in-house and third-party monitoring software for our servers,
processes and network connectivity. Reporting and tracking systems generate
daily traffic, demographic and advertising reports. All of our production
systems are copied to backup tapes each night and regularly stored in a storage
facility on Exodus's premises as well as in a storage facility at our offices in
Buenos Aires. We have implemented these various redundancies and backup systems
in order to minimize the risk associated with damage from fire, power, loss,
telecommunications failure, break-ins, computer viruses and other events beyond
our control.
Our network of Websites must accommodate a high volume of traffic and
deliver frequently updated information. Components or features of our network
have in the past suffered outages or experienced slower response times because
of equipment or software downtime. We are in the process of migrating our
platform and our applications to a Unix platform using Sun Microsystems servers,
which we believe will increase the reliability, availability and serviceability
of our network. We anticipate that this migration process, which we believe will
not affect the continuous operation of our network, will be completed by the end
of 1999.
CONNECTIVITY. In connection with our acquisitions of retail dial-up access
customers of IMPSAT Corporation in Argentina and Brazil, and our pending
acquisition of its retail dial-up access customers in Colombia, we have not
acquired and will not acquire the telecommunications infrastructure, such as
telecommunications bandwidth, points-of-presence, switches and backhaul
capacity, to provide these services. Instead, we will outsource that
infrastructure from third-party providers-- initially, from subsidiaries of
IMPSAT Corporation. We have entered into three-year services agreements with
subsidiaries of IMPSAT Corporation in Argentina and Brazil, according to which,
in exchange for a fee per port or "channel" made available to our customers for
the transmission of data, IMPSAT Corporation will provide us with the
telecommunications infrastructure and equipment installation and maintenance
services to provide connectivity services to our subscribers on a 24-hour,
365-day basis using equipment owned by subsidiaries of IMPSAT Corporation. We
currently estimate that the aggregate fee payable by us for these services will
be approximately $500,000 per month.
IMPSAT Corporation uses routers with average connectivity speed of 33Kbps,
with a majority of subscribers migrating to a speed of 56Kbps. IMPSAT S.A.
(Argentina) subscribers are able to connect to the Internet through special
Internet dedicated phone lines at rates significantly cheaper than connecting
through conventional phone lines.
COMPETITION
Many companies provide Websites, connectivity services and e-commerce
targeted to Spanish- and Portuguese-speaking audiences. All of these companies
compete with us for user traffic, advertising dollars and e-commerce
opportunities. The market for Internet content companies in Latin America is new
and rapidly evolving. Competition for users, advertisers and e-commerce
opportunities is intense and is expected to increase significantly in the future
because there are no substantial barriers to entry in our markets.
We compete with providers of content and services over the Internet,
including Web directories, portals, search engines, content sites, Internet
service providers and sites maintained by government and educational
institutions.
We face competition on both a country-specific and regional level. Our
primary competitors include, among others, StarMedia and Terra Networks (in most
of Latin America, the United States and the Iberian peninsula), Quepasa.com and
Yupi (in the United States), Clarin Digital (in Argentina) and Universo Online
(in Brazil). We also face competition from Spanish-and/or Portuguese-language
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versions of U.S. services, such as Yahoo!, America Online and Prodigy
Communications. Our competitors may develop content that is better than ours or
that achieves greater market acceptance. It is also possible that new
competitors may emerge and acquire significant market share. Some of our
established competitors and potential new competitors may have better brand
recognition and significantly greater financial, technical and marketing
resources than our company.
As a result of our completed and pending acquisitions of the retail dial-up
access customers in Argentina, Brazil and Colombia of IMPSAT Corporation, we
recently entered the dial-up access services market, which is extremely
competitive and is characterized by rapidly changing technology and evolving
standards. We do not own telecommunications infrastructure and, therefore, will
depend upon telecommunications providers to carry our Internet traffic.
Increased competition could require us to lower our prices, increase our selling
and marketing expenses, and raise subscriber acquisition costs. New technologies
permitting faster dial-up may make our connectivity services business obsolete.
We may not be able to retain our users or, if we do, to offset the effect of
increased costs through an increase in users, user revenues or revenues from
other sources.
We expect to experience increased competition from the traditional
telecommunications carriers. We believe that there is a move toward horizontal
integration by these carriers through acquisitions of, joint ventures with, or
the wholesale purchase of connectivity from Internet service providers in order
to meet the Internet connectivity requirements of their business customers.
We also compete with traditional forms of media, such as newspapers,
magazines, radio and televison, for advertisers and advertising revenue. If
advertisers perceive the Internet or our network to be a limited or an
ineffective advertising medium, they may be reluctant to devote a portion of
their advertising budget to Internet advertising or to advertising on our
network.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We consider our EL SITIO, O SITE and medallion design trademarks and service
marks to be important to our success. We are pursuing the registration of our
trademarks and service marks in the United States and in key countries of Latin
America as well as Spain and Portugal. Although some of the countries have
registered our marks, we cannot predict with certainty whether the trademarks
office of the remaining countries will do the same. If we are unable to obtain a
registration in a particular country, we would have trademark or service mark
rights to the extent that we use the mark, but the rights would not be as strong
as if they were registered. Some companies, including other participants in the
Internet industry, use and/or may use trademarks or service marks in English or
other languages which, when translated, are similar to certain of our core
marks. This usage may hinder our ability to build a unique brand identity and
may possibly lead to trademark disputes, in that we may be sued for trademark
infringement in court or we may have the validity of our applications and/or
registrations challenged at government agencies. Although we do not believe that
such proceedings against us ultimately would be meritorious, we cannot predict
that with certainty. Should we lose the right to use a trademark or service
mark, we may be forced to adopt a new mark which would result in the loss of
substantial resources and brand identity. In any event, whether successful or
not, litigating a trademark dispute would result in the expenditure of monetary
resources and the diversion of executives' time. Any inability to protect,
enforce or use our trademarks, service marks or other intellectual property may
have a material adverse effect on our company.
We also depend upon technology licensed from third parties for chat,
homepage, search and related Web services. Any dispute with a licensor of the
technology may result in our inability to continue to use that particular
technology. Additionally, there may be patents issued or pending that are held
by third parties and that cover significant parts of the technology, products,
business methods or services used to conduct our business. We cannot be certain
that our technology, products, business methods or services do not or will not
infringe valid patents or other intellectual property rights held by
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third parties. In the event that a third party alleges infringement, we may be
forced to take a license, which we may not be able to obtain on commercially
reasonable terms. We may also incur substantial expenses in defending our
company against third party infringement claims, regardless of the merit of
these claims. Successful infringement claims against us could result in
substantial monetary liability and/or being prevented by a court from conducting
all or a part of our business that falls within the scope of the asserted
patent, leading to substantial expenditures to redesign and/or license
technology.
GOVERNMENT REGULATION
There are currently few laws or regulations directly applicable to access to
or commerce on the Internet. However, due to the increasing use of the Internet,
a number of legislative and regulatory proposals are under consideration by
various governments and governmental agencies or bodies.
The following is a brief summary of the current regulatory framework for the
Internet industry in the countries in which we have or plan to have operations:
- ARGENTINA. There are no laws or regulations governing on-line content
providers in Argentina, but dial-up access providers, in general, must
hold a correspondent license from the national telecommunications
authority. We have applied for that license and expect to receive it in
due course. The timing for completion of this application process is
unclear, particularly given recent regulatory changes in Argentina.
Dial-up access providers are also required to include a legend on their
invoices to clients, stating that the national government does not control
or regulate the information on the Internet and to provide contact
information for help with blocking undesirable content.
- BRAZIL. There are no laws or regulations governing on-line content
providers or dial-up access providers in Brazil.
- COLOMBIA. There are no laws or regulations governing on-line content
providers. Telecommunications services are public services for which a
value-added license must be obtained from the Colombian government. We are
in the process of applying for that license and expect to receive it in
due course. A dial-up access provider must be incorporated as a Colombian
company, file an application with the national communications authority
and meet specific technical and economic criteria. Finally, a dial-up
access provider is required to pay a royalty for the license of 3% of the
net annual income.
- MEXICO. In Mexico, the federal telecommunications law requires that each
provider of any value-added services (which includes Internet services)
register with the telecommunications registry of its national
telecommunications authority. This registration requires, among other
things, disclosure of foreign investments, a list of transmission
equipment, and a technical description of the services provided. In
October 1999, our registration was declared effective by the COMISION
FEDERAL DE TELECOMUNICACIONES (Mexican Federal Telecommunications
Commission).
- URUGUAY. There are no laws or regulations governing on-line content
providers or dial-up access providers in Uruguay.
- UNITED STATES. There are currently few U.S. laws or regulations which
specifically regulate communications or commerce over the Internet.
On-line content providers may be subject to lawsuits for information that
they disseminate, such as lawsuits claiming defamation and infringement of
copyrighted materials.
It is possible that laws or regulations may be adopted or applied with
respect to the Internet relating to issues such as the following:
- sales and other taxes;
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- user privacy;
- pricing controls;
- characteristics and quality of services and products;
- consumer protection;
- cross-border e-commerce;
- libel and defamation;
- copyright, trademark and patent infringement; and
- other claims based on the nature and content of Internet materials.
The adoption or application of any of these laws or regulations may
negatively affect the growth in the use of the Internet, which could, in turn,
decrease the demand for our services and products, increase our costs of doing
business, or otherwise have a material adverse effect on our company.
EMPLOYEES
At September 30, 1999, we had 285 full-time employees, including 79 in
production and development, 83 in sales and marketing, 30 in technology and 93
in finance and administration. We believe that we have attracted an experienced
management team and a highly professional staff.
We have hired 48 employees, who previously worked for IMPSAT Corporation or
its subsidiaries, following our acquisition of its retail dial-up access
customers in Argentina and Brazil. We expect to hire five additional employees
who previously worked for IMPSAT Corporation or its subsidiaries after
completion of our pending acquisition of IMPSAT's retail dial-up access
customers in Colombia.
FACILITIES
Our headquarters are located in Buenos Aires, where we currently lease
approximately 1,300 square meters. We also are leasing additional premises for
our new corporate headquarters in that city, to which we anticipate moving in
before the end of 1999.
We lease approximately 240 square meters in Sao Paulo, 265 square meters in
Mexico City, 80 square meters in Montevideo and 230 square meters in Miami.
LEGAL PROCEEDINGS
There are no material legal proceedings pending or, to our knowledge,
threatened against us.
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MANAGEMENT
DIRECTORS
The following table presents the names and ages of each member of our board
of directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Roberto Vivo-Chaneton..................... 46 Co-founder and Chairman of the Board
Roberto Cibrian-Campoy.................... 40 Co-founder and Director
Carlos Cisneros........................... 34 Director
Michael Greeley........................... 36 Director
Michael Levitt............................ 40 Director
Guillermo Liberman........................ 31 Director
Sofia Pescarmona.......................... 26 Director
Ricardo Verdaguer......................... 49 Director
</TABLE>
EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of each of our
executive officers. Executive officers are appointed by, and serve at the
discretion of, our board of directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Roberto Cibrian-Campoy.................... 40 Co-founder, President and Chief Executive Officer
Walter Forwood............................ 36 Chief Operating Officer
Daniel Rotsztain.......................... 37 Executive Vice President, Business Development and
Strategic Planning
Horacio Milberg........................... 52 Chief Financial Officer and Secretary
Alfredo Jimenez de Arechaga............... 46 Chief Administrative Officer, Controller and
Treasurer
Eduardo Weber............................. 38 Chief Technology Officer
Lucia Suarez.............................. 50 Vice President--Product Development
</TABLE>
ROBERTO VIVO-CHANETON is our co-founder and has served as Chairman of our
board of directors since our inception. Mr. Vivo was one of the founders of, and
since 1988 has served as a Director and Deputy Chief Executive Officer, of
IMPSAT Corporation, a provider of private networks of integrated data and voice
communications systems in a number of countries in Latin America. Mr. Vivo holds
LICENCIATURAS in Business Administration from Universidad Argentina de la
Empresa and Macroeconomics from Instituto Torcuato di Tella, both in Buenos
Aires.
ROBERTO CIBRIAN-CAMPOY is our co-founder and has served as the Chief
Executive Officer, President and a Director since our inception. In 1992,
Mr. Cibrian founded and served as President of Cibrian-Campoy Creativos, S.A., a
producer of computer animation and developer of multimedia projects. From 1989
to 1992, Mr. Cibrian served as Advisor to the Minister of Culture and Education
of Argentina. From 1982 to 1989, Mr. Cibrian practiced architecture at his own
firm and as a designer with a leading Buenos Aires architecture firm.
Mr. Cibrian holds a degree in Architecture from the Universidad de Belgrano,
Buenos Aires.
CARLOS CISNEROS has served as a Director since June 1999. In October 1996,
Mr. Cisneros founded and became Chief Executive Officer of the Cisneros
Television Group, a member of Ibero-American Media Partners, II, Ltd. In
January 1998, Mr. Cisneros was named Vice-Chairman of Ibero-American Media
Partners, II, Ltd., an investment fund jointly owned by the Cisneros Group of
Companies and Hicks, Muse, Tate & Furst Incorporated. From June 1993 to
October 1996, Mr. Cisneros was Vice-President of New Business Development at
Venevision International. Mr. Cisneros holds a Bachelor of Arts degree in
Political Science from American University in Washington, D.C.
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<PAGE>
MICHAEL GREELEY has served as a Director since July 1999. Since 1994,
Mr. Greeley has been a Senior Vice President of GCC Investments, Inc., the
private equity investment group of GC Companies, Inc., which owns and operates
General Cinema Theatres. Prior to 1994, Mr. Greeley was a Vice President at
Wasserstein Perella & Co., Inc., an international investment bank. Mr. Greeley
also currently serves as a director of American Capital Access Holdings, LLC,
Fuelman, Inc. and MotherNature.com, Inc. Mr. Greeley was previously a director
of Global TeleSystems Group, Inc. Mr. Greeley graduated from Williams College
with honors and has a Master of Business Administration degree from Harvard
Business School.
MICHAEL J. LEVITT has served as a Director since July 1999. Mr. Levitt has
been a partner of Hicks, Muse, Tate & Furst Incorporated since 1996. Mr. Levitt
serves as a director of Capstar Broadcasting Corporation, AMFM, Corp, Grupo MVS,
S.A. de C.V., International Home Foods, Inc., LIN Television Corp., Regal
Cinemas, Inc., STC Broadcasting, Inc., RCN Corporation, and Ibero American Media
Partners, L.P. Mr. Levitt received his undergraduate and Juris Doctor degrees
from the University of Michigan.
GUILLERMO LIBERMAN has served as a Director since July 1997. Mr. Liberman is
also a Director of Sociedad Latinoamericana de Inversiones, the parent company
of Grupo Liberman. Grupo Liberman is involved in agribusiness, fisheries,
telecommunications and hotel development. He holds a Bachelor of Science degree
in Business Administration from Babson College in Massachusetts and a Masters of
Business Administration degree from the University of Miami in Florida.
SOFIA PESCARMONA has served as a Director since October 10, 1999.
Ms. Pescarmona is Assistant to the Chief Executive Officer of IMPSAT
Corporation, and has also been a Director of IMPSAT since February 1996. From
1994 to January 1998, Ms. Pescarmona held various positions within IMPSAT
Corporation. Ms. Pescarmona holds a Bachelor of Arts degree from Tufts
University and a Masters of Business Administration degree from IAE University
in Argentina.
RICARDO VERDAGUER has served as a Director since July 1997. Mr. Verdaguer
has served as the President and Chief Executive Officer of IMPSAT Corporation
since 1988. In 1988, as a senior executive of Corporacion IMPSA, S.A., an
Argentina-based multinational company with holdings in manufacturing,
transportation and telecommications, Mr. Verdaguer was involved in the founding
of IMPSAT Corporation. From 1976 to 1988, Mr. Verdaguer occupied various
operational positions at Industrias Metalurgicas Pescarmona as an
electromechanical engineer. He holds an Engineering degree from the Universidad
Juan Agustin Mazza, Mendoza, Argentina.
WALTER FORWOOD has served as our Chief Operating Officer since November
1999. From July 1998 to October 1999, Mr. Forwood served as Managing Director
and Chief Financial Officer of Ibero-American Media Partners, II, Ltd., an
investment fund jointly owned by the Cisneros Group of Companies and Hicks,
Muse, Tate & Furst Incorporated. During the same period, Mr. Forwood also served
as Chief Financial Officer of Cisneros Television Group, a member of
Ibero-American Media Partners, II, Ltd. From September 1997 to October 1999, Mr.
Forwood was the Chief Financial Officer of Imagen Satelital, a programming
company owned by Cisneros Television Group. Mr. Forwood previously served as
Chief Financial Officer of Corporacion IMPSA S.A. in 1996 and 1997. Prior to
that time, beginning in 1993, he held various financial responsibility positions
with Industrias Metalurgicas Pescarmona S.A.I.C. y F., a subsidiary of
Corporacion IMPSA S.A., beginning in 1993. Mr. Forwood was an associate director
of Continental Bank in Buenos Aires, Argentina from 1988 through 1992. Mr.
Forwood holds a Bachelor of Science degree in Economics from the Universidad
Argentina de la Empresa and a Masters of Science in Finance from Florida
International University.
DANIEL ROTSZTAIN has served as our Executive Vice President, Business
Development and Strategic Planning since October 1999. He served as our Chief
Operating Officer from September 1998 to October 1999. From September 1998 to
July 1999, Mr. Rotsztain also served as our Country Manager for Argentina. From
1995 to 1998, Mr. Rotsztain served as the South America Regional Director and
Country Manager-Argentina of GTECH Foreign Holdings Corporation, a company
specialized in
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<PAGE>
software and data processing services for the gaming industry. From 1994 to
1995, Mr. Rotsztain served as a strategic marketing executive for IMPSAT
Corporation. Mr. Rotsztain was founder, and from 1992 to 1994 served as manager
of, Nexus Urbanos S.R.L., a consulting and information services company for
Argentine municipalities. From June 1990 to September 1993, Mr. Rotsztain served
as Executive Director of World Trade Center S.A. (Argentina-Chile-Paraguay), an
international commerce services and real estate company. Mr. Rotsztain holds a
Bachelor of Science degree in Computer Science from Escuela Tecnica ORT, Buenos
Aires, Argentina and a Master in Computer Science degree from Universidad de
Belgrano, Buenos Aires.
HORACIO MILBERG has served as our Chief Financial Officer since July 1999
and served as a financial advisor to our board of directors from September 1998
to July 1999. From April 1993 to July 1999, Mr. Milberg served as an independent
financial advisor and investment manager. Mr. Milberg previously served as:
senior finance officer of Corporacion IMPSA, S.A.; Vice President, Investment
Banking, Latin America for CS First Boston Corporation, New York; and Vice
President and Director for Latin America for The Chase Manhattan Bank, N.A., New
York and London. Mr. Milberg holds an undergraduate degree from Universidad de
Buenos Aires and a Master of Business Administration degree with honors from the
J. L. Kellogg Graduate School of Management, Northwestern University, where
Mr. Milberg was a Fulbright Scholar.
ALFREDO JIMENEZ DE ARECHAGA has served as our Chief Administrative Officer
since July 1999 and also served as our Chief Financial Officer from
November 1998 to July 1999. From 1995 until November 1998, Mr. Jimenez served in
the Corporate Treasury of Corporacion IMPSA, S.A. From 1994 to 1998,
Mr. Jimenez served as the Administration Manager for both Resis Ingenieria,
S.A., and International Satellite Communication Holding Ltd. (Switzerland), each
a subsidiary of IMPSAT Corporation. From 1992 to 1994, Mr. Jimenez served as a
Financial Manager for Puentes and Construcciones Ltda. in Uruguay. Mr. Jimenez
holds an agricultural engineering degree from Universidad Republica Oriental del
Uruguay, a Masters degree in Project Evaluation and Economics, and a Master in
Business Administration degree from O.R.T. University in Uruguay.
EDUARDO WEBER has served as our Chief Technology Officer since August 1999.
From October 1997 to February 1999, Mr. Weber served as vice-president of
T/Subcero S.A., a consulting company and developer of digital media projects.
From August 1995 to August 1997, Mr. Weber served as Technical Manager of Clarin
Internet, the Website for a leading Argentine daily newspaper. From
January 1991 to August 1995, Mr. Weber was General Manager of Weber Terro
s.r.l., a multimedia company. Mr. Weber holds an engineering degree from
Universidad de Buenos Aires.
LUCIA SUAREZ has served as our Vice President--Product Development since
October 1999. From 1999 until the present, Ms. Suarez has served as president of
Suarez/Kirzner S.A., an independent production company which creates television
programs for Argentina and abroad. From 1996 to 1998, Ms. Suarez served as a
Program Director for America TV-Canal Dos. During this period, Ms. Suarez was
responsible for artistic direction, the supervision of internal and external
production, design, creation of program formats and direction of production
teams. From 1995 to 1996, Ms. Suarez served as News Director for Libertad-Canal
9 where she was responsible for managing the news department and general
production of daily news programs. From 1992 to 1995, Ms. Suarez was a Producer
and Director for Telefe-Canal 11 where she was the creator and producer of the
investigative news program Edicion Plus, for which she won a Martin Fierro
award. In addition to receiving six Emmy Awards, the Associated Press
International Award and the International Film Festival Award, Ms. Suarez is a
member of the Directors Guild of America, Women in Communications and the
American Society of Composers and Publishers.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has standing audit and compensation committees.
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<PAGE>
The audit committee consists of Messrs. Verdaguer, Levitt and Greeley. Among
other functions, the audit committee:
- makes recommendations to the board of directors regarding the selection of
independent auditors;
- reviews the results and scope of the audit and other services provided by
our independent auditors;
- reviews our financial statements; and
- reviews and evaluates our internal control functions.
The compensation committee consists of Messrs. Vivo, Cisneros and Greeley.
The compensation committee makes recommendations to the board of directors
regarding the following matters:
- executive compensation;
- salaries and incentive compensation for our employees and consultants; and
- the administration of our share option plans.
DIRECTOR COMPENSATION
Directors currently do not receive stated compensation from our company for
their service as members of our board of directors. However, by resolution of
the board of directors, directors may receive a fixed amount and reimbursement
for expenses in connection with the attendance at board of directors and
committee meetings.
Our directors did not receive any payments in connection with their services
as such in the year ended December 31, 1998.
Under a shareholders' agreement entered into in connection with the
July 1999 private placement of our Class A convertible preferred shares,
monitoring and directors' fees of $700,000 per year, in the aggregate, are
payable to IAMP (El Sitio) Investments Ltd., GCC Investments, LLC, Tower Plus
International, SLI.com Inc., Militello Limited and IMPSAT Corporation.
From time to time, some of our directors may be granted options to purchase
shares of common shares.
EXECUTIVE OFFICER COMPENSATION
The aggregate amount of compensation paid by us to our executive officers
was $131,637 for the year ended December 31, 1998.
We operate in an industry that is highly competitive in terms of
compensation to talented executive and technical staff. We believe that we have
been able to attract a group of experienced executives with proven track records
in their areas of expertise for our key management positions.
Some of our executive officers have employment agreements with our company
for three-year terms. Each of these agreements provides for a specified monthly
salary, a minimum annual bonus and share options.
1999 SHARE OPTION PLAN
We view share options as a key financial incentive to attract, motivate and
retain our talented employees. Accordingly, we have adopted our 1999 share
option plan which, as amended, provides for the issuance of up to 1,240,000
common shares. An additional 2,000,000 common shares were reserved on
October 28, 1999. Our 1999 share option plan allows for the grant of incentive
share options qualified within the meaning of Section 422 of the U.S. Internal
Revenue Code of 1986 and
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<PAGE>
non-qualified share options, which do not so qualify. Each option granted under
the plan shall be evidenced by an agreement that specifies the terms and
conditions of the grant. The plan also provides for the issuance of share
appreciation rights.
Our 1999 share option plan is administered by the compensation committee of
our board of directors. Subject to the limitations in our 1999 share option
plan, the compensation committee has authority to determine to whom options may
be granted and the terms of such options, including the exercise price, the
number of shares subject to each option, the conditions for vesting, the
expiration date and the form of consideration payable upon exercise of options.
All of our directors, employees and bona-fide consultants and advisors are
eligible for non-qualified share option grants; however, incentive share options
may only be granted to our employees. No individual may be granted options
totaling more than 15% of the total number of options issuable under the plan.
The exercise price of an incentive share option cannot be less than 100% of
the fair market value of a common share on the grant date, provided that no
person who owns, directly or indirectly, more than 10% of the total combined
voting power of all classes of our shares, referred to below as a "Ten-Percent
Shareholder," may receive incentive stock options unless the exercise price is
at least 110% of the fair market value of a common share on the grant date.
Options granted under the 1999 share option plan are not transferable by the
optionee, other than by will or by the laws of descent and distribution. All
options issued under the 1999 share option plan will have a term no longer than
10 years from the grant date, except that in the case of incentive stock options
granted to a Ten-Percent Shareholder, the term shall not exceed five years. The
1999 share option plan terminates on December 1, 2008 but such termination will
not affect the validity of any outstanding option.
At September 30, 1999, options to purchase 1,238,400 common shares were
outstanding under the 1999 share option plan and 2,001,600 shares remained
available for future option grants. The weighted average exercise price for
these outstanding options is $3.01 per share. Most of these outstanding options
become exercisable either (i) in tranches (as to 30% of the options on the first
anniversary of the grant date, as to 30% of the options on the second
anniversary of the grant date and as to the remaining 40% of the options, on the
third anniversary of the grant date) or (ii) on the third anniversary of the
grant date. These options terminate upon the earliest to occur of the following:
termination of an optionee's employment for good cause, 30 days after an
optionee's resignation, 180 days after an optionee's employment is terminated
for any other reason, including retirement, disability or death, and eight years
after the grant date. Notwithstanding the foregoing, upon a change of control
(for example, a merger or similar transaction or the removal of a majority of
the members of our current board of directors) of our company that occurs on or
after the first anniversary of the grant date, all unvested portions of options
then outstanding will vest in full on that date.
Our board of directors may amend, alter, suspend, or terminate the 1999
share option plan at any time, provided however, that the board must first seek
the approval of stockholders, if required by law or regulation, and that of each
affected optionee if such amendment, alteration, suspension or termination would
adversely affect his or her obligations under any option granted prior to that
date.
LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITY
Under British Virgin Islands law, every director and officer of our company,
in performing his or her functions, is required to act honestly and in good
faith with a view to the best interests of our company and exercise the care,
diligence and skill that a reasonably prudent person would exercise in
comparable circumstances. No provision in our memorandum or articles of
association or in any agreement entered into by us relieves a director or
officer from the duty to act in accordance with our memorandum and articles of
association or from any personal liability arising from his or her management of
the business and affairs of our company.
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We may indemnify any director or officer against all expenses, including
legal fees, and against all judgments, fines and amounts paid in settlement and
reasonably incurred in connection with legal, administrative or investigative
proceedings. We may only indemnify a director or officer if the director or
officer acted honestly and in good faith with the view to the best interests of
our company and, in the case of criminal proceedings, the director or officer
had no reasonable cause to believe that his or her conduct was unlawful. The
decision of the board of directors as to whether the director or officer acted
honestly and in good faith with a view to the best interests of our company and
as to whether the director or officer had no reasonable cause to believe that
his or her conduct was unlawful, is in the absence of fraud sufficient for the
purposes of indemnification, unless a question of law is involved. The
termination of any proceedings by any judgment, order, settlement, conviction or
the entry of NO PLEA does not, by itself, create a presumption that a director
or officer did not act honestly and in good faith and with a view to the best
interests of our company or that the director or officer had reasonable cause to
believe that his or her conduct was unlawful. If a director or officer to be
indemnified has been successful in defense of any proceedings referred to above,
the director or officer is entitled to be indemnified against all expenses,
including legal fees, and against all judgments, fines and amounts paid in
settlement and reasonably incurred by the director or officer in connection with
the proceedings.
We may purchase and maintain insurance in relation to any director or
officer against any liability asserted against the director or officer and
incurred by the director or officer in that capacity, whether or not we have or
would have had the power to indemnify the director or officer against the
liability as provided in our articles of association.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table presents, as of November 15, 1999, the beneficial
ownership of our common shares by:
- each person or entity which, to our knowledge, owns beneficially more than
5% of the outstanding common shares;
- each of our directors and executive officers; and
- all of our directors and executive officers as a group.
Unless otherwise indicated, to our knowledge, all persons listed below have
sole voting and investment power with respect to their common shares, except to
the extent applicable law gives spouses shared authority.
The table assumes that all of our outstanding Class A convertible preferred
shares have been converted into our common shares, which will automatically
occur upon the closing of this offering.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON SHARES(1)
-------------------
NUMBER BEFORE AFTER
BENEFICIAL OWNER OF SHARES OFFERING OFFERING
- ---------------- ---------- -------- --------
<S> <C> <C> <C>
PRINCIPAL SHAREHOLDERS
IAMP (El Sitio) Investments, Ltd............................ 6,284,050 20.7% 16.3%
SLI.com Inc................................................. 4,894,176 16.1% 12.7%
Militello Limited........................................... 4,607,010 15.2% 11.9%
IMPSAT Corporation(2)....................................... 6,141,230 20.2% 15.9%
Tower Plus International.................................... 2,309,674 7.6% 6.0%
DIRECTORS AND EXECUTIVE OFFICERS
Roberto A. Vivo-Chaneton(3)................................. 10,748,240 35.4% 27.9%
Ricardo Verdaguer(4)........................................ 8,450,904 27.8% 21.9%
Sofia Pescarmona(5)......................................... 6,141,230 20.2% 15.9%
Carlos Cisneros(6).......................................... 6,284,050 20.7% 16.3%
Michael Levitt(7)........................................... 6,284,050 20.7% 16.3%
Guillermo J. Liberman(8).................................... 4,894,176 16.1% 12.7%
Michael Greeley(9).......................................... 1,456,756 4.8% 3.8%
Roberto Cibrian-Campoy (10)................................. 792,360 2.6% 2.0%
Daniel Rotsztain(11)........................................ 42,846 * *
Walter Forwood(12).......................................... * * *
Horacio Milberg(13)......................................... 31,000 * *
Alfredo Jimenez de Arechaga(14)............................. 14,282 * *
Eduardo Weber(15)........................................... * * *
Lucia Suarez(16)............................................ * * *
All directors and executive officers as a group (14
persons).................................................. 26,573,384 87.5% 68.9%
</TABLE>
- ------------------------
* indicates less than 1%.
(1) Calculated according to Rule 13d-3(d) of the Securities Exchange Act of
1934. Under Rule 13d-3(d), shares not outstanding which are subject to
options, warrants, rights or conversion privileges exercisable within
60 days are deemed outstanding for the purpose of calculating the number and
percentage owned by the holder of the options, warrants, rights or
conversion privileges such person, but not deemed outstanding for the
purpose of calculating the percentage
(FOOTNOTES CONTINUED ON FOLLOWING PAGES)
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owned by any other person listed. As of September 30, 1999, we had
12,568,098 common shares outstanding.
(2) Includes 5,284,314 shares issued in connection with the acquisition of
IMPSAT Corporation's retail dial-up customers in Argentina and Brazil.
(3) Includes 4,607,010 common shares owned by Militello Limited in respect of
which Mr. Vivo has a controlling interest. Also includes 6,141,230 shares
owned by IMPSAT Corporation attributable to Mr. Vivo as a result of his
affiliation with IMPSAT Corporation. Mr. Vivo disclaims beneficial ownership
of all shares owned by IMPSAT Corporation. Excludes 400,000 options to
purchase common shares granted to Mr. Vivo under our 1999 share option plan.
(4) Includes beneficial ownership of 2,309,674 common shares attributable to
Mr. Verdaguer as a result of his controlling interest in Tower Plus
International. Also includes 6,141,230 shares owned by IMPSAT Corporation
attributable to Mr. Verdaguer as a result of his affiliation with IMPSAT
Corporation. Mr. Verdaguer disclaims beneficial ownership of all shares
owned by IMPSAT Corporation.
(5) Includes 6,141,230 shares owned by IMPSAT Corporation attributable to Ms.
Pescarmona as a result of her position as a director in IMPSAT Corporation.
Ms. Pescarmona disclaims beneficial ownership of all shares owned by IMPSAT
Corporation.
(6) Includes 6,284,050 common shares owned by IAMP (El Sitio)
Investments, Ltd., which are included as a result of Mr. Cisneros'
affiliation with the Cisneros Group of Companies, which has an indirect
joint ownership interest in IAMP (El Sitio) Investments, Ltd. Mr. Cisneros
disclaims beneficial ownership of all shares owned by IAMP (El Sitio)
Investments, Ltd.
(7) Includes 6,284,050 common shares owned by IAMP (El Sitio)
Investments, Ltd., which are included as a result of Mr. Levitt's
affiliation with Hicks Muse, Tate & Furst Incorporated, which has an
indirect joint ownership interest in IAMP (El Sitio) Investments, Ltd.
Mr. Levitt disclaims beneficial ownership of all shares owned by IAMP (El
Sitio) Investments, Ltd.
(8) Includes beneficial ownership of 4,894,176 common shares attributable to
Mr. Liberman as a result of his controlling interest in SLI.com Inc.
(9) Includes 1,456,756 common shares owned by GCC Investments, LLC, which are
included as a result of Mr. Greeley's affiliation with GCC
Investments, LLC. Mr. Greeley disclaims beneficial ownership of all shares
owned by GCC Investments, LLC.
(10) Excludes options granted by Banco Nominees, Ltd. to Mr. Cibrian-Campoy in
respect of 114,254 common shares and options to purchase 210,000 common
shares granted to Mr. Cibrian-Campoy under our 1999 share option plan.
(11) Excludes options to purchase 334,000 common shares granted to
Mr. Rotsztain under our 1999 share option plan.
(12) Excludes options to purchase 90,000 common shares granted to Mr. Forwood
under our 1999 share option plan.
(13) Includes 31,000 common shares attributable to Mr. Milberg as a result of
their ownership by Summit Investment Management, of which Mr. Milberg is a
director. Mr. Milberg disclaims beneficial ownership of these shares.
Excludes options to purchase 210,000 common shares granted to Mr. Milberg
under our 1999 share option plan.
(14) Excludes options to purchase 40,000 common shares granted to Mr. Jimenez
under our 1999 share option plan.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
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(15) Excludes options to purchase 50,000 common shares granted to Mr. Weber
under our 1999 share option plan.
(16) Excludes options to purchase 20,000 common shares granted to Ms. Suarez
under our 1999 share option plan.
The above table does not include the following transactions or arrangements
with respect to our common shares:
- 2,268,600 common shares reserved for issuance upon exercise of options
granted under our 1999 share option plan at a weighted average exercise
price of $5.73 per share;
- 971,400 common shares reserved for issuance upon the exercise of options
that we may grant under our 1999 share option plan;
- 1,713,832 common shares issuable upon conversion of our Class A
convertible preferred shares issuable on a quarterly basis through
January 2001 in exchange for $6 million of non-cash advertising time
credits;
- 239,936 common shares issuable upon exercise of a warrant issued to Bear,
Stearns & Co. Inc. as part of its fee in connection with our July 1999
private placement of our Class A convertible preferred shares; and
- 1,111,111 common shares issuable upon conversion of our Class B
convertible preferred shares for an aggregate purchase price of
$10.0 million in cash, which were sold in a mid-November 1999 private
placement.
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RELATED PARTY TRANSACTIONS
IMPSAT Corporation is controlled largely by the Pescarmona group, of which
Sofia Pescarmona, one of our directors, is a member. The Pescarmona group
indirectly owns approximately 75% of the capital stock of IMPSAT Corporation.
Roberto Vivo-Chaneton, our co-founder and chairman, is a director and deputy
chief executive officer of IMPSAT Corporation. Mr. Vivo beneficially owns
approximately 6% of the capital stock of IMPSAT Corporation. Ricardo Verdaguer,
another of our directors, is the president and chief executive officer of IMPSAT
Corporation. Mr. Verdaguer owns approximately 3.5% of the capital stock of
IMPSAT Corporation. We have acquired the retail dial-up access customers of
IMPSAT Corporation in Argentina and Brazil and are in the process of acquiring
its retail dial-up access customers in Colombia. We will acquire a portfolio of
approximately 73,000 customers of these businesses in the three countries. In
connection with the acquisitions, IMPSAT Corporation will purchase a total of
3,070,615 Class A convertible preferred shares for approximately $21.5 million,
and we will enter into agreements with subsidiaries of IMPSAT Corporation, under
which they will provide us with the telecommunications infrastructure to provide
connectivity services to the acquired customers for approximately $500,000 per
month. Under services agreements with subsidiaries of IMPSAT Corporation, IMPSAT
Corporation provides us with links to the Internet in exchange for advertising
on our network. This arrangement accounted for $38,000, $165,000 and $123,000 of
our net revenues and corresponding amounts of our operating expenses in partial
year 1997, 1998 and the nine months ended September 30, 1999, respectively.
Guillermo Liberman is a director of Sociedad Latinoamericana de Inversiones,
the holding company of Grupo Liberman, which is involved in agribusiness,
fisheries, telecommunications and hotel development. An affiliate of Grupo
Liberman, Video Cable Comunicacion, or VCC, is a cable television system
operator which was sold to Tele-Communications, Inc. in 1997 in a series of
transactions for over $1 billion. Prior to the sale of VCC to
Tele-Communications, Inc., we entered into a reciprocal advertising agreement
with VCC pursuant to which each company provided the other with advertising
time. We previously leased offices from Grupo Liberman in Miami. Mr. Liberman
also is affiliated with one of our advertisers, TeleLatina, a start-up regional
telecommunications company in Latin America. TeleLatina accounted for
approximately $68,000 of our advertising revenues for the nine months ended
September 30, 1999.
In July 1998, we acquired 85% of the Class A shares and 100% of the Class B
shares of Cibrian-Campoy Creativos, S.A., in Argentina, from its shareholders,
who included the following directors and executive officers: Roberto
Cibrian-Campoy; Guillermo Liberman and Roberto Vivo-Chaneton. We paid $50,000
for 85% of the common shares, and issued 3,432,094 of our common shares for 100%
of the preferred shares, of Cibrian-Campoy Creativos, S.A. In October 1997, we
purchased, for an aggregate purchase price of $1,700, the majority of the shares
of Aalefranger, S.A., in Uruguay, from its shareholders, who included Roberto
Vivo-Chaneton and Roberto Cibrian-Campoy. These two companies are the
predecessors of our operating subsidiaries in Argentina and Uruguay.
Some of our directors have from time to time guaranteed short-term
indebtedness or other liabilities of our company. Mr. Vivo and Mr. Verdaguer
personally guaranteed payment of the monthly rent for our current headquarters
in Buenos Aires ($84,000 per year), as well as the rental of our new
headquarters at Azopardo in Buenos Aires ($228,000 per year).
On July 7, 1999, we completed a private placement of 5,447,088 Class A
convertible preferred shares for a gross purchase price of $38.4 million in
cash. Strategic investors included Hicks, Muse, Tate & Furst Incorporated and
the Cisneros Group of Companies (through IAMP (El Sitio) Investments Ltd.) and
GC Companies, Inc. (through GCC Investments, LLC). As a part of the private
placement, we entered into an agreement with Washburn Enterprises, an affiliate
of the Cisneros Television Group, under which we also agreed to purchase at
least $4.0 million of advertising time on the media networks owed by Washburn's
affiliate Ibero-American Media Partners II Ltd. and its
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affiliates, and Washburn agreed that it and its affiliates would purchase at
least $2 million of advertising time on our network, all during the period
through January 2001.
Under a shareholders' agreement entered into in conjunction with the
July 1999 private placement, we pay monitoring fees and director fees of
$700,000 per year, in the aggregate, to IAMP (El Sitio) Investments Ltd., GCC
Investments, LLC, Tower Plus International, SLI.com, Inc., Militello Limited and
IMPSAT Corporation.
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SHARES ELIGIBLE FOR FUTURE SALE
Sales of our common shares in the public market could adversely affect
market prices for our common shares. Because no shares will be available for
sale shortly after this offering due to the contractual and legal restrictions
on resale described below, sales of substantial numbers of our common shares
after these restrictions lapse could adversely affect market prices and our
ability to raise equity capital in the future.
Immediately upon completion of this offering, we will have outstanding an
aggregate of 38,574,460 common shares, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants. Of
these shares, all of the common shares sold in this offering will be freely
tradable without restriction or further registration under the Securities Act,
unless such common shares are purchased by "affiliates" as that term is defined
in Rule 144 under the Securities Act. Of the remaining common shares,
approximately 19,000,000 shares held by existing shareholders or issuable upon
conversion of our Class B convertible preferred shares will be "restricted
securities", as that term is defined in Rule 144 under the Securities Act.
Restricted securities may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rule 144 or 701 under the
Securities Act, which rules are summarized below.
LOCK-UP AGREEMENTS
All of our directors and executive officers, some of our employees, and some
of our existing shareholders have entered into lock-up agreements under which
they agreed not to transfer or dispose of, directly or indirectly, any common
shares, subject to limited exceptions, or any securities convertible into or
exercisable or exchangeable for common shares, for a period of 180 days after
the date of this prospectus. Transfers or dispositions can be made prior to the
end of that 180-day period with the prior written consent of Credit Suisse First
Boston Corporation or in other limited circumstances. Subject to the provisions
of Rules 144, 144(k) and 701, a significant portion of the restricted shares
will be available for sale in the public market, subject in the case of shares
held by affiliates to compliance with certain volume restrictions, shortly after
the end of that 180-day period.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned common shares
for at least one year would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:
- 1% of the number of common shares then outstanding, which will equal
approximately 385,745 shares immediately after this offering; or
- the average weekly trading volume of the common shares on the NASDAQ
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us.
RULE 144(K)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, including the holding period
of any prior owner other than an affiliate, is entitled to sell such shares
without complying with the manner of sale, public information, volume limitation
or notice provisions of Rule 144.
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RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased common shares from
us in connection with a compensatory share plan or other written agreement is
eligible to resell such shares 90 days after the closing of this offering in
reliance on Rule 144, but without compliance with certain restrictions,
including the holding period, contained in Rule 144.
REGULATION S
Under Regulation S, holders of our common shares may be able to sell their
shares outside the United States without registration under the Securities Act.
Non-U.S. purchasers of those common shares who are not affiliates of our company
should, subject to compliance with Regulation S, be able to resell those shares
in the public market in the United States without restriction.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of approximately 19,000,000
common shares, or their transferees, will be entitled to exercise rights to
cause us to register those shares for resale under the Securities Act of 1933.
These holders have these registration rights under the provisions of a
registration rights agreement that was entered into in connection with the
private placement of our Class A convertible preferred shares in July 1999.
1999 SHARE OPTION PLAN
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering 3,240,000 common shares reserved for issuance
under our 1999 share option plan. This registration statement is expected to be
filed as soon as practicable after the closing of this offering.
At September 30, 1999, options to purchase 1,238,400 shares were issued and
outstanding under our 1999 option plan. All of these shares will be eligible for
sale in the public market from time to time, subject to vesting provisions,
Rule 144 volume limitations applicable to our affiliates and, in the case of
some of the options, the expiration of lock-up agreements.
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DESCRIPTION OF SHARE CAPITAL
GENERAL
Our authorized capital consists of 200,000,000 common shares and 100,000,000
preferred shares, with 40,000,000 preferred shares designated as Class A
convertible preferred shares and 1,888,889 preferred shares designated as
Class B convertible preferred shares.
COMMON SHARES
As of September 30, 1999, we had 12,568,098 common shares issued and
outstanding. All outstanding shares of common shares are fully paid and
non-assessable.
The holders of common shares are entitled to one vote for each share held of
record on all matters submitted to a vote of our shareholders. Cumulative voting
is not permitted.
Subject to the prior rights of any series of shares that may be issued in
the future, holders of common shares are entitled to receive, ratably, such
dividends as may be declared by our board of directors from funds legally
available therefor and are entitled to share, ratably, in all our assets
available for distribution to holders of common shares upon the liquidation,
dissolution or winding up of our affairs.
PREFERRED SHARES
Authorized preferred shares may be issued from time to time by our board of
directors, in one or more series. Subject to the provisions of our articles of
association and the limitations prescribed by law, our board of directors is
authorized to adopt resolutions to issue the authorized preferred shares, to fix
the number of shares and to change the number of shares constituting any series,
and to provide for or change the voting powers, designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the preferred shares of any class or series, in each
case without any further action or vote by the shareholders.
One of the effects of undesignated preferred shares may be to enable our
board of directors to render more difficult or to discourage an attempt to
obtain control of our company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect continuity of our management. The issuance
of preferred shares may adversely affect the rights of the holders of common
shares. For example, our preferred shares may rank prior to the common shares as
to dividend rights, liquidation preference or both, may have full or limited
voting, rights and may be convertible into common shares. Accordingly, the
issuance of preferred shares may discourage bids for the common shares at a
premium or may otherwise adversely affect the market price of the common shares.
CLASS A CONVERTIBLE PREFERRED SHARES
GENERAL. As of September 30, 1999, we had 5,832,566 Class A convertible
preferred shares outstanding. Upon the closing of this offering, each
outstanding Class A convertible preferred share will be automatically converted
into two common shares.
DIVIDENDS. The holders of the Class A convertible preferred shares are
entitled to receive cumulative preferential dividends at an annual rate equal to
8% of the liquidation preference per Class A convertible preferred share,
payable quarterly, in arrears.
CONVERSION. The holders of Class A convertible preferred shares may, at
their option, convert these shares into common shares at any time in whole or in
part. These Class A convertible preferred shares will be automatically converted
into common shares upon the closing of this offering.
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REDEMPTION. The Class A convertible preferred shares are subject to
mandatory redemption beginning in July 2004, at a price equal to 100% of the
liquidation preference thereof, plus any and all accrued and unpaid cumulative
dividends thereon.
VOTING. The holders of the Class A convertible preferred shares have the
right to vote, together with the holders of all the issued and outstanding
common shares and not by classes, except as otherwise required by British Virgin
Islands law, on all matters on which holders of common shares are entitled to
vote. In addition, we may not take certain corporate actions without the
affirmative vote or consent of the holders of a majority of the Class A
convertible preferred shares.
Each holder of the Class A convertible preferred shares has the right to
cast one vote for each whole common share which would be issued to such holder
upon conversion of such holder's shares of Class A convertible preferred shares,
assuming that such conversion were to occur on the date immediately prior to the
record date for the determination of shareholders entitled to vote.
LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution
or winding up of our company, holders of Class A convertible preferred shares
are entitled to be paid an amount equal to the liquidation preference per
preferred share out of our assets before any distribution is made to any holders
of common or other junior shares.
REGISTRATION RIGHTS. In connection with the private placement in July 1999
of Class A convertible preferred shares, we entered into a registration rights
agreement with some of our shareholders. Under the registration rights
agreement, these shareholders have specified rights after a qualified offering
to cause us to register their holdings of common shares of $15.0 million or more
under the Securities Act of 1933. We have requested, and expect, that these
shareholders will waive their registration rights in connection with this
offering. We will also seek a waiver from these shareholders of the minimum
dollar per share feature of the qualified offering definition contained in the
registration rights agreement. We are required to bear all registration expenses
other than underwriting discounts and commissions and fees related to any
exercise of these registration rights. In addition, we have agreed to indemnify
the registration rights recipients against, and provide contribution with
respect to, liabilities under the Securities Act of 1933 in connection with
registrations.
CLASS B CONVERTIBLE PREFERRED SHARES
GENERAL. As of the date of this prospectus, we have 1,111,111 Class B
convertible preferred shares outstanding.
DIVIDENDS. The holders of the Class B convertible preferred shares are
entitled to receive cumulative preferential dividends at an annual rate equal to
8% of the liquidation preference per Class B convertible preferred share,
payable quarterly, in arrears.
CONVERSION. Each Class B convertible preferred share will automatically
convert, on the date six months following the closing date of this offering into
one common share, subject to specified anti-dilution adjustments. If this
offering is not consummated, the holders of Class B convertible preferred shares
may, after a period of six months, at their option, convert these shares into
common shares at any time in whole or in part.
REDEMPTION. The Class B convertible preferred shares are subject to
mandatory redemption beginning in July 2004, at a price equal to 100% of the
liquidation preference thereof, plus any and all accrued and unpaid cumulative
dividends thereon.
VOTING. The holders of the Class B convertible preferred shares have the
right to vote, together with the holders of all the issued and outstanding
common shares and not by classes, except as
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otherwise required by British Virgin Islands law, on all matters on which
holders of common shares are entitled to vote.
Each holder of the Class B convertible preferred shares has the right to
cast one vote for each whole common share which would be issued to such holder
upon conversion of such holder's shares of Class B convertible preferred shares,
assuming that such conversion were to occur on the date immediately prior to the
record date for the determination of shareholders entitled to vote.
LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution
or winding up of our company, holders of Class B convertible preferred shares
are entitled to be paid an amount equal to the liquidation preference per
preferred share out of our assets before any distribution is made to any holders
of common or other junior shares.
REGISTRATION RIGHTS. In connection with the private placement of Class B
convertible preferred shares, we entered into a registration rights agreement
with those investors. Under the registration rights agreement, the investors
have specified rights after this offering to cause us to register their holdings
of common shares of $5.0 million or more under the Securities Act of 1933. Each
Class B convertible preferred share will be convertible into one common share,
subject to specified anti-dilution adjustments. We will be required to bear all
registration expenses other than underwriting discounts and commissions and fees
related to any exercise of these registration rights. In addition, we have
agreed to indemnify the registration rights recipients against, and provide
contribution with respect to, liabilities under the Securities Act of 1933 in
connection with registrations.
LISTING
We have applied to list our common shares on the Nasdaq National Market
under the trading symbol "LCTO."
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for our common shares is The Bank of New
York. Its address is The Bank of New York, Shareholder Relations, P.O. Box
11258, New York, New York 10286-1258, and its telephone number is
(800) 432-0140.
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TAXATION
BRITISH VIRGIN ISLANDS TAX CONSIDERATIONS
We are exempt from all provisions of the Income Tax Act of the British
Virgin Islands with respect to all dividends, interests, rents, royalties,
compensation and other amounts payable by our company to persons who are not
persons resident in the British Virgin Islands. Persons who are not persons
resident in the British Virgin Islands are also exempt from any capital gains
realized with respect to any shares, debt obligations or other securities,
including the common shares, of our company. No estate, inheritance, succession
or gift tax, rate, duty, levy or other charge is payable by persons who are not
persons resident in the British Virgin Islands with respect to any shares, debt
obligations or other securities, including the common shares, of our company.
There is no reciprocal tax treaty in force between the British Virgin Islands
and the United States.
U.S. FEDERAL INCOME TAXATION CONSIDERATIONS
The following discussion describes the material U.S. federal income tax
considerations that may be relevant to a prospective purchaser of shares to a
U.S. Holder (as defined below) of the receipt of distributions on, and the
disposition of, our common shares. This discussion is based on provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), on the regulations
promulgated thereunder and on published administrative rulings and judicial
decisions, all as of the date hereof. We cannot assure you that future
legislation, administrative rulings or court decisions will not modify the
conclusions set forth in this summary, possibly with retroactive effect. The
discussion is of a general nature only and prospective purchasers of our common
shares are advised to consult their own tax advisors with respect to U.S.
federal, state and local tax consequences and tax consequences in other
jurisdictions, of the ownership of shares applicable in their particular
situation. Except as specifically set forth herein, this discussion deals only
with common shares held by a U.S. Holder as capital assets within the meaning of
Section 1221 of the Code, and does not address tax considerations applicable to
holders that may be subject to special tax rules, such as banks, insurance
companies, dealers in securities or currencies, tax-exempt entities, persons
that will hold shares as a position in a "straddle" or as part of a "hedging" or
"conversion" transaction for tax purposes or persons that have a "functional
currency" (as defined in Section 985 of the Code) other than the U.S. dollar.
As used herein, a "U.S. person" is:
- a United States citizen or resident;
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof;
- an estate the income of which is subject to United States federal income
taxation regardless of its source; or
- a trust which is subject to the supervision of a court within the United
States and the control of a United States person as described in
section 7701(a)(30) of the Code or that has a valid election in effect
under applicable U.S. Treasury regulations to be treated as a United
States person.
A "U.S. Holder" is a beneficial owner of common shares that is a U.S. person. A
"non-U.S. Holder" is a beneficial owner of common shares that is not a U.S.
Holder.
U.S. HOLDERS
DIVIDENDS. To the extent that a distribution on our common shares is paid
to a U.S. Holder out of our current or accumulated earnings and profits (as
determined for U.S. federal income tax purposes), that distribution will be
included in the U.S. Holder's gross income as foreign source dividend income
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in an amount equal to the U.S. dollar value of the distribution (without
reduction for any applicable foreign withholding tax). Therefore, in the event
that any foreign tax is withheld from a distribution on the common shares, a
U.S. Holder generally will be required to report gross income in an amount
greater than the cash received (although, as discussed below, that U.S. Holder
may be eligible to claim a deduction or a foreign tax credit in respect of such
foreign tax). To the extent that the amount of any distribution on the common
shares exceeds our current and accumulated earnings and profits (as determined
for U.S. federal income tax purposes), a U.S. Holder's pro rata share of the
excess amount would be treated first as a nontaxable return of capital that
would be applied against and would reduce the U.S. Holder's tax basis in its
common shares (but not below zero), and then as capital gain. Distributions in
excess of our current and accumulated earnings and profits (as determined for
U.S. federal income tax purposes) generally will not give rise to foreign source
income and a U.S. Holder may be unable to claim a foreign tax credit in respect
of any British Virgin Islands or other foreign withholding tax imposed on those
distributions unless, subject to applicable limitations, the U.S. Holder has
other foreign source income in the appropriate category for foreign tax credit
purposes. We believe that we do not have current or accumulated earnings and
profits for U.S. federal income tax purposes. However, we cannot predict whether
we will have any such earnings and profits for future taxable years.
Subject to certain conditions and limitations (including certain minimum
holding period requirements), the U.S. dollar value of the foreign income taxes,
if any, withheld from a distribution to a U.S. Holder on the common shares may
generally be claimed as a credit against the U.S. Holder's U.S. federal income
tax liability. Alternatively, a U.S. Holder may generally claim a deduction for
such amount of foreign income taxes withheld in a taxable year, but only if such
U.S. Holder does not elect to claim a foreign tax credit in respect of any
foreign taxes paid by it in the taxable year. Dividends on common shares
generally will constitute "passive income" or, in the case of some U.S. Holders,
"financial services income" for U.S. foreign tax credit purposes. Special rules
apply to some individuals whose foreign source income during the taxable year
consists entirely of "qualified passive income" and whose creditable foreign
taxes paid or accrued during the taxable year do not exceed $300 ($600 in the
case of a joint return).
The rules relating to foreign tax credits are extremely complex and the
availability of a foreign tax credit depends on numerous factors. Prospective
purchasers of our common shares should consult their own tax advisors concerning
the application of the U.S. foreign tax credit rules to their particular
situations.
The U.S. dollar value of any distribution to a U.S. Holder on shares that is
paid in a foreign currency will be calculated by reference to the exchange rate
in effect at the time the distribution is received by the U.S. Holder. If a U.S.
Holder that receives foreign currency from a distribution and does not convert
the foreign currency into U.S. dollars upon receipt, the U.S. Holder will
generally have foreign exchange gain or loss based on any appreciation or
depreciation of the value of the foreign currency against the U.S. dollar, which
will generally be U.S. source ordinary income or loss for U.S. foreign tax
credit purposes.
A corporate U.S. Holder will not be entitled to a dividends-received
deduction with respect to distributions on our common shares.
SALE OR EXCHANGE OF COMMON SHARES. A U.S. Holder generally will recognize
taxable gain or loss on any sale or exchange of a common share in an amount
equal to the difference between the amount realized for that common share and
the U.S. Holder's adjusted tax basis in that share. The gain or loss should be
capital gain or loss. Capital gains of individuals derived with respect to
capital assets held for more than one year are eligible for reduced rates of
taxation. The deductibility of capital losses is subject to limitations. Any
gain or loss recognized by a U.S. Holder will generally be treated as United
States source gain or loss for foreign tax credit purposes. As a result of
certain limitations under the
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foreign tax credit provisions of the Code, a U.S. Holder may be unable to claim
a foreign tax credit for British Virgin Islands withholding taxes, if any,
imposed on the proceeds received upon the sale, exchange, repurchase by us or
other disposition of common shares.
PASSIVE FOREIGN INVESTMENT COMPANY PROVISIONS. A foreign corporation will be
classified as a passive foreign investment company (a "PFIC") for U.S. federal
income tax purposes if 75% or more of its gross income for the taxable year is
passive income or on average for the taxable year, 50% or more of its assets, by
value (or, if it so elects, by adjusted basis), produce or are held for the
production of passive income. For this purpose, passive income generally
includes dividends, interest, royalties, rents (other than rents and royalties)
derived in the active conduce of a trade or business and not derived from a
related person), annuities and gains from assets that produce passive income. If
a foreign corporation owns at least 25% by value of the stock of another
corporation, the foreign corporation is treated for purposes of the PFIC tests
as owning its proportionate share of the assets of the other corporation and as
receiving directly its proportionate share of the other corporation's income. If
a foreign corporation is classified as a PFIC, in any year with respect to which
a U.S. Holder owns common shares, it generally will continue to be treated as a
PFIC, with respect to such shareholder in all succeeding years. We will notify
U.S. Holders by letter and provide them with the information as may be required
to make a "qualified electing fund" election effective.
Based upon our current and projected income, assets and activities, we do
not expect that our common shares will be considered shares of a PFIC for our
current fiscal year or for future years. This conclusion is a factual
determination made annually and thus is subject to change. In reaching the
conclusion that we do not believe that our company is a PFIC, we have valued our
company's assets based on the price per share of the common shares. For purposes
of applying the PFIC rules to our company, this valuation method results in
substantial value being given to intangible assets, including goodwill, that are
considered neither to produce nor to be held for the production of passive
income for purposes of the PFIC rules. The U.S. Internal Revenue Service (the
"IRS") has neither approved or disapproved of this valuation method, although we
believe that it constitutes a reasonable method of valuing our company's
non-passive assets. In addition, we believe that our passive income, as defined
under Section 1297 of the Code, does not, and should not, equal or exceed 75% of
our gross income. We will notify U.S. Holders if our company becomes a PFIC in
any taxable year. We will notify U.S. Holders by letter and provide them with
the information required to make a "QEF election," as described below.
If our company were treated as a PFIC, unless U.S. Holders make a "QEF
election" or a "mark-to-market election," each as described below:
- distributions made by our company during a taxable year with respect to
the common shares that are "excess distributions" (defined generally as
the excess of the amount received with respect to the shares in any
taxable year over 125% of the average received in the shorter of either
the three previous years or your holding period before the taxable year)
must be allocated ratably to each day of your holding period. The amounts
allocated to the current taxable year and to taxable years prior to the
first year in which our company was classified as a PFIC will be included
as ordinary income in gross income for that year. The amount allocated to
each other prior taxable year will be taxed as ordinary income at the
highest rate in effect for the U.S. Holder in that prior year and the tax
is subject to an interest charge at the rate applicable to deficiencies in
income taxes; and
- the entire amount of any gain realized upon the sale or other disposition
of common shares will be treated as an excess distribution made in the
year of sale or other disposition and as a consequence will be treated as
ordinary income and to the extent allocated to years prior to the year of
sale or disposition, will be subject to the interest charge described
above.
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These special PFIC tax rules will not apply if the U.S. Holder elects to
have our company treated as a "qualified electing fund" (a "QEF election") and
our company provides certain information required for the QEF election. If our
company is treated as a PFIC, we intend to notify U.S. Holders and provide them
with that information as may be required to make the QEF election effective.
If a U.S. Holder makes a QEF election, the U.S. Holder will be currently
taxable on its pro rata share of our company's ordinary earnings and net capital
gain (at ordinary income and capital gains rates, respectively) for each taxable
year of our company, regardless of whether or not distributions were received.
The U.S. Holder's basis in the common shares will be increased to reflect taxed
but undistributed income. Distributions of income that had previously been taxed
will result in a corresponding reduction in basis in the common shares and will
not be taxed again as a distribution.
Alternatively, if the common shares are treated as "marketable stock," a
U.S. Holder may make a mark-to-market election. If this election is made, the
U.S. Holder will not be subject to the PFIC rules described above. Instead, the
U.S. Holder generally will include in each year as ordinary income the excess,
if any, of the fair market value of the common shares at the end of the taxable
year over the U.S. Holder's adjusted basis in the shares and will be permitted
an ordinary loss in respect of the excess, if any, of the U.S. Holder's adjusted
basis in the common shares over its fair market value at the end of the taxable
year (but only to the extent of the net amount previously included in income as
a result of the mark-to-market election). Basis in the shares would be adjusted
to reflect any such income of loss amounts. The mark-to-market election is only
available with respect to stock traded on certain U.S. exchanges and other
exchanges designated by the U.S. Treasury. It is anticipated that such election
would be available to U.S. Holders.
U.S. Holders that own common shares during any year that our company is a
PFIC, must file IRS Form 8621. U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX
ADVISERS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF HOLDING SHARES
OF OUR COMPANY IF IT IS CONSIDERED A PFIC.
CONTROLLED FOREIGN CORPORATIONS. If United States Shareholders in the
aggregate own more than 50% of the voting power or value of the shares of a
foreign corporation, it will be classified as a "controlled foreign corporation"
("CFC"). A "United States Shareholder" is any United States person that owns
(directly or through certain deemed ownership rules) at least 10% of the total
combined voting power of all classes of shares of a foreign corporation.
If a foreign corporation is a CFC for an uninterrupted period of 30 days or
more during the taxable year, the United States Shareholders of the CFC will
generally be subject to current U.S. tax on certain types of income of the
foreign corporation ("Subpart F income," which includes dividends, interest,
certain rents and royalties, gain from the sale of property producing such
income and certain income from sales and services) and, in certain
circumstances, on earnings of the CFC that are invested in U.S. property,
whether or not cash is distributed by the CFC. In addition, gain on the sale of
the CFC's shares by a United States Shareholder (during the period that the
corporation is a CFC and thereafter for a five-year period) will be ordinary
income in whole or in part.
If we are treated as a CFC, any U.S. Holder that acquires (directly or
through certain deemed ownership rules) 10% or more of the total combined voting
power of all classes of our shares will be required to include certain amounts
with respect to its investment in income currently. Our status as a CFC should
have no adverse effect on any U.S. Holder that is not a United States
Shareholder.
FOREIGN PERSONAL HOLDING COMPANIES. If five or fewer U.S. individuals own,
or are treated as owning under certain attribution rules, in the aggregate more
than 50% of the voting power or value of the shares of a foreign corporation,
and at least 60% (50% in certain circumstances) of the "gross income" of such
foreign corporation is made up of certain passive type income (for example,
dividends, interest, certain rents and royalties and gain from the sale of stock
or securities) for a taxable year, then such corporation will be a "foreign
personal holding company" ("FPHC"). If a foreign
90
<PAGE>
corporation is a FPHC, U.S. persons that own shares in the FPHC (regardless of
the size of their shareholding and regardless of whether they are individuals)
will generally be subject to current U.S. tax on a pro-rata portion of the
FPHC's undistributed foreign personal holding company income ("FPHCI") for the
taxable year or part thereof, although tax-exempt U.S. investors will not be
subject to tax on amounts attributable to FPHCI. In addition, U.S. persons that
are required under these rules to include undistributed taxable income for a
taxable year and that own at least 5% of the value of the FPHC's shares are
required to comply with certain reporting requirements under Code. In addition,
if our company became a FPHC, U.S. persons who acquire their shares from
decedents would not receive a "stepped-up" basis in such shares. Instead, such
U.S. persons would have a tax basis equal to the lower of fair market value or
the decedent's basis.
Based upon our current and projected income, assets and activities, we do
not expect the common shares to be considered shares of FPHC for our current
year or for future years. We will notify U.S. Holders if we become a FPHC in any
taxable year.
NON-U.S. HOLDERS
A non-U.S. Holder generally will not be subject to U.S. federal income tax
on dividends paid by us with respect to the common shares unless such income is
effectively connected with the conduct by the non-U.S. Holder of a trade or
business in the United States.
A non-U.S. Holder generally will not be subject to United States federal
income tax on any gain recognized on the sale or other disposition of the common
shares unless that gain is effectively connected with the conduct by the
non-U.S. Holder of a trade or business within the United States, or, in the case
of gains recognized by individual non-U.S. Holders, the individual is present in
the United States for 183 days or more and certain other conditions are met.
Effectively connected dividends and gains of a non-U.S. Holder generally
will be subject to tax in the same manner as a U.S. Holder. These dividends and
gains realized by a corporate non-U.S. Holder may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to dividends in
respect of the common shares or the proceeds received on the sale, exchange or
redemption of common shares paid within the U.S. (and in certain cases, outside
the United States) to U.S. Holders other than certain exempt recipients, such as
corporations, and a 31% backup withholding may apply to such amounts if the U.S.
Holder fails to provide an accurate taxpayer identification number or to report
interest and dividends required to be shown on its U.S. federal income tax
returns. The amount of any backup withholding from a payment to a U.S. Holder
will be allowed as credit against the U.S. Holder's U.S. federal income tax
liability.
Non-U.S. Holders are generally exempt from the information reporting and
backup withholding rules but may be required to comply with certification and
identification requirements in order to prove their exemption.
The rules for information reporting and backup withholding requirements have
been altered in certain respects with respect to payments after December 31,
2000. It is possible that we and other withholding agents may request a new
withholding certificate in order to qualify for continued exemption from backup
withholding under Treasury regulations when they become effective. Holders of
the common shares should consult their tax advisers concerning the possible
application of these alterations to any payments made with respect to the common
shares.
91
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
dated December , 1999, each of the underwriters named below, for which Credit
Suisse First Boston Corporation, Lehman Brothers Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Salomon Smith Barney Inc., Wit Capital Corporation
and Fidelity Capital Markets, a division of National Financial Services
Corporation, are acting as representative, have severally agreed to purchase
from us the aggregate number of common shares set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER
OF COMMON
NAME SHARES
- ---- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Lehman Brothers Inc.........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Salomon Smith Barney Inc....................................
Wit Capital Corporation.....................................
Fidelity Capital Markets
a division of National Financial Services Corporation.....
---------
Total.................................................... 8,200,000
=========
</TABLE>
The underwriting agreement provides that, the underwriters are obligated to
purchase and pay for all of the above common shares if any are purchased, other
than those common shares covered by the over-allotment option described below.
The underwriting agreement provides that, if an underwriter defaults, the
purchase commitments on non-defaulting underwriters may, in some circumstances,
be increased or the offering of common shares may be terminated.
The underwriters propose to offer the common shares initially at the public
offering price set forth on the cover page of this prospectus and at this price
less a concession not in excess of $ per common share to other dealers who
are members of the National Association of Securities Dealers, Inc. The
underwriters may allow, and dealers may reallow, concessions not in excess of
$ per common share to other dealers. After the offering, the offering price,
concessions and other selling terms may be changed by the underwriters.
We have granted an over-allotment option to the underwriters to purchase an
amount, up to an aggregate of 1,230,000 additional common shares, exercisable at
the initial public offering price less the underwriting discounts and
commissions, each as set forth on the cover page of this prospectus. If the
underwriters exercise this option in whole or in part, then each of the
underwriters will become obligated, subject to customary conditions, to purchase
approximately the same percentage of these additional common shares as is
approximately the percentage of common shares that it is obligated to purchase
of the total number of common shares under the underwriting agreement as shown
in the table set forth above.
The following table summarizes the underwriting discount and estimated
expenses that we will pay:
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------------------- -------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
OPTION OPTION OPTION OPTION
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discount paid by us.......... $ % $ % $ $
Expenses payable by us in connection with
this offering........................... $ % $ % $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common shares being offered.
The underwriting agreement provides that we will indemnify the underwriters
against liabilities under the Securities Act or contribute to payments that the
underwriters may be required to make in respect thereof.
Our directors and executive officers and some of our existing shareholders
who collectively hold a total of 27,121,294 shares have agreed under lock-up
agreements not to sell or offer to sell or otherwise
92
<PAGE>
dispose of any common shares, subject to limited exceptions, for a period
180 days after the date of this prospectus without the prior written consent of
Credit Suisse First Boston Corporation.
Prior to the offering, there has been no public market for our common
shares. Consequently, the initial offering price for the common shares offered
hereby was determined by negotiations between us and the representative of the
underwriters. Among the factors considered in these negotiations were our
results of operations in recent periods, estimates of our prospects and the
industry in which we compete, an assessment of our management, the general state
of the securities markets at the time of the offering and the prices of similar
securities of generally comparable companies. We will apply to list our common
shares on the Nasdaq National Market under the symbol "LCTO." We cannot assure
you, however, that an active or orderly trading market will develop for the
common shares or that our common shares will trade in the public markets
subsequent to the offering at or above the initial offering price.
In order to facilitate the offering, persons participating in the offering
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common shares during and after the offering. Specifically, the
underwriters may over-allot or otherwise create a short position in the common
shares for their own account by selling more common shares than we have actually
sold to them. The underwriters may elect to cover any short position by
purchasing common shares in the open market or by exercising the over-allotment
option granted to the underwriters. In addition, the underwriters may stabilize
or maintain the price of the common shares by bidding for or purchasing common
shares in the open market and may impose penalty bids, under which selling
concessions allowed to syndicate members or other broker-dealers participating
in the offering are reclaimed if common shares previously distributed in the
offering are repurchased in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize or maintain the
market price at a level above that which might otherwise prevail in the open
market. The imposition of a penalty bid may also affect the price of the common
shares to the extent that it discourages resales thereof. No representation is
made as to the magnitude or effect of these activities.
The underwriters have reserved for sale, at the initial public offering
price, up to 820,000 common shares for directors, officers, employees, directors
and other persons associated with us who have expressed an interest in
purchasing common shares in the offering. The number of common shares available
for sale to the general public in the offering will be reduced to the extent
these persons purchase reserved common shares. Any reserved common shares not
purchased by these persons will be offered by the underwriters to the general
public on the same terms as the other common shares offered in this offering.
Some of the employees and other persons who will be offered reserved common
shares will be required to agree not to sell or offer to sell or otherwise
dispose of any common shares, subject to limited exceptions, for a period of 90
days after the date of this prospectus without the prior written consent of
Credit Suisse First Boston Corporation and Lehman Brothers Inc.
A prospectus in electronic format is being made available on an Internet
Website maintained by Wit Capital Corporation, which is one of the underwriters
in this offering. In addition, all dealers purchasing common shares from Wit
Capital Corporation in this offering have agreed to make a prospectus in
electronic format available on a Website maintained by each of them. Other than
the prospectus in electronic format, the information on the Website and any
information contained on any other Website maintained by Wit Capital Corporation
or any dealer purchasing common shares from it is not part of this prospectus or
the registration statement of which this prospectus forms a part, has not been
approved and/or endorsed by us or any underwriter in its capacity as underwriter
and should not be relied on by prospective investors.
Fidelity Capital Markets, a division of National Financial Services
Corporation, which is one of the underwriters in this offering, will be
facilitating electronic distribution of information through the Internet,
Intranet and other proprietary electronic technology.
93
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common shares in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each provinces where
trades of common shares are effected. Accordingly, any resale of the common
shares in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or pursuant
to a discretionary exemptions granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the common shares.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common shares in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common shares without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as agent
and (iii) such purchaser has reviewed the text above under "Resale
Restrictions".
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The common shares being offered are those of a foreign Issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common shares to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common shares acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common shares acquired on the same date and under
the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common shares should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
shares in their particular circumstances and with respect to the eligibility of
the common shares for investment by the purchaser under relevant Canadian
legislation.
94
<PAGE>
LEGAL MATTERS
The validity of the common shares and certain other matters of British
Virgin Islands law in connection with this offering will be passed upon for us
by Conyers Dill & Pearman, our British Virgin Islands counsel.
Certain matters relating to this offering will be passed upon for us by
Paul, Hastings, Janofsky & Walker LLP, our U.S. counsel, and for the
underwriters by Simpson Thacher & Bartlett, U.S. counsel to the underwriters.
Some partners and associates of Paul, Hastings, Janofsky & Walker LLP will
be purchasing up to 18,750 common shares in the offering.
EXPERTS
The consolidated financial statements of our company as of December 31,
1997, December 31, 1998 and September 30, 1999 and for the period from July 16,
1997 (date of inception) through December 31, 1997, the year ended December 31,
1998 and the nine months ended September 30, 1999 included in this prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and are included in reliance upon the report of
that firm given upon their authority as experts in accounting and auditing.
The statement of historical net assets to be sold by IMPSAT Corporation as
of September 30, 1999 included in this prospectus has been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and is included in reliance upon the report of that firm given upon
their authority, as experts in accounting and auditing.
The statements of net revenues and direct costs and expenses of IMPSAT
S.A.'s retail dial-up access business in Argentina for the years ended
December 31, 1997 and December 31, 1998 and the nine months ended September 30,
1999 included in this prospectus have been audited by Deloitte & Touche,
Argentina, independent auditors, as stated in their report appearing herein, and
are included in reliance upon the report of that firm given upon their authority
as experts in accounting and auditing.
The statements of net revenues and direct costs and expenses of MANDIC
INTERNET LTDA.'s retail dial-up access business in Brazil for the years ended
December 31, 1997 and December 31, 1998 and the nine months ended September 30,
1999 included in this prospectus have been audited by Deloitte Touche Tohmatsu,
Brazil, independent auditors, as stated in their report appearing herein, and
are included in reliance upon the report of that firm given upon their authority
as experts in accounting and auditing.
The statements of net revenues and direct costs and expenses of IMPSAT
S.A.'s, retail dial-up access business in Colombia for the years ended
December 31, 1997 and December 31, 1998 and the nine months ended September 30,
1999 included in this prospectus have been audited by Deloitte & Touche,
Colombia, independent auditors, as stated in their report appearing herein, and
are included in reliance upon the report of that firm given upon their authority
as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form F-1, including exhibits, under the Securities Act of 1933 with
respect to the common shares to be sold in this offering. This prospectus, which
constitutes a part of the registration statement, does not contain all of the
information set forth in the registration statement or the exhibits which are a
part of the registration statement. For further information with respect to us
and the common shares, reference is made to the registration statement and the
exhibits.
95
<PAGE>
You may read and copy all or any portion of the registration statement or
other information in our files in the Commission's public reference room at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Seven World Trade Center, 13(th)
Floor, New York, NY 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You can request copies of these documents upon payment of a
duplicating fee, by writing to the Commission. Please call the Commission at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. EL SITIO'S COMMISSION FILINGS, INCLUDING THE REGISTRATION STATEMENT, WILL
ALSO BE AVAILABLE TO YOU ON THE COMMISSION'S INTERNET SITE (HTTP://WWW.SEC.GOV).
Please note that as a foreign private issuer, we are not subject to the same
disclosure requirements as a domestic registrant under the Securities Exchange
Act of 1934. For example, we are not required to prepare and issue quarterly
reports. However, we intend to furnish our shareholders with annual reports
containing financial statements audited by our independent auditors and to make
available to our shareholders quarterly reports containing unaudited financial
data for the first three quarters of each fiscal year. We intend to file
quarterly financial information with the SEC within two months of the end of the
first three quarters of our fiscal year, and we will file annual reports on
Form 20-F within the time period required by the SEC, which is currently six
months from the end of our fiscal year on December 31.
96
<PAGE>
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
EL SITIO, INC. AND SUBSIDIARIES
Independent Auditors' Report............................ F-2
Consolidated Balance Sheets at December 31, 1997 and
1998 and September 30, 1999............................. F-3
Consolidated Statements of Operations and Comprehensive
Loss for the period from July 16, 1997 (date of
inception) through December 31, 1997, the year ended
December 31, 1998 and the nine months ended
September 30, 1998 (unaudited) and 1999................. F-4
Consolidated Statements of Shareholders' Equity
(Deficit) for the period from July 16, 1997 (date of
inception) through December 31, 1997, the year ended
December 31, 1998 and the nine months ended
September 30, 1999...................................... F-5
Consolidated Statements of Cash Flows for the period
from July 16, 1997 (date of inception) through
December 31,1997, the year ended December 31, 1998 and
the nine months ended September 30, 1998 (unaudited) and
1999.................................................... F-6
Notes to Consolidated Financial Statements.............. F-7
IMPSAT CORPORATION
Independent Auditors' Report............................ F-18
Statement of Historical Net Assets to be Sold by IMPSAT
Corporation at September 30, 1999....................... F-19
Notes to Statement of Historical Net Assets to be sold
by IMPSAT Corporation................................... F-20
IMPSAT S.A. (RETAIL DIAL-UP ACCESS BUSINESS IN ARGENTINA)
Independent Auditors' Report............................ F-21
Statements of Net Revenues and Direct Costs and Expenses
for the years ended December 31, 1997 and 1998 and the
nine months ended September 30, 1998 (unaudited) and
1999.................................................... F-22
Notes to Statements of Net Revenues and Direct Costs and
Expenses................................................ F-23
MANDIC INTERNET LTDA. (FORMERLY MANDIC.COM LTDA) (RETAIL
DIAL-UP ACCESS BUSINESS IN BRAZIL)
Independent Auditors' Report............................ F-26
Statements of Net Revenues and Direct Costs and Expenses
for the years ended December 31, 1997 and 1998 and the
nine months ended September 30, 1998 (unaudited) and
1999.................................................... F-27
Notes to Statements of Net Revenues and Direct Costs and
Expenses................................................ F-28
IMPSAT S.A. (RETAIL DIAL-UP ACCESS BUSINESS IN COLOMBIA)
Independent Auditors' Report............................ F-31
Statements of Net Revenues and Direct Costs and Expenses
for the years ended December 31, 1997 and 1998 and the
nine months ended September 30, 1998 (unaudited) and
1999.................................................... F-32
Notes to Statements of Net Revenues and Direct Costs and
Expenses................................................ F-33
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION...... F-36
Pro Forma Statement of Operations for the nine months
ended September 30, 1999 and the year ended December 31,
1998.................................................... F-37
Pro Forma Balance Sheet at September 30, 1999........... F-39
Adjustments to Pro Forma Financial Information.......... F-40
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of El Sitio, Inc.:
We have audited the accompanying consolidated balance sheets of El
Sitio, Inc. and its subsidiaries (the "Company") as of December 31, 1997,
December 31, 1998 and September 30, 1999, and the related consolidated
statements of operations and comprehensive loss, shareholders' equity (deficit)
and cash flows for the period from July 16, 1997 (date of inception) through
December 31, 1997, the year ended December 31, 1998, and the nine months ended
September 30, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with 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, December 31, 1998 and September 30, 1999, and the results of its
operations and its cash flows for the period from July 16, 1997 (date of
inception) through December 31, 1997, the year ended December 31, 1998, and the
nine months ended September 30, 1999 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
October 22, 1999 (October 28, 1999 as to the effects of
the share split described in Note 3 and November 5, 1999
as to the last sentence in the second paragraph in Note 14)
F-2
<PAGE>
\
EL SITIO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 89 $ 246 $24,393
Trade accounts receivable, net............................ 48 105 976
Other receivables......................................... 72 307 1,078
Prepaid expenses.......................................... 5 12 137
------- ------- -------
Total current assets.................................. 214 670 26,584
PROPERTY AND EQUIPMENT, NET................................. 180 581 1,878
LICENSES AND PERMITS, NET................................... -- 223 98
OTHER ASSETS................................................ 2 7 4,560
------- ------- -------
TOTAL ASSETS................................................ $ 396 $ 1,481 $33,120
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable--trade................................... $ 63 $ 336 $ 2,287
Accrued and other liabilities, including due to
shareholders............................................ 1,297 376 3,405
Current portion of installment loan....................... -- -- 7
Unearned revenues......................................... -- -- 628
------- ------- -------
Total current liabilities............................. 1,360 712 6,327
------- ------- -------
INSTALLMENT LOAN............................................ -- -- 22
COMMITMENTS AND CONTINGENCIES (Note 13)
CLASS A CONVERTIBLE PREFERRED SHARES
Redeemable, $.01 par value, 8% cumulative dividend,
40,000,000 shares authorized, 5,832,566 shares issued
and outstanding, liquidation preference $7.00186 per
share................................................... -- -- 38,327
------- ------- -------
SHAREHOLDERS' EQUITY (DEFICIT):
Common shares, $.01 par value; 200,000,000 shares
authorized; 100,000 and 6,000,000 shares issued and
outstanding at December 31, 1997 and 1998, respectively,
and 12,568,098 shares issued and outstanding at
September 30, 1999...................................... 1 60 126
Additional paid-in capital................................ 49 2,940 13,943
Irrevocable capital contribution.......................... -- 2,302 --
Deferred share-based compensation......................... -- -- (7,286)
Accumulated other comprehensive (loss) income............. -- (2) 95
Accumulated deficit....................................... (1,014) (4,531) (18,434)
------- ------- -------
Total shareholders' equity (deficit)...................... (964) 769 (11,556)
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)........................................... $ 396 $ 1,481 $33,120
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
PERIOD FROM JULY 16, 1997 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1997, THE YEAR ENDED DECEMBER 31, 1998
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD NINE MONTHS
ENDED YEAR ENDED ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, -----------------------
1997 1998 1998 1999
------------ ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUES:
Advertising................................ $ 181 $ 527 $ 380 $ 1,195
Web design and hosting..................... 86 253 229 329
---------- ---------- ---------- ----------
Total.................................. 267 780 609 1,524
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Product, content and technology............ 221 1,556 848 3,181
Marketing and sales........................ 142 674 320 7,157
Corporate, general and administrative...... 727 1,940 1,144 3,736
Depreciation and amortization.............. 81 107 59 336
Share-based compensation................... -- -- -- 499
---------- ---------- ---------- ----------
Total costs and expenses............... 1,171 4,277 2,371 14,909
---------- ---------- ---------- ----------
Operating loss............................. (904) (3,497) (1,762) (13,385)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSES):
Interest income (expense), net............. (75) (42) (53) 264
Foreign exchange loss...................... (3) (44) (32) 5
Other income (expense), net................ (32) 66 55 (3)
---------- ---------- ---------- ----------
Total other (expenses) income, net..... (110) (20) (30) 266
---------- ---------- ---------- ----------
NET LOSS BEFORE DIVIDENDS ON CLASS A
CONVERTIBLE PREFERRED SHARES............... (1,014) (3,517) (1,792) (13,119)
DIVIDENDS ON CLASS A CONVERTIBLE PREFERRED
SHARES..................................... -- -- -- (784)
---------- ---------- ---------- ----------
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS............................... (1,014) (3,517) (1,792) (13,903)
OTHER COMPREHENSIVE LOSS,
NET OF TAX:
Foreign currency translation adjustment.... -- (2) -- 97
---------- ---------- ---------- ----------
COMPREHENSIVE LOSS........................... $ (1,014) $ (3,519) $ (1,792) $ (13,806)
========== ========== ========== ==========
NET LOSS PER COMMON SHARE:
Basic...................................... $ (10.14) $ (1.15) $ (.87) $ (1.18)
========== ========== ========== ==========
Diluted.................................... $ (10.14) $ (1.15) $ (.87) $ (1.18)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic...................................... 100,000 3,050,000 2,066,667 11,777,516
========== ========== ========== ==========
Diluted.................................... 100,000 3,050,000 2,066,667 11,777,516
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
PERIOD FROM JULY 16, 1997 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1997, THE YEAR ENDED DECEMBER 31, 1998
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL IRREVOCABLE DEFERRED COMPREHENSIVE
COMMON PAID-IN CAPITAL SHARE-BASED (LOSS) ACCUMULATED
SHARES AMOUNT CAPITAL CONTRIBUTION COMPENSATION INCOME DEFICIT
---------- -------- ---------- ------------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial capitalization...... 100,000 $ 1 $ 49 -- -- -- --
Net loss for the period..... -- -- -- -- -- -- $ (1,014)
---------- ------ ------- ------- ------- --- --------
BALANCE,
DECEMBER 31, 1997......... 100,000 1 49 -- -- -- (1,014)
Issuance of common shares in
exchange for shares of El
Sitio Argentina........... 3,432,094 34 1,682 -- -- -- --
Issuance of common shares... 2,467,906 25 1,209 -- -- -- --
Irrevocable capital
contribution.............. -- -- -- $ 2,302 -- -- --
Foreign currency translation
adjustment................ -- -- -- -- -- $(2) --
Net loss for the year....... -- -- -- -- -- -- (3,517)
---------- ------ ------- ------- ------- --- --------
BALANCE,
DECEMBER 31, 1998......... 6,000,000 60 2,940 2,302 -- (2) (4,531)
Issuance of common shares... 168,098 2 82 -- -- -- --
Irrevocable capital
contribution.............. -- -- -- 898 -- -- --
Capitalization of
irrevocable capital
contribution.............. 6,400,000 64 3,136 (3,200) -- -- --
Deferred compensation
related to share
options................... -- -- 7,785 -- $(7,785) -- --
Amortization of deferred
share-based
compensation.............. -- -- -- -- 499 -- --
Foreign currency translation
adjustment................ -- -- -- -- -- 97 --
Net loss for the nine months
ended..................... -- -- -- -- -- -- (13,903)
---------- ------ ------- ------- ------- --- --------
BALANCE,
SEPTEMBER 30, 1999........ 12,568,098 $ 126 $13,943 $ -- $(7,286) $95 $(18,434)
========== ====== ======= ======= ======= === ========
<CAPTION>
TOTAL
--------
<S> <C>
Initial capitalization...... $ 50
Net loss for the period..... (1,014)
--------
BALANCE,
DECEMBER 31, 1997......... (964)
Issuance of common shares in
exchange for shares of El
Sitio Argentina........... 1,716
Issuance of common shares... 1,234
Irrevocable capital
contribution.............. 2,302
Foreign currency translation
adjustment................ (2)
Net loss for the year....... (3,517)
--------
BALANCE,
DECEMBER 31, 1998......... 769
Issuance of common shares... 84
Irrevocable capital
contribution.............. 898
Capitalization of
irrevocable capital
contribution.............. --
Deferred compensation
related to share
options................... --
Amortization of deferred
share-based
compensation.............. 499
Foreign currency translation
adjustment................ 97
Net loss for the nine months
ended..................... (13,903)
--------
BALANCE,
SEPTEMBER 30, 1999........ $(11,556)
========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIOD FROM JULY 16, 1997 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1997, THE YEAR ENDED DECEMBER 31, 1998
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED NINE MONTHS
DECEMBER 31, DECEMBER 31, ENDED SEPTEMBER 30,
------------ ------------ ------------------------
1997 1998 1998 1999
------------ ------------ ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $(1,014) $(3,517) $(1,792) $(13,903)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization and depreciation.......................... 81 107 59 336
Amortization of deferred share-based compensation...... -- -- -- 499
Changes in assets and liabilities: Increase in trade
accounts receivable, net............................. (48) (57) (43) (871)
Increase in prepaid expenses......................... (5) (7) (33) (125)
Increase in other receivables and other non-current
assets............................................. (74) (240) (293) (2,768)
Increase in accounts payable--trade.................. 63 273 25 1,951
Increase in accrued and other liabilities............ 122 221 77 3,029
Increase in unearned revenues........................ -- -- -- 628
------- ------- ------- --------
Net cash used in operating activities.............. (875) (3,220) (2,000) (11,224)
------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.................... (261) (510) (367) (1,545)
Purchases of licenses and permits...................... -- (223) -- --
------- ------- ------- --------
Net cash used in investing activities.............. (261) (733) (367) (1,545)
------- ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings.................... -- -- -- 3,875
Repayments of short-term borrowings.................... -- -- -- (3,875)
Shareholder loans to subsidiaries...................... 1,175 -- -- --
Capital contribution................................... 50 1,808 1,808 84
Irrevocable capital contribution....................... -- 2,302 900 898
Net proceeds from issuance of Class A convertible
preferred shares..................................... -- -- -- 35,837
------- ------- ------- --------
Net cash provided by financing activities.......... 1,225 4,110 2,708 36,819
------- ------- ------- --------
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS..... -- -- -- 97
------- ------- ------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS................ 89 157 341 24,147
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD......... -- 89 89 246
------- ------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............... $ 89 $ 246 $ 430 $ 24,393
======= ======= ======= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.......................................... $ 21
========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Capitalization of shareholder loans to subsidiaries.... $ 1,142
=======
Capitalization of irrevocable capital contributions.... $ 3,200
========
Motor vehicle acquired through an installment loan..... 29
========
Advertising time acquired from TV Azteca, S.A. de C.V.
through the issuance of 355,478 Class A
convertible preferred shares......................... 2,489
========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
1. BACKGROUND AND EVOLUTION
El Sitio, Inc., a British Virgin Islands holding company (the "Company"), is
an Internet network providing country-specific and regional content, for
Spanish- and Portuguese-speaking audiences in Latin America and the United
States. The Company recently began to offer connectivity services in Argentina
and Brazil and expects to offer similar services in Colombia before the end of
1999. The Company intends to provide e-commerce services for Spanish- and
Portuguese- speaking audiences in Latin America and the United States.
The Company was formed in July 1997 under the name Blasin International
Corporation. In October 1997 and July 1998, the Company acquired ownership of
interests in subsidiaries located in Uruguay and Argentina, respectively, which
were under common ownership. These acquired entities had been established in
Argentina and Uruguay on December 30, 1996 and February 24, 1997, respectively,
under the names of Cibrian Campoy Creativos S.A. ("El Sitio Argentina") and
Aalefranger S.A., an inactive entity ("El Sitio Uruguay"). During 1998,
operating subsidiaries have been established in Mexico ("El Sitio Mexico"), the
United States ("El Sitio USA") and Brazil ("El Sitio Brazil"). At September 30,
1999, the Company's operating subsidiaries were as follows:
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY OPERATING SUBSIDIARIES PERCENTAGE
- ------- --------------------------------------------- -----------
<S> <C> <C>
Argentina............... El Sitio de Argentina, S.A. 100%
Uruguay................. El Sitio Uruguay 100%
United States........... El Sitio U.S.A., Inc. 100%
Brazil.................. O Site Entretenimentos Ltda. 100%
Mexico.................. El Sitio Entretenimientos, S.A. de C.V. 100%
</TABLE>
The Company's successful completion of its development program and,
ultimately, the attainment of profitable operations is dependent on future
events, including maintaining adequate financing to fulfill its development
activities and achieving a level of income adequate to support the Company's
cost structure. With the proceeds of the private placement in July 1999 and from
anticipated future offerings, the Company will fund its sales and marketing, and
branding and advertising activities, expand its sales force, improve its network
infrastructure, develop new services and products, make strategic investments or
acquisitions and fund other corporate purposes.
2. MERGERS AND ACQUISITIONS
In October 1997, the Company acquired 75% of the common shares of El Sitio
Uruguay, an inactive entity, for $1.7 in cash. This acquisition was accounted
for under the purchase method of accounting.
In July 1998, the Company acquired 85% of the Class A shares of El Sitio
Argentina for $50 and 100% of the Class B shares of El Sitio Argentina in
exchange for the issuance of 3,432,094 common shares of the Company. This
acquisition, as is generally the case for transactions among companies under
common control, has been accounted for in a manner similar to the pooling of
interests method of accounting, whereby all assets and liabilities have been
recorded at their historical carrying amounts.
F-7
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
2. MERGERS AND ACQUISITIONS (CONTINUED)
During the nine months ended September 30, 1999, the Company acquired the
remaining minority interest in El Sitio Argentina and El Sitio Uruguay. These
acquisitions were accounted for under the purchase method of accounting.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION--The financial statements are presented on a
consolidated basis and include the accounts of the Company and its subsidiaries.
All significant intercompany transactions and balances have been eliminated.
INTERIM FINANCIAL INFORMATION--The unaudited consolidated statements for the
nine months ended September 30, 1998 have been prepared on the same basis as the
audited consolidated financial statements. In the opinion of management, such
unaudited consolidated financial statements include all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the results
for such period. The results of operations for the nine month periods ended
September 30, 1998 and 1999 are not necessarily indicative of the results of
operations to be expected for the full fiscal year or for any future period.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents are highly liquid
investments, including short-term investments and time deposits with maturities
of three months or less at the time of purchase. Cash equivalents and short-term
investments are stated at cost, which approximates market value.
REVENUE RECOGNITION--The Company's revenues are derived principally from the
sale of advertisements. The Company sells advertising primarily at a fixed price
per month. Revenues on these contracts are recognized ratably over the period of
time in which the advertisement is displayed. The Company also sells advertising
on a cost-per-thousand impressions, or "CPM" basis under which such advertisers
and advertising agencies receive a guaranteed number of "impressions,"or number
of times that an advertisement appears in pages viewed by users of the Company's
online properties, for a fixed fee. The Company's contracts with advertisers and
advertising agencies for these types of contracts cover periods ranging from one
month to one year. Advertising revenues are recognized ratably based on the
number of impressions displayed, provided that the Company has no obligations
remaining at the end of a period and collection of the resulting receivable is
probable. Company obligations typically include guarantees of minimum number of
impressions. To the extent that minimum guaranteed impressions are not met, the
Company defers recognition of the corresponding revenues until the remaining
guaranteed impression levels are achieved. Payments received from advertisers
prior to displaying their advertisements on the Company's network are recorded
as deferred revenues. Revenues from exclusive sponsorship arrangements are
recognized ratably. Additional revenue is generated from Website design and Web
hosting. Website design revenues are recognized once the related activities are
F-8
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
performed and the customer's website is complete and operational. Web hosting
revenues are recognized ratably over the term of the contracts.
For the period ended December 31, 1997 and the year ended December 31, 1998,
the Company had five customers which each exceeded 10% of total revenue and
collectively represented 89% of revenues, and four customers which each exceeded
10% of total revenue and collectively represented 72% of revenues, respectively.
Three of the customers are common in both years. For the nine months ended
September 30, 1999, the Company had one customer which exceeded 10% of total
revenue and represented 13% of revenues.
The Company in the ordinary course of business enters into reciprocal
services arrangements whereby the Company provides advertising service to third
parties in exchange for telecommunications services and advertising services in
other media. Revenues and expenses from these agreements are recorded at the
fair value of services provided or received, whichever is more determinable in
the circumstances. The fair value represents market prices negotiated on an
arms' length basis. Revenue from reciprocal services arrangements is recognized
as income when advertisements are delivered on the Company's Websites. Expense
from reciprocal services arrangements is recognized when telecommunication
services are received or the Company's advertisements are run in other media
which are typically in the same period when the reciprocal service revenue is
recognized. Related expenses which include telecommunication charges are
classified as product, content and technology and advertising charges are
classified as marketing and sales in the accompanying statements of operations.
During the period ended December 31, 1997 and the year ended December 31, 1998,
revenues attributable to reciprocal services totaled approximately $38 and $180,
respectively. For the nine months ended September 30, 1999, revenues
attributable to reciprocal services totaled approximately $554. No gain or loss
was recognized on these reciprocal services arrangements for the period ended
December 31, 1997, the year ended December 31, 1998 and for the nine months
ended September 30, 1999.
PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost and
depreciated using the straight-line method over the following estimated useful
lives:
<TABLE>
<S> <C>
Computers, software and other equipment................. 3 years
Furniture, fixtures and other fixed assets.............. 5 - 10 years
Vehicles................................................ 5 years
Leasehold improvements.................................. 5 years (lease term)
</TABLE>
DEFERRED OFFERING COSTS--As of September 30, 1999, the Company had incurred
approximately $94 of transaction expenses relating to the initial public
offering which were included in prepaid expenses. Upon the successful closing of
the initial public offering, these costs will be netted against the proceeds of
the offering as part of additional paid-in-capital.
LICENSES AND PERMITS--Licenses and permits are being amortized on a
straight-line basis over periods not exceeding two years.
ADVERTISING EXPENSES--The Company expenses advertising costs as incurred.
Advertising expense was $17, $180 and $5,800 for the period ended December 31,
1997, the year ended December 31, 1998 and the nine months ended September 30,
1999, respectively.
F-9
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
SHARE SPLIT--On October 28, 1999, the Company's Board of Directors approved
a 2-for-1 share split. Retroactive restatement has been made to all share
amounts to reflect this share split.
NET LOSS PER COMMON SHARE--Basic net loss per share is computed based on the
average number of common shares outstanding and diluted net loss per share is
computed based on the average number of common shares outstanding and, when
dilutive, potential common shares from share options and warrants to purchase
common shares using the treasury stock method and from convertible securities
using the if-converted basis.
FOREIGN CURRENCY TRANSLATION--The Company's subsidiaries generally use the
U.S. dollar as the functional currency because their primary function, the sale
of advertising, is priced and billed in U.S. dollars. Accordingly, the financial
statements of the subsidiaries have been remeasured (or translated into U.S.
Dollars). The effects of foreign currency transactions and of remeasuring the
financial position and results of operations into U.S. dollars are included as
net gain or loss on foreign exchange, except for the Brazil subsidiary which
uses the local currency as its functional currency and the effects of the
translation is included in shareholders' equity.
SHARE-BASED COMPENSATION--SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, encourages, but does not require, companies to record compensation
cost for employees under share-based compensation plans at fair value. The
Company has chosen to continue to account for share-based compensation to
employees 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 share
options issued to employees are measured as the excess, if any, of the fair
value of the Company's common shares at the date of grant over the amount an
employee must pay for the common shares.
IRREVOCABLE CAPITAL CONTRIBUTIONS--Irrevocable capital contributions
represented capital contributions received from existing shareholders from time
to time to fund operations and carried no obligation on the part of the Company
to issue common shares or repay such contributions. On January 29, 1999, the
Company's Board of Directors approved the issuance of 6,400,000 common shares to
capitalize the $3,200 in irrevocable capital contributions.
LONG-LIVED ASSETS--Long-lived assets are reviewed on an ongoing basis for
impairment based on comparison of carrying value against estimated undiscounted
future cash flows. If an impairment is identified, the assets carrying amount is
adjusted to fair value. No such adjustments were recorded for the years ended
December 31, 1997 and 1998 and during the nine months ended September 30, 1998
and 1999.
NEW ACCOUNTING PRONOUNCEMENTS--In June 1998, the FASB issued SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. Among other
provisions, SFAS No. 133 establishes
F-10
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 June 15, 2000. Management is currently
evaluating the effect that adoption of SFAS No. 133 will have on the Company's
financial statements.
4. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable, by operating subsidiaries, are summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1997 1998 1999
--------- -------- -------------
<S> <C> <C> <C>
El Sitio Mexico.................................... $ -- $ -- $535
El Sitio Argentina................................. 48 96 258
El Sitio Uruguay................................... -- 29 103
El Sitio USA....................................... -- -- 78
El Sitio Brazil.................................... -- -- 2
--------- ---- ----
Total.............................................. 48 125 976
Less: allowance for doubtful accounts.............. -- (20) --
--------- ---- ----
Trade accounts receivable, net..................... $ 48 $105 $976
========= ==== ====
</TABLE>
The Company's subsidiaries provide trade credit to their customers in the
normal course of business. Prior to extending credit, a customer's financial
history is analyzed. The collection of a substantial portion of the trade
receivables is susceptible to changes in Latin American economic and political
conditions.
The Company provides its allowance for doubtful accounts on a specific
identification basis. The activity for the allowance for doubtful accounts is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1997 1998 1999
--------- --------- -------------
<S> <C> <C> <C>
Beginning balances................................. $ -- $ -- $20
Provision for doubtful accounts.................... -- 20 8
Write-offs, net of recoveries...................... -- -- (28)
--------- --------- ---
Ending balances.................................... $ -- $ 20 $--
========= ========= ===
</TABLE>
F-11
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
5. OTHER RECEIVABLES
Other receivables consist primarily of refunds or credits pending from local
governments for non-income taxes and other miscellaneous amounts due to the
Company and its operating subsidiaries and are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1997 1998 1999
--------- -------- -------------
<S> <C> <C> <C>
El Sitio Argentina................................. $ 65 $182 $ 678
El Sitio Uruguay................................... 7 48 113
El Sitio Mexico.................................... -- 76 281
All others......................................... -- 1 6
--------- ---- ------
Total.............................................. $ 72 $307 $1,078
========= ==== ======
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
<S> <C> <C> <C>
Computers, software and other equipment............ $153 $523 $1,706
Furniture and fixtures............................. 71 209 269
Motor vehicles..................................... -- -- 80
Leasehold improvements............................. -- -- 251
---- ---- ------
Total............................................ 224 732 2,306
Less: accumulated depreciation..................... (44) (151) (428)
---- ---- ------
Property and equipment, net........................ $180 $581 $1,878
==== ==== ======
</TABLE>
Accumulated depreciation is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1997 1998 1999
--------- -------- -------------
<S> <C> <C> <C>
Beginning balance.................................. -- $ 44 $151
Depreciation expense............................... $ 44 107 277
--------- ---- ----
Ending balance..................................... $ 44 $151 $428
========= ==== ====
</TABLE>
7. INCOME TAXES
The Company has not provided for income taxes because of its operating loss
position. Statutory tax rates range from 20% to 35% depending on the particular
country. Deferred tax assets associated with the net operating loss
carryforwards amounted to $266, $1,412, and $5,536 as of December 31, 1997, 1998
and September 30, 1999, respectively. No deferred tax assets have been
recognized for changes in exchange rates for foreign subsidiaries whose
functional currency is the U.S. dollar. Because there is no assurance that the
Company will generate sufficient tax earnings to utilize its available tax
assets derived from loss carryforwards, a corresponding valuation allowance has
been established to offset deferred tax assets.
F-12
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
8. INSTALLMENT LOAN
As of September 30, 1999, the Company had an installment loan, payable in
monthly installments of approximately six hundred dollars plus interest at a
rate of 2.90% due on September 29, 2003. The installment note is collateralized
by a motor vehicle.
9. SEGMENT INFORMATION
The Company's segment information is based on the geographic locations in
which its subsidiaries operate. Each operating subsidiary has a country manager
who reports to senior management of the Company. Each country manager is
currently responsible for managing the assets in his or her respective country,
generating revenues, and supervising results of operations. The Company's
segment information is as follows:
<TABLE>
<CAPTION>
EL SITIO EL SITIO EL SITIO EL SITIO EL SITIO EL SITIO, INC. CONSOLIDATED
PERIOD OR YEAR ARGENTINA URUGUAY MEXICO BRAZIL USA (PARENT COMPANY) ELIMINATION TOTAL
- -------------- --------- -------- -------- -------- -------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1997
- ---------------------
Total assets......... $ 344 $ 52 $ -- $ -- $ -- $ -- $ -- $ 396
Net revenues......... $ 267 $ -- $ -- $ -- $ -- $ -- $ -- $ 267
Operating loss....... $ (897) $ (7) $ -- $ -- $ -- $ -- $ -- $ (904)
DECEMBER 31, 1998
- ---------------------
Total assets......... $ 698 $ 121 $ 243 $ 317 $ 31 $ 80 $ (9) $ 1,481
Net revenues......... $ 657 $ 106 $ 17 $ -- $ -- $ -- $ -- $ 780
Operating loss....... $(2,322) $(118) $ (569) $ (51) $ (268) $ (169) $ -- $ (3,497)
SEPTEMBER 30, 1999
- ---------------------
Total assets......... $ 2,906 $ 345 $ 4,956 $13,109 $ 2,394 $11,900 $(2,490) $ 33,120
Net revenues......... $ 715 $ 455 $ 339 $ 12 $ 3 $ -- $ -- $ 1,524
Operating loss....... $(5,574) $(364) $(1,830) $(2,504) $(2,246) $ (867) $ -- $(13,385)
</TABLE>
The Company itself is a holding company which holds primarily cash and
incurs certain general and administrative expenses. The elimination entries
represent the elimination of intercompany balances in the normal course of
business.
10. RELATED PARTY TRANSACTIONS
The Company, in the normal course of business, provides advertising services
to related parties. During 1997 and 1998, such services totaled approximately
$38 and $165, respectively, and during the nine months period ended
September 30, 1999, such services totaled approximately $191.
11. SHARE OPTION PLAN
In May 1999, the Company adopted the 1999 Share Option Plan (the "Plan"),
pursuant to which 1,240,000 common shares were reserved for issuance upon
exercise of options. An additional 2,000,000 shares were reserved on
October 28, 1999. Options granted under the Plan shall be either incentive share
options or nonstatutory share options and will have an exercise term of no
longer than ten years from the grant date. The Plan is designed as a means to
retain and motivate key employees and directors. The Company's Compensation
Committee, or in the absence thereof, its Board of Directors, administers and
interprets the Plan and is authorized to grant options thereunder to all
eligible
F-13
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
11. SHARE OPTION PLAN (CONTINUED)
employees of the Company, including directors (whether or not they are
employees) and executive officers of the Company or affiliated companies. The
Plan will terminate on December 1, 2008, unless sooner terminated by the Board
of Directors.
In October 1998, the Company granted nonstatutory share options for 322,400
shares at an exercise price of $1.613, the fair value of the shares at the time
of grant. These options vest 30% after the first year, 30% after the second
year, and 40% after the third year.
In August and September 1999, the Company granted nonstatutory share options
for 292,400 and 623,600 shares, respectively, at an exercise price of $3.501,
the fair value of the shares at the time of grant. These options vest 30% after
the first year, 30% after the second year, and 40% after the third year.
The following table summarizes information concerning outstanding options at
December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTION EXERCISABLE
------------------------------ ----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- --------------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$1.613 322,400 9.75 years $1.613 -- --
</TABLE>
The following table summarizes information concerning outstanding options at
September 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTION EXERCISABLE
------------------------------ ----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- --------------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$1.613 322,400 9 years $1.613 -- --
3.501 916,000 9.89 years 3.501 -- --
</TABLE>
No options have been forfeited as of December 31, 1998 and September 30,
1999.
The Company applies APB No. 25 and related interpretations in accounting for
its share options plan to employees as described in Note 3. In connection with
the granting of share options in August and September 1999, the Company recorded
total deferred share-based compensation of approximately $7,785. Total deferred
share-based compensation is being amortized for financial reporting purposes
over the respective vesting periods of the share options. The amount recognized
as expense during the nine months ended September 30, 1999 amounted to
approximately $499.
For purposes of pro forma disclosures prescribed by SFAS No. 123, the fair
value of the options granted in 1999 was estimated using the minimum value
method for nonpublic entities with the following assumptions: no dividend
yields; no volatility; risk-free interest rate of 7.0%; and an expected term of
3 years. If compensation cost had been determined based on the fair value at the
date of grant consistent with the requirement of SFAS No. 123, the Company's net
loss and comprehensive loss would have increased by approximately $8 and $63
during the year ended December 31, 1998 and nine months ended September 30,
1999, respectively.
F-14
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
12. CLASS A CONVERTIBLE PREFERRED SHARES
On July 7, 1999, the Company completed a private placement of 5,477,088
Class A Convertible Preferred Shares (the "Class A Convertible Preferred
Shares") at $7.00186 per share for $35,837 (net of offering costs of $2,513)
under a stock purchase agreement. In addition, the Company has entered into an
arrangement whereby it agreed to issue 856,916 Class A Convertible Preferred
Shares in return for $6,000 in advertising time credit on media networks owned
and controlled by Washburn Enterprises, Inc., an affiliate of our shareholders.
Such advertising must be utilized during an eighteen-month period following the
closing date of the private placement. The Company will be required to issue and
deliver the number of Class A Convertible Preferred Shares equal to the
advertising time incurred on a quarterly basis. The Company currently
anticipates that it will recognize advertising expense based on the fair value
of such shares at the time of issuance. The Company has also agreed to purchase
at least $4,000 of advertising time on the media networks owned by affiliates of
Washburn Enterprises, Inc. in return for Washburn's commitment to purchase at
least $2,000 of advertising time on the Websites maintained by the Company and
its subsidiaries. As agreed in connection with the private placement, the
Company is required to pay annual monitoring fees to certain investor groups and
annual directors' fees to certain directors amounting to $600 per annum in the
aggregate. In addition, the Company issued to the placement agent a warrant
exercisable for the purchase of approximately 239,936 common shares for $1.
The following are principal terms of the Class A Convertible Preferred
Shares: (a) cumulative preferential dividends at the annual rate of 8% on the
liquidation preference per share, payable quarterly in cash or at the option of
the Board of Directors, in additional Class A Convertible Preferred Shares;
(b) mandatory redemption by the Company in 2004 (five years after issuance) at a
price equal to the liquidation preference per share plus accrued and unpaid
cumulative dividends; (c) convertible into two common shares of the Company at
any time at the option of the holder or automatically upon the closing of this
offering. For purposes of determining the number of common shares issuable upon
conversion, each Class A Convertible Preferred Share will be valued at
liquidation preference, which will be divided by the conversion price in effect
on the date of conversion; (d) the right of certain shareholders holding a
certain minimum number of outstanding Class A Convertible Preferred Shares to
appoint a maximum of three directors to the Company's Board of Directors;
(e) holders of Class A Convertible Preferred Shares have the right to vote,
together with the holders of outstanding common shares, except as otherwise
required by British Virgin Islands law, on all matters on which holders of
common shares are entitled to vote. Each holder of Class A Convertible Preferred
Shares will have the right to cast one vote for each whole share which would be
issued to such holder upon conversion of such holder's Class A Convertible
Preferred Shares to common shares, assuming that such conversion were to occur
on the date immediately prior to the record date for the determination of
shareholders entitled to vote; and (f) upon any liquidation, dissolution or
winding up of the Company, the holders of Class A Convertible Preferred Shares
are entitled to be paid an amount equal to the liquidation preference for each
share out of the assets of the Company before any distribution is made to any
common shares or other junior shares.
PREFERRED STOCK/BARTER ARRANGEMENT--On August 31, 1999, the Company entered
into an agreement relating to a three-year investment and reciprocal advertising
arrangement with TV Azteca, S.A. de C.V. ("TV Azteca"), Mexico's second largest
television network. Under this agreement, the Company will receive, over a
three-year period beginning in July 1999, $3,500 of advertising time on TV
Azteca's networks (which amounts shall be based on rates actually charged to
similarly situated clients of TV
F-15
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
12. CLASS A CONVERTIBLE PREFERRED SHARES (CONTINUED)
Azteca at the time), in return for 355,478 shares of Class A Convertible
Preferred Shares issued on August 31, 1999 at the same price per share as in the
July 1999 private placement. At September 30, 1999, approximately $2,500 of
prepaid advertising was included in other assets in the accompanying
consolidated balance sheet. In addition, as of September 30, 1999, TV Azteca has
not provided any advertising time on its network to the Company relating to this
agreement.
13. COMMITMENTS AND CONTINGENCIES
The Company has entered into a strategic alliance, for a term of two years
with renewal options, with a renowned baseball player whereby such baseball
player granted the Company the exclusive right to utilize such player's name,
likeness or any derivative thereof via the Internet within the Company's web
sites for the development of joint marketing campaigns, promotions, research and
e-commerce operations. The Company will pay this baseball player $1,000 cash in
four installments of $250. As of September 30, 1999, $750 remained to be paid in
future installments. In addition, the Company has committed to grant such
baseball player 25,000 common shares of the Company to be distributed on or
about the date of the initial public offering and also on or before January 31,
2001, such baseball player will be entitled to purchase an additional 25,000
common shares at the closing price on January 29, 2001 or the prior day if that
one is a holiday, less 25%. Approximately $1,375 is included in Other Assets and
$1,125 is included in Accrued and other liabilities in the accompanying
consolidated balance sheet as of September 30, 1999 to account for all of the
provisions of this alliance. The Other Asset will be amortized on a
straight-line basis over a two-year period. The initial amount of the discount
will be remeasured, on a quarterly basis, based on the fair value of the common
shares at the time that such shares are issued.
The Company has entered into employment agreements with various members of
senior management for periods extending for three years. Minimum annual
compensation approximates $1,024 in the aggregate.
The Company leases telecommunication links with rental commitments of
approximately $215 through July 2000.
The Company leases several facilities under non-cancellable leases for
varying periods through May 2004. Some of the Company's directors have from time
to time guaranteed short-term indebtedness or other liabilities of the Company.
Mr. Vivo and Mr. Verdaguer personally guaranteed payment of the monthly rent for
our current headquarters in Buenos Aires ($84,000) per year, as well as rental
of our new headquarters in Buenos Aires ($228,000 per year).
Rent expense for these operating leases was approximately $20, $144 and $272
for the years ended December 31, 1997 and 1998 and the nine months ended
September 30, 1999, respectively.
F-16
<PAGE>
EL SITIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum payments under the various operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -----------------------
<S> <C>
1999........................................................ $ 533
2000........................................................ 455
2001........................................................ 418
2002........................................................ 418
2003 and thereafter......................................... 611
------
Total minimum lease payments................................ $2,435
======
</TABLE>
14. SUBSEQUENT EVENTS
FRAMEWORK AGREEMENT WITH IMPSAT CORPORATION--On August 4, 1999, the Company
entered into a framework agreement with IMPSAT Corporation ("IMPSAT") for the
purchase of IMPSAT's retail dial-up access customers in Argentina, Brazil and
Colombia for $21,500 (subject to adjustment based on the number of subscribers
actually acquired by the Company) and the related sale of 3,070,615 Class A
Convertible Preferred Shares of the Company for $21,500. In connection with
these transactions, El Sitio will also enter into telecommunications services
agreements with IMPSAT or its subsidiaries under which it will provide El Sitio
with telecommunication infrastructure to access the Internet.
The transactions contemplated by the framework agreement are subject to the
negotiation of definitive documentation and various other conditions, including
governmental approvals, and accordingly, there can be no assurance that these
transactions will be completed. Subject to the satisfaction of these conditions,
the transactions are expected to be consummated by the end of 1999. Effective
October 7, 1999, the transaction for the Brazil retail dial-up access business
was closed for $12,300. Effective November 5, 1997, the transaction for the
Argentina retail dial-up access business was closed for $6,200.
SHARE OPTIONS--On November 1, 1999, the Company granted additional share
options for 1,030,200 common shares to employees at an exercise price of $9.00
per share. In connection with the granting of these share options, the Company
will record total deferred share-based compensation of approximately $3,091 in
the fourth quarter of 1999.
PRIVATE PLACEMENT--In mid-November 1999, the Company completed a private
placement of 1,111,111 Class B convertible preferred shares for an aggregate
purchase price of $10.0 million in cash, or $9.00 per Class B convertible
preferred share. Purchasers of the Class B convertible preferred shares
consisted of Intel Atlantic, Inc., a subsidiary of Intel Corporation, and
Latinvest Asset Management do Brasil, Ltda., an affiliate of Globalvest
Management Company, L.P. The Class B convertible preferred shares have an annual
dividend rate of 8%. Each Class B convertible preferred share will automatically
convert, on the date six months after the closing date of this offering, into
one common share. The discount between the initial public offering price per
common share and the $9.00 price per Class B convertible preferred share will be
amortized as a deemed dividend during the same six-month period.
F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of IMPSAT Corporation:
We have audited the accompanying statement of historical net assets to be
sold in connection with IMPSAT Corporation's retail dial-up access business in
Argentina, Brazil and Colombia as of September 30, 1999. This statement is the
responsibility of management. Our responsibility is to express an opinion on
this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit 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 audit provides a
reasonable basis for our opinion.
The accompanying statement of historical net assets to be sold by IMPSAT
Corporation was prepared for inclusion in the Form F-1 of El Sitio, Inc. on the
basis of presentation as described in Note 2, and is not intended to be a
complete presentation of the financial position of IMPSAT Corporation.
In our opinion, such statement presents fairly, in all materials respects,
the historical net assets to be sold in connection with IMPSAT Corporation's
retail dial-up access business in Argentina, Brazil and Colombia at
September 30, 1999 on the basis of presentation as described in Note 2, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
October 28, 1999 (November 5, 1999
as to the second sentence in Note 3)
F-18
<PAGE>
IMPSAT CORPORATION
(COMPRISING IMPSAT CORPORATION'S RETAIL DIAL-UP ACCESS BUSINESSES IN ARGENTINA,
BRAZIL AND COLOMBIA)
STATEMENT OF HISTORICAL NET ASSETS TO BE SOLD BY IMPSAT CORPORATION
AS OF SEPTEMBER 30, 1999 (IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
ASSETS
PROPERTY AND EQUIPMENT, NET................................. $116
LESS: ACCRUED SALARIES--BRAZIL.............................. (56)
----
TOTAL HISTORICAL NET ASSETS TO BE SOLD BY IMPSAT
CORPORATION............................................... $ 60
====
</TABLE>
See notes to statement of historical net assets to be sold by Impsat
Corporation.
F-19
<PAGE>
IMPSAT CORPORATION
NOTES TO THE STATEMENT OF HISTORICAL NET ASSETS TO BE SOLD BY
IMPSAT CORPORATION
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
1. BACKGROUND
On August 4, 1999, IMPSAT Corporation ("IMPSAT") entered into a framework
agreement with El Sitio, Inc. ("El Sitio") for the sale of IMPSAT's retail
dial-up access customers in Argentina, Brazil and Colombia for approximately
$21,500 and the related purchase by IMPSAT of 3,070,615 of El Sitio's Class A
convertible preferred shares for $21,500. In connection with these transactions,
El Sitio will also enter into telecommunications services agreements with
subsidiaries of IMPSAT under which they will provide El Sitio with
telecommunications infrastructure. The transactions contemplated by the
framework agreement are subject to the negotiation of definitive documentation
and various other conditions, including governmental approvals.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION--The retail dial-up access business (the "Business")
is not a "stand-alone" division or subsidiary of IMPSAT and was not generally
accounted for separately. As a result, the distinct and separate accounts
necessary to present an individual balance sheet, income statement and cash flow
statement of the Business have not been maintained. The financial information
presented is limited to the statement of assets to be sold by IMPSAT and it is
not intended to present the financial position of the Business.
The statement of historical net assets to be sold include property and
equipment and certain accrued liabilities being acquired in accordance with the
contractual terms. Property and equipment consist of computer and office
equipment in Brazil and is recorded at cost. Depreciation is calculated using
the straight line method over the useful life which range from five to ten
years. Accumulated depreciation amounted to $130 at September 30, 1999.
3. SUBSEQUENT EVENTS
Effective October 7, 1999, the Brazil sale was completed at a sale price of
$12,300. Effective November 5, 1999, the Argentina sale was completed at a sale
price of $6,200. The Colombia sale, which is subject to governmental approvals,
is expected to be completed before the end of 1999.
F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of IMPSAT S.A.:
We have audited the accompanying statements of net revenues and direct costs
and expenses of IMPSAT S.A.'s retail dial-up access business in Argentina (the
"Business"), for the years ended December 31, 1997 and 1998 and the nine months
ended September 30, 1999. These statements of net revenues and direct costs and
expenses are the responsibility of IMPSAT S.A.'s management. Our responsibility
is to express an opinion on these statements of net revenues and direct costs
and expenses based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
statements of net revenues and direct costs and expenses are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements of net revenues and direct costs
and expenses. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statements of net revenues and direct costs and expenses presentation. We
believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 2 to the statements of net revenues and direct costs
and expenses, the Business comprises IMPSAT S.A.'s retail dial-up access
business in Argentina based on management's estimates. As a result, the net
revenues and direct costs and expenses of the Business may not be indicative of
conditions that would have existed or results that would have occurred had the
Business operated as an unaffiliated entity.
In our opinion, the statements of net revenues and direct costs and expenses
present fairly, in all material respects, the net revenues and direct costs and
expenses of the Business for the years ended December 31, 1997 and 1998 and the
nine months ended September 30, 1999 in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE
Buenos Aires, Argentina
November 5, 1999
F-21
<PAGE>
IMPSAT S.A.
(COMPRISING IMPSAT S.A.'S RETAIL DIAL-UP ACCESS BUSINESS IN ARGENTINA)
STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------- ----------------------
1997 1998 1998 1999
-------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUES............................................. $2,634 $2,982 $2,298 $2,880
------ ------ ------ ------
DIRECT COSTS AND EXPENSES:
Product, content and technology........................ 1,573 1,851 1,421 1,802
Marketing and sales.................................... 477 479 346 332
------ ------ ------ ------
Total direct costs and expenses.......................... 2,050 2,330 1,767 2,134
------ ------ ------ ------
EXCESS OF NET REVENUES OVER DIRECT COSTS AND EXPENSES.... $ 584 $ 652 $ 531 $ 746
====== ====== ====== ======
</TABLE>
See notes to statements of net revenues and direct costs and expenses.
F-22
<PAGE>
IMPSAT S.A.
(COMPRISING IMPSAT S.A.'S RETAIL DIAL-UP ACCESS BUSINESS IN ARGENTINA)
NOTES TO STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES
(IN THOUSANDS OF U.S. DOLLARS)
1. OPERATIONS
On August 4, 1999, El Sitio, Inc. ("El Sitio") entered into a framework
agreement with IMPSAT Corporation ("IMPSAT") for the purchase of IMPSAT's retail
dial-up access customers in Argentina, Brazil and Colombia for approximately
$21,500 and the related purchase by IMPSAT of 3,070,615 of El Sitio's Class A
convertible preferred shares for $21,500. In connection with these transactions,
El Sitio will also enter into a telecommunications services agreement with
IMPSAT under which it will provide El Sitio with telecommunications
infrastructure.
Effective November 5, 1999, the transaction for the Argentina retail dial-up
business was closed for $6,200.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION--The retail dial-up access business in Argentina (the
"Business") was part of the total Internet services provided by IMPSAT S.A.,
which also included dial-up access to corporate customers. The Business was not
a "stand-alone" division or subsidiary of IMPSAT S.A. and was not generally
accounted for separately. As a result, the distinct and separate accounts
necessary to present an individual balance sheet, income statement and cash flow
statement of the Business have not been maintained. The Business did not
maintain its own stand-alone treasury, legal, financial, information systems and
other similar corporate support functions. The financial information presented
is limited to the statement of net revenues and direct costs and expenses.
REVENUES--The retail dial-up access business represented 60% of IMPSAT's
S.A.'s total revenues associated with Internet services for the years ended
December 31, 1997 and 1998 and for the nine months ended September 30, 1998 and
64% for the nine months ended September 30, 1999. These percentages were
calculated based on information derived from the general ledger accounts as
follows: actual revenues for retail dial-up and corporate dial-up accounts were
specifically identified and then the revenues for corporate accounts were
subtracted from total actual revenues, resulting in net revenues associated with
retail dial-up customers.
DIRECT COSTS AND EXPENSES--IMPSAT S.A.'s management allocated direct costs
and expenses (other than credit card fees and bad debt expenses) to the retail
dial-up access business based on the proportionate share of retail dial-up
revenues to total Internet revenues.
Credit card fee and bad debt expenses associated with the retail dial-up
access business were specifically identified based upon billing and customer
information provided by IMPSAT S.A.'s management information system.
These allocations were based on, among other things, subscriber statistics
and the shared use by the retail dial-up and corporate dial-up portions of
IMPSAT S.A.'s assets and resources such as the following: call center, technical
and sales and marketing personnel; equipment such as servers, routers and
modems; and supplies. These allocations are believed to be reasonable under the
circumstances. However, the Business may not be indicative of conditions that
would have existed or results that would have occurred had the Business operated
as an unaffiliated entity.
The same allocation methodologies were used for each of the financial years
and periods presented in these statements.
F-23
<PAGE>
IMPSAT S.A.
(COMPRISING IMPSAT S.A.'S RETAIL DIAL-UP ACCESS BUSINESS IN ARGENTINA)
NOTES TO STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A statement of cash flow is not being presented as the Business does not
maintain its own cash accounts and components, such as the changes in working
capital, are not available to prepare the cash flow information.
INTERIM FINANCIAL INFORMATION--The unaudited statement of net revenues and
direct costs and expenses for the nine months ended September 30, 1998 has been
prepared on the same basis as the audited annual statements of net revenues and
direct costs and expenses. In the opinion of management, such unaudited
statement of net revenues and direct costs and expenses includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the results for such period. The results of operations for the nine months ended
September 30, 1998 are not necessarily indicative of the results of operations
to be expected for the full fiscal year or for any future period.
REVENUE RECOGNITION--Revenues represent month-to-month subscriptions for
pre-paid and per-minute usage of access levels. Subscription revenues are
recognized over the period that services are provided.
USE OF ESTIMATES--The preparation of the statements of net revenues and
direct costs and expenses in conformity with generally accepted accounting
principles in the United States requires management to make certain estimates
and assumptions that effect the amounts of the reported amounts of net revenues
and direct costs and expenses during the reporting period. Actual results could
differ from those estimates.
3. PRODUCT, CONTENT AND TECHNOLOGY
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
DESCRIPTION 1997 1998 1998 1999
- ----------- ------------ ------------ -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Telecommunication links.................... $ 362 $ 674 $ 509 $ 954
Personnel costs............................ 869 645 490 539
Depreciation and amortization.............. 93 149 96 154
Installation costs......................... 32 186 185 37
Supplies and other costs................... 217 197 141 118
------ ------ ------ ------
$1,573 $1,851 $1,421 $1,802
====== ====== ====== ======
</TABLE>
F-24
<PAGE>
IMPSAT S.A.
(COMPRISING IMPSAT S.A.'S RETAIL DIAL-UP ACCESS BUSINESS IN ARGENTINA)
NOTES TO STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
4. MARKETING AND SALES
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
DESCRIPTION 1997 1998 1998 1999
- ----------- ------------ ------------ -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Advertising and promotion.................. $220 $323 $231 $203
Credit card fees........................... 57 106 77 73
Bad debt expense........................... 200 50 38 56
---- ---- ---- ----
$477 $479 $346 $332
==== ==== ==== ====
</TABLE>
F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of MANDIC INTERNET LTDA.:
We have audited the accompanying statements of net revenues and direct costs
and expenses of MANDIC INTERNET LTDA.'s (formerly known as MANDIC.COM LTDA.)
retail dial-up access business in Brazil (the "Business") for the years ended
December 31, 1997 and 1998 and the nine months ended September 30, 1999. These
statements of net revenues and direct costs and expenses are the responsibility
of MANDIC INTERNET LTDA.'s management. Our responsibility is to express an
opinion on these statements of net revenues and direct costs and expenses based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
statements of net revenues and direct costs and expenses are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements of net revenues and direct costs
and expenses. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statements of net revenues and direct costs and expenses presentation. We
believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 2 to the statements of net revenues and direct costs
and expenses, the Business comprises MANDIC INTERNET LTDA.'s retail dial-up
access business in Brazil. Direct costs and expenses included in the statements
of net revenues and direct costs and expenses have been allocated to the retail
dial-up access business based on the proportionate share of retail dial-up
revenues. As a result, the net revenues and direct costs and expenses of the
Business may not be indicative of conditions that would have existed or results
that would have occurred had the Business operated as an unaffiliated entity.
In our opinion, the statements of net revenues and direct costs and expenses
present fairly, in all material respects, the net revenues and direct costs and
expenses of the Business for the years ended December 31, 1997 and 1998 and the
nine months ended September 30, 1999 in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE TOUCHE TOHMATSU
Sao Paulo, Brazil
November 5, 1999
F-26
<PAGE>
MANDIC INTERNET LTDA. (FORMERLY KNOWN AS MANDIC.COM LTDA.)
(COMPRISING MANDIC.INTERNET LTDA.'S RETAIL DIAL-UP ACCESS BUSINESS IN BRAZIL)
STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------- ----------------------
1997 1998 1998 1999
-------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUES............................................ $7,033 $11,394 $8,031 $5,766
------ ------- ------ ------
DIRECT COSTS AND EXPENSES:
Cost of services...................................... 3,259 6,157 4,708 3,590
Marketing and sales................................... 1,781 1,423 910 1,029
Corporate, general and administrative................. 1,286 2,128 1,389 657
------ ------- ------ ------
Total direct costs and expenses..................... 6,326 9,708 7,007 5,276
------ ------- ------ ------
EXCESS OF NET REVENUES OVER DIRECT COSTS AND EXPENSES... $ 707 $ 1,686 $1,024 $ 490
====== ======= ====== ======
</TABLE>
See notes to statements of net revenues and direct costs and expenses.
F-27
<PAGE>
MANDIC INTERNET LTDA. (FORMERLY KNOWN AS MANDIC.COM LTDA.)
(COMPRISING MANDIC.INTERNET LTDA.'S RETAIL DIAL-UP ACCESS BUSINESS IN BRAZIL)
NOTES TO STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES
(IN THOUSANDS OF U.S. DOLLARS)
1. OPERATIONS
On August 4, 1999, El Sitio, Inc. ("El Sitio") entered into a framework
agreement with IMPSAT Corporation ("IMPSAT") for the purchase of IMPSAT's retail
dial-up access customers in Argentina, Brazil and Colombia for approximately
$21,500 and the related purchase by IMPSAT of 3,070,615 of El Sitio's Class A
convertible preferred shares for $21,500. In connection with these transactions,
El Sitio has also entered into a telecommunications services agreement with an
affiliate of IMPSAT under which it will provide El Sitio with telecommunications
infrastructure.
Effective October 6, 1999, the transaction for the Brazil retail dial-up
access business was closed for $12,300.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION--The retail dial-up access business in Brazil (the
"Business") is not a "stand-alone" division or subsidiary of MANDIC
INTERNET LTDA. and was not generally accounted for separately. As a result, the
distinct and separate accounts necessary to present an individual balance sheet,
income statement and cash flow statement of the Business have not been
maintained. The Business does not maintain its own stand-alone treasury, legal,
financial, information systems and other similar corporate support functions.
The financial information presented is limited to the statement of net revenues
and direct costs and expenses.
For purposes of preparing these statements, revenues of MANDIC INTERNET
LTDA's retail dial up access businesses were specifically identified and
obtained from the general ledger. Direct costs and expenses associated with
MANDIC INTERNET LTDA.'s dial-up access businesses have been allocated to the
Business as follows:
COST OF SERVICES:
- telecommunications services expenses reflect direct expenses paid for
telecommunication links to EMBRATEL, a telecommunications services
provider. These expenses will be equivalent to El Sitio's cost of
telecommunication links under El Sitio's new service agreement with a
subsidiary of IMPSAT for Brazil;
- salaries and wages were allocated to the retail dial-up access business
based on the number of managers and employees responsible for the retail
dial-up access business, as a percentage of the total number of managers
and employees employed in the entire (i.e., retail plus corporate) dial-up
access business of IMPSAT in Brazil; and
- expenses relating to the call center were specifically identified and
obtained from the general ledger.
MARKETING AND SALES:
- credit card fees were specifically identified and obtained from the
general ledger; and
- advertising expenses for the Business were based on management's
good-faith estimates.
F-28
<PAGE>
MANDIC INTERNET LTDA. (FORMERLY KNOWN AS MANDIC.COM LTDA.)
(COMPRISING MANDIC.INTERNET LTDA.'S RETAIL DIAL-UP ACCESS BUSINESS IN BRAZIL)
NOTES TO STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CORPORATE, GENERAL AND ADMINISTRATIVE:
- depreciation and amortization expense was computed based on the assets
specifically identified by management as being used in the retail dial-up
access business;
- outsourced services were specifically identified and obtained from the
general ledger; and
- rent, utilities and services were allocated based on the space utilized by
the retail dial-up access business, as a percentage of the total space
used by the entire (i.e., retail plus corporate) dial-up access business.
Of total retail dial-up access direct costs and expenses for Brazil,
approximately 47% were directly obtained from the general ledger for 1997, 68%
in 1998, 63% in the nine months ended September 30, 1998 and 60% in the nine
months ended September 30, 1999. MANDIC INTERNET LTDA.'s retail dial-up
operations in Brazil accounts for approximately 52,000 of the approximately
73,000 retail dial-up access customers which El Sitio is acquiring from IMPSAT.
However, the Business may not be indicative of conditions that would have
existed or results that would have occurred had the Business operated as an
unaffiliated entity.
The same allocation methodologies were used for each of the financial years
and periods presented in these statements.
A statement of cash flow is not being presented as the Business does not
maintain its own cash accounts and components, such as the changes in working
capital, are not available to prepare the cash flow information.
INTERIM FINANCIAL INFORMATION--The unaudited statement of net revenues and
direct costs and expenses for the nine months ended September 30, 1998 has been
prepared on the same basis as the audited annual statement of net revenues and
direct costs and expenses. In the opinion of management, such unaudited annual
statement of net revenues and direct costs and expenses includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the results for such period. The operating results for the nine months ended
September 30, 1998 are not necessarily indicative of the operating results to be
expected for the full fiscal year or for any future period.
REVENUE RECOGNITION--Revenues represent month-to-month subscriptions for
pre-paid and per-minute usage of access levels. Subscription revenues are
recognized over the period that services are provided.
USE OF ESTIMATES--The preparation of the statements of net revenues and
direct costs and expenses in conformity with generally accepted accounting
principles in the United States of America requires management to make certain
estimates and assumptions that effect the amounts of the reported amounts of net
revenues and direct costs and expenses during the reporting period. Actual
results could differ from those estimates.
F-29
<PAGE>
MANDIC INTERNET LTDA. (FORMERLY KNOWN AS MANDIC.COM LTDA.)
(COMPRISING MANDIC.INTERNET LTDA.'S RETAIL DIAL-UP ACCESS BUSINESS IN BRAZIL)
NOTES TO STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
3. COST OF SERVICES
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
DESCRIPTION 1997 1998 1998 1999
- ----------- ------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Telecommunications services................ $2,221 $4,122 $3,125 $2,070
Salaries and wages......................... 1,038 1,378 1,108 994
Call center................................ -- 657 475 526
------ ------ ------ ------
Total.................................. $3,259 $6,157 $4,708 $3,590
====== ====== ====== ======
</TABLE>
4. MARKETING AND SALES
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
DESCRIPTION 1997 1998 1998 1999
- ----------- ------------ ------------ -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Credit card fees........................... $ -- $ 439 $279 $ 283
Advertising................................ 1,781 984 631 746
------ ------ ---- ------
Total.................................. $1.781 $1,423 $910 $1,029
====== ====== ==== ======
</TABLE>
5. CORPORATE, GENERAL AND ADMINISTRATIVE
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
DESCRIPTION 1997 1998 1998 1999
- ----------- ------------ ------------ -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Depreciation and amortization.............. $ 42 $ 73 $ 50 $ 55
Outsourced services........................ 749 1,404 554 288
Rent expenses.............................. 154 125 449 49
Utilities and services..................... 119 155 91 99
Other expenses............................. 222 371 245 166
------ ------ ------ ----
Total.................................. $1,286 $2,128 $1,389 $657
====== ====== ====== ====
</TABLE>
F-30
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of IMPSAT S.A.:
We have audited the accompanying statements of net revenues and direct costs
and expenses of IMPSAT S.A.'s retail dial-up access business in Colombia (the
"Business") for the years ended December 31, 1997 and 1998 and the nine months
ended September 30, 1999. These statements of net revenues and direct costs and
expenses are the responsibility of IMPSAT S.A.'s management. Our responsibility
is to express an opinion on these statements of net revenues and direct costs
and expenses based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
statements of net revenues and direct costs and expenses are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements of net revenues and direct costs
and expenses. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statements of net revenues and direct costs and expenses presentation. We
believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 2 to the statements of net revenues and direct costs
and expenses, the Business comprises IMPSAT S.A.'s retail dial-up access
business in Colombia. Costs incurred directly are included in the statements of
net revenues and direct costs and expenses and operating expenses have been
allocated to the retail dial-up access business based on management's estimates.
As a result, the net revenues and direct costs and expenses of the Business may
not be indicative of conditions that would have existed or results that would
have occurred had the Business operated as an unaffiliated entity.
In our opinion, the statements of net revenues and direct costs and expenses
present fairly, in all material respects, the net revenues and direct costs and
expenses of the Business for the years ended December 31, 1997 and 1998 and the
nine months ended September 30, 1999 in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE
Santafe de Bogota, Colombia
November 4, 1999
F-31
<PAGE>
IMPSAT S.A.
(COMPRISING IMPSAT S.A.'S RETAIL DIAL-UP ACCESS BUSINESS IN COLOMBIA)
STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------- ----------------------
1997 1998 1998 1999
-------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUES............................................. $1,817 $2,131 $1,741 $1,371
------ ------ ------ ------
DIRECT COSTS AND EXPENSES:
Product, content and technology........................ 871 1,424 1,015 1,035
Marketing and sales.................................... 137 239 189 96
Corporate, general and administrative.................. 283 406 302 318
------ ------ ------ ------
Total direct costs and expenses.......................... 1,291 2,069 1,506 1,449
------ ------ ------ ------
EXCESS (DEFICIENCY) OF NET REVENUES OVER DIRECT COSTS AND
EXPENSES............................................... $ 526 $ 62 $ 235 $ (78)
====== ====== ====== ======
</TABLE>
See notes to statements of net revenues and direct costs and expenses.
F-32
<PAGE>
IMPSAT S.A.
(COMPRISING IMPSAT S.A.'S RETAIL DIAL-UP ACCESS BUSINESS IN COLOMBIA)
NOTES TO STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES
(IN THOUSANDS OF U.S. DOLLARS)
1. OPERATIONS
On August 4, 1999, El Sitio, Inc. ("El Sitio") entered into a framework
agreement with IMPSAT Corporation ("IMPSAT") for the purchase of IMPSAT's retail
dial-up access customers in Argentina, Brazil and Colombia for $21,500 and the
related purchase by IMPSAT of 3,070,615 Class A Convertible Preferred Shares of
El Sitio for $21,500. In connection with these transactions, El Sitio will also
enter into a telecommunications services agreement with an affiliate of IMPSAT
under which it will provide El Sitio with telecommunications infrastructure.
The closing of the acquisition of retail dial-up access customers of IMPSAT
in Colombia is subject to the negotiation of definitive documentation and
various other conditions, including governmental approvals, and accordingly,
there can be no assurance that this transaction will be completed. Subject to
the satisfaction of these conditions, the transaction is expected to be
consummated by the end of 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION--The retail dial-up access business in Colombia (the
"Business") is not a "stand-alone" division or subsidiary of IMPSAT S.A. and was
not generally accounted for separately. As a result, the distinct and separate
accounts necessary to present an individual balance sheet, income statement and
cash flow statement of the Business have not been maintained. The Business does
not maintain its own stand-alone treasury, legal, financial, information systems
and other similar corporate support functions. The financial information
presented is limited to the statement of net revenues and direct costs and
expenses.
For purposes of preparing these statements, revenues of IMPSAT S.A.'s retail
dial-up access business were specifically identified and obtained from the
general ledger. Product, content and technology costs were also specifically
identified and obtained from the general ledger. Operating expenses such as
marketing and sales and corporate, general and administrative associated with
IMPSAT S.A.'s retail dial-up access business have been allocated based on
management's estimates.
Product, content and technology expenses accounted for 67% of expenses in
Colombia in 1997, 68% in 1998, 67% in the nine months ended September 30, 1998
and 71% in the nine months ended September 30, 1999.
IMPSAT S.A.'s management allocated other direct costs and expenses related
to the Business based on the proportionate share of retail Internet revenue to
total Internet revenue. These allocations are based on, among other things,
subscriber statistics and the shared use by the retail dial-up and corporate
dial-up portions of IMPSAT S.A.'s assets and resources such as the following:
call center, technical and sales and marketing personnel; equipment such as
servers, routers and modems; and supplies. These allocations are believed to be
reasonable under the circumstances. However, the Business' may not be indicative
of conditions that would have existed or results that would have occurred had
the Business operated as an unaffiliated entity.
The same allocation methodologies were used for each of the financial years
and periods presented in these statements.
F-33
<PAGE>
IMPSAT S.A.
(COMPRISING IMPSAT S.A.'S RETAIL DIAL-UP ACCESS BUSINESS IN COLOMBIA)
NOTES TO STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A statement of cash flow is not being presented as the Business does not
maintain its own cash accounts and components, such as the changes in working
capital, are not available to prepare the cash flow information.
INTERIM FINANCIAL INFORMATION--The unaudited statement of net revenues and
direct costs and expenses for the nine months ended September 30, 1998 has been
prepared on the same basis as the audited annual statements of net revenues and
direct costs and expenses. In the opinion of management, such unaudited
statement of net revenues and direct costs and expenses includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the results for such period. The operating results for the nine months ended
September 30, 1998 are not necessarily indicative of the operating results to be
expected for the full fiscal year or for any future period.
REVENUE RECOGNITION--Revenues represent month-to-month subscriptions for
pre-paid and per-minute usage of access levels. Subscription revenues are
recognized over the period that services are provided.
CURRENCY TRANSLATIONS--The statements of net revenues and direct costs and
expenses of the Company contain currency translations of Colombian peso amounts
to U.S. dollars at the exchange rate at the date of the transactions reported by
the Superintendency of Banking. No representation is made that the Colombian
peso amounts have been, could have been, or could be converted into U.S.
dollars, at such a rate or any other rate.
USE OF ESTIMATES--The preparation of the statements of net revenues and
direct costs and expenses in conformity with generally accepted accounting
principles in the United States of America requires management to make certain
estimates and assumptions that effect the amounts of the reported amounts of net
revenues and direct costs and expenses during the reporting period. Actual
results could differ from those estimates.
3. PRODUCT, CONTENT AND TECHNOLOGY
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
DESCRIPTION 1997 1998 1998 1999
- ----------- ------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Maintenance................................ $283 $ 599 $ 450 $ 402
Satellite capacity......................... 398 612 443 498
Telephone.................................. 105 116 35 84
Communications fee surcharge............... 85 97 87 51
---- ------ ------ ------
Total.................................. $871 $1,424 $1,015 $1,035
==== ====== ====== ======
</TABLE>
F-34
<PAGE>
IMPSAT S.A.
(COMPRISING IMPSAT S.A.'S RETAIL DIAL-UP ACCESS BUSINESS IN COLOMBIA)
NOTES TO STATEMENTS OF NET REVENUES AND DIRECT COSTS AND EXPENSES (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
4. MARKETING AND SALES
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
DESCRIPTION 1997 1998 1998 1999
- ----------- ------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Marketing and promotion.................... $131 $191 $153 $50
Credit card fees........................... 6 48 36 46
---- ---- ---- ---
Total.................................. $137 $239 $189 $96
==== ==== ==== ===
</TABLE>
5. CORPORATE, GENERAL AND ADMINISTRATIVE
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
DESCRIPTION 1997 1998 1998 1999
- ----------- ------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Salaries and wages......................... $172 $170 $127 $137
Other general and administrative........... 94 181 136 131
Depreciation and amortization.............. 17 55 39 50
---- ---- ---- ----
Total.................................. $283 $406 $302 $318
==== ==== ==== ====
</TABLE>
F-35
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following sets forth unaudited pro forma consolidated financial
information for our company at September 30, 1999 and for the year ended
December 31, 1998 and the nine months ended September 30, 1999 giving effect to
(i) our completed and pending acquisitions of the retail dial-up access
customers in Argentina, Brazil and Colombia from IMPSAT Corporation for
approximately $21.5 million in the aggregate and the related purchase by IMPSAT
Corporation of 3,070,615 Class A convertible preferred shares for $21.5 million
and (ii) our private placement in mid-November 1999 of 1,111,111 Class B
convertible preferred shares for an aggregate purchase price of $10.0 million in
cash.
The pro forma financial information assumes that the above transactions had
been completed at January 1, 1998 and January 1, 1999 in the case of the pro
forma statement of operations data for the year ended December 31, 1998 and the
nine months ended September 30, 1999, respectively, and at September 30, 1999 in
the case of the pro forma balance sheet data.
The pro forma financial information does not purport to present our
financial condition or results of operations had these transactions occurred on
those dates and is not necessarily indicative of our results of operations for
future periods.
The historical financial information for our company and for the dial-up
access customers in Argentina, Brazil and Colombia of IMPSAT Corporation has
been derived from the financial statements included in this prospectus. The pro
forma adjustments relating to the acquisition of these retail dial-up access
customers are based upon available information and assumptions that we consider
reasonable under the circumstances. Final adjustments could differ from these
adjustments.
F-36
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
--------------------------------------------------------------------------------------------------
RETAIL DIAL-UP ACCESS
------------------------------------------ PRO FORMA
ACTUAL ARGENTINA BRAZIL COLOMBIA TOTAL TOTAL ADJUSTMENTS PRO FORMA
----------- --------- -------- -------- -------- -------- ----------- -----------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES............. $ 1,524 $2,880 $5,766 $1,371 $10,017 $ 11,541 $ 11,541
COSTS AND EXPENSES:
Product, content and
technology........... 3,181 1,802 3,590 1,035 6,427 9,608 9,608
Marketing and sales.... 7,157 332 1,029 96 1,457 8,614 8,614
Corporate, general and
administrative....... 3,736 -- 657 318 975 4,711 75(b) 4,786
Depreciation and
amortization......... 336 -- -- -- -- 336 3,225(c) 3,561
Share-based
compensation......... 499 -- -- -- -- 499 499
----------- ------ ------ ------ ------- -------- -----------
Total costs and
expenses............. 14,909 2,134 5,276 1,449 8,859 23,768 27,068
----------- ------ ------ ------ ------- -------- -----------
Operating income
(loss)............... (13,385) 746 490 (78) 1,158 (12,227) (15,527)
OTHER INCOME (EXPENSES)
Interest income
(expense), net....... 264 -- -- -- -- 264 264
Foreign exchange
income............... 5 -- -- -- -- 5 5
Other income (expense),
net.................. (3) -- -- -- -- (3) (3)
----------- ------ ------ ------ ------- -------- -----------
Total other income
(expense)............ 266 -- -- -- -- 266 266
----------- ------ ------ ------ ------- -------- -----------
NET LOSS BEFORE DIVIDENDS
ON CLASS A AND CLASS B
CONVERTIBLE PREFERRED
SHARES................. (13,119) 746 490 (78) 1,158 (11,961) (15,261)
Dividends on Class A and 1,290(e)
Class B convertible 600(f)
preferred shares....... 784 -- -- -- -- 784 3,333(h) 6,007
----------- ------ ------ ------ ------- -------- -----------
NET LOSS ATTRIBUTABLE TO
COMMON SHAREHOLDERS.... $ (13,903) $ 746 $ 490 $ (78) $ 1,158 $(12,745) $ (21,268)
=========== ====== ====== ====== ======= ======== ===========
NET LOSS PER COMMON
SHARE:
Basic and diluted........ $ (1.18) $ (1.81)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES:
Basic and diluted........ 11,777,516 11,777,516
</TABLE>
F-37
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------------------------------------------------
RETAIL DIAL-UP ACCESS
------------------------------------------ PRO FORMA
ACTUAL ARGENTINA BRAZIL COLOMBIA TOTAL TOTAL ADJUSTMENTS PRO FORMA
---------- --------- -------- -------- -------- -------- ----------- ----------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES............... $ 780 $2,982 $11,394 $2,131 16,507 $17,287 $ 17,287
COSTS AND EXPENSES:
Product, content and
technology............. 1,556 1,851 6,157 1,424 9,432 10,988 10,988
Marketing and sales...... 674 479 1,423 239 2,141 2,815 2,815
Corporate, general and
administrative......... 1,940 -- 2,128 406 2,534 4,474 100(b) 4,574
Depreciation and
amortization........... 107 -- -- -- -- 107 4,300(c) 4,407
---------- ------ ------- ------ ------ ------- ----------
Total costs and
expenses............... 4,277 2,330 9,708 2,069 14,107 18,384 22,784
---------- ------ ------- ------ ------ ------- ----------
Operating income
(loss)................. (3,497) 652 1,686 62 2,400 (1,097) (5,497)
OTHER INCOME (EXPENSES)
Interest income
(expense), net......... (42) -- -- -- -- (42) (42)
Foreign exchange loss.... (44) -- -- -- -- (44) (44)
Other income (expense),
net.................... 66 -- -- -- -- 66 66
---------- ------ ------- ------ ------ ------- ----------
Total other income
(expense).............. $ (20) (20) (20)
---------- ------ ------- ------ ------ ------- ----------
NET LOSS BEFORE DIVIDENDS
ON CLASS A AND CLASS B
CONVERTIBLE PREFERRED
SHARES................... (3,517) 652 1,686 62 2,400 (1,117) $ (5,517)
Dividends on Class A and 1,720(e)
Class B convertible 800(f)
preferred shares......... -- -- -- -- -- -- 3,333(h) 5,853
---------- ------ ------- ------ ------ ------- ----------
NET LOSS ATTRIBUTABLE TO
COMMON SHAREHOLDERS...... $ (3,517) $ 652 $ 1,686 $ 62 2,400 $(1,117) $ (11,370)
========== ====== ======= ====== ====== ======= ==========
NET LOSS PER COMMON SHARE:
Basic and diluted.......... $ (1.15) $ (3.73)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES:
Basic and diluted.......... 3,050,000 3,050,000
</TABLE>
F-38
<PAGE>
PRO FORMA BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1999
--------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 24,393 (20,600)(a) $ 34,493
21,500 (d)
9,200 (g)
Trade accounts receivable, net............................ 976 976
Other receivables......................................... 1,078 1,078
Prepaid expenses.......................................... 137 137
-------- --------
Total current assets...................................... 26,584 36,684
PROPERTY AND EQUIPMENT, NET............................... 1,878 116 (a) 1,994
LICENSES AND PERMITS, NET................................. 98 98
OTHER ASSETS.............................................. 4,560 4,560
INTANGIBLE ASSETS--Customer base.......................... -- 21,440 (a) 21,440
-------- --------
TOTAL ASSETS........................................ $ 33,120 $ 64,776
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable--trade................................... $ 2,287 $ 2,287
Unearned revenues......................................... 628 628
Accrued and other liabilities............................. 3,405 56 (a) 3,461
Current portion of installment loans...................... 7 450 (a) 457
-------- --------
Total current liabilities........................... 6,327 6,833
-------- --------
INSTALLMENT LOANS......................................... 22 450 (a) 472
-------- --------
CLASS A CONVERTIBLE PREFERRED SHARES...................... 38,327 21,500 (d) 59,827
CLASS B CONVERTIBLE PREFERRED SHARES...................... 9,200 (g) 9,200
SHAREHOLDERS' EQUITY (DEFICIT):
Common shares............................................. 126 126
Additional paid-in-capital................................ 13,943 3,333 (h) 17,276
Deferred share-based compensation......................... (7,286) (7,286)
Accumulated other comprehensive income.................... 95 95
Accumulated deficit....................................... (18,434) (18,434)
Discount on Class B convertible preferred shares.......... -- (3,333)(h) (3,333)
-------- --------
Total shareholders' equity (deficit)................ (11,556) (11,556)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)......................................... $ 33,120 $ 64,776
======== ========
</TABLE>
F-39
<PAGE>
ADJUSTMENTS:
The following are the pro forma adjustments made for purposes of the pro
forma financial information:
(a) Reflects the acquisitions of IMPSAT Corporation's retail dial-up access
customers in Argentina for $6.2 million (of which $5.3 million was paid
in cash with the remainder due in 24 equal monthly installments), Brazil
for $12.3 million and Colombia for $3.0 million for a total purchase
price of $21.5 million. The purchase price has been allocated to the
assets acquired and liabilities assumed based on management's preliminary
estimates of fair value. In connection with these acquisitions, we will
enter into agreements for telecommunication services to be provided to us
by IMPSAT Corporation or its subsidiaries.
(b) Reflects monitoring fees of $100,000 per year payable to IMPSAT
Corporation pursuant to our acquisitions of retail dial-up access
customers of IMPSAT Corporation.
(c) Reflects depreciation and amortization over five years of the fixed and
intangible assets created in connection with acquisitions of retail
dial-up access customers in Argentina, Brazil and Colombia from IMPSAT
Corporation. The customer base will be reviewed on an ongoing basis for
impairment based on comparison of carrying value against estimated
undiscounted future cash flows. If an impairment is identified, the
assets carrying amount will be adjusted to fair value.
(d) Reflects the purchase of 3,070,615 Class A convertible preferred shares
by IMPSAT Corporation for $21.5 million in conjunction with the
acquisitions of its retail dial-up access customers in Argentina, Brazil
and Colombia.
(e) Reflects 8% dividend rate on Class A convertible preferred shares
calculated as follows:
<TABLE>
<CAPTION>
TRANSACTION AMOUNT
- ----------- -----------
<S> <C>
IMPSAT Corporation purchase................................. $21,500,000
===========
Dividend rate per annum..................................... 8%
Annual dividend............................................. $ 1,720,000
Nine-month dividend......................................... $ 1,290,000
</TABLE>
(f) Reflects 8% dividend rate on Class B convertible preferred shares as
follows:
<TABLE>
<CAPTION>
TRANSACTION AMOUNT
- ----------- -----------
<S> <C>
Private placement investors................................. $10,000,000
===========
Dividend rate per annum..................................... 8%
Annual dividend............................................. $ 800,000
Nine-month dividend......................................... $ 600,000
</TABLE>
(g) Reflects the net proceeds from the private placement in mid-November
1999 of Class B convertible preferred shares (total gross proceeds of
$10.0 million less $800,000 for private placement agent fee and
transaction expenses).
F-40
<PAGE>
(h) Reflects the recognition of the discount on sale of the Class B
convertible preferred shares and the amortization of such discount over
the six-month period after the closing of this offering. Each Class B
convertible preferred share will automatically convert, on the date six
months after the closing of this offering, into one common share. This
discount is calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
Expected initial public offering price per common share..... $ 12.00
less: purchase price per Class B convertible preferred
share................................................. 9.00
----------
Discount per share.......................................... $ 3.00
==========
Number of Class B convertible preferred shares.......... 1,111,111
----------
Total amount of discount.............................. $3,333,333
==========
</TABLE>
F-41
<PAGE>
8,200,000 SHARES
[LOGO]
WWW.ELSITIO.COM
COMMON SHARES
------------
PROSPECTUS
DECEMBER , 1999
-----------------
CREDIT SUISSE FIRST BOSTON
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
WIT CAPITAL CORPORATION
FIDELITY CAPITAL MARKETS
a division of National Financial Services Corporation
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the offering, all of which will be
borne by us, are as follows:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $36,777
NASD Filing Fee and Expenses................................ 24,800
NASDAQ National Market Listing Fee.......................... 94,000
"Blue Sky" Fees and Expenses................................ 5,000
Transfer Agent Fees......................................... *
Printing Costs.............................................. *
Legal Fees and Expenses..................................... *
Accounting Fees............................................. *
Miscellaneous............................................... *
-------
TOTAL....................................................... $ *
=======
</TABLE>
- ------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The International Business Companies Act, 1984 of the British Virgin Islands
permits an international business company to indemnify directors and officers
and permits an international business company to acquire liability insurance for
directors and officers.
Under Sections 118 through 123 of our articles of association, our company
is empowered to indemnify our directors and officers as follows:
"118. Subject to the limitations hereinafter provided, the Company may
indemnify against all expenses, including legal fees, and against all
judgments, fines and amounts paid in settlement and reasonably
incurred in connection with legal, administrative or investigative
proceedings any person who
(a) is or was a party or is threatened to be made a party to any
threatened, pending or completed proceedings, whether civil,
criminal, administrative or investigative, by reason of the fact
that the person is or was a director, an officer or a liquidator of
the Company; or
(b) is or was, at the request of the Company, serving as a director,
officer or liquidator of, or in any other capacity is or was acting
for, another company or a partnership, joint venture, trust or
other enterprise.
119. The Company may only indemnify a person if the person acted honestly
and in good faith with a view to the best interests of the Company and,
in the case of criminal proceedings, the person had no reasonable cause
to believe that his conduct was unlawful.
120. The decision of the directors as to whether the person acted honestly
and in good faith and with a view to the best interests of the Company
and as to whether the person had no reasonable cause to believe that
his conduct was unlawful is, in the absence of fraud, sufficient for
the purposes of these Articles, unless a question of law is involved.
II-1
<PAGE>
121. The termination of any proceedings by any judgment, order, settlement,
conviction or the entering of a nolle prosequi does not, by itself,
create a presumption that the person did not act honestly and in good
faith and with a view to the best interests of the Company or that the
person had reasonable cause to believe that his conduct was unlawful.
122. If a person to be indemnified has been successful in defense of any
proceedings referred to above the person is entitled to be indemnified
against all expenses, including legal fees, and against all judgments,
fines and amounts paid in settlement and reasonably incurred by the
person in connection with the proceedings.
123. The Company may purchase and maintain insurance in relation to any
person who is or was a director, an officer or a liquidator of the
Company, or who at the request of the Company is or was serving as a
director, an officer or a liquidator of, or in any other capacity is or
was acting for, another company or a partnership, joint venture, trust
or other enterprise, against any liability asserted against the person
and incurred by the person in that capacity, whether or not the Company
has or would have had the power to indemnify the person against the
liability as provided in these Articles."
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On July 7, 1999, we completed the private placement of 6,334,004 Class A
convertible preferred shares for a total purchase price of $44.4 million,
consisting of 5,477,088 shares sold for $38.4 million in cash and 856,916 shares
to be issued on a quarterly basis through 2001 in exchange for $6.0 million in
non-cash advertising time credits. Strategic investors included Hicks, Muse,
Tate & Furst Incorporated, and the Cisneros Group of Companies (through IAMP (El
Sitio) Investments Ltd.) and GC Companies Inc. (through GCC Investments, LLC).
Some of our initial investors purchased $6.5 million of our Class A convertible
preferred shares as part of the private placement. The private placement was
exempt from registration under the Securities Act in reliance upon the exemption
provided by Section 4(2) under that Act.
In August 1999, we entered into a framework agreement with IMPSAT
Corporation, a leading provider of private networks of integrated data and voice
communications systems in a number of countries in Latin America, to acquire its
retail dial-up access customers in Argentina, Brazil and Colombia. Under this
Agreement, we have acquired or will acquire these customers for an aggregate of
$21.5 million. IMPSAT Corporation will, in turn, purchase a total of 3,070,615
Class A convertible preferred shares for approximately $21.5 million. The
Argentine and Brazilian acquisitions were consummated in October and
November 1999, respectively, and we expect to close the acquisition in Colombia
in fourth quarter 1999. The sale of these shares to IMPSAT Corporation was
exempt from registration under the Securities Act in reliance upon
Regulation S, and in the alternative, Section 4(2) under that Act.
In mid-November 1999, we completed a private placement of 1,111,111 Class B
convertible preferred shares for a purchase price of $10.0 million in cash, or
$9.00 per Class B convertible preferred share. Purchasers of the Class B
convertible preferred shares consisted of Intel Atlantic, Inc., a subsidiary of
Intel Corporation, and Latinvest Asset Management do Brasil, Ltda., an affiliate
of Globalvest Management Company, L.P. Each Class B convertible preferred share
will automatically convert, on the date six months following the closing date of
this offering, into one common share. The private placement was exempt from
registration under the Securities Act in reliance upon the exemption provided by
Section 4(2) under that Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement between El Sitio, Inc. and
the underwriters
2.1 Framework Agreement dated August 4, 1999, between IMPSAT
Corporation and El Sitio, Inc. (formerly, El Sitio
International Corporation)
3.1 Amended and Restated Memorandum of Association of El Sitio,
Inc. (formerly, El Sitio International Corporation)
3.2 Amended and Restated Articles of Association of El Sitio,
Inc. (formerly, El Sitio International Corporation)
4.1 Form of Common Share Certificate
5.1 Opinion of Conyers Dill & Pearman regarding validity of
common shares*
8.1 Opinion of Paul, Hastings, Janofsky & Walker LLP as to tax
matters*
8.2 Opinion of Conyers Dill & Pearman as to tax matters*
10.1 Stock Purchase Agreement, dated June 21, 1999, among El
Sitio, Inc. (formerly, El Sitio International Corporation),
Washburn Enterprises, Inc., Chestnut Hill (El Sitio), LLC
and Ibero-American Media Partners II Ltd.
10.2 Form of Service Agreement, dated June 10, 1999, between
Exodus Communications, Inc. and El Sitio U.S.A., Inc.
10.3 Service Agreement, dated April 29, 1999, between IMPSAT
Corporation USA IP-Internet Backbone & Co. and El Sitio
U.S.A., Inc.
10.4 Letter Agreement, dated February 11, 1999, between TV
Azteca, S.A. de C.V. and El Sitio, Inc. (formerly, El Sitio
International Corporation)
10.5 Subscription Agreement, dated August 31, 1999, between TV
Azteca, S.A. de C.V. and El Sitio, Inc. (formerly, El Sitio
International Corporation)
10.6 Registration Rights Agreement, dated July 2, 1999, by and
among El Sitio, Inc. (formerly, El Sitio International
Corporation) and holders of its Class A Convertible
Preferred Stock
10.7 El Sitio International Corporation 1999 Stock Option Plan
10.8 Employment Agreement, dated June 18, 1999, between El Sitio,
Inc. (formerly, El Sitio International Corporation) and
Roberto Cibrian-Campoy
10.9 Employment Agreement, dated June 18, 1999, between El Sitio,
Inc. (formerly, El Sitio International Corporation) and
Daniel Rotsztain
10.10 Noncompete Agreement, dated July 2, 1999, between El Sitio,
Inc. (formerly, El Sitio International Corporation) and
Roberto Cibrian-Campoy
10.11 Noncompete Agreement, dated July 2, 1999, between El Sitio,
Inc. (formerly, El Sitio International Corporation) and
Daniel Rotsztain
10.12 Amendment No. 1 to the Stock Purchase Agreement, dated July
2, 1999, among El Sitio, Inc. (formerly, El Sitio
International Corporation), Washburn Enterprises, Inc.,
Chestnut Hill (El Sitio), LLC and Ibero-American Media
Partners II Ltd.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.13 Stockholders Agreement, dated July 2, 1999 by and among the
Stockholders of El Sitio International Corporation
10.14 Registration Rights Agreement, dated July 2, 1999, by and
among El Sitio, Inc. (formerly, El Sitio International
Corporation) and the holders of its Class A convertible
Preferred Stock
10.15 Quotas Purchase Agreement, dated October 6, 1999, between
IMPSAT Comunicacoes Ltda. and O Site Entretenimentos Ltda.
10.16 Internet Service Agreement, dated October 6, 1999, between
IMPSAT Comunicacoes Ltda. and Mandic Internet Ltda.
10.17 Share Purchase Agreement, dated October 6, 1999, between El
Sitio, Inc. and IMPSAT Corporation
10.18 Amendment No. 1 to Registration Rights Agreement, dated
October 6, 1999, among El Sitio, Inc. and the holders of its
Class A Convertible Preferred Stock
10.19 Amendment No. 1 to Stockholders Agreement, dated October 6,
1999, by and among IAMP (El Sitio) Investments Ltd.,
Washburn Enterprises Inc., GCC Investments, LLC, the Initial
Stockholders, and El Sitio, Inc.
10.20 Assignment Agreement, dated October 5, 1999, between El
Sitio Argentina S.A. and IMPSAT S.A.
10.21 Internet Service Agreement, dated October 5, 1999, between
El Sitio Argentina S.A. and IMPSAT S.A.
10.22 Reseller and Management Agreement, dated October 5, 1999,
between El Sitio Argentina S.A. between El Sitio Argentina
S.A. and IMPSAT S.A.
10.23 Form of Share Purchase Agreement, dated November 9, 1999 by
and among El Sitio, Inc., Intel Atlantic, Inc., and
Utilitivest II, L.P and Utilitivest III, L.P. (investment
funds managed by Latinvest Asset Management do Brasil)
10.24 Form of Amended and Restated Registration Rights Agreement,
dated November 9, 1999 by and among El Sitio, Inc. and the
holders of its Class B Convertible Preferred Stock.
10.25 Form of Amended and Restated Shareholders' Agreement dated
November 9, 1999 by and among El Sitio, Inc. and certain of
its shareholders
21.1 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Deloitte & Touche, Argentina
23.3 Consent of Deloitte Touche Tohmatsu, Brazil
23.4 Consent of Deloitte & Touche, Colombia
23.5 Consent of Deloitte & Touche LLP
23.6 Consent of Conyers Dill & Pearman (contained in Exhibits 5.1
and 8.2)*
23.7 Consent of Paul, Hastings, Janofsky & Walker LLP (contained
in Exhibit 8.1)*
24.1 Power of Attorney for directors and officers of El Sitio,
Inc. (included on pages II-6 and II-7)
</TABLE>
- ------------------------
* To be filed by amendment.
(B) FINANCIAL STATEMENTS SCHEDULE.
II-4
<PAGE>
None.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes to 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 underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than 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 Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon 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 was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, 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 at that time
shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form F-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
New York, on November 18, 1999.
<TABLE>
<S> <C> <C>
EL SITIO, INC.
By: /s/ HORACIO MILBERG
-----------------------------------------
Horacio Milberg
CHIEF FINANCIAL OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose name appears
below hereby appoints Roberto Cibrian-Campoy and Horacio Milberg, and each of
them, as his true and lawful and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to execute any and all amendments to the within Registration
Statement, including post-effective amendments, and to sign any and all
registration statements relating to the same offering of securities as this
Registration Statement that are filed pursuant to Rule 462(b) of the Securities
Act of 1933, as amended, and to file the same, together with all exhibits
thereto, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each said attorney-in-fact and
agent may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following person in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ ROBERTO CIBRIAN-CAMPOY Chief Executive Officer and
------------------------------------------- Director (Principal November 18, 1999
Roberto Cibrian-Campoy Executive Officer)
/s/ HORACIO MILBERG Chief Financial Officer
------------------------------------------- (Principal Financial November 18, 1999
Horacio Milberg Officer)
Chief Administrative
/s/ ALFREDO JIMENEZ DE ARECHAGA Officer, Controller and
------------------------------------------- Treasurer (Principal November 18, 1999
Alfredo Jimenez de Arechaga Accounting Officer)
/s/ ROBERTO VIVO-CHANETON Chairman of the Board of
------------------------------------------- Directors November 18, 1999
Roberto Vivo-Chaneton
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ GUILLERMO LIBERMAN Director
------------------------------------------- November 18, 1999
Guillermo Liberman
/s/ RICARDO VERDAGUER Director
------------------------------------------- November 18, 1999
Ricardo Verdaguer
/s/ MICHAEL GREELEY Director
------------------------------------------- November 18, 1999
Michael Greeley
/s/ MICHAEL LEVITT Director
------------------------------------------- November 18, 1999
Michael Levitt
/s/ CARLOS CISNEROS Director
------------------------------------------- November 18, 1999
Carlos Cisneros
/s/ SOFIA PESCARMONA Director
------------------------------------------- November 18, 1999
Sofia Pescarmona
</TABLE>
II-7
<PAGE>
SIGNATURE OF AUTHORIZED REPRESENTATIVE
Pursuant to the Securities Act of 1933, as amended, the undersigned, the
duly authorized representative in the United States of El Sitio, Inc. has signed
this Registration Statement on Form F-1 or amendment thereto in New York, New
York on November 18, 1999.
/s/ PAOLA PRADO
--------------------------------------
Paola Prado
AUTHORIZED REPRESENTATIVE
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement between El Sitio, Inc. and
the underwriters
2.1 Framework Agreement, dated August 4, 1999, between IMPSAT
Corporation and El Sitio, Inc. (formerly, El Sitio
International Corporation)
3.1 Amended and Restated Memorandum of Association of
El Sitio, Inc. (formerly, El Sitio International
Corporation)
3.2 Amended and Restated Articles of Association of El Sitio,
Inc. (formerly, El Sitio International Corporation)
4.1 Form of Common Share Certificate
5.1 Opinion of Conyers Dill & Pearman regarding validity of
common shares*
8.1 Opinion of Paul, Hastings, Janofsky & Walker LLP as to tax
matters*
8.2 Opinion of Conyers Dill & Pearman as to tax matters*
10.1 Stock Purchase Agreement, dated June 21, 1999, among
El Sitio, Inc. (formerly, El Sitio International
Corporation), Washburn Enterprises, Inc., Chestnut Hill
(El Sitio), LLC and Ibero-American Media Partners II Ltd.
10.2 Form of Service Agreement, dated June 10, 1999, between
Exodus Communications, Inc. and El Sitio U.S.A., Inc.
10.3 Service Agreement, dated April 29, 1999, between IMPSAT
Corporation USA IP-Internet Backbone & Co. and El Sitio
U.S.A., Inc.
10.4 Letter Agreement, dated February 11, 1999, between TV
Azteca, S.A. de C.V. and El Sitio, Inc. (formerly, El Sitio
International Corporation)
10.5 Subscription Agreement, dated August 31, 1999, between TV
Azteca, S.A. de C.V. and El Sitio, Inc. (formerly, El Sitio
International Corporation)
10.6 Registration Rights Agreement, dated July 2, 1999, by and
among El Sitio, Inc. (formerly, El Sitio International
Corporation) and holders of its Class A Convertible
Preferred Stock
10.7 El Sitio International Corporation 1999 Stock Option Plan
10.8 Employment Agreement, dated June 18, 1999, between
El Sitio, Inc. (formerly, El Sitio International
Corporation) and Roberto Cibrian-Campoy
10.9 Employment Agreement, dated June 18, 1999, between
El Sitio, Inc. (formerly, El Sitio International
Corporation) and Daniel Rotsztain
10.10 Noncompete Agreement, dated July 2, 1999, between
El Sitio, Inc. (formerly, El Sitio International
Corporation) and Roberto Cibrian-Campoy
10.11 Noncompete Agreement, dated July 2, 1999, between
El Sitio, Inc. (formerly, El Sitio International
Corporation) and Daniel Rotsztain
10.12 Amendment No. 1 to the Stock Purchase Agreement, dated
July 2, 1999, among El Sitio, Inc. (formerly, El Sitio
International Corporation), Washburn Enterprises, Inc.,
Chestnut Hill (El Sitio), LLC and Ibero-American Media
Partners II Ltd.
10.13 Stockholders Agreement, dated July 2, 1999 by and among the
Stockholders of El Sitio International Corporation
10.14 Registration Rights Agreement, dated July 2, 1999, by and
among El Sitio, Inc. (formerly El Sitio International
Corporation) and the holders of its Class A convertible
Preferred Stock
10.15 Quotas Purchase Agreement, dated October 6, 1999, between
IMPSAT Comunicacoes Ltda. and O Site Entretenimentos Ltda.
10.16 Internet Service Agreement, dated October 6, 1999, between
IMPSAT Comunicacoes Ltda. and Mandic Internet Ltda.
10.17 Share Purchase Agreement, dated October 6, 1999, between
El Sitio, Inc. and IMPSAT Corporation
10.18 Amendment No. 1 to Registration Rights Agreement, dated
October 6, 1999, among El Sitio, Inc. and the holders of
its Class A Convertible Preferred Stock
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.19 Amendment No. 1 to Stockholders Agreement, dated October 6,
1999, by and among IAMP (El Sitio) Investments Ltd.,
Washburn Enterprises Inc., GCC Investments, LLC, the Initial
Stockholders, and El Sitio, Inc.
10.20 Assignment Agreement, dated October 5, 1999, between El
Sitio Argentina S.A. and Impsat S.A.
10.21 Internet Service Agreement, dated October 5, 1999, between
El Sitio Argentina S.A. and Impsat S.A.
10.22 Reseller and Management Agreement, dated October 5, 1999,
between El Sitio Argentina S.A. and Impsat S.A.
10.23 Form of Share Purchase Agreement, dated November 9, 1999, by
and among El Sitio, Inc., Intel Atlantic, Inc., Utilitivest
II, L.P. and Utilitivest III, L.P. (investment funds managed
by Latinvest Asset Management do Brasil)
10.24 Form of Amended and Restated Registration Rights Agreement,
dated November 9, 1999, by and among El Sitio, Inc. and the
holders of its Class B Convertible Preferred Stock
10.25 Form of Amended and Restated Shareholders' Agreement, dated
November 9, 1999, by and among El Sitio, Inc. and certain of
its shareholders
21.1 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Deloitte & Touche, Argentina
23.3 Consent of Deloitte Touche Tohmatsu, Brazil
23.4 Consent of Deloitte & Touche, Colombia
23.5 Consent of Deloitte & Touche LLP
23.6 Consent of Conyers Dill & Pearman (contained in Exhibits 5.1
and 8.2)*
23.7 Consent of Paul, Hastings, Janofsky & Walker LLP (contained
in Exhibit 8.1)*
24.1 Power of Attorney for directors and officers of
El Sitio, Inc. (included on pages II-6 and II-7)
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
8,200,000 SHARES
EL SITIO, INC.
COMMON SHARES
UNDERWRITING AGREEMENT
December __, 1999
CREDIT SUISSE FIRST BOSTON CORPORATION
LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
SALOMON SMITH BARNEY INC.
WIT CAPITAL CORPORATION
FIDELITY CAPITAL MARKETS
a division of National Financial Services Corporation
As Representatives of the several
Underwriters named in Schedule 1
c/o Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010-3629
Ladies and Gentlemen:
El Sitio, Inc., a British Virgin Islands company (the
"Company"), proposes to sell to the Underwriters named in Schedule 1 hereto (the
"Underwriters"), for which Credit Suisse First Boston Corporation, Lehman
Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith
Barney Inc., Wit Capital Corporation and Fidelity Capital Markets, a division of
National Financial Services Corporation, are acting as Representatives (the
"Representatives"), 8,200,000 common shares, par value U.S.$0.01 per share (the
"Common Shares") (the "Firm Shares"). In addition, the Company proposes to grant
to the Underwriters an option to purchase up to an additional 1,230,000 Common
Shares on the terms and for the purposes set forth in Section 2 (the "Option
Shares"). The Firm Shares and the Option Shares, if purchased, are hereinafter
collectively called the "Shares". This is to confirm the agreement concerning
the purchase of the Shares from the Company by the Underwriters.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents, warrants and agrees that:
<PAGE>
2
(a) A registration statement on Form F-1
(Registration No. 333-__), and one or more amendments thereto,
with respect to the Shares have (i) been prepared by the
Company in conformity with the requirements of the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and
the rules and regulations (the "Rules and Regulations") of the
U.S. Securities and Exchange Commission (the "Commission")
thereunder, (ii) been filed with the Commission under the
Securities Act and (iii) become effective under the Securities
Act; and a second registration statement on Form F-1 with
respect to the Shares (i) may also be prepared by the Company
in conformity with the requirements of the Securities Act and
the Rules and Regulations and (ii) if to be so prepared, will
be filed with the Commission under the Securities Act pursuant
to Rule 462(b) of the Rules and Regulations on the date
hereof. Copies of the first such registration statement and
the amendments to such registration statement, together with
the form of any such second registration statement, have been
delivered by the Company to the Representatives. As used in
this Agreement, "Effective Time" means (i) with respect to the
first such registration statement, the date and the time as of
which such registration statement, or the most recent
post-effective amendment thereto, if any, was declared
effective by the Commission and (ii) with respect to any
second registration statement, the date and time as of which
such second registration statement is filed with the
Commission, and "Effective Times" is the collective reference
to both Effective Times; "Effective Date" means (i) with
respect to the first such registration statement, the date of
the Effective Time of such registration statement and (ii)
with respect to any second registration statement, the date of
the Effective Time of such second registration statement, and
"Effective Dates" is the collective reference to both
Effective Dates; "Preliminary Prospectus" means each
prospectus included in any such registration statement, or
amendments thereof, before it became effective under the
Securities Act and any prospectus filed with the Commission by
the Company with the consent of the Representatives pursuant
to Rule 424(a) of the Rules and Regulations; "Primary
Registration Statement" means the first registration statement
referred to in this Section 1(a), as amended at its Effective
Time, "Rule 462(b) Registration Statement" means the second
registration statement, if any, referred to in this Section
1(a), as filed with the Commission, and "Registration
Statements" means both the Primary Registration Statement and
any Rule 462(b) Registration Statement, including in each case
all information contained in the final prospectus filed with
the Commission pursuant to Rule 424(b) of the Rules and
Regulations in accordance with Section 5(a) hereof and deemed
to be a part of the Registration Statements as of the
Effective Time of the Primary Registration Statement pursuant
to paragraph (b) of Rule 430A of the Rules and Regulations;
and "Prospectus" means such final prospectus, as first filed
with the Commission pursuant to paragraph (1) or (4) of Rule
424(b) of the Rules and Regulations. The Commission has not
issued any order preventing or suspending the use of any
Preliminary Prospectus.
(b) The Primary Registration Statement conforms, and
the Rule 462(b) Registration Statement, if any, the Prospectus
and any further amendments or
<PAGE>
3
supplements to the Registration Statements or the Prospectus,
when they become effective or are filed with the Commission,
as the case may be, will conform, in all material respects to
the requirements of the Securities Act and the Rules and
Regulations and do not and will not, as of the applicable
Effective Date (as to the Registration Statements and any
amendment thereto) and as of the applicable filing date (as to
the Prospectus and any amendment or supplement thereto)
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
PROVIDED that no representation or warranty is made as to
information contained in or omitted from the Registration
Statements or the Prospectus in reliance upon and in
conformity with written information furnished to the Company
through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein.
(c) The Company has been duly incorporated and is
validly existing as a company in good standing under the laws
of the British Virgin Islands. Each of the subsidiaries of the
Company has been duly organized and is validly existing as a
corporation, company or other corporate entity, as the case
may be, in good standing, if applicable, under the laws of its
respective jurisdiction of organization. Each of the Company
and its subsidiaries is duly qualified to do business and is
in good standing in each jurisdiction in which its respective
ownership or lease of property or assets or the conduct of its
respective businesses requires such qualification, and has all
power and authority necessary to own or hold its respective
properties or assets and to conduct the businesses in which it
is engaged. El Sitio Argentina S.A., O Site Entretenimento
Ltda., El Sitio Entretenimientos, S.A. de C.V., El Sitio
U.S.A., Inc. and El Sitio (Uruguay) Sociedad Anonima, each of
which is a subsidiary of the Company, are the sole
"significant subsidiaries" (as defined in Section 17) of the
Company (collectively, the "Significant Subsidiaries").
(d) The Company has an authorized capitalization as
set forth in the Prospectus; all of the issued and outstanding
Common Shares have been duly and validly authorized and
issued, are fully paid and non-assessable and conform to the
description thereof contained in the Prospectus; there are no
authorized classes of capital stock of the Company other than
the Common Shares and - Class A convertible preferred
shares, par value U.S.$0.01 per share ("Class A Convertible
Preferred Shares"), which will automatically convert into
Common Shares on the First Delivery Date (as defined in
Section 4) and - Class B convertible preferred shares, par
value U.S.$0.01 per share (the "Class B Convertible Preferred
Shares"); and all of the issued and outstanding shares of
capital stock of each subsidiary of the Company have been duly
and validly authorized and issued and are fully paid and
non-assessable and (other than a de minimis number of shares
required in certain jurisdictions to satisfy diversity of
ownerships requirements) are owned directly or indirectly by
the Company, free and clear of all liens, encumbrances,
equities or claims.
<PAGE>
4
(e) The Shares to be issued and sold by the Company
to the Underwriters hereunder have been duly and validly
authorized and, when issued and delivered against payment
therefor as provided herein, will be duly and validly issued,
fully paid and non-assessable; the holders of the Shares will
have no liability for any debt or other obligation of the
Company towards third parties in their capacity as holders
thereof; the Shares will conform to the description thereof
contained in the Prospectus; except as described in the
Prospectus, there are no outstanding securities convertible
into or exchangeable for, or warrants, rights or options to
purchase from the Company and its subsidiaries, or obligations
of the Company and its subsidiaries to issue, any class of
capital stock of the company or any of its subsidiaries; and
except as described in the Prospectus, there are no
restrictions on transfer or voting of any capital stock of the
Company pursuant to the Company's Amended and Restated
Memorandum of Association and Amended and Restated Articles of
Association (the "Memorandum and Articles of Association") or
any agreement to which the Company is a party or by which it
may be bound or to which any of its property or assets may be
subject.
(f) Each of the Company and the Significant
Subsidiaries has full power and authority to execute, deliver
and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby (including,
without limitation, the issuance, sale and delivery of the
Shares by the Company).
(g) This Agreement has been duly authorized, executed
and delivered by each of the Company and the Significant
Subsidiaries and constitutes a legal, valid and binding
obligation of each of the Company and the Significant
Subsidiaries, respectively, enforceable against the Company
and the Significant Subsidiaries, respectively, in accordance
with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally and
by general equitable principles and except, further, as
enforceability of indemnification provisions may be limited by
considerations of public policy.
(h) The execution, delivery and performance of this
Agreement by each of the Company and the Significant
Subsidiaries, respectively, and the consummation of the
transactions contemplated hereby will not (A) conflict with or
result in a breach or violation of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the properties
or assets of the Company or any of its subsidiaries is
subject, (B) result in any violation of the Company's
Memorandum and Articles or of the charter, ESTATUTOS, by-laws
or any other constitutive document of any of the Company's
subsidiaries or (C) result in any violation of any statute or
any regulation, rule or order of any governmental agency or
body or court having
<PAGE>
5
jurisdiction over the Company or any of its subsidiaries or
any of their properties or assets.
(i) No consent, approval, authorization or order of,
or filing or registration with, any governmental agency or
body or court is required for the execution, delivery and
performance of this Agreement by the Company and the
Significant Subsidiaries and the consummation of the
transactions contemplated hereby, except for the registration
of the Shares under the Securities Act and such consents,
approvals, authorizations, registrations or qualifications as
may be required under the U.S. Securities Exchange Act of
1934, as amended (the "Exchange Act"), and applicable U.S.
state securities or "blue sky" laws in connection with the
purchase and distribution of the Shares by the Underwriters
and except for the filing with the British Virgin Islands
Registrar of Companies of any amendment to the Company's
Memorandum and Articles of Association pursuant to Section
7(r) hereof.
(j) Except as described in the Prospectus, there are
no contracts, agreements or understandings between the Company
and any other person which grant 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
owned or to be owned by such person or to require the Company
to include such securities as part of the securities
registered pursuant to the Registration Statements or in any
securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act.
(k) Except for offers and sales of the Company's
Class A Convertible Preferred Shares as described in the
Prospectus, the Company has not offered or sold any Common
Shares or securities convertible or exchangeable into Common
Shares during the six-month period preceding the date of the
Prospectus (including, without limitation, any offers or sales
pursuant to (i) Section 4(2) of , or Regulation D under, the
Securities Act or (ii) Rule 144A under, or Regulation S of,
the Securities Act). The offer and sale by the Company of its
Class A Convertible Preferred Shares and Class B Convertible
Preferred Shares as described in the Prospectus and in Item 15
of the Primary Registration Statement were not, and are not,
required to be integrated with the offering of the Shares as
contemplated under this Agreement and, accordingly, to be
registered under the Securities Act.
(l) Neither the Company nor any of its subsidiaries
has sustained, since the date of the latest audited financial
statements included in the Prospectus, any material loss or
interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the
Prospectus; and, since such date, there has not been any
change in the capital stock, any increase in current
liabilities or any decrease in shareholders' equity of the
Company or any of its subsidiaries or any material adverse
change, or any
<PAGE>
6
development involving a prospective material adverse change,
in or affecting the business, properties, results of
operations, financial condition or prospects of the Company
and its subsidiaries taken as a whole ("Material Adverse
Effect"), otherwise than as set forth in the Prospectus.
(m) The consolidated financial statements of the
Company and its subsidiaries and the statement of historical
net assets to be sold by IMPSAT Corporation at September 30,
1999 and the statements of net revenues and direct costs and
expenses for the retail dial-up access businesses of each of
IMPSAT S.A. (Argentina), MANDIC INTERNET LTDA (formerly
MANDIC.COM LTDA.) (Brazil) and IMPSAT S.A. (Colombia)
(collectively, the "IMPSAT Entities") filed as part of the
Registration Statements or included in the Prospectus present
fairly, in all material respects, the financial condition and
results of operations of the entities purported to be shown
thereby, at the dates and for the periods indicated, and have
been prepared in conformity with U.S. generally accepted
accounting principles applied on a consistent basis throughout
the periods indicated. The summary financial data and selected
financial data included in the Registration Statements and the
Prospectus have been fairly and accurately extracted from the
financial statements and pro forma consolidated financial
information of the Company filed as part of the Registration
Statements or included in the Prospectus. The pro forma
consolidated financial information included in the Prospectus
(i) is presented fairly in all material respects, (ii) has
been prepared in accordance with the Rules and Regulations
with respect to pro forma financial statements and (iii) has
been properly compiled on the bases described therein, and the
assumptions used in the preparation of the pro forma
consolidated financial information included in the Prospectus
are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or
circumstances referred to therein.
(n) No forward-looking statement (with the meaning to
Section 27A of the Securities Act and Section 21E of the
Exchange Act) contained in the Prospectus has been made or
reaffirmed without a reasonable basis or has been disclosed
other than in good faith.
(o) Deloitte & Touche LLP and its affiliates in
Argentina, Brazil and Colombia (collectively, "Deloitte &
Touche"), which have certified the financial statements of the
Company and of the IMPSAT Entities, whose reports appear in
the Prospectus and which have delivered the initial comfort
letter referred to in Section 5(q) hereof, are independent
public accountants as required by the Securities Act and the
Rules and Regulations.
(p) Each of the Company and its subsidiaries owns,
leases or licenses all properties and assets necessary to
conduct its business as presently conducted and as proposed to
be conducted.
<PAGE>
7
(q) Neither the Company nor any of its subsidiaries
owns any real property; the Company and each of its
subsidiaries have good and marketable title to all personal
property owned by them, 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 all real property and
buildings held under lease by the Company and its subsidiaries
are held by them under valid, subsisting and enforceable
leases, with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.
(r) Except as set forth in the Prospectus, each of
the Company and its subsidiaries possesses adequate
certificates, authorities, approvals, licenses or permits
issued by appropriate governmental agencies or bodies
necessary to conduct its business as presently conducted and
as proposed to be conducted, and has not received any notice
of proceedings relating to the revocation or modification of
any such certificate, authority, approval, license or permit.
(s) The Company and each of its subsidiaries carry,
or are covered by, insurance from insurers of recognized
financial responsibility in such amounts and covering such
risks as is adequate for the conduct of their respective
businesses and the value of their respective properties and as
is prudent and customary for companies engaged in similar
businesses in similar industries; all policies of insurance
insuring the Company or any of its subsidiaries or their
respective businesses, assets, directors, officers and
employees are in full force and effect; the Company and its
subsidiaries are in compliance with the terms of such policies
and instruments in all material respects; and there are no
claims by the Company or any of its subsidiaries under any
such policy or instrument as to which any insurance company is
denying liability or defending under a reservation of rights
clause; neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for; and
neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that could not
reasonably be expected to have a Material Adverse Effect.
(t) Except as set forth in the Prospectus, the
Company and each of its subsidiaries own or possess adequate
rights to use all material uniform resource locators (URLs),
patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations,
copyrights and licenses necessary for them to conduct their
respective businesses as now conducted and as proposed to be
conducted and have no reason to believe that the conduct of
their
<PAGE>
8
respective businesses will conflict with, and have not
received any notice of any claim of conflict with, any such
rights of any other person or entity.
(u) There are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a
party or of which any property or assets of the Company or any
of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, could
reasonably be expected to have a Material Adverse Effect; and
to the Company's knowledge, no such proceedings are threatened
or contemplated by any governmental agency or body or
threatened by any other person or entity.
(v) There are no contracts or other documents which
are required to be described in the Prospectus or filed as
exhibits to either of the Registration Statements by the
Securities Act or by the Rules and Regulations which have not
been described in the Prospectus or filed as exhibits to the
Registration Statements.
(w) No relationship, direct or indirect, exists
between or among the Company or any of its subsidiaries on the
one hand, and the directors, officers, shareholders, customers
or suppliers of the Company or such subsidiary, as the case
may be, on the other hand, which is required to be described
in the Prospectus which is not so described.
(x) No labor disturbance by the employees of the
Company or its subsidiaries exists or, to the knowledge of the
Company, is imminent, which could reasonably be expected to
have a Material Adverse Effect. Each of the Company and its
subsidiaries is in compliance in all material respects with
all applicable laws in their respective jurisdictions relating
to employees (including, without limitation, laws relating to
pension contributions and obligations).
(y) Each of the Company and its subsidiaries has
filed with all appropriate taxing authorities all income,
franchise or other tax returns required to be filed through
the date hereof and has paid all taxes due thereon; each such
tax return, report or other information, was, when filed,
accurate and complete in all material respects; and no tax
deficiency has been determined adversely to the Company or any
of its subsidiaries which has had (nor does the Company have
any knowledge of any tax deficiency which, if determined
adversely to the Company or any of its subsidiaries, could
reasonably be expected to have) a Material Adverse Effect.
(z) All dividends and other distributions properly
declared and payable on the Shares may under the current laws
and regulations of the British Virgin Islands be paid in U.S.
dollars that may be freely transferred from or out of the
British Virgin Islands without the necessity of obtaining any
consents, approvals, authorizations, orders or clearances from
or registering with any governmental agency or body or court
of the British Virgin Islands.
<PAGE>
9
(aa) No stamp or other issuance or transfer taxes or
duties and no capital gains, income, withholding or other
taxes are payable by or on behalf of the Underwriters to the
government of the British Virgin Islands or any political
subdivision or taxing authority thereof or therein in
connection with (i) the issuance and sale of the Shares by the
Company to the Underwriters in accordance with this Agreement,
(ii) the delivery of the Shares to or for the respective
accounts of the Underwriters in the manner contemplated in
this Agreement or (iii) the resale and delivery by the
Underwriters of the Shares to the initial purchasers therefrom
as contemplated in the Prospectus.
(bb) The Common Shares have been approved for
listing, subject only to official notice of issuance, on the
National Association of Securities Dealers, Inc. ("NASD")
Automated Quotation National Market System (the "Nasdaq
National Market System").
(cc) None of the Company, any subsidiary of the
Company or any director or officer of the Company or of any
subsidiary of the Company is (i) a director, officer, or
partner of any brokerage firm, broker or dealer that is a
member of the NASD ("NASD member") or (ii) directly or
indirectly, a "person associated with" a NASD member or an
"affiliate" of a NASD member, as such terms are used in the
NASD by-laws or rules.
(dd) Since the date as of which information is given
in the Prospectus, and except as set forth in the Prospectus,
the Company has not (i) issued or granted any securities, (ii)
incurred any liability or obligation, direct or contingent,
other than liabilities and obligations which were incurred in
the ordinary course of business, (iii) entered into any
transaction not in the ordinary course of business or (iv)
declared or paid any dividend on the Common Shares.
(ee) The Company (i) makes and keeps accurate books
and records and (ii) maintains internal accounting controls
which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation
of its financial statements and to maintain accountability for
its assets, (C) access to its assets is permitted only in
accordance with management's authorization and (D) the
reported accountability for its assets is compared with
existing assets at reasonable intervals.
(ff) Neither the Company nor any of its subsidiaries,
nor any director, officer, agent, employee or other person
associated with or acting on behalf of the Company or any of
its subsidiaries, has used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated
or is in violation of any provision of the
<PAGE>
10
U.S. Foreign Corrupt Practices Act of 1977, as amended; or
made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(gg) Neither the Company nor any of its subsidiaries
(i) is in violation of, in the case of the Company, its
Memorandum and Articles of Association, and in the case of
each such subsidiary, of its charter, ESTATUTOS, by-laws or
any other constitutive document, as the case may be, (ii) is
in default in any material respect, and no event has occurred
which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any
material indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties or assets
is subject or (iii) is in violation in any material respect of
any statute or any rule, regulation or order of any
governmental agency or body or court to which it or its
properties or assets may be subject.
(hh) For the purpose described in Section 17 hereof,
under the laws of the State of New York relating to submission
to jurisdiction, the Company has validly and irrevocably
submitted to the jurisdiction of any New York state or U.S.
federal court located in the Borough of Manhattan, New York
City, has validly and irrevocably waived any objection to the
venue of a proceeding in any such court, and has validly and
irrevocably appointed CT Corporation System as its authorized
agent for service of process.
(ii) As of the date hereof, neither the Company nor
any of its subsidiaries is, or intends to conduct its business
activities in such a manner that it would become, and, after
giving effect to the transactions contemplated hereunder,
neither the Company nor any of its subsidiaries will be
required to be registered as, an "investment company" pursuant
to the U.S. Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations of
the Commission thereunder.
(jj) Under the laws of the British Virgin Islands and
under the laws of the jurisdiction of incorporation or
organization of each Significant Subsidiary, the submission by
the Company and each Significant Subsidiary to the
jurisdiction of any New York state or U.S. federal court
sitting in the Borough of Manhattan, New York City, and the
choice of the law of the State of New York to govern this
Agreement, will be binding upon the Company and the
Significant Subsidiaries, respectively and would be
enforceable in any judicial or administrative proceeding in
the British Virgin Islands, in the case of the Company, or in
the relevant jurisdiction of incorporation or organization, in
the case of each Significant Subsidiary (in each case subject
to any applicable exceptions to the recognition or enforcement
of foreign judgments in the British Virgin Islands or in such
other jurisdiction of incorporation or organization).
<PAGE>
11
(kk) Neither the Company nor any of its subsidiaries
has (i) violated any material environmental statute, rule,
regulation, order, judgment, decree or permit in any
jurisdiction in which the Company or such subsidiary conducts
any business or owns or holds any properties or assets or (ii)
received notice of any actual or potential liability for the
investigation or remediation of any disposal or release of
hazardous or toxic substance or wastes, pollutants or
contaminants, except where such violation or liability could
not reasonably be expected to have a Material Adverse Effect.
(ll) The acquisitions of the retail dial-up access
customers and related assets of the IMPSAT Entities in
Argentina and Brazil have been completed in accordance with
the terms set forth in the Prospectus. Other than the pending
acquisition of the retail dial-up access customers and related
assets of IMPSAT S.A. (Colombia), there are no material
acquisitions of businesses or assets by the Company or any of
its subsidiaries pending or currently being negotiated.
(mm) Based on its projected income and assets
(including goodwill), which it believes to be reasonable, the
nature of the Company's business and assets and taking into
account the receipt of proceeds from the offering and sale of
the Shares, the Company believes that it will not be
classified as a passive foreign investment company ("PFIC")
within the meaning of Section 1297(a) of the U.S. Internal
Revenue Code of 1986, as amended (the "Internal Revenue
Code"), including the regulations and rulings and
interpretations thereunder, for its current taxable year. The
Company intends to conduct its business activities in an
effort to reduce the risk of its classification as a PFIC.
(nn) Any reprogramming required to permit the proper
functioning, in and following the year 2000, of the Company's
and its subsidiaries' (i) computer systems and (ii) equipment
containing embedded microchips (including systems and
equipment supplied by others or with which the Company's
systems interface) and the testing of all such systems and
equipment, as so reprogrammed, will be completed by November
30, 1999. The cost to the Company of such reprogramming and
testing and of the reasonably foreseeable consequences of year
2000 to the Company (including, without limitation,
reprogramming errors and the failure of others' systems or
equipment) will not result in a Material Adverse Effect.
Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and
management information systems of the Company and its
subsidiaries are and, with ordinary course upgrading and
maintenance, will continue to be, sufficient to permit the
Company to conduct its business without a Material Adverse
Effect.
(oo) None of the Company and any of its subsidiaries,
or any of their respective affiliates, does business with the
government of Cuba or with any person or affiliate located in
Cuba.
<PAGE>
12
(pp) Neither the Company nor any of its officers,
directors or affiliates has taken, directly or indirectly, any
action designed to stabilize or manipulate the trading price
of the Common Shares, or that might reasonably be expected to
cause or result in stabilization or manipulation of the
trading price of the Common Shares.
2. PURCHASE OF THE SHARES BY THE UNDERWRITERS.
On the basis of the representations and warranties contained
in, and subject to the terms and conditions of, this Agreement, the Company
agrees to sell 8,200,000 Firm Shares to the several Underwriters, and each of
the Underwriters, severally and not jointly, agrees to purchase the number of
Firm Shares set opposite that Underwriter's name in Schedule 1 hereto. The
respective purchase obligations of the Underwriters with respect to the Firm
Shares shall be rounded among the Underwriters to avoid fractional shares, as
the Representatives may determine.
In addition, the Company grants to the Underwriters an option
to purchase up to 1,230,000 Option Shares. Such option is granted solely for the
purpose of covering over-allotments in the sale of Firm Shares and is
exercisable as provided in Section 4 hereof. The Option Shares shall be
purchased severally for the account of the Underwriters in proportion to the
number of Firm Shares set opposite the name of such Underwriters in Schedule 1
hereto. The respective purchase obligations of each Underwriter with respect to
the Option Shares shall be adjusted by the Representatives so that no
Underwriter shall be obligated to purchase Option Shares other than in 100-share
amounts.
The purchase price to be paid by the Underwriters for the Firm
Shares and any Option Shares shall be U.S.$__.00 per share.
The Company shall not be obligated to deliver any of the
Shares to be delivered on the First Delivery Date or the Second Delivery Date
(as defined in Section 4), as the case may be, except upon payment for all the
Shares to be purchased on such Delivery Date as provided herein.
3. OFFERING OF SHARES BY THE UNDERWRITERS.
Upon authorization by the Representatives of the release of
the Firm Shares, the several Underwriters propose to offer the Firm Shares for
sale upon the terms and conditions set forth in the Prospectus; PROVIDED,
HOWEVER, that no Shares registered pursuant to the Rule 462(b) Registration
Statement, if any, shall be offered prior to the Effective Time thereof.
It is understood that up to 820,000 Firm Shares ("Directed
Sale Shares") may initially be reserved by the several Underwriters for offer
and sale upon the terms and conditions set forth in the Prospectus and in
accordance with the rules and regulations of the NASD to certain persons
designated by the Company ("Directed Sale Share Purchasers") who have heretofore
delivered to the Representatives offers to purchase Directed Sale Shares in form
satisfactory to the Representatives, and that any allocation of Directed Sale
Shares among the Directed Sale Share Purchasers shall be made in accordance with
timely directions received by the Representatives from
<PAGE>
13
the Company; PROVIDED, HOWEVER, that under no circumstances shall the
Representatives or any Underwriter be liable to, or have any liability
whatsoever for, the Company or to any Directed Sale Share Purchaser for any
action taken or omitted in good faith in connection with such offering to the
Directed Sale Share Purchasers. It is further understood that any such Directed
Sale Shares which are not purchased by the Directed Sale Share Purchasers will
be offered by the Underwriters to the public upon the terms and conditions set
forth in the Prospectus.
4. DELIVERY OF AND PAYMENT FOR THE SHARES. Delivery of and
payment for the Firm Shares shall be made at the office of Simpson Thacher &
Bartlett, U.S. counsel to the Underwriters, located at 425 Lexington Avenue, New
York, New York 10017, United States, at 10:00 A.M., New York City time, on the
third full business day following the date of this Agreement or at such other
date or place as shall be determined by agreement between the Representatives
and the Company. This date and time are sometimes referred to as the "First
Delivery Date." On the First Delivery Date, the Company shall deliver or cause
to be delivered certificates representing the Firm Shares to the Representatives
for the account of each Underwriter against payment to or upon the order of the
Company of the purchase price by wire transfer in immediately available funds to
a bank account at a bank located in New York City designated by the Company in
writing at least one business day prior to the First Delivery Date. Time shall
be of the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of each Underwriter
hereunder. Upon delivery, the Firm Shares shall be registered in such names and
in such denominations as the Representatives shall request in writing not less
than two full business days prior to the First Delivery Date. For the purpose of
expediting the checking and packaging of the certificates for the Firm Shares,
the Company shall make the certificates representing the Firm Shares available
for inspection by the Representatives in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to the First Delivery Date.
At any time on or before the 30th day after the date of this
Agreement, the option granted in Section 2 may be exercised in whole or in part
from time to time by written notice being given to the Company by the
Representatives. Such notice shall set forth the aggregate number of Option
Shares as to which the option is being exercised, the names in which the Option
Shares are to be registered, the denominations in which the Option Shares are to
be issued and the date and time, as determined by the Representatives, when the
Option Shares are to be delivered; PROVIDED, HOWEVER, that this date and time
shall not be earlier than the First Delivery Date nor earlier than the second
business day after the date on which the option shall have been exercised nor
later than the fifth business day after the date on which the option shall have
been exercised. The date and time the Option Shares are delivered are sometimes
referred to as the "Second Delivery Date" and the First Delivery Date and the
Second Delivery Date are sometimes each referred to as a "Delivery Date".
Delivery of and payment for the Option Shares shall be made at
the place specified in the first paragraph of this Section 4 (or at such other
place as shall be determined by agreement between the Representatives and the
Company) at 10:00 A.M., New York City time, on the Second Delivery Date. On the
Second Delivery Date, the Company shall deliver or cause to be delivered the
certificates representing the Option Shares to the Representatives for the
account of each
<PAGE>
14
Underwriter against payment to or upon the order of the Company of the purchase
price by wire transfer in immediately available funds to the bank account
designated by the Company pursuant to the first paragraph of this Section 4.
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of the obligation of each
Underwriter hereunder. Upon delivery, the Option Shares shall be registered in
such names and in such denominations as the Representatives shall request in the
aforesaid written notice. For the purpose of expediting the checking and
packaging of the certificates for the Option Shares, the Company shall make the
certificates representing the Option Shares available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the Second Delivery Date.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants
and agrees:
(a) To prepare the Rule 462(b) Registration
Statement, if necessary, in a form approved by the
Representatives and to file such Rule 462(b) Registration
Statement with the Commission on the date hereof; to prepare
the Prospectus in a form approved by the Representatives and
to file such Prospectus pursuant to Rule 424(b) under the
Securities Act not later than the Commission's close of
business on the second business day following the execution
and delivery of this Agreement; to make no further amendment
or any supplement to the Registration Statements or to the
Prospectus except as permitted herein; to advise the
Representatives, promptly after it receives notice thereof, of
the time when any amendment to either Registration Statement
has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to
furnish the Representatives with copies thereof to advise the
Representatives, promptly after it receives notice thereof, of
the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus, of the suspension of the
qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the
Registration Statements or the Prospectus or for additional
information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any
such qualification, to use promptly its best efforts to obtain
its withdrawal;
(b) To furnish promptly to each of the
Representatives and to U.S. counsel to the Underwriters a copy
of each draft of the Registration Statements as submitted for
confidential review by the Commission and a signed copy of
each of the Registration Statements as originally filed with
the Commission, and each amendment thereto filed with the
Commission, including all consents and other exhibits
submitted or filed therewith;
(c) To deliver promptly to the Representatives in New
York City such number of the following documents as the
Representatives shall request: (i)
<PAGE>
15
conformed copies of the Registration Statements as originally
filed with the Commission and each amendment thereto (in each
case excluding exhibits other than this Agreement and the
computation of per share earnings), (ii) each Preliminary
Prospectus, the Prospectus (not later than 10:00 A.M., New
York City time, of the day following the execution and
delivery of this Agreement) and any amended or supplemented
Prospectus (not later than 10:00 A.M., New York City time, on
the day following the date of such amendment or supplement)
and, if the delivery of a prospectus is required at any time
after the Effective Time of the Primary Registration Statement
in connection with the offering or sale of the Shares (or any
other securities relating thereto) and if at such time any
event shall have occurred as a result of which the Prospectus
as then amended or supplemented would include any 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 not misleading, or, if for any
other reason it shall be necessary during such same period to
amend or supplement the Prospectus in order to comply with the
Securities Act, to notify the Representatives and, upon their
request, to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as
the Representatives may from time to time request of an
amended or supplemented Prospectus which will correct such
statement or omission or effect such compliance;
(d) To file promptly with the Commission any
amendment to the Registration Statements or the Prospectus or
any amendment or supplement to the Prospectus that may, in the
judgment of the Company or the Representatives, be required by
the Securities Act or requested by the Commission;
(e) Prior to filing with the Commission (i) any
amendment to either of the Registration Statements or
amendment any or supplement to the Prospectus or (ii) any
Prospectus pursuant to Rule 424 of the Rules and Regulations,
to furnish a copy thereof to the Representatives and counsel
for the Underwriters and obtain the consent of the
Representatives to the filing;
(f) As soon as practicable after the Effective Date
of the Primary Registration Statement, to make generally
available to the Company's security holders and to deliver to
the Representatives an earning statement of the Company and
its subsidiaries (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule
158);
(g) For a period of five years following the
Effective Date of the Primary Registration Statement, to
furnish to the Representatives copies of all materials
furnished by the Company to its shareholders and all public
reports and all reports and financial statements furnished by
the Company to (i) the principal U.S. national securities
exchange or automatic quotation system upon which the Common
Shares may be listed or quoted pursuant to requirements of or
agreements with such
<PAGE>
16
securities exchange or system or (ii) the Commission pursuant
to the Exchange Act or any rule or regulation of the
Commission thereunder;
(h) Promptly from time to time to take such action as
the Representatives may request to qualify the Shares for
offering and sale under the securities laws of such
jurisdictions as the Representatives may request and to comply
with such laws so as to permit sales and dealings therein in
such jurisdictions for as long as may be necessary to complete
the distribution of the Shares; PROVIDED, HOWEVER, that in
connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent
to service of process in any jurisdiction in any action other
than one arising out of the offering or sale of the Shares;
(i) (i) For a period of 180 days from the date of the
Prospectus, not to, directly or indirectly, (a) offer for
sale, sell or contract to sell, pledge or otherwise dispose
of, or announce an offering of (or enter into any transaction
or device which is designed to, or could be expected to,
result in the disposition or purchase by any person at any
time in the future of) any Common Shares or other equity
securities of the Company or any securities convertible into
or exchangeable for any Common Shares or other equity
securities, or sell or grant options, rights or warrants with
respect to any Common Shares or equity securities of the
Company or any securities convertible into or exchangeable for
any Common Shares or other equity securities (other than
options granted or Common Shares issued pursuant to the
Company's share option plan), or (b) enter into any swap or
other derivatives transaction that transfers to another, in
whole or in part, any of the economic benefits or risks of
ownership of any Common Shares or other equity Securities,
whether any such transaction described in clause (a) or (b)
above is to be settled by delivery of Common Shares or other
equity securities in cash or otherwise, in each case without
the prior written consent of Lehman Brothers Inc. on behalf of
the Underwriters; and (ii) to cause each director, officer and
shareholders of the Company listed on Schedule 2 to furnish to
the Representatives, prior to the First Delivery Date, a
"lock-up" letter (each, a "Lock-up Letter"), substantially in
the form of Exhibit A hereto;
(j) Prior to the Effective Date, to apply for the
inclusion of the Common Shares on the Nasdaq National Market
System and to use its best efforts to effect such quotation,
subject only to official notice of issuance, prior to the
First Delivery Date;
(k) To use its best efforts to cause the Shares to be
accepted for settlement through the facilities of The
Depository Trust Company ("DTC");
(l) To complete the 2-for-1 share split in respect of
the Common Shares as contemplated in the Prospectus
(including, without limitation, to provide that the holders of
the Company's Class B Convertible Preferred Shares shall be
entitled to convert such shares solely into post-share split
Common Shares);
<PAGE>
17
(m) To duly appoint The Bank of New York (or such
other leading U.S. financial institution as may be reasonably
satisfactory to the Representatives) as registrar and transfer
agent for the Company's Common Shares;
(n) To apply the net proceeds from the sale of the
Shares being sold by the Company as set forth in the
Prospectus under the caption "Use of Proceeds";
(o) Between the date hereof and the First Delivery
Date (both dates inclusive), to notify and consult with the
Representatives, and to cause its subsidiaries and all other
parties acting on its or their behalf to notify and consult
with the Representatives, prior to issuing any press release
or other announcement which could be material in the context
of the distribution of the Shares;
(p) To conduct its business activities in a manner to
avoid the requirement to be registered as an "investment
company" pursuant to the Investment Company Act and the rules
and regulations of the Commission thereunder, and that none of
the Company's subsidiaries shall become an "investment
company" within the meaning of such term under the Investment
Company Act and the rules and regulations of the Commission
thereunder;
(q) From and after the First Delivery Date, to use
its best efforts to maintain the Shares as "marketable
securities" within the meaning of Section 1296(e) of the
Internal Revenue Code and the regulations, rulings and
interpretations thereunder; to monitor its PFIC status and
take all reasonable steps to notify U.S. shareholders as
promptly as practicable in the event that the Company believes
it will become a PFIC in any taxable year; and if the Company
becomes a PFIC, to provide U.S. shareholders, upon request,
with the annual information statement and any other
information necessary for U.S. shareholders to make a
"qualified electing fund" election under Section 1295 of the
Internal Revenue Code and the regulations thereunder;
(r) To indemnify and hold harmless the Underwriters
against any British Virgin Islands documentary, stamp or
similar issuance tax, including any interest and penalties, on
the issuance, sale and delivery by the Company of the Shares
and on the execution and delivery of this Agreement; and
(s) To cause Deloitte & Touche to deliver one or more
"initial comfort letters", with respect to the financial
statements and financial data, and pro forma consolidated
financial statements, of the Company and the IMPSAT Entities,
dated the date of the Prospectus, in form and substance
reasonably satisfactory to the Representatives, at or prior to
the time copies of the Prospectus are furnished to the
Representatives.
<PAGE>
18
6. EXPENSES. The Company and the Significant Subsidiaries
agree, jointly and severally, to pay the following fees, costs and expenses on a
timely basis:
(a) The costs incident to the authorization,
issuance, sale and delivery of the Shares (and any VAT or
other taxes payable in that connection);
(b) The costs incident to the preparation, printing
and filing under the Securities Act of the Registration
Statements and any amendments and exhibits thereto;
(c) The costs of preparing, printing and distributing
the Registration Statements as originally submitted to the
Commission for confidential review and as formally filed with
the Commission and each amendment thereto and any
post-effective amendments thereof (including, in each case,
exhibits), any Preliminary Prospectus, the Prospectus and any
amendment or supplement to the Prospectus, all as provided in
this Agreement;
(d) The costs of producing and distributing this
Agreement, and any other related documents in connection with
the offer, sale and delivery of the Shares;
(e) The filing fees incident to securing any required
review by the NASD of the terms of sale of the Shares;
(f) Any applicable listing or other fees, including,
without limitation, the fees for listing of the Common Shares
on the Nasdaq National Market System;
(g) The fees and expenses of qualifying the Shares
under the securities laws of the several jurisdictions as
provided in Section 5(h) and of preparing, printing and
distributing a "blue sky" memorandum (including related fees
and expenses of U.S. counsel to the Underwriters);
(h) The fees and expenses of U.S., British Virgin
Islands and other counsel to the Company and of Deloitte &
Touche, in each case relating to the transactions contemplated
by this Agreement;
(i) All costs and expenses of the Underwriters
including the (related fees and disbursements of U.S. counsel
to the Underwriters), incident to the offer and sale of the
Shares by the Underwriters to the Directed Sale Share
Purchasers;
(j) All costs and expenses incurred by or on behalf
of the Company in connection with the "road show" for the
offering of the Shares;
[(k) the aggregate amount of U.S.$______ to the
Representatives in partial reimbursement of their
out-of-pocket expenses (including the fees and expenses of
<PAGE>
19
U.S. counsel to the Underwriters) relating to the transactions
contemplated by this Agreement;] and
(l) All other costs and expenses incident to the
performance of the obligations of the Company and the
Significant Subsidiaries under this Agreement.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company
contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Rule 462(b) Registration Statement, if any,
and the Prospectus shall have been timely filed with the
Commission in accordance with Section 5(a); no stop order
suspending the effectiveness of either of the Registration
Statements or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or
threatened by the Commission; and any request of the
Commission for inclusion of additional information in either
of the Registration Statements or the Prospectus or otherwise
shall have been complied with.
(b) No Underwriter shall have discovered and
disclosed to the Company on or prior to such Delivery Date
that either of the Registration Statements or the Prospectus
or any amendment or supplement thereto contains any untrue
statement of a fact which, in the opinion of Simpson Thacher &
Bartlett, U.S. counsel for the Underwriters, is material or
omits to state any fact which, in the opinion of such counsel,
is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this
Agreement, the Common Shares (including the Shares), the
Registration Statements and the Prospectus, and all other
legal matters relating to this Agreement and the transactions
contemplated hereby shall be satisfactory in all respects to
U.S. counsel for the Underwriters, and the Company shall have
furnished to such counsel all documents and information that
they may reasonably request to enable them to pass upon such
matters and to furnish to the Representatives their written
opinion, addressed to the Underwriters and dated such Delivery
Date, covering such matters as the Representatives may
reasonably request..
(d) Paul, Hastings, Janofsky & Walker LLP, U.S.
counsel to the Company, shall have furnished to the
Representatives their written opinion, addressed to the
Underwriters and dated such Delivery Date, in form and
substance satisfactory to the Representatives, to the effect
that:
(i) The Primary Registration Statement was
declared effective under the Securities Act as of the
date and time specified in such opinion; the
<PAGE>
20
Rule 462(b) Registration Statement, if any, was filed
with the Commission on the date specified therein;
the Prospectus was filed with the Commission pursuant
to the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such opinion on the date
specified therein; and no stop order suspending the
effectiveness of either of the Registration
Statements has been issued and, to the knowledge of
such counsel, no proceeding for that purpose is
pending or threatened by the Commission;
(ii) The Registration Statements, as of their
respective Effective Dates, and the Prospectus, as of
its date, and any further amendments or supplements
thereto, as of their respective dates, made by the
Company prior to such Delivery Date (other than the
financial statements and other financial data
contained therein, as to which such counsel need
express no opinion) complied as to form in all
material respects with the requirements of the
Securities Act and the Rules and Regulations;
(iii) To such counsel's knowledge, there are
no contracts or other documents which are required to
be described in the Prospectus or filed as exhibits
to the Registration Statements under the Securities
Act or under the Rules and Regulations which have not
been described or filed as exhibits to the
Registration Statements;
(iv) To such counsel's knowledge and except
as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any
property or asset of the Company or any of its
subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries,
might have a Material Adverse Effect on the Company
and its subsidiaries; and, to such counsel's
knowledge, no such proceedings are threatened or
contemplated by any governmental agency or body or
threatened by any other person or entity;
(v) Assuming due authorization, execution
and delivery by the Company under the laws of the
British Virgin Islands and by each of the Significant
Subsidiaries under the laws of its jurisdiction of
incorporation or organization, this Agreement has
been duly executed and delivered by each of the
Company and the Significant Subsidiaries,
respectively, in accordance with the laws of the
State of New York and constitutes a valid and legally
binding agreement of each of the Company and the
Significant Subsidiaries, respectively, enforceable
in the State of New York in accordance with its
terms, except as enforcement thereof may be limited
by bankruptcy, insolvency moratorium and similar laws
affecting enforcement of creditors' rights generally
and by general principles of equity (regardless of
whether in a proceeding in equity or at law) and
except, further, as indemnification provisions may be
limited by considerations of public policy;
<PAGE>
21
(vi) To such counsel's knowledge, and except
as set forth in the Prospectus, there are no
preemptive or other rights to subscribe for or to
purchase, nor any restriction upon the voting or
transfer of, any Shares pursuant to any agreement,
contract or other instrument to which the Company is
a party;
(vii) The Company is not and, after giving
effect to the offering and the sale of the Shares,
will not be an "investment company" or an entity
"controlled" by an "investment company" (as such
terms are defined in the Investment Company Act);
(viii) Assuming the validity of such actions
under the laws of the British Virgin Islands and
under the laws of the jurisdiction of incorporation
or organization of each of the Significant
Subsidiaries, under the laws of the State of New York
relating to submission of jurisdiction, each of the
Company and the Significant Subsidiaries has validly
and irrevocably submitted to the non-exclusive
personal jurisdiction of any U.S. federal or New York
state court located in the Borough of Manhattan, The
City of New York, in any action arising out of or
relating to this Agreement and has validly and
irrevocably appointed CT Corporation System (or such
other successor agent as the parties hereto shall
mutually agree), as its authorized agent for the
purposes described in Section 17 of this Agreement;
and service of process effected in the manner set
forth in Section 17 of this Agreement will be
effective to confer valid personal jurisdiction over
each of the Company and the Significant Subsidiaries
in any such action; and each of the Company and the
Significant Subsidiaries has legally, validly,
effectively and irrevocably waived (A) the defense of
an inconvenient forum to the maintenance of any such
suit or proceeding and (B) any immunity to
jurisdiction to which it may otherwise be entitled in
any such suit or proceeding;
(ix) To such counsel's knowledge, the issue
and sale of the Shares being delivered on such
Delivery Date by the Company and the compliance by
the Company and the Significant Subsidiaries with all
of the provisions of this Agreement and the
consummation of the transactions contemplated hereby
will not conflict with or result in a breach or
violation of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel
to which the Company or any of its subsidiaries is a
party or by which the Company or any of its
subsidiaries is bound or to which any of the
properties or assets of the Company or any of its
subsidiaries is subject, nor will such actions
result in any violation of any U.S. federal or New
York state statute or any order, rule or regulation
known to such counsel of any U.S. federal or New
York state
<PAGE>
22
governmental agency or body or court having
jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets;
(x) No consent, approval, authorization or
order of, or filing or registration with, any U.S.
federal or New York state governmental agency or body
or court required for the execution, delivery and
performance of this Agreement by the Company and the
Significant Subsidiaries and the consummation of the
transactions contemplated hereby, except for the
registration of the Shares under the Securities Act
and such consents, approvals, authorizations,
registrations or qualifications as may be required
under the Exchange Act in connection with the listing
of the Common Shares on the Nasdaq National Market
System or under U.S. state securities or "blue sky"
laws in connection with the purchase and distribution
of the Shares by the Underwriters;
(xi) The offer and sale by the Company of its
Class A Convertible Preferred Shares and its Class B
Convertible Preferred Shares as described in the
Prospectus and in Item 15 of the Primary Registration
Statement were not, and are not, required to be
integrated with the offering of the Shares as
contemplated under this Agreement and, accordingly,
to be registered under the Securities Act.
(xii) To such counsel's knowledge and except
as set forth in 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 owned or to be owned by
such person or to require the Company to include such
securities in the securities registered pursuant to
the Registration Statements or in any securities
being registered pursuant to any other registration
statement filed by the Company under the Securities
Act.
(xiii) The statements contained in the
Prospectus under the caption "Taxation - U.S. Federal
Income Tax Considerations", insofar as they purport
to summarize U.S. federal tax statutes, rules and
regulations, constitute accurate summaries thereof in
all material respects and the tax opinion filed as
Exhibit 8.1 to the Registration Statement is
confirmed;
(xiv) The statements contained in the
Prospectus under the captions "Risk Factors - We are
dependent on our intellectual property" and "Business
- Intellectual Property and Proprietary Rights",
insofar as they purport to constitute summaries of
intellectual property-related laws and other matters,
constitute accurate summaries thereof in all material
respects; and
<PAGE>
23
(xv) The statements contained in the
Prospectus under the caption "Shares Eligible for
Future Sale", insofar as they purport to constitute
summaries of the terms of U.S. federal securities
laws or rules and regulations thereunder or contracts
or other documents, constitute accurate and complete
summaries of the terms of such statutes, rules and
regulations and contracts and other documents in all
material respects.
The opinion of such counsel shall also include an
opinion or statement to the effect that (x) such counsel has
acted as U.S. counsel to the Company in connection with
previous financing transactions and has acted as U.S. counsel
to the Company in connection with the preparation of the
Registration Statements and the Prospectus, and (y) based on
the foregoing, no facts have come to the attention of such
counsel which lead them to believe that the Registration
Statements, as of their respective Effective Dates, contained
any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary
in order to make the statements therein not misleading, or
that the Prospectus contains any untrue statement of a
material fact or omits to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The foregoing opinion or statement may
be qualified by a statement to the effect that such counsel
does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statements or the Prospectus (except as stated in
paragraphs xiii and xiv above).
In rendering the foregoing opinion, such counsel may
(i) state that their opinion is limited to matters governed by
the federal laws and New York state laws and (ii) rely, as to
matters involving the laws of the British Virgin Islands, upon
the opinion of Conyers Dill & Pearman rendered pursuant to
Section 7(e).
(e) Conyers Dill & Pearman, British Virgin Islands
counsel to the Company, shall have furnished to the
Representatives their written opinion, addressed to the
Underwriters and dated such Delivery Date, in form and
substance satisfactory to the Representatives, to the effect
that:
(i) The Company has been duly incorporated
and is validly existing as a corporation for an
unlimited duration under the laws of the British
Virgin Islands and has full power and authority
necessary to own or hold its properties and assets
and conduct the businesses in which it is engaged;
(ii) The Company has an authorized and issued
capitalization as set forth in the Prospectus; and
all of the issued and outstanding Common Shares of
the Company have been duly and validly authorized and
issued, are fully
<PAGE>
24
paid and non-assessable and conform to the
description thereof contained in the Prospectus;
(iii) The Shares being delivered by the
Company to the Underwriters upon such Delivery Date
have been duly and validly authorized and, when
issued against payment and delivery in accordance
with this Agreement, will be duly and validly issued,
fully paid and non-assessable and will conform to the
description of thereof contained in the Prospectus;
(iv) The Company has full power and authority
to enter into this Agreement; this Agreement has been
duly authorized, executed and delivered by the
Company; and assuming due authorization, execution
and delivery thereof by the other parties hereto and
assuming that this Agreement constitutes a valid and
legally binding agreement under the laws of the State
of New York, this Agreement constitutes a valid and
legally binding agreement of the Company enforceable
in the British Virgin Islands in accordance with its
terms, except as enforcement thereof may be limited
by bankruptcy, insolvency moratorium and similar laws
of general applicability relating to or affecting
creditors' rights and to general equitable
principles; and the indemnification and contribution
provisions of this Agreement do not contravene
British Virgin Islands law;
(v) There are no preemptive or other rights
to subscribe for or to purchase, nor any restriction
upon the voting or transfer of, any shares of the
capital stock of the Company pursuant to the
Company's Memorandum and Articles of Association,
British Virgin Islands law or any agreement or other
instrument known to such counsel and to which the
Company is a party or to which any of its properties
or assets is subject;
(vi) To such counsel's knowledge there are no
legal, judicial, arbitral, rule-making,
administrative, governmental or other proceedings
pending in the British Virgin Islands to which the
Company is a party or any of its properties or assets
is subject which, (A) individually or in the
aggregate, if determined adversely to the Company or
any of its subsidiaries, could reasonably be expected
to have a Material Adverse Effect or (B) questions
the validity or enforceability of this Agreement or
any action taken or to be taken in connection
therewith; and, to such counsel's knowledge, no such
proceedings in the British Virgin Islands are
threatened or contemplated by any British Virgin
Islands governmental agency or body or threatened by
any person or entity in the British Virgin Islands;
(vii) The execution and delivery of this
Agreement, the issue and sale of Shares being
delivered on such Delivery Date by the Company and
the compliance by the Company with all of the
provisions of this Agreement
<PAGE>
25
and the consummation of the transactions contemplated
hereby will not contravene, or result in a breach or
violation of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel
which is governed by the law of the British Virgin
Islands and to which the Company or any of its
subsidiaries is a party or by which the Company or
any of its subsidiaries is bound or to which any of
the properties or assets of the Company or any of its
subsidiaries is subject, nor will such actions result
in any violation of the Company's Memorandum and
Articles of Association or any British Virgin Islands
statute or any order, rule or regulation of any
British Virgin Islands governmental agency or body
having jurisdiction over the Company;
(viii) No consent, approval, authorization or
order of, or filing or registration with, any British
Virgin Islands governmental agency or body or court
is required for the execution, delivery and
performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby,
except for the filing with the British Virgin Islands
Registrar of Companies of an amendment to the
Company's Memorandum and Articles of Association
pursuant to Section 7(r) hereof (which filing has
been made and is effective);
(ix) To such counsel's knowledge, the Company
is not in violation of its Memorandum and Articles of
Association; neither the Company nor its subsidiaries
are (A) in default in any material respect, and no
event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the
due performance or observance of any material
indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument known to such
counsel which is governed by the law of the British
Virgin Islands and to which they are a party or by
which they are bound or to which any of their
properties or assets is subject or (B) in violation
in any material respect of any British Virgin Islands
statute or any regulation, rule or order of any
British Virgin Island governmental agency or body or
court to which the Company or any of its subsidiaries
or their respective properties or assets may be
subject;
(x) The filing of the Registration
Statements with the Commission and the listing of the
Common Shares on the Nasdaq National Market System
have been duly authorized by the Company;
(xi) The Underwriters would be permitted to
commence proceedings in British Virgin Islands courts
of competent jurisdiction based on this Agreement,
and such courts would accept jurisdiction over any
such action or proceeding and would recognize the
choice of the law of the State of New York as the
governing law of this Agreement;
<PAGE>
26
(xii) The courts of the British Virgin Islands
will recognize and enforce a judgment of a U.S.
federal or New York state court in respect of any
legal suit or proceedings arising out of or relating
to this Agreement without retrial on the merits based
on the principle that a judgment of a competent
foreign court imposes upon the judgment debtor an
obligation to pay the sum for which judgment has been
given[, PROVIDED that such judgment is final and was
not obtained in a manner and is not of a kind the
enforcement of which is contrary to the public policy
of the British Virgin Islands];
(xiii) Assuming valid submission by the Company
under the laws of the State of New York to the
jurisdiction of the U.S. federal or New York state
courts sitting in the Borough of Manhattan, New York
City as set forth in this Agreement and valid service
of process under the laws of the State of New York
effected in the manner set forth in this Agreement,
the submission by the Company to the non-exclusive
jurisdiction of the U.S. federal or New York state
courts sitting in the Borough of Manhattan, New York
City as set forth in this Agreement and the
appointment of CT Corporation System (or such other
successor agent as the parties hereto shall mutually
agree) as its authorized agent for the purpose
described in Section 19 of this Agreement will be
legal, valid and binding on the Company insofar as
British Virgin Islands law is concerned;
(xiv) Under the laws of the British Virgin
Islands, the choice of the laws of the State of New
York to govern this Agreement is valid and legally
binding and will be recognized by British Virgin
Islands courts; and the Company is not entitled to
any immunity in respect of its obligations under this
Agreement and could not interpose any immunity as a
defense to any suit or action brought or maintained
in respect of its obligations under such agreements;
(xv) To ensure the legality, validity,
enforceability or admissibility in evidence of this
Agreement in the British Virgin Islands, it is not
necessary that any document be filed, recorded or
enrolled with any government or other authority in
the British Virgin Islands, or any British Virgin
Islands stamp or similar tax be paid in respect of
the Agreement; and all formalities required in the
British Virgin Islands for the validity and
enforceability of this Agreement have been
accomplished, and no notarization is required, for
the validity and enforceability thereof;
(xvi) The statements in the Prospectus under
the captions (A) "Description of Share Capital",
insofar as they describe certain provisions of the
Company's Memorandum and Articles of Association
relating to the capital stock of the Company and the
British Virgin Islands International
<PAGE>
27
Business Companies Act and (B) "Taxation - British
Virgin Islands Tax Considerations", insofar as they
constitute a summary of matters of British Virgin
Islands tax law, constitute accurate summaries
thereof in all material respects;
(xvii) Under current British Virgin Islands
laws and regulations, there are no restrictions on
the ability of the Company to pay dividends declared
and payable in respect of the Common Shares by the
Company to the holder thereof in U.S. dollars or in
any other currency; and
(xviii) No stamp or other issuance or transfer
taxes or duties and no capital gains, income,
withholding or other taxes are payable by or on
behalf of the Underwriters to the British Virgin
Islands or any taxing authority thereof or therein in
connection with (A) the issuance and sale of the
Shares by the Company; (B) the delivery of the Shares
to or for the respective accounts of the Underwriters
in the manner contemplated herein; or (C) the sale
and delivery outside of the British Virgin Islands by
the Underwriters of the Shares to the initial
purchasers thereof.
The opinion of such counsel shall also have furnished
to the Representatives a written statement, addressed to the
Underwriters and dated such Delivery Date, in form and
substance satisfactory to the Representatives, to the effect
that (x) such counsel has acted as counsel to the Company on a
regular basis has acted as counsel to the Company in
connection with previous financing transactions and has acted
as counsel to the Company in connection with the preparation
of the Registration Statements, and (y) based on the
foregoing, no facts have come to the attention of such counsel
which lead them to believe that, solely as regards to matters
purporting to summarize the laws of, or documents governed by
the laws of, the British Virgin Islands, the Registration
Statements, as of their respective Effective Dates, contained
any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary
in order to make the statements therein not misleading, or
that the Prospectus contains any untrue statement of a
material fact or omits to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The foregoing opinion or statement may
be qualified by a statement to the effect that such counsel
does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statements or the Prospectus (except as stated in
paragraph (xvi) above).
In rendering the foregoing opinion, such counsel may
(i) state that their opinion is limited to matters governed by
the laws of the British Virgin Islands and (ii) rely, as to
matters involving the laws of the United States and the State
of New York, upon the opinion of Paul Hastings Janofsky &
Walker LLP rendered pursuant to Section 7(d).
<PAGE>
28
(f) Amaro, Stuber e Advogados, special Brazilian
counsel to the Company and its Brazilian subsidiary, O Site
Entretenimento Ltda. ("O Site"), shall have furnished to the
Representatives their written opinion, addressed to the
Underwriters and dated such Delivery Date, in form and
substance satisfactory to the Representatives to the effect
that:
(i) O Site has been duly incorporated and is
validly existing as a limited liability company
(SOCIEDADE POR QUOTAS DE RESPONSABILIDADE LIMITADA)
under the laws of Brazil and has all power and
authority necessary to own or hold its properties and
assets and conduct the businesses in which it is
engaged;
(ii) Each of the Company and O Site possesses
adequate certificates, authorities, approvals,
licenses or permits issued by appropriate
governmental agencies or bodies in Brazil necessary
to conduct its business as presently conducted and as
proposed to be conducted;
(iii) All of the issued shares of capital
stock of O Site have been duly and validly authorized
and issued are fully paid and non-assessable, and are
owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(iv) O Site has full power and authority to
enter into this Agreement; this Agreement has been
duly authorized, executed and delivered by O Site;
and assuming due authorization, execution and
delivery thereof by the other parties hereto and
assuming that this Agreement constitutes a valid and
legally binding agreement under the laws of the State
of New York, this Agreement constitutes a valid and
legally binding agreement of O Site enforceable in
Brazil in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy,
insolvency moratorium and similar laws of general
applicability relating to or affecting creditors'
rights and to general equitable principles; and the
indemnification and contribution provisions of this
Agreement do not contravene Brazilian law;
(v) The execution and delivery of this
Agreement, the issue and sale of Shares being
delivered on such Delivery Date by the Company and
the compliance by the Company and O Site with all of
the provisions of this Agreement and the consummation
of the transactions contemplated hereby will not
contravene, or result in a breach or violation of, or
constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or
instrument known to such counsel which is governed by
the law of Brazil and to which the Company or any of
its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any
of the properties or assets of the Company or any of
its subsidiaries is subject, nor
<PAGE>
29
will such actions result in any violation of the
ESTATUTOS of O Site or any Brazilian statute or any
order, rule or regulation of any Brazilian
governmental agency or body or court having
jurisdiction over the Company or any of its
subsidiaries;
(vi) No consent, approval, authorization or
order of, or filing or registration with, any
Brazilian governmental agency or body or court is
required for the execution, delivery and performance
of this Agreement by O Site; [CONFIRM]
(vii) The statements in the Prospectus under
the caption "Business-Government Regulation-Brazil",
insofar as they describe the relevant laws and
regulations in Brazil, constitute accurate summaries
thereof in all material respects;
(viii) To such counsel's knowledge, there are
no legal or governmental proceedings pending in
Brazil to which the Company or O Site is a party or
of which any property or assets of the Company or is
the subject; and to such counsel's knowledge, no such
proceedings are threatened or contemplated by any
Brazilian governmental agency or body or threatened
by any other person or entity in Brazil; and
(ix) [The Internet Services Agreement, dated
October 6, 1999, between IMPSAT Comunicacoes Ltda
("IMPSAT Brazil") and O Site, which relates to the
provision to the Company of telecommunications
infrastructure for Internet access by IMPSAT Brazil,
constitutes a valid and legally binding obligation of
O Site and IMPSAT Brazil, respectively, and is
enforceable against O Site or IMPSAT Brazil, as the
case may be, in accordance with the terms thereof].
In rendering such Brazilian legal opinion, such
counsel may state that their opinion is limited to matters
governed by the laws of the Federative Republic of Brazil.
(g) Estudio Marval, O'Farrell & Mairal, special
Argentine counsel to the Company and its Argentine subsidiary,
El Sitio Argentina S.A., formerly Cibrian Campoy Creativos
S.A. ("El Sitio Argentina"), shall have furnished to the
Representatives their written opinion, addressed to the
Underwriters and dated such Delivery Date, in form and
substance satisfactory to the Representatives to the effect
that:
(i) El Sitio Argentina has been duly
organized and is validly existing as a corporation
(SOCIEDAD ANONIMA) under the laws of Argentina and
<PAGE>
30
has all power and authority necessary to own or hold
its properties and assets and conduct the businesses
in which it is engaged;
(ii) Each of the Company and El Sitio
Argentina possesses adequate certificates,
authorities, approvals, licenses or permits issued by
appropriate governmental agencies or bodies in
Argentina necessary to conduct its business as
presently conducted and as proposed to be conducted;
(iii) All of the issued shares of capital
stock of El Sitio Argentina have been duly and
validly authorized and issued, are fully paid and
non-assessable, and are owned directly or indirectly
by the Company, free and clear of all liens,
encumbrances, equities or claims;
(iv) El Sitio Argentina has full power and
authority to enter into this Agreement; this
Agreement has been duly authorized, executed and
delivered by El Sitio Argentina; and assuming due
authorization, execution and delivery thereof by the
other parties hereto and assuming that this Agreement
constitutes a valid and legally binding agreement
under the laws of the State of New York, this
Agreement constitutes a valid and legally binding
agreement of El Sitio Argentina enforceable in
Argentina in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy,
insolvency moratorium and similar laws of general
applicability relating to or affecting creditors'
rights and to general equitable principles; and the
indemnification and contribution provisions of this
Agreement do not contravene Argentine law;
(v) The execution and delivery of this
Agreement, the issue and sale of Shares being
delivered on such Delivery Date by the Company and
the compliance by the Company and El Sitio Argentina
with all of the provisions of this Agreement and the
consummation of the transactions contemplated hereby
will not contravene, or result in a breach or
violation of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel
which is governed by the law of Argentina and to
which the Company or any of its subsidiaries is a
party or by which the Company or any of its
subsidiaries is bound or to which any of the
properties or assets of the Company or any of its
subsidiaries is subject, nor will such actions result
in any violation of the ESTATUTOS of El Sitio
Argentina or any Argentine statute or any order, rule
or regulation of any Argentine governmental agency or
body or court having jurisdiction over the Company or
any of its subsidiaries;
(vi) No consent, approval, authorization or
order of, or filing or registration with, any
Argentine governmental agency or body or court is
<PAGE>
31
required for the execution, delivery and performance
of this Agreement by El Sitio Argentina; [CONFIRM]
(vii) The statements in the Prospectus under
the captions (A) "Business-Government
Regulation-Argentina", insofar as they describe the
relevant laws and regulations in Argentina and (B)
"Business-Dial-Up Access" and
"Business-Technology-Dial-Up Access", insofar as they
constitute summaries of intellectual property-related
laws and other matters, constitute accurate summaries
thereof in all material respects;
(viii) To such counsel's knowledge, there are
no legal or governmental proceedings pending in
Argentina to which the Company or El Sitio Argentina
is a party or of which any property or assets of the
Company or El Sitio Argentina is the subject; and to
such counsel's knowledge, no such proceedings are
threatened or contemplated by any Argentine
governmental agency or body or threatened by any
other person or entity in Argentina;
(ix) [The Internet Services Agreement, dated
October __, 1999, between IMPSAT S.A. ("IMPSAT
Argentina") and El Sitio Argentina, which relates to
the provision to the Company of telecommunications
infrastructure for Internet access by IMPSAT
Argentina, constitutes a valid and legally binding
obligation of El Sitio Argentina and IMPSAT
Argentina, respectively, and is enforceable against
El Sitio Argentina or IMPSAT Argentina, as the case
may be, in accordance with the terms THEREOF].
In rendering such opinion, such counsel may state
that their opinion is limited to matters governed by the laws
of the Argentine Republic.
(h) Garcia-Alvarez Salom & Asociados, S.C., special
Mexican counsel to the Company and its Mexican subsidiary, El
Sitio Entretenimientos S.A. de C.V. ("El Sitio Mexico"), shall
have furnished to the Representatives their written opinion,
addressed to the Underwriters and dated such Delivery Date, in
form and substance satisfactory to the Representatives, to the
effect that:
(i) El Sitio Mexico has been duly organized
and is validly existing as a corporation (SOCIEDAD
ANONIMA DE CAPITAL VARIABLE) under the laws of Mexico
and has all power and authority necessary to own or
hold its properties and assets and conduct the
businesses in which it is engaged;
(ii) Each of the Company and El Sitio Mexico
possesses adequate certificates, authorities,
approvals, licenses or permits issued by appropriate
governmental agencies or bodies in Mexico necessary
to conduct its business as presently conducted and as
proposed to be conducted;
<PAGE>
32
(iii) All of the issued shares of capital
stock of El Sitio Mexico have been duly and validly
authorized and issued, are fully paid and
non-assessable, and are owned directly or indirectly
by the Company, free and clear of all liens,
encumbrances, equities or claims;
(iv) El Sitio Mexico has full power and
authority to enter into this Agreement; this
Agreement has been duly authorized, executed and
delivered by El Sitio Mexico; and assuming due
authorization, execution and delivery thereof by the
other parties hereto and assuming that this Agreement
constitutes a valid and legally binding agreement
under the laws of the State of New York, this
Agreement constitutes a valid and legally binding
agreement of El Sitio Mexico enforceable in Mexico in
accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency
moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to
general equitable principles; and the indemnification
and contribution provisions of this Agreement do not
contravene Mexican law;
(v) The execution and delivery of this
Agreement, the issue and sale of Shares being
delivered on such Delivery Date by the Company and
the compliance by the Company and El Sitio Mexico
with all of the provisions of this Agreement and the
consummation of the transactions contemplated hereby
will not contravene, or result in a breach or
violation of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel
which is governed by the law of Mexico and to which
the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is
bound or to which any of the properties or assets of
the Company or any of its subsidiaries is subject,
nor will such actions result in any violation of the
ESTATUTOS of El Sitio Mexico or any Mexican statute
or any order, rule or regulation of any Mexican
governmental agency or body or court having
jurisdiction over the Company or any of its
subsidiaries;
(vi) No consent, approval, authorization or
order of, or filing or registration with, any Mexican
governmental agency or body or court is required for
the execution, delivery and performance of this
Agreement by El Sitio Mexico; [CONFIRM]
(vii) The statements in the Prospectus under
the caption "Business - Government Regulation -
Mexico", insofar as they describe the relevant laws
and regulations in Mexico, constitute accurate
summaries thereof in all material respects;
<PAGE>
33
(viii) To such counsel's knowledge, there are
no legal or governmental proceedings pending in
Mexico to which the Company or El Sitio Mexico is a
party or of which any property or assets of the
Company or any of its subsidiaries is the subject;
and to such counsel's knowledge, no such proceedings
are threatened or contemplated by any Mexican
governmental agency or body or court or threatened by
any other person or entity in Mexico;
In rendering such opinion, such counsel may state
that their opinion is limited to matters governed by the laws
of the United Mexican States.
(i) Guyer y Regules, special Uruguayan counsel to the
Company and its Uruguayan subsidiary, El Sitio (Uruguay)
Sociedad Anonima ("El Sitio Uruguay"), shall have furnished to
the Representatives their written opinion, addressed to the
Underwriters and dated such Delivery Date, in form and
substance satisfactory to the Representatives, to the effect
that:
(i) El Sitio Uruguay has been duly organized
and is validly existing as a corporation (SOCIEDAD
ANONIMA) under the laws of Uruguay and has all power
and authority necessary to own or hold its properties
and assets and conduct the businesses in which it is
engaged;
(ii) Each of the Company and El Sitio Uruguay
possesses adequate certificates, authorities,
approvals, licenses or permits issued by appropriate
governmental agencies or bodies in Uruguay necessary
to conduct its business as presently conducted and as
proposed to be conducted;
(iii) All of the issued shares of capital
stock of El Sitio Uruguay have been duly and validly
authorized and issued, are fully paid and
non-assessable, and are owned directly or indirectly
by the Company, free and clear of all liens,
encumbrances, equities or claims;
(iv) El Sitio Uruguay has full power and
authority to enter into this Agreement; this
Agreement has been duly authorized, executed and
delivered by El Sitio Uruguay; and assuming due
authorization, execution and delivery thereof by the
other parties hereto and assuming that this Agreement
constitutes a valid and legally binding agreement
under the laws of the State of New York, this
Agreement constitutes a valid and legally binding
agreement of El Sitio Uruguay enforceable in Uruguay
in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency
moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to
general equitable principles; and the indemnification
and contribution provisions of this Agreement do not
contravene Uruguayan law;
<PAGE>
34
(v) The execution and delivery of this
Agreement, the issue and sale of Shares being
delivered on such Delivery Date by the Company and
the compliance by the Company and El Sitio Uruguay
with all of the provisions of this Agreement and the
consummation of the transactions contemplated hereby
will not contravene, or result in a breach or
violation of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel
which is governed by the law of Uruguay and to which
the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is
bound or to which any of the properties or assets of
the Company or any of its subsidiaries is subject,
nor will such actions result in any violation of the
ESTATUTOS of El Sitio Uruguay or any Uruguayan
statute or any order, rule or regulation of any
Uruguayan governmental agency or body or court having
jurisdiction over the Company or any of its
subsidiaries;
(vi) No consent, approval, authorization or
order of, or filing or registration with, any
Uruguayan governmental agency or body or court is
required for the execution, delivery and performance
of this Agreement by El Sitio Uruguay; [CONFIRM]
(vii) The statements in the Prospectus under
the caption "Business - Government Regulation -
Uruguay", insofar as they describe the relevant laws
and regulations in Uruguay, constitute accurate
summaries thereof in all material respects;
(viii) To such counsel's knowledge, there are
no legal or governmental proceedings pending in
Uruguay to which the Company or El Sitio Uruguay is a
party or of which any property or assets of the
Company or any of its subsidiaries is the subject;
and to such counsel's knowledge, no such proceedings
are threatened or contemplated by any Uruguayan
governmental agency or body or court or threatened by
any other person or entity in Uruguay;
In rendering such opinion, such counsel may state
that their opinion is limited to matters governed by the laws
of the Republic of Uruguay.
(j) De La Pena, Villanueva & Bajandas, special U.S.
counsel to the Company's U.S. subsidiary, El Sitio U.S.A.,
Inc. ("El Sitio USA"), shall have furnished to the
Representatives their written opinion, addressed to the
Underwriters and dated such Delivery Date, in form and
substance satisfactory to the Representatives to the effect
that:
(i) El Sitio U.S.A. has been duly organized,
is validly existing and in good standing as a
corporation under the laws of the State of Florida
and
<PAGE>
35
has all corporate power and authority necessary to
own or hold its properties and assets and conduct the
businesses in which it is engaged;
(ii) All of the issued shares of capital
stock of El Sitio USA have been duly and validly
authorized and issued, are fully paid and
non-assessable and are owned directly or indirectly
by the Company, free and clear of all liens,
encumbrances, equities or claims;
(iii) El Sitio U.S.A. has full power and
authority to enter into this Agreement; this
Agreement has been duly authorized, executed and
delivered by El Sitio U.S.A.; and assuming due
authorization, execution and delivery thereof by the
other parties hereto and assuming that this Agreement
constitutes a valid and legally binding agreement
under the laws of the State of New York, this
Agreement constitutes a valid and legally binding
agreement of El Sitio U.S.A. enforceable in the State
of Florida in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy,
insolvency moratorium and similar laws of general
applicability relating to or affecting creditors'
rights and to general equitable principles; and the
indemnification and contribution provisions of this
Agreement do not contravene Florida law;
(iv) The execution and delivery of this
Agreement, the issue and sale of Shares being
delivered on such Delivery Date by the Company and
the compliance by the Company and El Sitio U.S.A.
with all of the provisions of this Agreement and the
consummation of the transactions contemplated hereby
will not contravene, or result in a breach or
violation of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel
which is governed by the law of Florida and to which
the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is
bound or to which any of the properties or assets of
the Company or any of its subsidiaries is subject,
nor will such actions result in any violation of the
Articles of Incorporation and by-laws of El Sitio
U.S.A. or any Florida statute or any order, rule or
regulation of any Florida governmental agency or body
or court having jurisdiction over the Company or any
of its subsidiaries;
(v) No consent, approval, authorization or
order of, or filing or registration with, any Florida
governmental agency or body or court is required for
the execution, delivery and performance of this
Agreement by El Sitio U.S.A. and the consummation of
the transactions contemplated hereby; [CONFIRM]
(vi) Each of the Company and El Sitio USA
possesses adequate, certificates, authorities,
approvals, licenses or permits issued by appropriate
<PAGE>
36
governmental agencies or bodies in the State of
Florida to conduct its business as presently
conducted and as proposed to be conducted; and
(vii) To such counsel's knowledge, there are
no U.S. federal or Florida state legal or
governmental proceedings pending to which the Company
or El Sitio USA is a party or of which any property
or assets of the Company or El Sitio USA is the
subject which, if determined adversely to the Company
or El Sitio USA, might have a Material Adverse Effect
on the Company and El Sitio USA; and, to such
counsel's knowledge, no such proceedings are
threatened or contemplated by any U.S. federal or
Florida state governmental agency or body or
threatened by any other person or entity in the
United States.
(k) With respect to the "comfort letter" of Deloitte
& Touche delivered to the Representatives concurrently with
the execution of this Agreement (the "initial comfort
letter"), the Company shall have furnished to the
Representatives a letter (the "bring-down letter") of such
accountants, addressed to the Underwriters and dated such
Delivery Date (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are
in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (ii) stating, as of the date of the
bring-down comfort letter (or, with respect to matters
involving changes or developments since the respective dates
as of which specified financial information is given in the
Prospectus, as of a date not more than three days prior to the
date of the bring-down comfort letter), the conclusions and
findings of such firm with respect to the financial
information and other matters covered by the initial comfort
letter and (iii) confirming in all material respects the
conclusions and findings set forth in the initial letter.
(l) The Company shall have furnished to the
Representatives a certificate, dated such Delivery Date, of
its chief executive officer and chief financial officer, in
form and substance satisfactory to the Representatives, to the
effect that:
(i) The representations, warranties and
agreements of the Company in Section 1 are true and
correct as of such Delivery Date; the Company has
complied with all its agreements contained herein;
and the conditions set forth in Section 7(a) have
been fulfilled;
(ii) (A) Neither the Company nor any of its
subsidiaries has sustained since the date of the
latest audited financial statements included in the
Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any
labor dispute or court or governmental action, order
or decree, otherwise than as set forth or
contemplated in the Prospectus or (B) since such date
there has
<PAGE>
37
not been any change in the capital stock, any
increase in current liabilities and any decrease in
shareholders' equity of the Company or any of its
subsidiaries or any change, or any development
involving a prospective change, in or affecting the
business, properties, results of operations,
financial condition or prospects of the Company and
its subsidiaries taken as a whole, except as set
forth in the Prospectus;
(iii) They have carefully examined the
Registration Statements and the Prospectus and, in
their opinion (A) the Registration Statements, as of
their respective Effective Dates, and the Prospectus,
as of each of the Effective Dates, did not include
any untrue statement of a material fact and did not
omit to state any material fact required to be stated
therein or necessary to make the statements therein
not misleading, and (B) since the Effective Date of
the Primary Registration Statement, no event has
occurred which would be required by the Securities
Act to be set forth in a supplement or amendment to
either of the Registration Statements or the
Prospectus; and
(iv) No stop order suspending the
effectiveness of either of the Registration
Statements or any part thereof has been issued and no
proceeding for that purpose has been initiated or
threatened by the Commission.
(m) (i) Neither the Company nor any of its
subsidiaries shall have sustained since the date of the latest
audited financial statements included in the Prospectus any
loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated
in the Prospectus and (ii) since such date there shall not
have been any change in the capital stock, any increase in
current liabilities and any decrease in shareholders' equity
of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or
affecting the business, properties, results of operations,
financial condition or prospects of the Company and its
subsidiaries, except as set forth in the Prospectus, the
effect of which, in any such case described in clause (i) or
(ii), is, in the judgment of the Representatives, so material
and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares
being delivered on such Delivery Date on the terms and in the
manner contemplated in the Prospectus.
(n) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred any of the following:
(i) trading in securities generally on the New York Stock
Exchange or the American Stock Exchange, the Nasdaq National
Market System or in the over-the-counter market, or trading in
any securities of the Company on any exchange or in the
over-the-counter market shall have been suspended or minimum
prices shall have been established on any such exchange or
such market
<PAGE>
38
by the Commission, by such exchange or by any other regulatory
body or governmental authority having jurisdiction, (ii) a
banking moratorium shall have been declared by the British
Virgin Islands or U.S. federal or New York state authorities,
(iii) the United States or any of the British Virgin Islands,
Brazil, Argentina or Mexico shall have become engaged in
hostilities, there shall have been an escalation in
hostilities involving any of such countries or there shall
have been a declaration of a national emergency or war by any
of such countries; or (iv) there shall have occurred such a
material adverse change in general economic, political or
financial conditions (or the effect of international
conditions on the financial markets in the United States shall
be such) as to make it, in the judgment of a majority in
interest of the several Underwriters, impracticable or
inadvisable to proceed with the public offering or delivery of
the Shares being delivered on such Delivery Date on the terms
and in the manner contemplated in the Prospectus.
(o) The Company shall have furnished to the
Representatives an original counterpart of each executed
Lock-up Letter, in each case in form and substance
satisfactory to the Representative.
(p) The Common Shares shall have been approved for
inclusion on the Nasdaq National Market System, subject only
to official notice of issuance and evidence of satisfactory
distribution.
(q) The Common Shares shall have been accepted for
settlement through the facilities of DTC.
(r) The 2-for-1 share split in respect of the Common
Shares shall have been completed as contemplated in the
Prospectus, and the Company shall have duly filed with the
British Virgin Islands Registrar of Companies amendments to
its Memorandum and Articles of Association to appropriately
reflect such share split and other matters relating to the
Common Shares in form and substance reasonably satisfactory to
the Representatives.
(s) The private placement of the Class B Convertible
Preferred Shares by the Company to [four] strategic
institutional investors shall have been consummated as set
forth in the Prospectus and on terms reasonably satisfactory
to the Representatives.
All opinions, letters, evidence and certificates referred to
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance satisfactory to
Simpson Thacher & Bartlett, U.S. counsel for the Underwriters.
8. INDEMNIFICATION AND CONTRIBUTION.
<PAGE>
39
(a) The Company and the Significant Subsidiaries,
jointly and severally, shall indemnify and hold harmless each
Underwriter, its directors, officers and employees and each
person, if any, who controls any Underwriter within the
meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss,
claim, damage, liability or action relating to purchases and
sales of Shares), to which that Underwriter, director,
officer, employee or controlling person may become subject,
under the Securities Act, the Exchange Act or otherwise,
insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in
any Preliminary Prospectus, either of the Registration
Statements or the Prospectus, or in any amendment or
supplement thereto, or (B) in any blue sky application or
other document prepared or executed by the Company (or based
upon any written information furnished by the Company)
specifically for the purpose of qualifying any or all of the
Shares under the securities laws of any state or other
jurisdiction (any such application, document or information
being hereinafter called a "Blue Sky Application"), (ii) the
omission or alleged omission to state in any Preliminary
Prospectus, either of the Registration Statements or the
Prospectus, or in any amendment or supplement thereto, or in
any Blue Sky Application any material fact required to be
stated therein or necessary to make the statements therein not
misleading or (iii) any act or failure to act, or any alleged
act or failure to act, by any Underwriter in connection with,
or relating in any manner to, the Shares or the offering
contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action
arising out of or based upon matters covered by clause (i) or
(ii) above (PROVIDED that the Company and the Significant
Subsidiaries shall not be liable in the case of any matter
covered by this clause (iii) to the extent that it is
determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, liability or
action resulted directly from any such act or failure to act
undertaken or omitted to be taken by such Underwriter through
its gross negligence or wilful misconduct), and shall
reimburse each Underwriter and each such director, officer,
employee and controlling person promptly upon demand for any
legal or other expenses reasonably incurred by that
Underwriter, director, officer, employee or controlling person
in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or
action as such expenses are incurred; PROVIDED, HOWEVER, that
the Company and the Significant Subsidiaries shall not be
liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based
upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or
in any such amendment or supplement, or in any Blue Sky
Application in reliance upon and in conformity with the
written information furnished to the Company through the
Representatives by or on behalf of any Underwriter
specifically for inclusion therein and described in Section
8(e). The foregoing indemnity agreement is in addition to any
liability which the Company may
<PAGE>
40
otherwise have to any Underwriter or to any director, officer,
employee or controlling person of that Underwriter.
(b) Each Underwriter, severally and not jointly,
shall indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named
in either of the Registration Statements as about to become a
director of the Company), officers and employees and each
person, if any, who controls the Company within the meaning of
the Securities Act, from and against any loss, claim, damage
or liability, joint or several, or any action in respect
thereof, to which the Company or any such director, officer,
employee or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a
material fact contained (A) in any Preliminary Prospectus,
either of the Registration Statements or the Prospectus, or in
any amendment or supplement thereto, or (B) in any Blue Sky
Application or (ii) the omission or alleged omission to state
in any Preliminary Prospectus, either of the Registration
Statements or the Prospectus, or in any amendment or
supplement thereto, or in any Blue Sky Application any
material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case
only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance
upon and in conformity with the written information furnished
to the Company through the Representatives by or on behalf of
that Underwriter specifically for inclusion therein and
described in Section 8(e), and shall reimburse the Company and
any such director, officer, employee or controlling person for
any legal or other expenses reasonably incurred by the Company
or any such director, officer or controlling person in
connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or
action as such expenses are incurred. The foregoing indemnity
agreement is in addition to any liability which any
Underwriter may otherwise have to the Company or any such
director, officer or controlling person.
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of any claim or the
commencement of any action, the indemnified party shall, if a
claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement
of that action; PROVIDED, HOWEVER, that the failure to notify
the indemnifying party shall not relieve it from any liability
which it may have under this Section 8 except to the extent it
has been materially prejudiced by such failure and, PROVIDED
FURTHER, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 8. If
any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to
assume the defense thereof with
<PAGE>
41
counsel satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified
party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of
investigation; PROVIDED, HOWEVER, that the Representatives
shall have the right to employ counsel to represent jointly
the Representatives and those other Underwriters and their
respective directors, officers, employees and controlling
persons who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the
Underwriters against the Company or any Significant Subsidiary
under this Section 8 if, in the reasonable judgment of the
Representatives, it is advisable for the Representatives and
those Underwriters, directors, officers, employees and
controlling persons to be jointly represented by separate
counsel, and in that event the fees and expenses of such
separate counsel shall be paid by the Company and the
Significant Subsidiaries. No indemnifying party shall (i)
without the prior written consent of the indemnified parties
(which consent shall not be unreasonably withheld), settle or
compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified
parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or
proceeding, or (ii) be liable for any settlement of any such
action effected without its written consent (which consent
shall not be unreasonably withheld), but if settled with its
written consent or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and
against any loss of liability by reason of such settlement or
judgment.
(d) If the indemnification provided for in this
Section 8 shall for any reason be unavailable to or
insufficient to hold harmless an indemnified party under
Section 8(a) or 8(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to
therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such
loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and the
Significant Subsidiaries on the one hand and the Underwriters
on the other from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company and the
Significant Subsidiaries on the one hand and the Underwriters
on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action
in respect thereof, as well as any other relevant equitable
considerations. The
<PAGE>
42
relative benefits received by the Company and the Significant
Subsidiaries on the one hand and the Underwriters on the other
with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the offering of
the Shares purchased under this Agreement (before deducting
expenses) received by the Company, on the one hand, and the
total underwriting discounts and commissions received by the
Underwriters with respect to the Shares purchased under this
Agreement, on the other hand, bear to the total gross proceeds
from the offering of the shares of the Shares under this
Agreement, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault shall be determined
by reference to whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company
or the Underwriters, the intent of the parties and their
relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. For purposes of
the preceding two sentences, the net proceeds deemed to be
received by the Company shall be deemed to be also for the
benefit of the Significant Subsidiaries and information
supplied by the Company shall also be deemed to have been
supplied by the Significant Subsidiaries. The Company, the
Significant Subsidiaries and the Underwriters agree that it
would not be just and equitable if contributions pursuant to
this Section 8(d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as
a result of the loss, claim, damage or liability, or action in
respect thereof, referred to above in this Section 8(d) shall
be deemed to include, for purposes of this Section 8(d), any
legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), 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 was offered to the public
exceeds the amount of any damages which such Underwriter has
otherwise paid or become liable to pay by reason of any 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 Underwriters'
obligations to contribute as provided in this Section 8(d) are
several in proportion to their respective underwriting
obligations and not joint.
(e) The Underwriters severally confirm, and the
Company acknowledges, that the statements with respect to the
public offering of the Shares set forth in the box on the
cover page of, and the selling concession and reallowance
figures under the caption "Underwriting" in, the Prospectus
are correct and constitute the only information furnished in
writing to the Company by or on behalf of the Underwriters
specifically for inclusion in the Registration Statements and
the Prospectus.
<PAGE>
43
9. DEFAULTING UNDERWRITERS. If, on either Delivery Date, any
Underwriter defaults in the performance of its obligations under this Agreement,
the remaining non-defaulting Underwriters shall be obligated severally to
purchase the Shares which the defaulting Underwriter agreed but failed to
purchase on such Delivery Date in the respective proportions which the number of
Firm Shares set opposite the name of each remaining non-defaulting Underwriter
in Schedule 1 hereto bears to the total number of Firm Shares set opposite the
names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
PROVIDED, HOWEVER, that the remaining non-defaulting Underwriters shall not be
obligated to purchase any of the Shares on such Delivery Date if the total
number of Shares which the defaulting Underwriter or Underwriters agreed but
failed to purchase on such date exceeds 9.09% of the total number of the Shares
to be purchased on such Delivery Date, and any remaining non-defaulting
Underwriter shall not be obligated to purchase more than 110% of the number of
Shares which it agreed to purchase on such Delivery Date pursuant to the terms
of Section 2. If the foregoing maximums are exceeded, the remaining
non-defaulting Underwriters, or those other underwriters satisfactory to the
Representatives who so agree, shall have the right, but shall not be obligated,
to purchase, in such proportion as may be agreed upon among them, all the Shares
to be purchased on such Delivery Date. If the remaining Underwriters or other
underwriters satisfactory to the Representatives do not elect to purchase the
shares which the defaulting Underwriter or Underwriters agreed but failed to
purchase on such Delivery Date, this Agreement (or, with respect to the Second
Delivery Date, the obligation of the Underwriters to purchase, and of the
Company to sell, the Option Shares) shall terminate without liability on the
part of any non-defaulting Underwriter or the Company, except that the Company
will continue to be liable for the payment of expenses to the extent set forth
in Sections 6 and 11. As used in this Agreement, the term "Underwriter"
includes, for all purposes of this Agreement unless the context requires
otherwise, any party not listed in Schedule 1 hereto who, pursuant to this
Section 9, purchases Firm Shares which a defaulting Underwriter agreed but
failed to purchase.
Nothing contained herein shall relieve a defaulting
Underwriter of any liability it may have to the Company for damages caused by
its default. If other underwriters are obligated or agree to purchase the Shares
of a defaulting or withdrawing Underwriter, either the Representatives or the
Company may postpone the First Delivery Date for up to seven full business days
in order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in the Registration Statement, the
Prospectus or in any other document or arrangement.
10. TERMINATION. The obligations of the Underwriters hereunder
may be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Shares if, prior to that
time, any of the events described in Sections 7(m) or 7(n) shall have occurred
or if the Underwriters shall decline to purchase the Shares for any reason
permitted under this Agreement.
11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If (a) the
Company shall fail to tender the Shares for delivery to the Underwriters for any
reason permitted under this Agreement, or (b) the Underwriters shall decline to
purchase the Shares for any reason permitted under this Agreement (including the
termination of this Agreement pursuant to Section 10), the Company and the
Significant Subsidiaries shall, jointly and severally, shall reimburse the
Underwriters for the fees
<PAGE>
44
and expenses of their U.S. counsel and for such other out-of-pocket expenses as
shall have been incurred by them in connection with this Agreement and the
proposed purchase of the Shares, and upon demand the Company and the Significant
Subsidiaries shall, jointly and severally, pay the full amount thereof to the
Representatives. If this Agreement is terminated pursuant to Section 9 by reason
of the default of one or more Underwriters, the Company and the Significant
Subsidiaries shall not be obligated to reimburse any defaulting Underwriter on
account of those expenses.
12. ADDITIONAL AMOUNTS. If the compensation (including the
Underwriters' discounts and commissions) or any other amounts to be received by
the Underwriters under this Agreement, solely as a result of entering into this
Agreement, are subject to any present or future taxes, assessments, deductions,
withholdings or changes of any nature enacted by any non-U.S. jurisdiction or
any political subdivision thereof or taxing authority therein ("Non-U.S.
Taxes"), then the Company and the Significant Subsidiaries, jointly and
severally, shall pay to the Underwriters an additional amount so that the
Underwriters shall retain, after taking into consideration all such Non-U.S.
Taxes, an amount equal to this Agreement as if such amounts had not been subject
to Taxes. If any Non-U.S. Taxes are collected by deduction or withholding, the
Company shall provide to the Underwriters copies of documents evidencing the
transmittal to the proper authorities of the amount of Non-U.S. Taxes deducted
or withheld.
13. JUDGMENT CURRENCY. The Company and the Significant
Subsidiaries, jointly and severally, shall indemnify each Underwriter against
any loss incurred by it as a result of any judgment or order being given or
made and expressed and paid in a currency (the "Judgment Currency") other
than U.S. dollars and as a result of any variation as between (i) the rate of
exchange at which the U.S. dollar amount is converted into the Judgment
Currency for the purpose of such judgment or order and (ii) the spot rate of
exchange in New York, New York at which such Underwriter on the date of
payment of such judgment or order is able to purchase U.S. dollars with the
amount of the Judgment Currency actually received by such Underwriter. The
foregoing indemnity shall constitute a separate and independent obligation of
the Company and shall continue in full force and effect notwithstanding any
such judgment or order as aforesaid. The term "spot rate of exchange" shall
include any premiums and costs of exchange payable in connection with the
purchase of, or conversion into, U.S. dollars.
14. NOTICES, ETC. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or
sent by mail, telex or facsimile transmission to Credit Suisse
First Boston Corporation, 111 Madison Avenue, New York, New
York 10010, Attention: [Syndicate Department] (Fax:
212-___-____);
(b) if to the Company, shall be delivered or sent
by mail, telex or facsimile transmission to the address of the
Company set forth in the Primary Registration Statement,
Attention: Horacio Milberg, Chief Financial Officer (Fax:
011-54-11-4343-6700 ext. 104);
<PAGE>
45
PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section 8(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.
The Company shall be entitled to act and rely upon any
request, consent, notice or agreement given or made by Lehman Brothers Inc. on
behalf of the Representatives or on behalf of the Underwriters.
15. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement
shall inure to the benefit of and be binding upon the Company, the Significant
Subsidiaries and the Underwriters and their respective successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (A) the representations, warranties, indemnities and
agreements of the Company and the Significant Subsidiaries contained in this
Agreement shall also be deemed to be for the benefit of the directors, officers
and employees of each Underwriter and the person or persons, if any, who control
each Underwriter within the meaning of Section 15 of the Securities Act and (B)
the indemnity agreement of the Underwriters contained in Section 8(b) of this
Agreement shall be deemed to be for the benefit of the directors, officers and
employees of the Company and any person controlling the Company within the
meaning of Section 15 of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 5, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
16. SURVIVAL. The respective indemnities, representations,
warranties and agreements of the Company and the Significant Subsidiaries on the
one hand and the Underwriters on the other contained in this Agreement or made
by or on behalf of them, respectively, pursuant to this Agreement, shall survive
the delivery of and payment for the Shares or any termination or cancellation of
this Agreement and shall remain in full force and effect, regardless of any
investigation made by or on behalf of any of them or any person controlling any
of them.
17. CERTAIN DEFINITIONS. For purposes of this Agreement, (a)
"business day" means any day on which the Nasdaq National Market System is open
for trading, (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules
and Regulations and (c) "significant subsidiary" has the meaning set forth in
Rule 405 of the Rules and Regulations.
18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
19. CONSENT TO JURISDICTION. Each of the Company and the
Significant Subsidiaries agrees that any legal suit, action or proceeding
brought against it by any party to this Agreement or by each person, if any, who
controls any such party arising out of or based upon this Agreement may be
instituted in any New York state or U.S. federal court sitting in the Borough of
Manhattan, New
<PAGE>
46
York City, and waives any objection which it may now or hereafter have to the
laying of venue of any such proceeding, and irrevocably submits to the
non-exclusive jurisdiction of such courts in any suit, action or proceeding.
Each of the Company and the Significant Subsidiaries, to the fullest extent
permitted by applicable law, irrevocably waives the defense of sovereign
immunity and the defense of an inconvenient forum to the maintenance of such
suit, action or proceeding.
Each of the Company and the Significant Subsidiaries hereby
designates and appoints CT Corporation System (or such other successor agent as
the parties hereto shall mutually agree) (the "Process Agent"), as its
authorized agent, upon whom process may be served in any such suit, action or
proceeding. Each of the Company and the Significant Subsidiaries that it has
notified the Process Agent of such designation and appointment and that the
Process Agent has accepted the same in writing. Each of the Company and the
Significant Subsidiaries hereby irrevocably authorizes and directs the Process
Agent to accept such service. Each of the Company and the Significant
Subsidiaries further agrees that service of process upon the Process Agent and
written notice of such service to the Company or such Significant Subsidiary,
mailed by first class mail or delivered to the Process Agent shall be deemed in
every respect effective service of process upon the Company or such Significant
Subsidiary in any such suit or proceeding.
Nothing herein shall affect the right of any person to serve
process in any other manner permitted by law. Each of the Company and the
Significant Subsidiaries agrees that a final judgment in any such suit, action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgement or in any other lawful manner.
The provisions of this Section 19 shall survive the
termination of this Agreement.
20. COUNTERPARTS. This Agreement may be executed in one or
more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
21. HEADINGS. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
<PAGE>
47
If the foregoing correctly sets forth the agreement among the
Company, the Significant Subsidiaries and the Underwriters, please indicate your
acceptance in the space provided for that purpose below.
Very truly yours,
EL SITIO, INC.
By:_______________________________________
Name:
Title:
EL SITIO ARGENTINA, S.A.
By:_______________________________________
Name:
Title:
O SITE ENTRETENIMENTO LTDA.
By:_______________________________________
Name:
Title:
EL SITIO ENTRETENIMIENTOS, S.A. DE C.V.
By:_______________________________________
Name:
Title:
EL SITIO U.S.A., INC.
By:_______________________________________
Name:
Title:
EL SITIO (URUGUAY) SOCIEDAD ANONIMA
By:_______________________________________
Name:
Title:
<PAGE>
48
Accepted:
CREDIT SUISSE FIRST BOSTON CORPORATION
LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
SALOMON SMITH BARNEY INC.
WIT CAPITAL CORPORATION
FIDELITY CAPITAL MARKETS,
a division of National Financial Services Corporation
By: Credit Suisse First Boston Corporation
By __________________________
AUTHORIZED REPRESENTATIVE
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
Number of
Underwriters Firm Shares
------------ -----------
<S> <C>
Credit Suisse First Boston Corporation......................................
Lehman Brothers Inc.........................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..............................................
Salomon Smith Barney Inc....................................................
WIT Capital Corporation.....................................................
Fidelity Capital Markets, a division of National Financial Services
Corporation...............................................................
---------------
Total 8,200,000
===============
</TABLE>
<PAGE>
SCHEDULE 2
Directors, Executive Officers and Shareholders
To Deliver Lock-Up Letters
DIRECTORS
Roberto Vivo-Chaneton
Roberto Cibrian-Campoy
Guillermo Liberman
Ricardo Verdaguer
EXECUTIVE OFFICERS
Daniel Rotsztain
Horacio Milberg
Alfredo Jimenez de Arechaga
Eduardo Weber
SHAREHOLDERS
IAMP (El Sitio) Investments, Ltd.
Militello Limited
Tower Plus International
SLI.com Inc.
IMPSAT Corporation
Bear, Stearns & Co., Inc.
Intel Atlantic, Inc.
Utilivest II, L.P.
Utilivest III, L.P.
<PAGE>
EXHIBIT A
FORM OF LOCK-UP LETTER
November ___, 1999
CREDIT SUISSE FIRST BOSTON CORPORATION
LEHMAN BROTHERS INC.
SALOMON SMITH BARNEY INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
WIT CAPITAL CORPORATION
FIDELITY CAPITAL MARKETS
a division of National Financial Services Corporation
As Representatives of the several
Underwriters named in
Schedule 1 to the Underwriting Agreement
Ladies and Gentlemen:
In consideration of the participation of the several
Underwriters, for which Credit Suisse First Boston Corporation, Lehman Brothers
Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney
Inc., Wit Capital Corporation and Fidelity Capital Markets, a division of
National Financial Services Corporation (the "Representatives") will to act as
Representatives, in the underwriting of the proposed initial public offering
(the "Offering") of common shares ("Common Shares") of El Sitio, Inc., a British
Virgin Islands company (the "Company"), as contemplated by a Registration
Statement on Form F-1 filed with the Securities and Exchange Commission
(Registration No. 333-______) and for other good and valuable consideration (the
receipt of which is hereby acknowledged) the undersigned hereby agrees that the
undersigned will not, for a period of 180 days commencing on the date of the
final Prospectus included as part of the Registration Statement, directly or
indirectly, (a) offer for sale, sell or contract to sell, pledge or otherwise
dispose of (or enter into any transaction or device which is designed to, or
could be expected to, result in the disposition or purchase by any person at any
time in the future of) any Common Shares or other equity securities of the
Company or any securities convertible into or exchangeable for any Common Shares
or other equity securities, or sell or grant options, rights or warrants with
respect to any Common Shares or other equity securities of the Company or any
securities convertible into or exchangeable for any Common Shares or other
equity securities, or (b) enter into any swap or other derivatives transaction
that transfers to another, in whole or in part, any of the economic benefits or
risks of ownership of whether any such transaction described in clause (a) or
(b) above is to be settled by delivery of any Common Shares or other equity
securities, in cash or otherwise, in each case without the prior written consent
of Lehman Brothers Inc. on behalf of the Underwriters.
The undersigned hereby represents and warrants that the
undersigned has full power and authority to enter into this agreement, and that,
upon request, the undersigned will execute any additional documents necessary or
desirable in connection with the enforcement hereof. All authority herein
conferred or agreed to be conferred shall survive the death or incapacity of the
undersigned and any obligations of the undersigned shall be binding upon the
heirs, personal representatives, successors and assigns of the undersigned.
<PAGE>
A-2
This letter constitutes an agreement that shall be governed
by, and construed in accordance with, the laws of the State of New York.
Very truly yours,
By:_____________________________
Name:
<PAGE>
Exhibit 2.1
-----------------------------
FRAMEWORK AGREEMENT
between
IMPSAT CORPORATION
and
EL SITIO INTERNATIONAL CORP
August 4, 1999
-----------------------------
<PAGE>
FRAMEWORK AGREEMENT
THIS FRAMEWORK AGREEMENT (the "Agreement") is made as of this ___
day of August, 1999, by and between IMPSAT Corporation, a Delaware corporation
("IMPSAT"), and El Sitio International Corp., a British Virgin islands
corporation ("El Sitio").
RECITALS
WHEREAS, IMPSAT and its subsidiaries provide telecommunications services
to business customers, carriers, Internet service providers ("ISPs") and other
telecommunications providers in the Americas and are developing a terrestrial
broadband fiber optic network connecting the major cities of Latin America and
building local distribution networks in the major cities of Latin America.
WHEREAS, El Sitio and its subsidiaries are developing an internet access
and content business in Argentina, Brazil, Colombia and other countries.
WHEREAS, IMPSAT has decided to divest its retail Internet access business
in Argentina, Brazil and Colombia in order to further develop its
telecommunications businesses, including Internet backbone and wholesale
Internet access services to ISPs, and El Sitio desires to acquire IMPSAT's
retail Internet access business and enter into a telecommunications services
agreement with IMPSAT and/or subsidiaries for Internet backbone and wholesale
Internet access services.
WHEREAS, El Sitio and IMPSAT desire to enter into a series of related
agreements as set for in Article 2 of this Agreement (such agreements, the
"Transaction Agreements") in connection with the sale of IMPSAT's retail
Internet access business to El Sitio, the provision by IMPSAT to El Sitio of
telecommunications network services and access for El Sitio's ISP business in
specified countries in South America, and the issuance and sale by El Sitio to
IMPSAT of preferred stock of El Sitio.
WHEREAS, El Sitio and IMPSAT desire to set forth an interim framework for
the negotiation the Transaction Agreements, including the material terms and
conditions of the Transaction Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements hereinafter set forth, which the parties agree is good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1.
THE TRANSACTION
1.1. Purpose. The purpose of this Agreement is to set forth the terms and
conditions upon which El Sitio and IMPSAT will negotiate and enter into the
Transaction Agreements.
1.2. Term. This Agreement is an interim non-binding agreement between El
Sitio and IMPSAT and shall be superseded at each Closing (as defined below) by
thc applicable Transaction Agreements set forth in Article 2. All terms and
conditions of this Agreement with respect to a particular Closing shall expire
and terminate at such Closing. This Agreement shall expire and terminate in
accordance with the provisions of Section 6.1 hereof. Promptly after the date
hereof, El Sitio and IMPSAT shall use all reasonable best endeavors to negotiate
Transaction Agreements with terms and conditions consistent with the terms
hereof and mutually acceptable to each party hereto. As soon as practicable
after the satisfaction of the conditions set forth in Article 3 applicable to
IMPSAT S.A. (Argentina) ("IMPSAT Argentina"), IMPSAT S.A. (Colombia) ("IMPSAT
Colombia") or IMPSAT
<PAGE>
Comunicacoes Ltda. ("IMPSAT Brazil"), as the case may be, the parties, and/or
their respective subsidiaries, shall consummate the Transaction Agreements
applicable to IMPSAT Argentina, IMPSAT Colombia or IMPSAT Brazil (each such date
being a "Closing Date"). The parties shall use their reasonable best efforts to
finalize and enter into each of the Transaction Agreements not later than
September 30, 1999.
ARTICLE 2.
TRANSACTION AGREEMENTS
El Sitio, IMPSAT and/or their respective subsidiaries, as applicable, will
enter into the Transaction Agreements set forth below. The Transaction
Agreements shall also contain such usual, customary or appropriate terms and
conditions as the parties may agree.
2.1. Purchase and Sale Agreements.
(a) As soon as practicable after the date hereof, each of IMPSAT
Argentina, IMPSAT Colombia and IMPSAT Brazil (collectively, the "Sellers"), will
enter into a Purchase and Sale Agreement with El Sitio, or any subsidiary of El
Sitio designated by El Sitio (collectively, the "Buyers"), pursuant to which
each applicable Seller will transfer, sell and assign to each applicable Buyer
the retail Internet access customer contracts (the "Subscribers") and assets of
each applicable Seller, directly and exclusively related to IMPSAT's retail
internet access business in Argentina, Brazil or Colombia, as the case may be.
The specific related assets to be sold shall be agreed among the parties in the
applicable Purchase and Sale Agreements.
(b) The Purchase Price for respective assets shall be as follows:
Seller Purchase Price (U.S. dollars)
IMPSAT Argentina $6.2 million
IMPSAT Brazil $12.3 million
IMPSAT Colombia $3.0 million
in the event that the number of Subscribers of IMPSAT Argentina, IMPSAT Brazil
or IMPSAT Colombia at July 31, 1999 shall be greater or less by five percent
(5%) or more than the number of Subscribers set forth in the following table,
then the parties shall adjust the applicable Purchase Price on a per Subscriber
basis by the amounts set forth in the following table, and such amounts shall be
added or subtracted from the applicable Purchase Price. For the purposes of
adjustment in the amounts paid, IMPSAT and El Sitio shall undertake reasonable
efforts to determine jointly the actual number of Subscribers at July 31, 1999
within thirty (30) days following the date hereof and shall make any appropriate
additions or subtractions to the applicable Purchase Price in U.S. dollars.
2
<PAGE>
Country Subscribers as of May 31, 1999 Value per Subscriber
------- ------------------------------ --------------------
Argentina 12,639 $489.77
Brazil 48,548 $253.36
Colombia 7,046 $425.77
(c) The Purchase and Sale Agreements shall contain terms and provisions
customary and applicable for such transactions and shall otherwise be mutually
agreeable to El Sitio and IMPSAT.
2.2. Telecommunications Services Agreements.
(a) On or prior to each Closing Date, the applicable Seller and/or one
of its Affiliates and the applicable Buyer and/or one of its Affiliates shall
enter into one or more Telecommunications Services Agreements whereby such
Seller or Affiliate shall provide, and such Buyer or Affiliate shall
purchase, telecommunications services related to El Sitio's Internet access
requirements with respect to the Subscribers transferred to such Buyer on an
exclusive basis for a one-year term commencing on such Closing Date. The
Telecommunications Services Agreements shall also provide that IMPSAT or one
of its Affiliates shall have a right of first refusal to provide such
telecommunications services with respect to other telecommunications
requirements of El Sitio and its Affiliates, including with respect to the
Subscribers transferred to the applicable Buyer, following the one-year
exclusivity period. The terms and conditions of the Telecommunications
Services Agreements shall be mutually agreeable to El Sitio and IMPSAT.
(b) On each Closing Date, El Sitio and each of IMPSAT Argentina, IMPSAT
Brazil and IMPSAT Colombia, as applicable, shall enter into transition services
agreements pursuant to which IMPSAT Argentina, IMPSAT Brazil and IMPSAT Colombia
shall operate El Sitio's business activities in Argentina, Brazil and Colombia,
respectively, for a period of no more than two months after such Closing Date
subject to terms and conditions, including the terms of the compensation to be
paid to each Seller for the provision of such services, mutually agreeable to El
Sitio and each of IMPSAT Argentina, IMPSAT Brazil and IMPSAT Colombia.
(c) IMPSAT and El Sitio also agree that they shall use their respective
best efforts to enter into Telecommunications Service Agreements in other
countries where IMPSAT has or may in the future have an operating presence in
connection with the future expansion of El Sitio's business into such countries.
2.3. Stock Purchase Agreement. As soon as practicable after the date
hereof, IMPSAT and El Sitio shall enter into a stock purchase agreement (the
"Stock Purchase Agreement") providing for the issuance by El Sitio to IMPSAT, or
a designated subsidiary, for the purchase price of $21.5 million of 3,070,615
shares of Class A Convertible Preferred Stock of El Sitio having a liquidation
value of $21.5 million. The Class A Convertible Preferred Stock of El Sitio to
be subscribed by IMPSAT shall have anti-dilution and related rights and
protections applicable to such class of El Sitio's capital stock on a
retroactive basis to June 21, 1999. The Stock Purchase Agreement shall contain
terms and conditions customary and applicable for such transactions, including,
without limitation, representations and warranties, conditions precedent,
covenants, anti-dilution provisions and indemnities, shall be substantially
similar to the Stock Purchase Agreement dated June 21, 1999 entered into by El
Sitio in connection with the prior issuance of 4,727,319 shares of its Class A
Convertible Preferred Stock to
3
<PAGE>
Ibero-American Media Partners II Ltd. and certain other parties (collectively,
the "Private Placement Investors") and shall otherwise be satisfactory to
IMPSAT. The Stock Purchase Agreement shall provide that on the respective
Closing Dates for IMPSAT Argentina, IMPSAT Brazil and IMPSAT Colombia, IMPSAT
shall purchase, and El Sitio shall issue and sell, 885,480, 1,756,677 and
428,458 shares of Class A Convertible Preferred Stock.
2.4. Shareholders Agreement. On the date of the first Closing under the
Stock Purchase Agreement, IMPSAT, El Sitio and the existing shareholders of El
Sitio who are parties to the Stockholders Agreement and Registration Rights
Agreement each dated June 21, 1999 entered into connection with the issuance of
El Sitio's Class A Convertible Preferred Stock to the Private Placement
Investors (the "Shareholders Agreement" and the "Registration Rights Agreement,"
respectively) shall enter into a new or amended Shareholders Agreement (the
"Shareholders Agreement") and registration rights agreement relating to the
management of El Sitio and the transfer and ownership of the shares of El Sitio.
The Shareholders Agreement and the registration rights agreement shall each be
substantially similar to the Stockholders Agreement and Registration Rights
Agreement. The Shareholders Agreement shall provide (A) that the number of
directors to be designated by the holders of the Class A Convertible Preferred
Stock shall be increased to five, one of whom shall be designated by IMPSAT and
another of whom shall be (i) independent to any other holder of common of Class
A Convertible Preferred Stock and (ii) designated by the unanimous vote of all
of the other directors of El Sitio and (B) that the actions specified in Section
2.3 of the Stockholders Agreement shall require the affirmative vote of at least
three of the five directors allocated to or designated by the holders of the
Class A Convertible Preferred Stock. The new or amended registration rights
agreement shall provide IMPSAT with certain registration rights and tag-along
rights with respect to transfers of capital stock by the shareholders of El
Sitio. In the event that all of the Closings for the IMPSAT Argentina, IMPSAT
Brazil or IMPSAT Colombia Transaction Agreements shall not have occurred as of a
date to be set forth in the Stock Purchase Agreement, the Shareholders Agreement
will provide for an appropriate adjustment, if any, to IMPSAT's right to
designate a member of thc Board of Directors and to vote in favor of the
independent member of the Board of Directors in a manner, and at a shareholding
level, substantially identical to Section 2.2(a) of the Stockholders Agreement
with respect to the Private Placement Investors. The Shareholders Agreement and
Registration Rights Agreement shall each contain terms and conditions customary
and applicable for such agreements and shall be otherwise satisfactory to
IMPSAT.
ARTICLE 3.
CONDITIONS TO CLOSING
3.1. Conditions to Obligations of El Sitio to Close. The obligations of
El Sitio under Article 2 of this Agreement are subject to the fulfillment and
satisfaction, on or prior to each Closing Date, of each of the following
conditions:
(a) Approvals. The Board of Directors and shareholders of El Sitio shall
have approved the execution and delivery by El Sitio and its Affiliates of the
applicable Transaction Agreements and the performance by El Sitio and its
Affiliates of their obligations thereunder, and El Sitio, the applicable Buyer
and any Affiliate entering into any applicable Transaction Agreement as of such
date shall have obtained or filed all approvals, authorizations, consents,
licenses, permits and other notices with all governmental authorities and third
parties required to be obtained or filed by such Persons in connection with the
transactions contemplated by the applicable Closing.
(b) Representations, Warranties, Etc. (i) All representations and
warranties of IMPSAT, the applicable Seller and their respective Affiliates
contained in this Agreement and the Transaction
4
<PAGE>
Agreements to be consummated on such Closing Date shall be true and correct
in all material respects and as of such Closing Date, as applicable; and
(ii) IMPSAT, the applicable Seller and their respective Affiliates shall have
performed and complied with, in all material respects, their respective
obligations under this Agreement and the applicable Transaction Agreements
that are to be performed or complied with by them prior to or on such Closing
Date.
(c) Transaction Agreements. Each of IMPSAT, the applicable Seller and
their respective Affiliates shall have executed and delivered all of the
applicable Transaction Agreements to which it is to be a party.
(d) No Changes. There shall have been no adverse change between the date
hereof and such Closing Date in the assets intended to be purchased by El Sitio
or the applicable Buyer or in the business or financial condition of IMPSAT, in
each case that shall be reasonably unacceptable to El Sitio.
3.2. Conditions to Obligations of IMPSAT to Close. The obligations of
IMPSAT under Article 2 of this Agreement are subject to the fulfillment and
satisfaction, on or prior to each Closing Date, of each of the following
conditions:
(a) Approvals. The Board of Directors and shareholders of IMPSAT shall
have approved the execution and delivery by IMPSAT and its Affiliates of the
applicable Transaction Agreements and the performance by IMPSAT and its
Affiliates of their obligations thereunder, and IMPSAT, the applicable Seller
and any Affiliate entering into any applicable Transaction Agreement as of such
date shall have obtained or filed all approvals, authorizations, consents,
licenses, permits and other notices with all governmental authorities and third
parties required to be obtained or filed by such Persons in connection with the
transactions contemplated by the applicable Closing.
(b) Representations, Warranties and Covenants True at each Closing Date.
(i) All representations and warranties of El Sitio, the applicable Buyer and
their respective Affiliates contained in this Agreement and the applicable
Transaction Agreements shall be true and correct in all material respects at and
as of such Closing Date, as applicable; and (ii) El Sitio, the applicable Buyer
and their respective Affiliates shall have performed and complied with, in all
material respects, their respective obligations under this Agreement and the
applicable Transaction Agreements that are to be performed or complied with by
them prior to or on such Closing Date.
(c) Transaction Agreements. Each of El Sitio, the applicable Buyer and
their respective Affiliates shall have executed and delivered all of the
applicable Agreements to which it is to be a party.
(d) No Changes. There shall have been no significant change between the
date hereof and such Closing Date in the business, financial condition, assets,
indebtedness or shareholders of El Sitio that shall be reasonably unacceptable
to IMPSAT.
5
<PAGE>
ARTICLE 4.
COVENANTS
4.1. Actions Prior to the Closings. Upon the terms and subject to the
conditions of this Agreement and the other agreements, documents and instruments
pursuant to which the transactions contemplated hereby are to be consummated, El
Sitio and IMPSAT will use their reasonable best efforts to take all other
actions, and to do, or cause to be done, all other things necessary, proper or
advisable to carry out its obligations under this Agreement and to consummate
and make effective the transactions contemplated hereby and by the Transaction
Agreements, including, without limitation, the following:
(a) as soon as practicable following the execution of this Agreement, to
make all applications and filings and to use its best efforts to obtain all
other authorizations and consents required to be obtained by such party or its
Subsidiaries in connection with the consummation of the transactions
contemplated by this Agreement and by the Transaction Agreements;
(b) in the event any claim, action, suit, investigation or other
proceeding by any governmental authority or other Person is commenced which
questions the validity or legality of any of the transactions contemplated
hereby or by any of the Transaction Agreements or any injunction or other order
is issued in any such proceeding, to cooperate with the other party hereto
regarding the defense of such proceedings and the removal of any such impediment
to the consummation of such transactions and to use its reasonable best efforts
to have such injunction or other order dissolved.
4.2. Information. Each of the parties hereto agrees to keep the other
informed as to all material developments and communications relating to the
transactions contemplated by this Agreement.
4.3. Public Announcements. Either party may publicly announce that it has
entered into this Agreement, provided that the other party is given a reasonable
opportunity to review the form and content of the proposed announcement.
4.4. Confidentiality. El Sitio and IMPSAT agree that any written
information with respect to this Agreement or the Transaction Agreements
delivered to it by the other party that is confidential and proprietary and is
marked "confidential and proprietary" ("Confidential Information") will be kept
confidential by El Sitio and IMPSAT and shall not be disclosed, in whole or in
part to any person other than Affiliates, officers, directors, employees, agents
consultants or representatives of El Sitio and IMPSAT (collectively
"Representatives") who need to know such Confidential Information. Each of the
parties agrees to inform each of its Representatives of the non-public nature of
the Confidential Information and to direct such persons to treat such
Confidential Information in accordance with the terms of this Section 4.4.
Nothing herein shall prevent either party from disclosing Confidential
Information (a) upon the order of any court or administrative agency, (b) upon
the request or demand of, or pursuant to any rule or regulation of any
regulatory agency or authority, and (c) to its legal counsel or independent
auditors.
ARTICLE 5.
TERMINATION AND EXPENSES
5.1. Termination. Notwithstanding anything herein, this Agreement may be
terminated at any time prior to any Closing Date:
(a) by mutual consent of El Sitio and IMPSAT;
6
<PAGE>
(b) by either El Sitio or IMPSAT, if either El Sitio or IMPSAT receives a
final non-appealable order from any regulatory authority denying an
authorization necessary in order for any party to execute and deliver any of the
Transaction Agreements;
(c) by either El Sitio or IMPSAT, if all the Closings shall not have
occurred on or before December 31, 1999, unless such failure so to consummate
shall be due to the failure of the party seeking to terminate this Agreement
to perform in all material respects each of its obligations under this
Agreement required to be performed by it on or prior to each Closing Date
pursuant to the terms hereof (unless such failure to consummate is due to the
failure to obtain required authorizations in which case such date shall be
extended for an additional three months);
(d) by El Sitio, if there has been a material breach of a representation
or warranty in this Agreement by IMPSAT, and IMPSAT fails to cure such breach
within 60 days after notice thereof from El Sitio, or a material breach by
IMPSAT of any covenant set forth in this Agreement or a failure of any condition
to which the obligations of El Sitio are subject, and such breach or failure has
not been waived expressly in writing;
(e) by IMPSAT, if there has been a material breach of a representation or
warranty in this Agreement by El Sitio and El Sitio fails to cure such breach
within 60 days after notice thereof from IMPSAT or a material breach by El Sitio
of any covenant set forth in this Agreement or a failure of an condition to
which the obligations of IMPSAT are subject, and such breach or failure has not
been waived expressly in writing.
5.2. Liabilities in Event of Termination. In the event of the termination
and abandonment of this Agreement and the transactions contemplated hereby, this
Agreement shall become void and have no effect, and El Sitio, IMPSAT and their
respective directors, officers, employees and shareholders shall have no
obligation or liability to each other hereunder, except (a) for those
obligations set forth in Section 4.4 or (b) for any obligations of El Sitio and
IMPSAT arising prior to such termination.
ARTICLE 6.
MISCELLANEOUS
6.1. Survival. The representations and warranties and covenants of each of
the parties contained in this Agreement shall survive until each Closing, as
applicable.
6.2. Defined Terms. As used herein, the following terms have the following
meanings:
"Affiliate" means as to any Person, any other Person controlled by,
controlling or under common control with such Person. For purposes of
this definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 50% or more of the securities having ordinary voting power
for the election of directors of such Person, or (b) direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise
"Person" means any natural person or corporation, limited liability
company, general partnership, limited partnership, venture, trust, business
trust, estate or other entity.
7
<PAGE>
6.3. Successors and Permitted Assigns; Assignment.
(a) Subject to Section 6.3(b), the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, and to the extent applicable heirs, executors,
administrators and legal representatives.
(b) Neither party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the prior written consent of
each of the parties hereto. Notwithstanding the foregoing, a party may assign
its rights and obligations under this Agreement to an Affiliate provided that
the assigning party will continue to be responsible for its liabilities and
obligations hereunder.
6.4. Notices. All notices, requests and other communications hereunder
shall be deemed to have been duly delivered, given or made to or upon any party
hereto if in writing and delivered by hand against receipt, or by certified or
registered mail, postage prepaid, return receipt requested, or to a courier who
guarantees next business day delivery or sent by telecopy (with confirmation),
to such-party at its address set forth below or to such other address as such
party may at any tune, or from time to time, direct by notice given in
accordance with this Section 6.4.
if to El Sitio:
El Sitio International Corp.
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Fax: 54114 343-9122
Attention: Roberto Cibrian-Campoy
if to IMPSAT:
IMPSAT Corporation
Alferez Parcia 256
1107 Buenos Aires, Argentina
Fax: 54114-328-0140
Attention: Hector Alonso
The date of delivery of any such notice, request or other communication shall be
the earlier of (i) the date of actual receipt or (ii) three business days after
such notice, request or other communication is sent if sent by certified or
registered mail, (iii) if sent by courier who guarantees next business day
delivery the business day next following the day such notice, request or other
communication is actually delivered to the courier or (iv) the day actually
telecopied.
6.5. Amendments and Waivers. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as 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.
8
<PAGE>
6.6. Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, EXCLUDING ANY
CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. If any
provision of this Agreement or its application to any Person or circumstance is
held invalid or unenforceabie to any extent, the remainder of this Agreement and
the application of such provision to other Persons or circumstances is not
affected and such provision shall be enforced to the greatest extent permitted
by law.
6.7. Expenses. All expenses incurred by any party hereto in connection
with the negotiation preparation and consummation of this Agreement and the
transactions contemplated hereby shall be borne by such party except as
otherwise expressly provided in any provision of this Agreement.
6.8. Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signature thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
6.9. Headings. The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
6.10. Entire Agreement. This Agreement, the Exhibits attached (or to be
attached) hereto and the agreements, documents and instruments contemplated
hereby, constitute the entire agreement between the parties with respect to the
subject matter hereof, and supersede all prior agreements and understandings,
whether oral or written, between or among any of the parties hereto with respect
to the subject matter hereof.
6.11. Interpretation. In any dispute concerning the construction or
interpretation of any provision of this Agreement or any ambiguity thereof,
there shall be no presumption that the Agreement or any provision hereof be
construed against the party who drafted this Agreement.
6.12. Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each party shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provision of this
Agreement and such transactions.
9
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement as of the date first set forth above.
EL SITIO INTERNATIONAL CORP.
By /s/ Roberto Cibrian-Campoy
--------------------------------------
Name: ROBERTO CIBRIAN CAMPOY
Title: CHIEF EXECUTIVE OFFICER
EL SITIO INTERNATIONAL CORP
IMPSAT CORPORATION
By /s/ Marcos Souza Aranha
--------------------------------------
Name:
Title:
10
<PAGE>
TERRITORY OF THE BRITISH VIRGIN ISLANDS
THE INTERNATIONAL BUSINESS COMPANIES ACT
(CAP. 291)
AMENDED AND RESTATED
MEMORANDUM OF ASSOCIATION
OF
EL SITIO, INC.
NAME
1. The name of the Company is El Sitio, Inc.
REGISTERED OFFICE
2. The Registered Office of the Company will be situated at Romasco Place,
PO Box 3140, Wickhams Cay I, Road Town, Tortola, British Virgin
Islands.
REGISTERED AGENT
3. The Registered Agent of the Company will be Codan Trust Company
(B.V.I.) Ltd., with its address at Romasco Place, PO Box 3140, Wickhams
Cay I, Road Town, Tortola, British Virgin Islands.
GENERAL OBJECTS AND POWERS
4. (1) The object of the Company is to engage in any act or activity
that is not prohibited under any law for the time being in
force in the British Virgin Islands.
(2) The Company may not
(a) carry on business with persons resident in the
British Virgin Islands;
(b) own an interest in real property situated in the
British Virgin Islands, other than a lease referred
to in paragraph (e) of subclause (3);
(c) carry on banking or trust business, unless it is
licensed to do so under the Banks and Trust Companies
Act, 1990;
<PAGE>
(d) carry on business as an insurance or reinsurance
company, insurance agent or insurance broker, unless
it is licensed under and enactment authorizing it to
carry on that business;
(e) carry on the business of company management, unless
it is licensed under the Company Management Act,
1990; or
(f) carry on the business of providing the registered
office or the registered agent for companies
incorporated in the British Virgin Islands.
(3) For purposes of paragraph (a) of subclause (2) the Company
shall not be treated as carrying on business with persons
resident in the British Virgin Islands if
(a) it makes or maintains deposits with a person carrying
on banking business within the British Virgin
Islands;
(b) it makes or maintains professional contact with
solicitors, barristers, accountants, bookkeepers,
trust companies, administration companies, investment
advisers or other similar persons carrying on
business within the British Virgin Islands;
(c) It prepares or maintains books and records within the
British Virgin Islands;
(d) it holds, within the British Virgin Islands, meetings
of its directors or Members;
(e) it holds a lease of property for use as an office
from which to communicate with Members or where books
and records of the Company are prepared or
maintained;
(f) it holds shares, debt obligations or other securities
in a company incorporated under the International
Business Companies Act or under the Companies Act; or
(g) shares, debt obligations or other securities in the
Company are owned by any person resident in the
British Virgin Islands or by any company incorporated
under the International Business Companies Act or
under the Companies Act.
(4) The Company shall have all such powers as are permitted by law
for the time being in force in the British Virgin Islands,
irrespective of corporate benefit, to
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perform all acts and engage in all activities necessary or
conducive to the conduct, promotion or attainment of the
object of the Company.
CURRENCY
5. Shares in the Company shall be issued in the currency of the United States of
America.
AUTHORIZED CAPITAL
6. The authorized capital of the Company is US$3,000,000.00
CLASSES, NUMBER AND PAR VALUE OF SHARES
7. The authorized capital is made up of three classes of shares as follows:
(i) 200,000,000 Common Shares of US$0.01 par value each (the "Common
Shares");.
(ii) 100,000,000 Preferred Shares of US$0.01 par value each (the
"Preferred Shares"), of which 40,000,000 are designated Class A
Preferred Shares (the "Class A Preferred Shares"), and 1,888,889 are
designated Class B Preferred Shares (the "Class B Preferred Shares").
DESIGNATIONS, POWERS, PREFERENCES, ETC. OF SHARES
8. The rights attaching to the various classes of shares are as follows:
A. COMMON SHARES
(1) Holders of Common Shares shall have the right to one
vote per share; and
(2) Holders of Common Shares shall have the same rights
with regard to dividends and distributions upon
liquidation of the Company.
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<PAGE>
B. PREFERRED SHARES
Holders of Preferred Shares shall have the following rights and be subject to
the following restrictions:
(1) RANKING.
(a) The Class A Preferred Shares shall rank, with respect to
dividend distributions and distributions upon a Liquidation
(as defined in paragraph (4) of this Section B below), (i)
PARI PASSU with the Class B Preferred Shares and (ii) senior
to all classes of common shares of the Company and to each
other class of shares established after the Class A Preferred
Shares Issue Date by the board of directors (collectively
referred to with the common shares of the Company as "Class A
Junior Securities").
(b) The Class B Preferred Shares shall rank, with respect to
dividend distributions and distributions upon a Liquidation
(as defined in paragraph (4) of this Section B below), (i)
PARI PASSU with the Class A Preferred Shares and (ii) senior
to all classes of common shares of the Company and to each
other class of shares established after the Class B Preferred
Shares Issue Date by the board of directors (collectively
referred to with the common shares of the Company as "Class B
Junior Securities").
(2) DIVIDENDS.
(a) The holders of Preferred Shares shall be entitled to receive,
when, as and if dividends are declared by the Board of
Directors out of funds of the Company legally available
therefor, cumulative preferential dividends at the annual rate
of 8% on the Liquidation Preference, payable quarterly in cash
or, at the option of the Board of Directors, in additional
Preferred Shares, to the holders of record at the close of
business on the date specified by the Board of Directors at
the time such dividend is declared. Holders of Class A
Preferred Shares and Class B Preferred Shares shall be
entitled to receive the dividends provided for herein in
preference to and in priority over any dividends upon any of
the Class A Junior Securities and Class B Junior Securities,
respectively.
(b) Dividends on the Class A Preferred Shares and Class B
Preferred Shares shall accrue on a daily basis from the Class
A Preferred Shares Issue Date and Class B Preferred Shares
Issue Date, respectively, and, to the extent they are not
paid, shall accumulate on an annual basis on each December 31,
whether or not the Company has earnings or profits, whether or
not there are funds legally
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<PAGE>
available for the payment of such dividends and whether or not
dividends are declared.
(c) Unless full cumulative dividends on all outstanding Class A
Preferred Shares and Class B Preferred Shares shall have been
declared and paid in full, then: (i) no dividend (other than a
dividend payable solely in shares of any Class A Junior
Securities or Class B Junior Securities) shall be declared or
paid upon, or any sum set apart for the payment of dividends
upon, any shares of Class A Junior Securities or Class B
Junior Securities; (ii) no other distribution shall be
declared or made upon, or any sum set apart for the payment of
any distribution upon, any shares of Class A Junior Securities
or Class B Junior Securities, other than a distribution
consisting solely of Class A Junior Securities or Class B
Junior Securities; (iii) no shares of Class A Junior
Securities or Class B Junior Securities shall be purchased,
redeemed or otherwise acquired or retired other than
securities received from an employee pursuant to a severance
agreement for value (excluding an exchange for shares of other
Class A Junior Securities or Class B Junior Securities) by the
Company or any of its Subsidiaries; and (iv) no monies shall
be paid into or set apart or made available for a sinking or
other like fund for the purchase, redemption or other
acquisition or retirement for value of any shares of Class A
Junior Securities or Class B Junior Securities by the Company
or any of its Subsidiaries.
(d) In the event that the Company declares and pays any dividends
upon the Common Shares (whether payable in cash, securities or
other property) other than dividends payable solely in Common
Shares, the Company shall also declare and pay to the holders
of the Preferred Shares at the same time it declares and pays
such dividends to the holders of the Common Shares, the
dividends which would have been declared and paid with respect
to the Common Shares issuable upon conversion of the Preferred
Shares had all of the issued and outstanding Preferred Shares
been converted immediately prior to the record date for such
dividend, or if no record date is fixed, the date as of which
the record holders of Common Shares entitled to such dividends
are to be determined.
(3) CONVERSION.
(a) A holder of Class A Preferred Shares may convert such shares,
in whole or in part, at the option of such holder into Common
Shares at any time after the date of issuance of such Class A
Preferred Shares in whole or in part at the option of such
holder. For the purposes of conversion, each Class A Preferred
Share shall be valued at the Class A Liquidation Preference,
which shall be divided by the Class A Conversion Price in
effect on the Conversion Date to
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<PAGE>
determine the number of Common Shares issuable for each Class
A Preferred Share upon conversion. Immediately following such
conversion, the rights of the holders of converted Class A
Preferred Shares shall cease and the Persons entitled to
receive the Common Shares upon the conversion of Class A
Preferred Shares shall be treated for all purposes as having
become the owners of such Common Shares.
A holder of Class B Preferred Shares may convert such shares,
in whole or in part, at the option of such holder, into Common
Shares at the Class B Conversion Price on or after the earlier
of (i) the six month anniversary of the effectiveness of a
registration statement of the Company filed with the United
States Securities and Exchange Commission in connection with
the registration of Common Shares, and (ii) February 15, 2001.
For the purposes of conversion, each Class B Preferred Share
shall be valued at the Class B Liquidation Preference, which
shall be divided by the Class B Conversion Price in effect on
the Conversion Date to determine the number of Common Shares
issuable for each Class B Preferred Share upon conversion.
Immediately following such conversion, the rights of the
holders of converted Class B Preferred Shares shall cease and
the Persons entitled to receive the Common Shares upon the
conversion of Class B Preferred Shares shall be treated for
all purposes as having become the owners of such Common
Shares.
(b) Upon the consummation of a Qualifying IPO, the outstanding
Class A Preferred Shares shall be automatically converted into
Common Shares at the Class A Conversion Price in effect
immediately after giving effect to the consummation of such
Qualifying IPO. Promptly following the occurrence of such
conversion, the Company shall give written notice thereof to
each record holder of converted Class A Preferred Shares,
including instructions to be followed to obtain a certificate
for the Common Shares into which such holder's Class A
Preferred Shares were converted.
Upon the six month anniversary of the consummation of a
Qualifying IPO, the outstanding Class B Preferred Shares shall
be automatically converted into Common Shares at the Class B
Conversion Price then in effect. Promptly following the
occurrence of such conversion, the Company shall give written
notice thereof to each record holder of converted Class B
Preferred Shares, including instructions to be followed to
obtain a certificate for the Common Shares into which such
holder's Class B Preferred Shares were converted.
(c) To convert Preferred Shares (other than an automatic
conversion pursuant to paragraph 3(b) above), a holder must
(i) surrender the certificate or certificates evidencing the
Preferred Shares to be converted, duly endorsed in a form
satisfactory to the Company, at the office of the Company or
transfer agent for
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<PAGE>
the Preferred Shares, (ii) notify the Company at such office
that he elects to convert Preferred Shares and the number of
shares to be converted and (iii) state in writing the name or
names in which he wishes the certificate or certificates for
Common Shares to be issued. The date on which the holder
satisfies all such requirements or the date on which the
Preferred Shares is automatically converted pursuant to
paragraph 3(b), as the case may be, shall be the "CONVERSION
DATE." As soon as practicable thereafter, the Company shall
deliver a certificate for the number of full Common Shares
issuable upon the conversion, except that the Company shall
not be required to deliver such certificate in the case of an
automatic conversion until the holders of the converted
Preferred Shares shall have complied with the provisions of
clauses (i) and (iii) of the first sentence of this paragraph
3(c). The Person in whose name the Common Shares certificate
is registered shall be treated as the shareholder of record on
and after the Conversion Date.
(d) The Company shall pay cash (based upon the Fair Market Value
of the Common Shares) in lieu of issuing any fractional Common
Shares upon conversion of Preferred Shares.
(e) If a holder converts Preferred Shares, the Company shall pay
any documentary, stamp or similar issue or transfer tax due on
the issue of Common Shares upon the conversion. However, the
holder shall pay any such tax that is due because the shares
are issued in a name other than the holder's name.
(f) The Company has reserved and shall continue to reserve out of
its authorized but unissued Common Shares or its Common Shares
held in treasury a sufficient number of Common Shares to
permit the conversion of the Preferred Shares in full. All
Common Shares that may be issued upon conversion of Preferred
Shares shall be fully paid and non-assessable. The Company
shall endeavor to comply with all securities laws regulating
the offer and delivery of Common Shares upon conversion of
Preferred Shares and if the Common Shares are then listed or
thereafter become listed on any national securities exchange
or automated quotation system, the Company shall use its best
efforts to list such shares on each such exchange or system on
which the Common Shares are or become listed, as the case may
be.
(g) If and whenever after the Class A Preferred Shares Issue Date
but prior to a Qualifying IPO, the Company shall issue or
sell, or is, in accordance with subparagraphs 3(g)(i) through
3(g)(viii) deemed to have issued or sold, any Common Shares
(other than options to acquire Common Shares under the
Company's share option plan and Common Shares issuable upon
the exercise of such options that are reserved for issuance as
of the Class A Preferred
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<PAGE>
Shares Issue Date), then, immediately upon such actual issue
or sale, or the date Common Shares are deemed to have been
issued or sold pursuant to subparagraphs 3(g)(i) through
3(g)(viii), the Class A Conversion Price shall be reduced to
(a) the price per share at which such Common Shares are sold,
in the case of a Strategic Sale, and (b) 75% of the price at
which the Common Shares are sold, in the case of any sale
(other than a Strategic Sale); provided, that only reductions
in the Class A Conversion Price shall be made pursuant to this
sentence and in no event shall the application of the
provisions of this sentence result in an increase in the Class
A Conversion Price. On the date of a Qualifying IPO, the Class
A Conversion Price shall be the lower of (i) the Class A
Conversion Price in effect immediately prior to such date, and
(ii) 75% of the price at which the Common Shares sold in such
Qualifying IPO are sold to the public.
For purposes of this paragraph 3(g), the following
subparagraphs 3(g)(i) to 3(g)(viii) shall also be applicable:
(i) In case at any time the Company shall in any manner
grant (whether directly or indirectly or by
assumption in a merger or otherwise) any warrants or
other rights to subscribe for or to purchase, or any
options for the purchase of, Common Shares or any
share or security convertible into or exchangeable
for Common Shares (such warrants, rights or options
being called "OPTIONS" and such convertible or
exchangeable shares -------- or securities being
called "CONVERTIBLE SECURITIES") other than Options
issued ----------------------- pursuant to an
employee share option plan approved by the
Compensation Committee whether or not such Options or
the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price
per share for which Common Shares are issuable upon
the exercise of such Options or upon the conversion
or exchange of such Convertible Securities
(determined by dividing (A) the total amount, if any,
received or receivable by the Company as
consideration for the granting of such Options, plus
the minimum aggregate amount of additional
consideration payable to the Company upon the
exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities,
the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the
conversion or exchange thereof, by (B) the total
maximum number of Common Shares issuable upon the
exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable
upon the exercise of such Options) shall be an amount
that would result in an adjustment to the Class A
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<PAGE>
Conversion Price pursuant to the first paragraph of
this Section 3(g), then the appropriate adjustment to
the Class A Conversion Price shall be made pursuant
to the first paragraph of this Section 3(g), based
upon the price per share underlying such Options or
Convertible Securities as determined above. Except as
otherwise provided in subparagraph 3(g)(iii), no
adjustment of the Class A Conversion Price shall be
made upon the actual issue of such Common Shares or
of such Convertible Securities upon exercise of such
Options or upon the actual issue of such Common
Shares upon conversion or exchange of such
Convertible Securities, but shall be made only upon
the date of such deemed issuance.
(ii) In case the Company shall in any manner issue
(whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert any
such Convertible Securities are immediately
exercisable, and the price per share for which Common
Shares are issuable upon such conversion or exchange
(determined by dividing (A) the total amount received
or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus
the minimum aggregate amount of additional
consideration, if any, payable to the Company upon
the conversion or exchange thereof, by (B) the total
maximum number of Common Shares issuable upon the
conversion or exchange of all such Convertible
Securities) shall be an amount that would result in
an adjustment to the Class A Conversion Price
pursuant to the first paragraph of this Section 3(g),
then the appropriate adjustment to the Class A
Conversion Price shall be made pursuant to the first
paragraph of this Section 3(g), based upon the price
per share underlying such Options or Convertible
Securities as determined above, provided that (x)
except as otherwise provided in subparagraph
3(g)(viii), no adjustment of the Class A Conversion
Price shall be made upon the actual issuance of such
Common Shares upon conversion or exchange of such
Convertible Securities (but shall be made only upon
the date of such deemed issuance) and (y) if any such
issuance or sale of such Convertible Securities is
made upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of
the Class A Conversion Price have been or are to be
made pursuant to other provisions of this paragraph
3(g), no further adjustment of the Class A Conversion
Price whether provided for under this subparagraph
3(g)(ii) or otherwise in the Memorandum, shall be
made by reason of such issue or sale.
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<PAGE>
(iii) Upon the happening of any of the following events,
namely, if the purchase price provided for in any
Option referred to in subparagraph 3(g)(i), the
additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities
referred to in subparagraph 3(g)(i) or 3(g)(ii), or
the rate at which Convertible Securities referred to
in subparagraph 3(g)(i) or 3(g)(ii) are convertible
into or exchangeable for Common Shares shall change
at any time (including, but not limited to, changes
under or by reason of provisions designed to protect
against dilution), the Class A Conversion Price in
effect at the time of such event shall forthwith be
readjusted to the Class A Conversion Price, which
would have been in effect at such time had such
Options or Convertible Securities still outstanding
provided for such changed purchase price, additional
consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold,
provided that no adjustment shall be made in the
Class A Conversion Price pursuant to this paragraph
3(g) that would increase the Class A Conversion Price
above the Class A Conversion Price in effect
immediately prior to the issuance of such Option or
Convertible Security; and on the expiration or
termination of any such Option or the termination of
any such right to convert or exchange such
Convertible Securities, the Class A Conversion Price
then in effect hereunder shall forthwith be increased
to the Class A Conversion Price which would have been
in effect at the time of such expiration or
termination had such Option or Convertible
Securities, to the extent outstanding immediately
prior to such expiration or termination, never been
issued.
(iv) In case the Company shall declare, if any, a dividend
or make any other distribution upon any share of the
Company payable in Common Shares (except for
dividends or distributions upon the Common Shares
payable solely in Common Shares), Options or
Convertible Securities, any Common Shares, Options or
Convertible Securities, as the case may be, issuable
in payment of such dividend or distribution shall be
deemed to have been issued or sold without
consideration.
(v) In the event the Company shall make or issue, or fix
a record date for the determination of holders of
Common Shares entitled to receive a dividend or other
distribution payable in securities of the Company,
then and in each such event lawful and adequate
provision shall be made so that the holders of Class
A Preferred Shares shall receive upon conversion
thereof in addition to the number of Common Shares
receivable thereupon, the number of securities of the
Company which
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<PAGE>
they would have received had their Class A Preferred
Shares been converted into Common Shares on the date
of such event and had they thereafter, during the
period from the date of such event to and including
the Conversion Date, retained such securities
receivable by them as aforesaid during such period,
giving application to all adjustments called for
during such period under this paragraph 3 with
respect to the rights of the holders of the Class A
Preferred Shares.
(vi) In case any Common Shares, Options or Convertible
Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be
the amount received by the Company therefor, without
deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In
case any Common Shares, Options or Convertible
Securities shall be issued or sold for a
consideration other than cash, the amount of the
consideration other than cash received by the Company
shall be deemed to be the fair value of such
consideration as determined in good faith by the
Board of Directors, without deduction of any expenses
incurred or any underwriting commissions or
concessions paid or allowed by the Company in
connection therewith. In case any Options shall be
issued in connection with the issue and sale of other
securities of the Company, together comprising one
integral transaction in which no specific
consideration is allocated to such Options by the
parties thereto, such Options shall be deemed to have
been issued for such consideration of US$0.01.
(vii) In case the Company shall fix a record date to
determine the holders of its Common Shares for the
purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Shares,
Options or Convertible Securities or (B) to subscribe
for or purchase Common Shares, Options or Convertible
Securities, then such record date shall be deemed to
be the date of the issue or sale of Common Shares
deemed to have been issued or sold upon the
declaration of such dividend or the making of such
other distribution or the date of the granting of
such right of subscription or purchase, as the case
may be.
(viii) The number of Common Shares issued and outstanding at
any given time shall not include shares owned or held
by or for the account of the Company (or any
Subsidiary), and the disposition of any Common Shares
so owned shall be considered an issue or sale of
Common Shares for the purpose of this subparagraph
3(g)(viii).
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<PAGE>
(h) If and whenever after the Class B Preferred Shares Issue Date
but prior to a Qualifying IPO, the Company shall issue or
sell, or is, in accordance with subparagraphs 3(h)(i) through
3(h)(viii) deemed to have issued or sold, any Common Shares
(other than options to acquire Common Shares under the
Company's share option plan and Common Shares issuable upon
the exercise of such options that are reserved for issuance as
of the Class B Preferred Shares Issue Date), then, immediately
upon such actual issue or sale, or the date Common Shares are
deemed to have been issued or sold pursuant to subparagraphs
3(h)(i) through 3(h)(viii), the Class B Conversion Price shall
be reduced to (a) the price per share at which such Common
Shares are sold, in the case of a Strategic Sale, and (b) 75%
of the price at which the Common Shares are sold, in the case
of any sale (other than a Strategic Sale); provided, that only
reductions in the Class B Conversion Price shall be made
pursuant to this sentence and in no event shall the
application of the provisions of this sentence result in an
increase in the Class B Conversion Price. On the date of a
Qualifying IPO, the Class B Conversion Price shall be the
lower of (i) the Class B Conversion Price in effect
immediately prior to such date, and (ii) 75% of the price at
which the Common Shares sold in such Qualifying IPO are sold
to the public.
For purposes of this paragraph 3(h), the following
subparagraphs 3(h)(i) to 3(h)(viii) shall also be applicable:
(i) In case at any time the Company shall in any manner
grant (whether directly or indirectly or by
assumption in a merger or otherwise) any Options or
Convertible Securities, other than Options issued
pursuant to an employee share option plan approved by
the Compensation Committee whether or not such
Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable,
and the price per share for which Common Shares are
issuable upon the exercise of such Options upon the
conversion or exchange of such Convertible Securities
(determined by dividing (A) the total amount, if any,
received or receivable by the Company as
consideration for the granting of such Options, plus
the minimum aggregate amount of additional
consideration payable to the Company upon the
exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities,
the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the
conversion or exchange thereof, by (B) the total
maximum number of Common Shares issuable upon the
exercise of such Options or upon the conversion or
exchange of all
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<PAGE>
such Convertible Securities issuable upon the
exercise of such Options) shall be an amount that
would result in an adjustment to the Class B
Conversion Price pursuant to the first paragraph of
this Section 3(h), then the appropriate adjustment to
the Class B Conversion Price shall be made pursuant
to the first paragraph of this Section 3(h), based
upon the price per share underlying such Options or
Convertible Securities as determined above. Except as
otherwise provided in subparagraph 3(h)(iii), no
adjustment of the Class B Conversion Price shall be
made upon the actual issue of such Common Shares or
of such Convertible Securities upon exercise of such
Options or upon the actual issue of such Common
Shares upon conversion or exchange of such
Convertible Securities, but shall be made only upon
the date of such deemed issuance.
(ii) In case the Company shall in any manner issue
(whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert any
such Convertible Securities are immediately
exercisable, and the price per share for which Common
Shares are issuable upon such conversion or exchange
(determined by dividing (A) the total amount received
or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus
the minimum aggregate amount of additional
consideration, if any, payable to the Company upon
the conversion or exchange thereof, by (B) the total
maximum number of Common Shares issuable upon the
conversion or exchange of all such Convertible
Securities) shall be an amount that would result in
an adjustment to the Class B Conversion Price
pursuant to the first paragraph of this Section 3(h),
then the appropriate adjustment to the Class B
Conversion Price shall be made pursuant to the first
paragraph of this Section 3(h), based upon the price
per share underlying such Options or Convertible
Securities as determined above, provided that (x)
except as otherwise provided in subparagraph
3(h)(viii), no adjustment of the Class B Conversion
Price shall be made upon the actual issuance of such
Common Shares upon conversion or exchange of such
Convertible Securities (but shall be made only upon
the date of such deemed issuance) and (y) if any such
issuance or sale of such Convertible Securities is
made upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of
the Class B Conversion Price have been or are to be
made pursuant to other provisions of this paragraph
3(h), no further adjustment of the Class B Conversion
Price whether provided for under this
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<PAGE>
subparagraph 3(h)(ii) or otherwise in the Memorandum,
shall be made by reason of such issue or sale.
(iii) Upon the happening of any of the following events,
namely, if the purchase price provided for in any
Option referred to in subparagraph 3(h)(i), the
additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities
referred to in subparagraph 3(h)(i) or 3(h)(ii), or
the rate at which Convertible Securities referred to
in subparagraph 3(h)(i) or 3(h)(ii) are convertible
into or exchangeable for Common Shares shall change
at any time (including, but not limited to, changes
under or by reason of provisions designed to protect
against dilution), the Class B Conversion Price in
effect at the time of such event shall forthwith be
readjusted to the Class B Conversion Price which
would have been in effect at such time had such
Options or Convertible Securities still outstanding
provided for such changed purchase price, additional
consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold,
provided that no adjustment shall be made in the
Class B Conversion Price pursuant to this paragraph
3(h) that would increase the Class B Conversion Price
above the Class B Conversion Price in effect
immediately prior to the issuance of such Option or
Convertible Security; and on the expiration or
termination of any such Option or the termination of
any such right to convert or exchange such
Convertible Securities, the Class B Conversion Price
then in effect hereunder shall forthwith be increased
to the Class B Conversion Price which would have been
in effect at the time of such expiration or
termination had such Option or Convertible
Securities, to the extent outstanding immediately
prior to such expiration or termination, never been
issued.
(iv) In case the Company shall declare, if any, a dividend
or make any other distribution upon any share of the
Company payable in Common Shares (except for
dividends or distributions upon the Common Shares
payable solely in Common Shares), Options or
Convertible Securities, any Common Shares, Options or
Convertible Securities, as the case may be, issuable
in payment of such dividend or distribution shall be
deemed to have been issued or sold without
consideration.
(v) In the event the Company shall make or issue, or fix
a record date for the determination of holders of
Common Shares entitled to receive a dividend or other
distribution payable in securities of the Company,
then and in each such event lawful and adequate
provision shall be
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made so that the holders of Class B Preferred Shares
shall receive upon conversion thereof in addition to
the number of Common Shares receivable thereupon, the
number of securities of the Company which they would
have received had their Class B Preferred Shares been
converted into Common Shares on the date of such
event and had they thereafter, during the period from
the date of such event to the date of a Qualifying
IPO, retained such securities receivable by them as
aforesaid during such period, giving application to
all adjustments called for during such period under
this paragraph 3 with respect to the rights of the
holders of the Class B Preferred Shares.
(vi) In case any Common Shares, Options or Convertible
Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be
the amount received by the Company therefor, without
deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In
case any Common Shares, Options or Convertible
Securities shall be issued or sold for a
consideration other than cash, the amount of the
consideration other than cash received by the Company
shall be deemed to be the fair value of such
consideration as determined in good faith by the
Board of Directors, without deduction of any expenses
incurred or any underwriting commissions or
concessions paid or allowed by the Company in
connection therewith. In case any Options shall be
issued in connection with the issue and sale of other
securities of the Company, together comprising one
integral transaction in which no specific
consideration is allocated to such Options by the
parties thereto, such Options shall be deemed to have
been issued for such consideration of US$0.01.
(vii) In case the Company shall fix a record date to
determine the holders of its Common Shares for the
purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Shares,
Options or Convertible Securities or (B) to subscribe
for or purchase Common Shares, Options or Convertible
Securities, then such record date shall be deemed to
be the date of the issue or sale of Common Shares
deemed to have been issued or sold upon the
declaration of such dividend or the making of such
other distribution or the date of the granting of
such right of subscription or purchase, as the case
may be.
(viii) The number of Common Shares issued and outstanding at
any given time shall not include shares owned or held
by or for the account of the
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<PAGE>
Company (or any Subsidiary), and the disposition of
any Common Shares so owned shall be considered an
issue or sale of Common Shares for the purpose of
this subparagraph 3(h)(viii).
(i) In case the Company shall at any time divide (by any share
split, share dividend or otherwise) its outstanding Common
Shares into a greater number of shares, the Class A Conversion
Price and the Class B Conversion Price in effect immediately
prior to such division shall be proportionately reduced, and,
conversely in case the issued and outstanding Common Shares
shall be combined into a smaller number of shares, the Class A
Conversion Price and the Class B Conversion Price in effect
immediately prior to such combination shall be proportionately
increased.
(j) Except for an event which the holders of the Preferred Shares
elect to treat as a Liquidation in accordance with the
provisions of paragraph 4, if any capital reorganization or
reclassification of the shares of the Company, or a merger or
consolidation of the Company with or into another company or
the sale of all or substantially all of the Company's
properties and assets to any other Person, shall be effected
in such a way that holders of Common Shares shall be entitled
to receive shares, stock, securities or assets with respect to
or in exchange for Common Shares, then, as a condition of such
reorganization, reclassification, merger, consolidation or
sale, lawful and adequate provisions shall be made whereby
each holder of Preferred Shares shall thereupon have the right
to receive, upon the basis and upon the terms and conditions
specified herein and in lieu of Common Shares immediately
theretofore receivable upon the conversion of such Preferred
Shares, such shares, securities or assets as may be issued or
payable with respect to or in exchange for a number of
outstanding Common Shares equal to the number of such Common
Shares immediately theretofore receivable upon such conversion
had such reorganization, reclassification, merger,
consolidation or sale not taken place, and in any such case
appropriate provisions shall be made with respect to the
rights and interests of such holder to the end that the
provisions hereof (including without limitation provisions for
adjustments of the Conversion Price with respect to such
Preferred Shares) shall thereafter be applicable, as nearly as
may be, in relation to any shares, stock, securities or assets
thereafter deliverable upon the exercise of such conversion
rights.
(k) No adjustment in the Class A Conversion Price or Class B
Conversion Price need be made until all cumulative adjustments
amount to 1% or more of the Class A Conversion Price or Class
B Conversion Price, respectively, as last adjusted. Any
adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this paragraph 3 shall be made to the
nearest
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<PAGE>
1/10,000th of a cent or to the nearest 1/10,000th of a share,
as the case may be. No adjustment in the Class A Conversion
Price or Class B Conversion Price shall reduce the Class A
Conversion Price or Class B Conversion Price below the then
par value of the Common Shares.
(l) As used in this paragraph 3, the term "COMMON SHARES" shall
mean and include the Company's authorized Common Shares, par
value US$0.01 per share, as constituted on the date of filing
this instrument, and shall also include any shares of any
class of the Company thereafter authorized which shall not be
limited to a fixed sum or percentage of par value in respect
of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary
or involuntary liquidation, dissolution or winding up of the
Company; provided that the Common Shares receivable upon
conversion of Preferred Shares shall include only shares
designated as Common Shares of the Company on the date of
filing of this instrument, or in case of any reorganization or
reclassification of the outstanding shares thereof, the
shares, securities or assets provided for in paragraph 3(i).
(m) Whenever the Class A Conversion Price or the Class B
Conversion Price is adjusted, the Company shall promptly mail
to holders of Preferred Shares, first class, postage prepaid,
a notice of the adjustment. The Company shall file with the
transfer agent for the Class A Preferred Shares or Class B
Preferred Shares, as applicable, if any (and make available to
holders of Preferred Shares upon request), a certificate from
the Company's independent public accountants briefly stating
the facts requiring the adjustment and the manner of computing
it.
(n) In case at any time (i) the Company shall declare any dividend
upon its Common Shares payable in cash or shares or make any
other distribution to the holders of its Common Shares, (ii)
the Company shall offer for subscription pro rata to the
holders of its Common Shares any additional shares of any
class or other rights, (iii) there shall be any capital
reorganization or reclassification of the share capital of the
Company, or a consolidation or merger of the Company with or
into, or a sale of all or substantially all its assets to,
another Person or Persons or (iv) there shall be a voluntary
or involuntary dissolution, liquidation or winding up of the
Company, then, in any one or more of said cases, the Company
shall give, by first class mail, postage prepaid, or by
facsimile, addressed to each holder of any issued and
outstanding Preferred Shares at the address of such holder as
shown on the books of the Company, (A) at least 20 days' prior
written notice of the date on which the books of the Company
shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights
to vote in respect of any such reorganization,
reclassification,
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<PAGE>
consolidation, merger, sale, dissolution, liquidation or
winding up and (B) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least 20 days' prior written
notice of the date when the same shall take place. Such notice
in accordance with the foregoing clause (A) shall also
specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common
Shares shall be entitled thereto and such notice in accordance
with the foregoing clause (B) shall also specify the date or
projected date on which the holders of Common Shares shall be
entitled to exchange their Common Shares for securities or
other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
(o) The Company will at no time close its transfer books against
the transfer of any Preferred Shares or of any Common Shares
issued or issuable upon the conversion of any Preferred Shares
in any manner which interferes with the timely conversion of
such Preferred Shares, except as may otherwise be required to
comply with applicable securities laws.
(4) LIQUIDATION RIGHTS.
Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company resulting in a distribution of
assets to the holders of the Company's shares (each such
event, a "LIQUIDATION"), each holder of Class A Preferred
Shares will be entitled to payment out of the assets of the
Company available for distribution of an amount equal to the
Class A Liquidation Preference per Class A Preferred Share and
each holder of Class B Preferred Shares will be entitled to
payment out of the assets of the Company available for
distribution of an amount equal to the Class B Liquidation
Preference per Class B Preferred Share. Upon any Liquidation,
each holder of Class A Preferred Shares and each holder of
Class B Preferred Shares shall be entitled to payment out of
the assets of the Company available for distribution in full
up to the amount of the Class A Liquidation Preference per
Class A Preferred Share and the amount of the Class B
Liquidation Preference per Class B Preferred Share,
respectively, before any holder of any other series or class
of Preferred Shares or the Common Shares shall be entitled to
any payment out of the assets of the Company available for
distribution.
If, upon any Liquidation, the Class A Liquidation Preference
per Class A Preferred Share and the Class B Liquidation
Preference per Class B Preferred Share are not paid in full,
the holders of the issued and outstanding Class A Preferred
Shares and the holders of the issued and outstanding Class B
Preferred Shares will share equally and ratably in any
distribution of assets of
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<PAGE>
the Company in proportion to the full liquidation preference
and accumulated and unpaid dividends, to which each is
entitled.
For the purposes of this paragraph 4, holders of a majority of
the issued and outstanding Preferred Shares may designate that
a consolidation or merger of the Company (other than a merger
(i) in which the Company is the surviving company, (ii) which
involves only a change in the Company's state of
incorporation, or (iii) with a wholly-owned Subsidiary of the
Company) or the sale of all or substantially all of the
Company's assets shall be deemed to be a Liquidation with
respect to the Preferred Shares (each such event, an "ORGANIC
CHANGE"), if (A) the amount of consideration (including the
Fair Market Value of any non-cash consideration per share )
received would be less than the sum of the Class A Liquidation
Preference and the Class B Liquidation Preference, or (B) such
consideration consists solely or in part of securities that
are not readily marketable on a national exchange or on the
NASDAQ National Market System. In the event that the holders
of Preferred Shares shall deem any transaction to be a
"LIQUIDATION" in accordance with this paragraph 4, the holders
of the issued and outstanding Preferred Shares shall be
entitled to payment of the amount set forth in the first
paragraph of this paragraph 4. To the extent any consideration
consists of non-cash items, the consideration shall be the
Fair Market Value of such non-cash items.
(5) VOTING RIGHTS.
(a) The holders of the issued and outstanding Preferred Shares
shall have the right to vote, together with the holders of all
the issued and outstanding Common Shares and not by classes,
except as otherwise required by British Virgin Islands law or
the Articles of Association, on all matters on which holders
of Common Shares are entitled to vote. Each holder of
Preferred Shares shall have the right to cast one vote for
each whole Common Share which would be issued to such holder
upon conversion of such holder's Preferred Shares, assuming
that such conversion were to occur on the date immediately
prior to the record date for the determination of shareholders
entitled to vote.
(b) Subject to paragraph 13 hereof, the Company shall not, without
the affirmative vote or consent of the holders of at least a
majority of the Preferred Shares then issued and outstanding
(with shares held by the Company or any of its Affiliates not
being considered to be outstanding for this purpose) voting or
consenting, as the case may be, as one class:
(i) amend or otherwise alter the Memorandum (including
the provisions of paragraph 5 hereof) in any manner
that adversely affects the
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<PAGE>
specified rights, preferences, privileges or voting
rights of holders of Preferred Shares;
(ii) authorize the issuance of any additional Preferred
Shares;
(iii) waive compliance with any provision of the
Memorandum; or
(iv) declare or pay any dividend or distribution on any
Class A Junior Securities or Class B Junior
Securities.
(6) REDEMPTION.
(a) At the option and written election of any holder of issued and
outstanding Preferred Shares (a "REDEMPTION OPTION") given at
any time on or after five (5) years after the Class A
Preferred Shares Issue Date, the Company shall, subject to
applicable law, redeem all or any part of the issued and
outstanding Preferred Shares beneficially owned by such holder
at the price and upon the terms stated in this paragraph 6, at
any time on or after five (5) years after the Class A
Preferred Shares Issue Date.
(b) The Company shall redeem the Preferred Shares on the
Redemption Date (as such term is defined below), unless
otherwise prevented by law, at a cash redemption price per
share payable in a single installment equal to the Class A
Liquidation Preference, in the case of the Class A Preferred
Shares and the Class B Liquidation Preference, in the case of
the Class B Preferred Shares. The total sum payable per Class
A Preferred Share on the Redemption Date is hereinafter
referred to as the "CLASS A REDEMPTION PRICE," and the payment
to be made on the Redemption Date to the holders of the Class
A Preferred Shares is hereinafter referred to as the "CLASS A
REDEMPTION PAYMENT." The total sum payable per Class B
Preferred Share on the Redemption Date is hereinafter referred
to as the "CLASS B REDEMPTION PRICE," and the payment to be
made to the holders of the Class B Preferred Shares on the
Redemption Date is hereinafter referred to as the "CLASS B
REDEMPTION PAYMENT." The Class A Redemption Price and the
Class B Redemption Price are hereinafter referred to
collectively as the "REDEMPTION PRICES", and the Class A
Redemption Payment and the Class B Redemption Payment are
hereinafter referred to collectively as the "REDEMPTION
PAYMENTS."
(c) On and after the Redemption Date, all rights of any holder of
Preferred Shares, except the right to receive the applicable
Redemption Price per Preferred Share as hereinafter provided,
shall cease and terminate, and such Preferred Shares shall no
longer be deemed to be outstanding, whether or not the
certificates representing such shares have been received by
the Company;
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<PAGE>
provided, however, that, notwithstanding anything to the
contrary set forth herein, (i) if the Company defaults in the
payment of the applicable Redemption Payment, the rights of
the holders of the affected Preferred Shares with respect to
such Preferred Shares shall continue until the Company cures
such default, and (ii) without limiting any other rights of
such holders, upon the occurrence of (A) a subsequent
Liquidation or (B) an Organic Change, with respect to the
Preferred Shares in respect of which no Redemption Payment has
been received by a holder of Preferred Shares where the
Company had been required to make the payment, such holder
shall be accorded the rights and benefits set forth in
paragraph 4 hereof in respect of such shares, as if no prior
redemption request had been made.
(d) Within five (5) Business Days of receipt of a redemption
request by any holder of Preferred Shares, the Company shall
notify in writing all other holders of Preferred Shares of the
request for the redemption of Preferred Shares (the "COMPANY
NOTICE"). Each Company Notice shall state (i)
the Redemption Date, (ii) the number of Preferred Shares to be
redeemed, (iii) the Class A Redemption Price and Class B
Redemption Price, and the calculation thereof, (iv) the place
or places where certificates for such shares are to be
surrendered for payment of the applicable Redemption Price,
and (v) that dividends on the shares to be redeemed will cease
to accrue on such Redemption Date. On the date specified in
the Company Notice as the Redemption Date, which date shall be
no later than the 60th day following the date upon which the
Company shall have sent such Company Notice, the Company shall
pay each holder of Preferred Shares the applicable Redemption
Price, provided that the Company or its transfer agent has
received the certificates representing each Preferred Share to
be redeemed. Such payment date shall be referred to herein as
the "REDEMPTION DATE." If, on the Redemption
Date, less than all the Preferred Shares requested to be
redeemed may be legally redeemed by the Company, the
redemption of such Preferred Shares shall be made pro rata
based upon the total amount that would be paid by the Company
to each holder of Preferred Shares being redeemed if all of
the Preferred Shares requested to be redeemed by the holders
of Preferred Shares being redeemed were so redeemed, and any
Preferred Shares not redeemed shall be redeemed, at the
holder's election, on any date following the Redemption Date
on which the Company may lawfully redeem such shares. The
Company shall redeem (unless otherwise prevented by law) the
Preferred Shares being redeemed by each holder on the
Redemption Date, and the Company shall promptly advise each
such holder of Preferred Shares of the Redemption Date, or of
the relevant facts applicable thereto preventing such
redemption. Upon redemption of only a portion of the number of
shares covered by a Preferred Share certificate, the Company
shall issue and deliver
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<PAGE>
to or upon the written order of the holder of such Preferred
Share certificate, at the expense of the Company, a new
certificate covering the number of Preferred Shares
representing the unredeemed portion of the Preferred Share
certificate, which new certificate shall entitle the holder
thereof to all the rights, powers, and privileges of a holder
of such shares.
In the event the Preferred Shares are not redeemed after a
Redemption Option is exercised, then, in addition to any other
remedies the holders of Preferred Shares may have, such
holders shall be entitled to elect a majority of the Members
of the Board of Directors, to serve until the redemption
obligations of the Company hereunder have been satisfied in
full.
VARIATION OF CLASS RIGHTS
9. The rights attached to any class or series (unless otherwise provided
by the terms of issue of the shares of that class or series) may,
whether or not the Company is being wound up, be varied with the
consent in writing of the majority of the issued shares of that class
or series and of the majority of the issued shares of any other class
or series of shares which may be affected by such variation.
RIGHTS NOT VARIED BY THE ISSUE OF SHARES PARI PASSU
10. The rights conferred upon the holders of the shares of any class issued
with preferred or other rights shall not, unless otherwise expressly
provided by the terms of issue of the shares of that class, be deemed
to be varied by the creation or issue of further shares ranking pari
passu therewith.
REGISTERED SHARES
11. Shares in the Company may only be issued as registered shares and may
not be exchanged for shares issued to bearer.
TRANSFER OF SHARES
12. Subject to the provisions relating to the transfer of shares set forth
in the Articles of Association annexed hereto (the "Articles of
Association") shares in the Company may be transferred subject to the
prior or subsequent approval of the Company as evidenced by a
resolution of directors or by a resolution of Members.
RESTRICTIONS ON MEMBERS RESERVED MATTERS
13. Notwithstanding anything in this Memorandum or in the Articles annexed
hereto to the contrary, no Members Reserved Matters may be authorized,
approved, done, effected or otherwise consummated, agreed to or
consented to by the Company, its
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<PAGE>
directors or its Members except, if it is (a) proposed at a meeting of
the Members at which a quorum is present and approved and consented to
by the affirmative vote of a simple majority of the votes of such
Members present or represented by proxy at the meeting and who voted
and did not abstain, including at least 50% of the votes of the Class A
Preferred Shares voting as a class and 50% of the votes of the Class B
Preferred Shares voting as a class (except with respect to any merger,
consolidation or spin-off involving the Company or sales of all or
substantially all the assets of the Company, which matters require the
affirmative vote of a simple majority of the votes of such Members
present or represented by proxy, including at least 50% of the votes of
all issued and outstanding Class A Preferred Shares), or (b) if it is
in the form of a written consent and approved and consented to by an
absolute majority of the votes of all Members entitled to vote,
including at least 50% of the votes of the Class A Preferred Shares
voting as a class and 50% of the votes of the Class B Preferred Shares
voting as a class (except with respect to any merger, consolidation or
spin-off involving the Company or sales of all or substantially all of
the assets of the Company, which matters require the approval and
consent of an absolute majority of the votes of all Members entitled to
vote, including at least 50% of the votes of all issued and outstanding
Class A Preferred Shares).
RESTRICTIONS ON DIRECTORS RESERVED MATTERS
14. Notwithstanding anything in this Memorandum or in the Articles annexed
hereto to the contrary, no Directors Reserved Matters may be
authorized, approved, done, effected or otherwise consummated, agreed
to or consented to by the Company or its directors, except if it is (a)
proposed at a meeting of the directors of the Company at which a quorum
is present, and approved and consented to by the affirmative vote of a
simple majority of the directors, including a simple majority of the
Class A directors, or (b) if it is in the form of a written consent and
approved and consented to by the majority of the Class A directors.
AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION
15. The Company may amend its Memorandum of Association and Articles of
Association by a resolution of Members or by a resolution of directors,
except for those amendments, which are expressly stated in the
Memorandum or Articles of Association or British Virgin Islands
legislation in force, to be reserved exclusively to the Members.
TERMINATION OF PROVISIONS
16. The provisions of paragraphs 8.B.(3)(g), 8.B(3)(h), 12, 13 and 14 shall
no longer have effect upon the closing of a Qualifying IPO, provided
that any adjustment of the Class A Conversion Price or the Class B
Conversion Price required to be made in
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<PAGE>
respect of the Qualifying IPO pursuant to the provisions of paragraphs
8.B.3(g) or 8.B.(3)(h) shall be made prior to the termination of such
provisions.
DEFINITIONS
17. In this Memorandum of Association:
(1) the following terms shall have the following meanings (with
terms defined in the singular having comparable meanings when
used in the plural and vice versa):
"AFFILIATE" of any Person means any Person that directly or
indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition,
"CONTROL" (including with its correlative meanings,
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean
the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a
Person (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise).
"BUSINESS DAY" means any day except a Saturday, a Sunday, or
any day on which banking institutions in New York, New York
are required or authorized by law or other governmental action
to be closed.
"CLASS A CONVERSION PRICE" shall initially equal US$3.50093
and thereafter shall be subject to adjustment from time to
time pursuant to the terms of Clause 8 paragraph 3 of this
Memorandum.
"CLASS A LIQUIDATION PREFERENCE" means an amount per share
equal to US$7.00186, plus all accrued and unpaid dividends,
whether or not declared and which if not paid shall cumulate
on an annual basis on each December 31.
"CLASS A PREFERRED SHARES ISSUE DATE" means the date on which
the Class A Preferred Shares are originally issued by the
Company under the Memorandum.
"CLASS B CONVERSION PRICE" shall initially equal $9.00 and
thereafter shall be subject to adjustment from time to time
pursuant to the terms of Clause 8 paragraph 3 of this
Memorandum.
"CLASS B LIQUIDATION PREFERENCE" means an amount per share
equal to US$9.00, plus all accrued and unpaid dividends,
whether or not declared and which if not paid shall cumulate
on an annual basis on each December 31.
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<PAGE>
"CLASS B PREFERRED SHARES ISSUE DATE" means the date on which
the Class B Preferred Shares are originally issued by the
Company under the Memorandum.
"CONVERSION PRICE" means the Class A Conversion Price or the
Class B Conversion Price, as applicable.
"FAIR MARKET VALUE" of any security means the average of the
closing prices of such security's sales on all securities
exchanges on which such security may at the time be listed,
or, if there have been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day
such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ
National Market System as of 4:00 P.M., New York time, or, if
on any day such security is not quoted in the NASDAQ National
Market System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or
any similar successor organization, in each such case averaged
over a period of twenty-one (21) days consisting of the day as
of which "Fair Market Value" is being determined and the
twenty (20) consecutive Business Days prior to such day. If at
any time such security is not listed on any U.S. securities
exchange or quoted in the NASDAQ National Market System or the
over-the-counter market, the "FAIR MARKET VALUE" shall be the
fair value thereof determined jointly by the Company and the
holders of Preferred Shares. If such parties are unable to
reach agreement within a reasonable period of time, such fair
value shall be determined by an independent appraiser
experienced in valuing securities jointly selected by the
Company and the holders of Preferred Shares. The determination
of such appraiser shall be final and binding upon the parties,
and the Company shall pay the fees and expenses of such
appraiser.
"MEMORANDUM" means the Memorandum of Association of the
Company.
"PERSON" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust,
unincorporated organization or other entity.
"QUALIFYING IPO" means an underwritten initial public offering
of Common Shares pursuant to an effective registration
statement under the U.S. Securities Act of 1933, as then in
effect (or any comparable statement under any similar U.S.
federal statute then in force or effect) in which the
cumulative gross proceeds to the Company are equal to or
greater than US$35.0 million.
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<PAGE>
"STRATEGIC SALE" means any transaction or series of
transactions resulting in the sale of shares of the Company to
Time Warner, Inc.; Lycos, Inc.; IAMP (El Sitio) Investments
Ltd.; Hicks, Muse, Tate & Furst; the Cisneros Group of
Companies; GC Companies, Inc.; Radio Sarandi; TV Bandeirantes;
Sony Corporation; The Seagram Company Ltd. and any of their
respective affiliates, which transaction or transactions close
prior to March 1, 2000 and to the extent that the aggregate
purchase price of such sales does not exceed $10,000,000.
"SUBSIDIARY" of any Person means (i) any company, corporation,
association or business entity of which more than 50% of the
total voting power of shares 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 and (ii) any partnership (a) the sole
general partner or the managing general partner of which is
such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more
Subsidiaries of such Person or any combination thereof.
(2) terms which have not been defined herein but have been defined
in the Articles of Association have the same meaning when used
herein.
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<PAGE>
We, COMMONWEALTH MANAGEMENT LIMITED, of P.O. Box 3321, Road Town, Tortola,
British Virgin Islands, being a licensed registered agent, for the purpose of
incorporating an International Business Company under the laws of the British
Virgin Islands hereby subscribe our name to this Memorandum of Association.
FOR: COMMONWEALTH MANAGEMENT LIMITED
Sgd: Scott F. Wilson
Authorized Signatory
DATED this 16th day of July, 1997
WITNESS to the above signature:
Sgd: Renwick Z. Ham
c/o P.O. Box 3321
Road Town, Tortola
British Virgin Islands
<PAGE>
Exhibit 3.2
TERRITORY OF
THE BRITISH VIRGIN ISLANDS
THE INTERNATIONAL BUSINESS COMPANIES ACT
(CAP. 291)
AMENDED AND RESTATED ARTICLES OF ASSOCIATION
OF
EL SITIO, INC.
PRELIMINARY
1. In these Articles, if not inconsistent with the subject or context, the
words and expressions standing in the first column of the following
table shall bear the meanings set opposite them respectively in the
second column thereof.
WORDS MEANING
AFFILIATE a Person that directly, or
indirectly through one or
more intermediaries,
controls or is controlled
by, or is under common
control with, a specified
Person
ARTICLES these Amended and Restated
Articles of Association as
from time to time amended
BOARD OF DIRECTORS those persons
elected as directors by the
Preferred Members and the
Common Members of the
Company or appointed by the
subscribers to the
Memorandum and Articles.
CAPITAL the sum of the aggregate par
value of all outstanding
shares with par value of the
Company and shares with par
value held by the Company as
treasury shares plus
(a) the aggregate of the
amounts designated as
capital of all
outstanding shares
without par value
<PAGE>
of the Company and
shares without par
value held by the
Company as treasury
shares, and
(b) the amounts as are
from time to time
transferred from
surplus to capital by
a resolution of
directors.
CLASS A DIRECTOR a person designated as such
at the time of appointment
by the subscriber to the
Memorandum or a person
elected and designated as
such by the Class A Members
or any person designated as
such pursuant to the
provisions of these
Articles.
CLASS A MEMBER a Person who holds Class A
Preferred Shares.
CLASS B MEMBER a Person who holds Class B
Preferred Shares.
COMMON DIRECTOR a person designated as such
at the time of appointment
by the subscriber to the
Memorandum or a person
elected and designated as
such by the Common Members
or any person designated as
such pursuant to the
provisions of these
Articles.
COMMON MEMBER a Person who holds Common
Shares in the Company.
DIRECTORS RESERVED MATTERS matters which require the
affirmative vote or consent
of at least a majority of
the Class A Directors,
namely:
(i) any guarantees, loans
or contractual
obligations to make
loans, in either case
made by the Company
or any Subsidiary to
third
-2-
<PAGE>
parties, in an amount
which, jointly or
severally, exceeds
$50,000;
(ii) execution by the
Company or any
Subsidiary of
contracts with
suppliers or service
companies in any
amount which requires
annual or single
payments which exceed
$75,000 above and
beyond any budgeted
item in the long term
and annual business
plans;
(iii) approval of the
Company's long term
business plan and any
material
modifications
thereto;
(iv) approval of the
Company's Annual
Budget and any
material
modifications
thereto;
(v) incurrence of debt by
the Company or any
Subsidiary in amounts
not contemplated by
the Company's long
term business plan
and annual business
plan;
(vi) granting of Liens
(other than purchase
money security
interests) on assets
(including shares of
any Subsidiary) of
the Company or any
Subsidiary not
contemplated by the
Company's long term
business plan and
annual business plan;
(vii) any disposition
outside the ordinary
course of business of
assets (including
shares of any
Subsidiary) of the
Company or any
Subsidiary having a
fair value of more
than $100,000 which
constitute less than
all or substantially
all of the assets of
the Company;
-3-
<PAGE>
(viii) any transactions
between the Company
or any of its
Subsidiaries, on the
one hand, and any
Member or any of its
Affiliates, on the
other hand;
(ix) reductions in capital
for any reason;
(x) public listing of
securities of the
Company on a
securities exchange
(except in connection
with the exercise of
demand registration
rights pursuant to
the Registration
Rights Agreement made
between the Company
and the other
signatories thereto),
other than in
connection with a
public offering which
raises at least
US$35.0 million net
proceeds for the
Company;
(xi) issuance of shares or
securities
convertible into or
exchangeable for
shares of the
Company; and
(xii) distribution of
dividends by the
Company.
EL SITIO SHARES collectively, the Common
Shares of the Company, the
Preferred Shares of the
Company, and any other class
of shares of the Company
issued at any time by the
Company.
IBERO GROUP means Members which are
Affiliates of IberoAmerican
Media Partners II Ltd.
INITIAL MEMBERS collectively, Militello
Limited, Futurit S.A., Tower
Plus International Corp.,
SLI.com Inc., Roberto
Cibrian-Campoy, Hector A.
Sierra, Hector R. Bandoni,
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<PAGE>
Sergio S. Monti, Damian
Said, Compania de
Inversiones Montevideo BVI,
Henry B. Wilson Trust,
Vamagra S.A., Julien Sevaux,
Elinstar International
Corp., Renee Saenz, Giles
Dard, Summit Investment
Management Ltd., Gustavo
Blufstein, Helaine Steden,
Jorge Ami, Roberto J. Garat
and Alberto E. Tapia; and
the term "Initial Member"
means one of the Initial
Members.
INTEREST the aggregate voting
interest represented by the
El Sitio Shares directly or
indirectly held, as of the
date of determination, by
such Member, expressed as a
percentage of the total
aggregate voting interest
represented by the El Sitio
Shares directly or
indirectly held by all the
Members.
MEMBER a Person who holds Common
Shares or Preferred Shares
in the Company.
MEMBERS RESERVED MATTERS are matters which require
the affirmative vote of at
least fifty percent (50%) of
the Class A Shares voting as
a class and at least fifty
percent (50%) of the Class B
Shares voting as a class
(except in the case of the
matters referred to in
clause (ii) below, which
requires the affirmative
vote of at least fifty
percent (50%) of the Class A
Shares).
(i) changes in legal
structure of the
Company such as the
conversion to a
partnership (other
than the creation of
a subsidiary);
(ii) merger, consolidation
or spin-off involving
the Company or sales
of all or
substantially all of
the assets of the
Company;
-5-
<PAGE>
(iii) redemption of shares
of the Company and
any other share
repurchases, as well
as a subsequent
resale of such
repurchased shares,
in excess of $50,000,
except that, with
respect to employment
related buy-backs,
the Company may
redeem or repurchase
such shares without
approval of the Class
A Members; provided,
however, that any
such employment
related buy-back is
carried out in
accordance with a
severance
arrangement;
(iv) insolvency,
protection measures
against creditors,
bankruptcies or any
other voluntary or
judicial financial
restructuring
procedures;
(v) entry by the Company
into any business
other than the
Internet business or
any other service;
(vi) dissolution, winding
up or voluntary
liquidation of the
Company;
(vii) modification of the
benefits, advantages
and conditions of
redemption or
amortization of one
or more classes of
preferred shares, or
the creation of a new
class of shares which
has rights which are
senior to the Class A
Preferred Shares or
Class B Preferred
Shares;
(viii) creation by the
Company of beneficial
interests; and
(ix) any amendments to the
-6-
<PAGE>
Memorandum or
Articles relating to
the foregoing items.
PERSON an individual, a
corporation, a company, a
trust, the estate of a
deceased individual, a
partnership or an
unincorporated association
of persons.
PREFERRED MEMBER a Person who holds Preferred
Shares in the Company
(either Class A Preferred
Shares or Class B Preferred
Shares)
RESOLUTION OF DIRECTORS (a) resolution approved
at a duly convened
and constituted
meeting of directors
of the Company or of
a committee of
directors of the
Company by the
affirmative vote of a
simple majority of
the directors present
at the meeting who
voted and did not
abstain; or
(b) a resolution
consented to in
writing by all
directors or of all
Members of the
committee, as the
case may be; except
that where a director
is given more than
one vote, he shall be
counted by the number
of votes he casts for
the purpose of
establishing a
majority; or
(c) notwithstanding the
foregoing (a) and
(b), with respect to
any matters listed as
Directors Reserved
Matters, a resolution
approved at a duly
convened and
constituted meeting
of directors of the
Company or of a
committee of
directors of the
Company by the
affirmative vote of a
simple majority of
the directors,
including a simple
majority of the Class
A Directors.
-7-
<PAGE>
RESOLUTION OF DIRECTORS (i) Subject to (ii)
below,
(a) a resolution approved
at a duly convened
and constituted
meeting of the
Members of the
Company by the
affirmative vote of
(1) a simple
majority of the
votes of the
shares entitled
to vote thereon
which were
present at the
meeting and
were voted and
not abstained,
or
(2) a simple
majority of the
votes of each
class or series
of shares which
were present at
the meeting and
entitled to
vote thereon as
a class or
series and were
voted and not
abstained and
of a simple
majority of the
votes of the
remaining
shares entitled
to vote thereon
which were
present at the
meeting and
were voted and
not abstained;
or
(b) a resolution
consented to in
writing by
(1) an absolute
majority of the
votes of shares
entitled to vote
thereon, or
(2) an absolute
majority of the
votes of each
class or series
of shares
entitled to
vote thereon as
a class or
series and of
an absolute
majority of the
votes of the
remaining
shares entitled
to vote
thereon.
(ii) with respect to any
Members
-8-
<PAGE>
Reserved Matters:
(a) a resolution approved
at a duly convened
and constituted
meeting of the
Members of the
Company by the
affirmative vote of
(1) a simple
majority of the
votes of the
shares
permitted to
vote thereon
which were
present at the
meeting and
were voted and
not abstained,
including at
least 50% of
the votes of
all the issued
and outstanding
Class A
Preferred
Shares voting
as a class and
at least 50% of
the votes of
all issued and
outstanding
Class B
Preferred
Shares voting
as a class
(except for the
matters
referred to in
clause (ii) of
the definition
of "Members
Reserved
Matters," which
require the
approval of at
least 50% of
the votes of
all the issued
and outstanding
Class A
Preferred
Shares), or
(2) a simple
majority of the
votes of each
class or series
of shares which
were present at
the meeting and
entitled
-9-
<PAGE>
to vote thereon
as a class or
series and were
voted and not
abstained, and
at least 50% of
the votes of
all the issued
and outstanding
Class A
Preferred
Shares voting
as a class and
at least 50% of
the votes of
all issued and
outstanding
Class B
Preferred
Shares voting
as a class, and
of a simple
majority of the
votes of the
remaining
shares entitled
to vote thereon
which were
present at the
meeting and
were voted and
not abstained;
or
(b) a resolution
consented to in
writing by
(1) an absolute
majority of the
votes of shares
entitled to
vote thereon,
including at
least 50% of
the votes of
the issued and
outstanding
Class A
Preferred
Shares voting
as a class and
at least 50% of
the votes of
the issued and
outstanding
Class B
Preferred
Shares voting
as a class; or
(2) an absolute
majority of the
votes of each
class or series
of shares
entitled
-9-
<PAGE>
to vote thereon
as a class or
series,
including at
least 50% of
votes of the
issued and
outstanding
Class A
Preferred
Shares voting
as a class and
at least 50% of
the votes of
the issued and
outstanding
Class B
Preferred
Shares voting
as a class and
of an absolute
majority of the
votes of the remaining
shares entitled to
vote thereon.
SECURITIES shares and debt obligations
of every kind, and options,
warrants and rights to
acquire shares, or debt
obligations.
SECURITIES ACT the United States Securities
Act of 1933, as amended, or
any similar United States
federal law then in force.
-10-
<PAGE>
SURPLUS the excess, if any, at the
time of the determination of
the total assets of the
Company over the aggregate
of its total liabilities, as
shown in its books of
account, plus the Company's
capital.
THE ACT the International Business
Companies Act, 1984 (Cap.
291) including any
modification, extension,
reenactment or renewal
thereof and any Articles
made thereunder.
THE MEMORANDUM the Amended and Restated
Memorandum of Association of
the Company as from time to
time amended.
THE SEAL any Seal which has been duly
adopted as the Seal of the
Company.
THESE ARTICLES these Amended and Restated
Articles of Association as
from time to time amended.
TREASURY SHARES shares in the Company that
were previously issued but
were repurchased, redeemed
or otherwise acquired by the
Company and not cancelled.
2. "Written" or any term of like import includes words typewritten,
printed, painted, engraved, lithographed, photographed or represented
or reproduced by any mode of reproducing words in a visible form,
including telex, facsimile, telegram, cable or other form of writing
produced by electronic communication.
3. Save as aforesaid any words or expressions defined in the Act shall
bear the same meaning in these Articles.
4. Whenever the singular or plural number, or the masculine, feminine or
neuter gender is used in these Articles, it shall equally, where the
context admits, include the others.
5. A reference in these Articles to voting in relation to shares shall be
construed as a reference to voting by Members holding the shares except
that it is the votes allocated to the shares that shall be counted and
not the number of Members who actually voted and a reference to shares
being present at a meeting shall be given a corresponding construction.
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<PAGE>
6. A reference to money in these Articles is, unless otherwise stated, a
reference to the currency in which shares in the Company shall be
issued according to the provisions of the Memorandum, or its foreign
currency equivalent at the time any determination is made.
REGISTERED SHARES
7. Every Member holding registered shares in the Company shall be entitled
to a certificate signed by a director or officer of the Company
specifying the share or shares held by him and the signature of the
director or officer and the Seal may be facsimiles.
8. Any Member receiving a share certificate for registered shares shall
indemnify and hold the Company and its directors and officers harmless
from any loss or liability which it or they may incur by reason of any
wrongful or fraudulent use or representation made by any Person by
virtue of the possession thereof. If a share certificate for registered
shares is worn out or lost it may be renewed on production of the worn
out certificate or on satisfactory proof of its loss together with such
indemnity as may be required by Resolution of Directors.
9. If several Persons are registered as joint holders of any shares, any
one or more of such Persons may give an effectual receipt for any
dividend payable in respect of such shares.
SHARES, AUTHORIZED CAPITAL, CAPITAL AND SURPLUS
10. Subject to the provisions of these Articles and any resolution of
Members, the unissued shares of the Company shall be at the disposal of
the directors who may, without limiting or affecting any rights
previously conferred on the holders of any existing shares or class or
series of shares, offer, allot, grant options over or otherwise dispose
of shares to such Persons, at such times and upon such terms and
conditions as the Company may by Resolution of Directors determine.
11. No share in the Company may be issued until the consideration in
respect thereof is fully paid, and when issued the share is for all
purposes fully paid and non-assessable save that a share issued for a
promissory note or other written obligation for payment of a debt may
be issued subject to forfeiture in the manner prescribed in these
Articles.
12. Shares in the Company shall be issued for money, services rendered,
personal property, an estate in real property, a promissory note or
other binding obligation to contribute money or property or any
combination of the foregoing as shall be determined by a Resolution of
Directors.
13. Shares in the Company may be issued for such amount of consideration as
the directors may from time to time by Resolution of Directors
determine, except that in the case of shares with par value, the amount
shall not be less than the par value, and in the absence of fraud the
decision of the directors as to the value of the consideration received
by the Company in respect of the issue is conclusive unless a question
of law is involved. The consideration in respect of the shares
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<PAGE>
constitutes capital to the extent of the par value and the excess
constitutes surplus.
14. A share issued by the Company upon conversion of, or in exchange for,
another share or a debt obligation or other security in the Company,
shall be treated for all purposes as having been issued for money equal
to the consideration received or deemed to have been received by the
Company in respect of the other share, debt obligation or security.
15. Treasury shares may be disposed of by the Company on such terms and
conditions (not otherwise inconsistent with these Articles) as the
Company may by Resolution of Directors determine.
16. The Company may issue fractions of a share and a fractional share shall
have the same liabilities, limitations, preferences, privileges,
qualifications, restrictions, rights and other attributes of a whole
share of the same class or series of shares.
17. Upon the issue by the Company of a share without par value, if an
amount is stated in the Memorandum to be authorized capital represented
by such shares then each share shall be issued for no less than the
appropriate proportion of such amount which shall constitute capital,
otherwise the consideration in respect of the share constitutes capital
to the extent designated by the directors and the excess constitutes
surplus, except that the directors must designate as capital an amount
of the consideration that is at least equal to the amount that the
share is entitled to as a preference, if any, in the assets of the
Company upon liquidation of the Company.
18. The Company may purchase, redeem or otherwise acquire and hold its own
shares but only out of surplus or in exchange for newly issued shares
of equal value.
19. Subject to provisions to the contrary in
(a) the Memorandum or these Articles;
(b) the designations, powers, preferences, rights, qualifications,
limitations and restrictions with which the shares were
issued; or
(c) the subscription agreement for the issue of the shares,
the Company may not purchase, redeem or otherwise acquire its own
shares without the consent of Members whose shares are to be purchased,
redeemed or otherwise acquired.
20. No purchase, redemption or other acquisition of shares shall be made
unless the directors determine that immediately after the purchase,
redemption or other acquisition the Company will be able to satisfy its
liabilities as they become due in the ordinary course of its business
and the realizable value of the assets of the Company will not be less
than the sum of its total liabilities, other than deferred taxes, as
shown in the books of account, and its capital and, in the absence of
fraud, the decision of the directors as to the realizable value of the
assets of the Company is conclusive, unless a question of law is
involved.
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<PAGE>
21. A determination by the directors under the preceding Article is not
required where shares are purchased, redeemed or otherwise acquired (a)
pursuant to a right of a Member to have his shares redeemed or to have
his shares exchanged for
money or other property of the Company;
(b) by virtue of a transfer of capital pursuant to Article 55;
(c) by virtue of the provisions of Section 83 of the Act; or
(d) pursuant to an order of the Court.
22. Shares that the Company purchases, redeems or otherwise acquires
pursuant to the preceding Article may be cancelled or held as treasury
shares except to the extent that such shares are in excess of 80
percent of the issued shares of the Company, in which case they shall
be cancelled but they shall be available for reissue.
23. Where shares in the Company are held by the Company as treasury shares
or are held by another company of which the Company holds, directly or
indirectly, shares having more than 50 percent of the votes in the
election of directors of the other company, such shares of the Company
are not entitled to vote or to have dividends paid thereon and shall
not be treated as outstanding for any purpose except for purposes of
determining the capital of the Company.
24. The Company may purchase, redeem or otherwise acquire its shares at a
price lower than the fair value if permitted by, and then only in
accordance with, the terms of (a) the Memorandum or these Articles; or
(b) a written agreement for the subscription for the shares to be
purchased, redeemed or otherwise
acquired.
25. The Company may by a Resolution of Directors include in the computation
of surplus, for any purpose the unrealized appreciation of the assets
of the Company and, in the absence of fraud, the decision of the
directors as to the value of the assets is conclusive unless a question
of law is involved.
MORTGAGES AND CHARGES OF REGISTERED SHARES
26. Members may mortgage or charge their registered shares in the Company
and upon satisfactory evidence thereof the Company shall give effect to
the terms of any valid mortgage or charge except insofar as it may
conflict with any requirements herein contained for consent to the
transfer of shares.
27. In the case of the mortgage or charge of registered shares there may be
entered in the share register of the Company at the request of the
registered holder of such shares (a) a statement that the shares are
mortgaged or charged; (b) the name of the mortgagee or chargee, and (c)
the date on which the aforesaid particulars are entered in the share
register.
28. Where particulars of a mortgage or charge are registered, such
particulars shall be cancelled
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<PAGE>
(a) with the consent of the named mortgagee or chargee or anyone
authorized to act on his behalf; or
(b) upon evidence satisfactory to the directors of the discharge
of the liability secured by the mortgage or charge and the
issue of such indemnities as the directors shall consider
necessary or desirable.
29. Whilst particulars of a mortgage or charge are registered, no transfer
of any share comprised therein shall be effected without the written
consent of the named mortgagee or chargee or anyone authorized to act
on his behalf
FORFEITURE
30. When shares issued for a promissory note or other written obligation
for payment of a debt have been issued subject to forfeiture, the
following provisions shall apply.
31. Written notice specifying a date for payment to be made and the shares
in respect of which payment is to be made shall be served on the Member
who defaults in making payment pursuant to a promissory note or other
written obligations to pay a debt.
32. The written notice specifying a date for payment shall
(a) name a further date not earlier than the expiration of 14 days
from the date of service of the notice on or before which
payment required by the notice is to be made; and
(b) contain a statement that in the event of non-payment at or
before the time named in the notice the shares, or any of
them, in respect of which payment is not made, will be liable
to be forfeited.
33. Where a written notice has been issued and the requirements have not
been complied with within the prescribed time, the directors may at any
time before tender of payment forfeit and cancel the shares to which
the notice relates.
34. The Company is under no obligation to refund any moneys to the Member
whose shares have been forfeited and cancelled pursuant to these
provisions. Upon forfeiture and cancellation of the shares the Member
is discharged from any further obligation to the Company with respect
to the shares forfeited and cancelled. LIEN
35. The Company shall have a first and paramount lien on every share issued
for a promissory note or for any other binding obligation to contribute
money or property or any combination thereof to the Company, and the
Company shall also have a first and paramount lien on every share
standing registered in the name of a Member, whether singly or jointly
with any other Person or Persons, for all the debts and liabilities of
such Member or his
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<PAGE>
estate to the Company, whether the same shall have been incurred before
or after notice to the Company of any interest of any Person other than
such Member, and whether the time for the payment or discharge of the
same shall have actually arrived or not, and notwithstanding that the
same are joint debts or liabilities of such Member or his estate and
any other Person, whether a Member of the Company or not. The Company's
lien on a share shall extend to all dividends payable thereon. The
directors may at any time either generally, or in any particular case,
waive any lien that has arisen or declare any share to be wholly or in
part exempt from the provisions of this Article.
36. In the absence of express provisions regarding sale in the promissory
note or other binding obligation to contribute money or property, the
Company may sell, in such manner as the directors may by Resolution of
Directors determine, any share on which the Company has a lien, but no
sale shall be made unless some sum in respect of which the lien exists
is presently payable nor until the expiration of twenty-one days after
a notice in writing, stating and demanding payment of the sum presently
payable and giving notice of the intention to sell in default of such
payment, has been served on the holder for the time being of the share.
37. The net proceeds of the sale by the Company of any shares on which it
has a lien shall be applied in or towards payment of discharge of the
promissory note or other binding obligation to contribute money or
property or any combination thereof in respect of which the lien exists
so far as the same is presently payable and any residue shall (subject
to a like lien for debts or liabilities not presently payable as
existed upon the share prior to the sale) be paid to the holder of the
share immediately before such sale. For giving effect to any such sale
the directors may authorize some Person to transfer the share sold to
the purchaser thereof. The purchaser shall be registered as the holder
of the share and he shall not be bound to see to the application of the
purchase money, nor shall his title to the share be affected by any
irregularity or invalidity in the proceedings in reference to the sale.
TRANSFER OF SHARES
38. The El Sitio Shares held by any Member party to the Amended and
Restated Shareholders Agreement dated as of November 9, 1999 (the
"Shareholders Agreement") among the Company and the signatories thereto
representing its Interest ("Covered Shares") shall not be transferable,
directly or indirectly, except upon the conditions specified pursuant
to Articles 38 to and including 47 hereof, which conditions are
intended in part to ensure compliance with the provisions of the
Securities Act in respect of any disposition of any Covered Shares or
any interest therein which would constitute a sale thereof within the
meaning of the Securities Act (a "Transfer"). As used in these
Articles, the term "Transferor" refers to the transferor (whether by
voluntary or involuntary means) of any Covered Shares, the term "Other
Member" means the Member party to the Shareholders Agreement which is
not the Transferor, and the term "Subject Shares" means the Covered
Shares that have been or are to be Transferred.
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<PAGE>
39. In the event that an Involuntary Transfer (as hereinafter defined) by
any Member party to the Shareholders Agreement of any Covered Shares
may occur, the following procedures shall apply:
(a) The Member transferring the Covered Shares due to any
Involuntary Transfer shall promptly give written notice of
such Involuntary Transfer in reasonable detail to the Company
and to the Other Members, and the Person or Persons who take
or propose to take any interest in the Subject Shares as a
result of such Involuntary Transfer (the "Transferee") shall
hold such interest subject to the rights of the Other Members
as set forth below.
(b) Upon receipt of the notice referred to in paragraph (a) of
this Article 39 above or upon discovery of such Involuntary
Transfer, the Company shall cause the appraisal referred to in
paragraph (c) of this Article 39 to be made and each of the
Other Members shall have the irrevocable option, but not the
obligation, for a period of sixty (60) days following receipt
by all Other Members of the results of such appraisal, to
purchase the Subject Shares, subject to the terms set forth
herein. Each Other Member may exercise the option for the
number of Subject Shares which bears the same relation to the
total number of Subject Shares as (x) such Other Member's
Interest bears to (y) the aggregate Interest then held by all
of the Other Members exercising such option (and purchasing
Subject Shares under paragraph (c) of this Article 39 below),
or for such other number of Subject Shares as all of the Other
Members exercising such option may agree in writing. In the
event that the Other Members elect to purchase, in the
aggregate, less than all of the Subject Shares, then the Other
Members shall have no right to purchase any of the Subject
Shares.
(c) The closing for any such sale of Subject Shares to one or more
Other Members shall be at the offices of the Company on a
mutually satisfactory business day within fifteen (15) days
after the expiration of such sixty (60) day period. The
purchase price per share of any Subject Shares purchased
pursuant to this Article 39 shall be the amount which is equal
to the fair value, as of the Valuation Date (as hereinafter
defined), of a Subject Share, as such fair value is determined
by an independent appraiser selected by the Company and
reasonably acceptable to the Members holding, in the
aggregate, the majority of the aggregate Interests, and all
costs of any such appraisal shall be paid by the Company. The
"Valuation Date" shall be the last day of the calendar quarter
immediately preceding the Involuntary Transfer.
(d) The term "Involuntary Transfer" shall mean any involuntary
sale, transfer, encumbrance or other disposition by or in
which any Member shall transfer any Covered Shares, including,
without limitation, any
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<PAGE>
levy of execution, transfer in connection with bankruptcy,
judicial reorganization, insolvency or similar proceedings or
any transfer to a public officer or agency pursuant to any
abandoned property or escheat law; provided that any Transfer
complying with Articles 40, 41, 42 or 43 hereof shall not be
deemed to be an "Involuntary Transfer."
40. RIGHTS OF FIRST OFFER. Except as otherwise expressly provided in
Articles 41 and 42 hereof, no Member party to the Shareholders
Agreement (other than the Class B Members) (such Member, the
"Transferor") shall Transfer any Covered Shares, except in accordance
with the following procedures:
(a) In the event that a Transferor wishes to Transfer any Covered
Shares and to the extent that any offers made pursuant to this
paragraph will not violate the Securities Act, the Transferor
shall first deliver to the Other Members a written notice (the
"Offer Notice"), which Offer Notice shall (i) specify the
terms, including the number of Covered Shares to be sold, and
the price per share at which the Transferor proposes to
Transfer such Covered Shares and (ii) be irrevocable for a
period of fifteen (15) days after delivery thereof, offering
(the "Offer") to the Other Members all of the Subject Shares
proposed to be sold by the Transferor at the purchase price
and on the terms specified therein. Each of the Other Members
shall have the right and option, at its sole discretion, for a
period of fifteen (15) days after delivery of the Offer Notice
(the "Acceptance Period"), to accept all, but not less than
all, of the Subject Shares (pro rata among such Other Members
so electing on the basis of the number of shares of El Sitio
Shares owned by such Other Members) offered at a price equal
to the purchase price and upon the other terms stated in the
Offer Notice. Such acceptance may be made by delivery of a
written notice to the Transferor within said fifteen (15) day
period, which notice shall specify whether such Member wishes
to purchase more than its pro rata share, if Other Members
decline to purchase, and if so, the maximum purchase such
Member elects to make. In the event that any Member elects not
to exercise its pro rata right to purchase, the Other
Member(s) shall have the right to purchase the Subject Shares
otherwise allocable to the non-participating Member pro rata
to their participation in the Offer, subject to the limits set
forth in the applicable Offer Notice. In the event that the
Other Members elect not to purchase all of the Subject Shares,
then the Other Members shall have no right to purchase all or
any portion of such Subject Shares and the Transferor shall be
free to Transfer the Subject Shares in accordance with
paragraph (c) of Article 40. A Member electing to purchase
Subject Shares pursuant to this Article 40 is referred to
herein as a "Purchasing Member". For purposes of this Article
40, if the Transferor is transferring Common Shares, then the
Class B Members shall be included as Other Members;
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in all other cases, the Class B Members shall not be included
as Other Members.
(b) Notwithstanding anything to the contrary contained in Article
40 hereof, in the event the Transferor is one of the (i)
Initial Members, the other Initial Members will have a
priority right of first offer with respect to any Subject
Shares offered by an Initial Member, in accordance with the
terms and conditions of the Syndication Agreement among the
Initial Members and dated as of June 10, 1999, before any such
right may be exercised by any other Members or (ii) Preferred
Members, the other Preferred Members will have a priority
right of first offer with respect to any Preferred Shares
offered by a Preferred Member, before any such right may be
exercised by the other Members.
(c) Transfers, if any, of Subject Shares to the Purchasing Member
under the terms of this Article 40 shall be made at the
offices of the Company or any other address acceptable to the
Company on a mutually satisfactory business day within fifteen
(15) days after the expiration of the Acceptance Period. The
Transferor shall deliver the Subject Shares by delivering a
transfer of shares and the share certificates, if any, against
payment of the purchase price thereof, in accordance with the
terms of the Offer.
(d) If effective acceptance shall not be received pursuant to
paragraph (a) of Article 40 above, with respect to all Covered
Shares offered for sale pursuant to the Offer Notice, then the
Transferor may Transfer all or any part of the El Sitio Shares
so offered for sale at a price not less than the price, and on
terms not more advantageous to the purchaser than the terms
stated in the Offer Notice at any time within one hundred
eighty (180) days after the expiration of the Acceptance
Period.
(e) In the event that any Member exercises a purchase right under
paragraph (a) of this Article 40 and then fails to purchase
such shares in accordance with the terms of the Offer Notice
(each such Member, a "Defaulting Member"), then, in addition
to any remedies at law or in equity that the Transferor may
have in respect of such failure, the Defaulting Member shall
thereafter cease to have any right to receive offers or
purchase shares pursuant to paragraph (a) of this Article 40.
41. EXEMPT TRANSFERS. Anything contained herein to the contrary
notwithstanding, the provisions of Articles 40, 42 and 43 shall not be
applicable to a Transfer (i) to an Affiliate of a Member or for the
benefit of an Affiliate or a family member of a Member, if made solely
for personal tax or estate planning purposes of the Transferor, or (ii)
in an offering pursuant to the exercise of registration rights under
the Amended and Restated Registration Rights Agreement made between the
Company and the other signatories thereto, provided such Affiliate
executes all documents (including the representation that such Transfer
may be elected
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without registration under the applicable provisions of the Securities
Act and state securities or blue sky laws) deemed reasonably necessary
by the Other Members to cause the Affiliate to become a party to, and
be bound by, the terms of the Shareholders Agreement.
42. TAG-ALONG RIGHTS.
(a) RIGHT TO PARTICIPATE IN SALE. Notwithstanding any other
provision hereof, if any Member party to the Shareholders
Agreement, other than any Class B Members (such Members,
together with their Affiliates, the "Selling Member(s)")
proposes to enter into an agreement with a third party to sell
or otherwise dispose of for value (such sale or other
disposition for value being referred to as a "Tag-Along Sale")
El Sitio Shares held by it to a third party who is not an
Affiliate (any such party, a "Third Party") pursuant to a bona
fide transaction (or series of related transactions) in which
shares representing an aggregate Interest of fifty percent
(50%) or more will be sold to a Third Party, then the Selling
Member(s) shall afford the other Member(s) party to the
Shareholders' Agreement (the "Tag-Along Member") the
opportunity to require that the sale by the Selling Member(s)
be conditioned upon such Third Party purchasing that number of
El Sitio Shares owned by such Tag-Along Member which delivers
a Tag-Along Notice in accordance with paragraph (c) of this
Article 42 equal to the product (rounded up to the nearest
whole number) of (i) the quotient determined by dividing (A)
the number of El Sitio Shares owned by such Tag-Along Member,
by (B) the number of El Sitio Shares owned by the Selling
Members and all Tag-Along Members which are selling El Sitio
Shares in the contemplated Tag-Along Sale, and (ii) the number
of El Sitio Shares proposed to be sold by all Members in the
contemplated Tag-Along Sale. In negotiating a Tag-Along Sale,
the Selling Member(s) shall provide (i) that the only
representations, warranties or covenants which any Tag-Along
Member shall be required to make in connection with any
Transfer are representations and warranties with respect to
its own ownership of the shares to be sold by it and its
ability to convey title thereto free and clear of liens,
encumbrances or adverse claims, its due organization, its due
authorization, execution and delivery of the definitive
purchase agreement (if applicable), enforceability of such
purchase agreement against it and no conflict of it with such
purchase agreement, and (ii) that the liability of the
Tag-Along Member with respect to any representation and
warranty made in connection with any Transfer is the several
liability of such Tag-Along Member (and not joint with any
other Person) and that such liability is limited to the amount
of proceeds actually received by such Tag-Along Member;
provided, however, that the foregoing shall not limit the
obligations of
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such Tag-Along Member, and such Tag-Along Member hereby
expressly agrees to be bound by and be subject to, any escrow
or other holdback arrangement (on a pro rata basis based on
the number of shares sold by such Tag-Along Member in
proportion to all shares of the Company sold in such Tag-Along
Sale) provided for in the agreement relating to the Tag-Along
Sale. For purposes of this Article 42, if the Selling Member
is transferring Common Shares, then the Class B Members shall
be included as Tag-Along Members; in all other cases, the
Class B Members shall not be included as Tag-Along Members.
(b) SALE NOTICE. The Selling Member(s) shall provide each
Tag-Along Member and the Company with written notice (the
"Tag-Along Sale Notice") not less than thirty (30) days prior
to the proposed date of the Tag-Along Sale (the "Tag-Along
Sale Date"). Each Tag-Along Sale Notice shall be accompanied
by a copy of any agreement relating to the Tag-Along Sale (if
available) and shall set forth: (i) the name and address of
the Third Party in the Tag-Along Sale; (ii) the number of
Shares proposed to be Transferred by the Selling Member(s);
(iii) the proposed amount and form of consideration to be paid
for such shares expressed on a per share basis and the terms
and conditions of payment offered by the Third Party; (iv) the
aggregate number of shares of the Company held of record by
the Selling Member(s) as of the close of business on the day
immediately preceding the date of the Tag-Along Notice (the
"Tag-Along Notice Date"); (v) confirmation that the Third
Party has been informed of the "Tag-Along Rights" provided for
herein and has agreed to purchase shares from any Tag-Along
Member in accordance with the terms hereof; and (vi) the
Tag-Along Sale Date.
(c) TAG-ALONG NOTICE. Any Tag-Along Member wishing to participate
in the Tag-Along Sale shall provide written notice (the
"Tag-Along Notice") to the Selling Member(s) no less than
fifteen (15) days prior to the Tag-Along Sale Date. The
Tag-Along Notice shall set forth the number of El Sitio Shares
that such Tag-Along Member elects to include in the Tag-Along
Sale. The Tag-Along Notice given by any Tag-Along Member shall
constitute such Tag-Along Member's binding agreement to sell
the shares specified in the Tag-Along Notice on the terms and
conditions applicable to the Tag-Along Sale; provided,
however, that in the event that there is any material change
in the material terms and conditions of such Tag-Along Sale
applicable to the Tag-Along Member (including, but not limited
to, any decrease in the purchase price that occurs other than
pursuant to an adjustment mechanism set forth in the agreement
relating to the Tag-Along Sale) after such Tag-Along Member
gives its Tag-Along Notice, then, notwithstanding anything
herein to the contrary, the Tag-Along Member shall have the
right to
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withdraw from participation in the Tag-Along Sale with respect
to all of its shares affected thereby. If the Third Party does
not consummate the purchase of all the shares requested to be
included in the Tag-Along Sale by any Tag-Along Member on
terms and conditions which are no more favorable in any
material respect to the Selling Member (except as otherwise
provided herein), then the Selling Member(s) shall not
consummate the Tag-Along Sale of any of its shares to the
Third Party. If a Tag-Along Notice from any Tag-Along Member
is not received by the Selling Member(s) prior to the fifteen
(15) day period specified above, the Selling Member(s) shall
have the right to consummate the Tag-Along Sale without the
participation of such Tag-Along Member, but only on terms and
conditions which are no more favorable in any material respect
to the Selling Member (and in any event, at no greater a
purchase price, except as the purchase price may be adjusted
pursuant to the agreement regarding the relevant sale or other
disposition) than as stated in the Tag-Along Sale Notice and
only if such Tag-Along Sale occurs on a date within one
hundred eighty (180) days of the Tag-Along Sale Date. If such
Tag-Along Sale does not occur within such one hundred eighty
(180) day period, the El Sitio Shares that were to be subject
to such Tag-Along Sale thereafter shall continue to be subject
to all of the restrictions contained in this Agreement.
(d) DELIVERY OF SHARES. On the Tag-Along Sale Date, each Tag-Along
Member shall deliver the shares to be sold in connection with
the Tag-Along Sale to the Third Party by delivering a transfer
of shares and the share certificates, if any, against delivery
of immediately available funds in the amount of the purchase
price for such shares.
(e) NO WAIVER. Any election in any instance by a Member not to
exercise its rights to participate in a Tag-Along Sale under
this Article 42 shall not constitute a waiver of such rights
with respect to any other proposed Transfer of shares of the
Company which would trigger such rights.
43. DRAG-ALONG RIGHTS.
(a) GRANT OF DRAG-ALONG RIGHTS. If any Member party hereto, other
than any Class B Members (such Members, together with their
Affiliates, the "Selling Member(s)") proposes to enter into an
agreement with a third party to sell or otherwise dispose of
for value (such sale or other disposition for value being
referred to as a "Drag-Along Sale") El Sitio Shares held by it
to a third party who is not an Affiliate (any such party, a
"Third Party") pursuant to a bona fide transaction (or series
of related transactions) in which securities representing an
aggregate Interest of fifty percent (50%) or more will be sold
to a Third Party, then the remaining Member(s), other than the
Class B Members (the "Drag-Along Members") shall, upon the
written request of the Selling
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Member(s), sell to such Third Party (i) El Sitio Shares owned
by such Drag-Along Member equal to (A) the number of El Sitio
Shares owned by such Drag-Along Member multiplied by (B) a
fraction ("Drag-Along Fraction"), the numerator of which is
the number of El Sitio Shares the Selling Member(s) intend to
sell pursuant to this Article 43 and the denominator of which
is the aggregate number of El Sitio Shares owned by the
Selling Member(s), and (ii) warrants owned by such Drag-Along
Member representing the right to acquire a number of shares
equal to (A) the number of shares underlying such Drag-Along
Members warrants multiplied by (B) the Drag-Along Fraction,
contemporaneously with the sale of such El Sitio Shares by the
Selling Member(s), for, with respect to the El Sitio Shares,
the same consideration and on the same terms as those provided
by such Third Party to the Selling Member(s) and, with respect
to the warrants, for the same consideration and on the same
terms as those provided by such Third Party to the Selling
Member(s) less the aggregate exercise price for the warrants
so transferred.
(a) EXERCISE OF DRAG-ALONG RIGHT. The Drag-Along Right shall be
exercisable by written notice given by the Selling Member(s)
to each Drag-Along Member, containing the price and other
material terms of the proposed sale and the date of the
closing of the proposed sale (the "Drag-Along Sale Date"),
which date shall not be less than twenty (20) nor more than
sixty (60) calendar days after the date of such notice.
(b) DELIVERY OF SHARES. On the Drag-Along Sale Date, each
Drag-Along Member shall deliver the shares to be sold in
connection with the Drag-Along Sale to the Third Party by
delivering a transfer of shares and the share certificates, if
any, against delivery of immediately available funds in the
amount of the purchase price for such shares.
44. TRANSFERS IN VIOLATION OF AGREEMENT. If any voluntary Transfer of
El Sitio Shares is made or attempted contrary to the provisions of this
Agreement (such Transfer, an "Unauthorized Transfer"), the Other
Members shall have the right to purchase all or part of such El Sitio
Shares from the Person entered on the share register as the holder of
the shares at any time before or after the Transfer at a purchase price
per share equal to (i) if any El Sitio Shares are listed for trading on
NASDAQ or the Bolsa de Comercios de Buenos Aires, the lesser of (x)
eighty percent (80%) of the thirty (30) day average closing price over
the thirty-day period immediately preceding the date of the initial
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Transfer contrary to this Agreement, or (y) eighty percent (80%) of the
thirty (30) day average closing price for the thirty days immediately
preceding the date of exercise of the right granted to the Other
Members herein, or (ii) if no El Sitio Shares are listed for trading on
NASDAQ or the Bolsa de Comercios de Buenos Aires, the lesser of (x)
eighty percent (80%) of the Fair Value at the time of the initial
transfer that was contrary to these Articles, or (y) eighty percent
(80%) of the Fair Value at the time of the Other Members' purchase of
such El Sitio Shares. The term "Fair Value" shall mean the amount at
which the El Sitio Shares would change hands between an independent,
willing buyer and an independent, willing seller, each having
reasonable knowledge of all relevant facts and neither being under any
compulsion to act (considering, where applicable, the relative rights
of all outstanding classes or series of shares but not discounting the
value of such securities for illiquidity or because they represent a
minority ownership position in the Company), which amount shall be
determined by the Board of Directors in its reasonable discretion and
in good faith.
45. PREEMPTIVE RIGHTS.
(a) Except for the issuance of the Company's shares or other
securities (i) pursuant to a Qualifying IPO; (ii) comprising
Class B Preferred Shares, up to an aggregate of 1,888,889
Class B Preferred Shares; (iii) comprising additional shares
or option issuances to employees of the Company pursuant to
share option plans existing on the date of the issuance of the
Class A Preferred Shares including the number of shares
issuable thereunder as of such date (or amendments to such
plans or new plans if agreed to by the Members) or (iv) in
connection with acquisitions of businesses by the Company
approved by the Members, if the Company at any time after the
date of the issuance of the Class A Preferred Shares
authorizes the issuance or sale of any shares of the Company
or any securities of the Company containing options or rights
to acquire any shares (other than as a dividend on the
outstanding shares), the Company shall first offer to sell to
the Members on a pro rata basis, all of such shares or other
securities (the "Offered Shares").
(b) In order to exercise its purchase rights under this paragraph
(b), each Member must within twenty (20) business days after
receipt of written notice from the Company describing in
reasonable detail the share capital or securities being
offered, the purchase price thereof and the payment terms,
deliver a written notice to the Company describing its
election hereunder. Such election shall indicate the number of
Offered Shares that the Member in its sole discretion elects
to purchase, which may be all or any portion of the Offered
Shares. The Company shall give the Members no less than
fifteen (15) business days notice of the closing of the sale
and purchase of such shares.
(c) Upon the expiration of the 20-day period described above, the
Company shall be entitled to sell such shares or securities
which the Member has not elected to purchase during the ninety
(90) days following such expiration on terms and conditions,
including price, no more favorable
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to the purchasers thereof than those offered to the Members.
Any shares or securities offered or sold by the Company to any
Person after such 90-day period must be re-offered to the
Members pursuant to the terms of this Article 45.
46. The Company shall not be required to treat a transferee of a registered
share in the Company as a Member until the transferee's name has been
entered in the share register.
47. Subject to any limitations in the Memorandum and these Articles, the
Company must on the application of the transferor or transferee of a
registered share in the Company enter in the share register the name of
the transferee of the share save that the registration of transfers may
be suspended and the share register closed at such times and for such
periods as the Company may from time to time by Resolution of Directors
determine provided always that such registration shall not be suspended
and the share register closed for more than 60 days in any period of 12
months.
TRANSMISSION OF SHARES
48. The executor or administrator of a deceased Member, the guardian of an
incompetent Member or the trustee of a bankrupt Member shall be the
only Person recognized by the Company as having any title to his share
but they shall not be entitled to exercise any rights as a Member of
the Company until they have proceeded as set forth in the next
following three Articles.
49. The production to the Company of any document which is evidence of
probate of the will, or letters of administration of the estate, or
confirmation as executor, of a deceased Member or of the appointment of
a guardian of an incompetent Member or the trustee of a bankrupt Member
shall be accepted by the Company even if the deceased, incompetent or
bankrupt Member is domiciled outside the British Virgin Islands if the
document evidencing the grant of probate or letters of administration,
confirmation as executed appointment as guardian or trustee in
bankruptcy is issued by a foreign court which had competent
jurisdiction in the matter. For the purpose of establishing whether or
not a foreign court had competent jurisdiction in such a matter the
directors may obtain appropriate legal advice. The directors may also
require an indemnity to be given by the executor, administrator,
guardian or trustee in bankruptcy.
50. Any Person becoming entitled by operation of law or otherwise to a
share or shares in consequence of the death, incompetence or bankruptcy
of any Member may be registered as a Member upon such evidence being
produced as may reasonably be required by the directors. An application
by any such Person to be registered as a Member shall for all purposes
be deemed to be a transfer of
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shares of the deceased, incompetent or bankrupt Member and the
directors shall treat it as such.
51. Any Person who has become entitled to a share or shares in consequence
of the death, incompetence or bankruptcy of any Member may, instead of
being registered himself, request in writing that some Person to be
named by him be registered as the transferee of such share or shares
and such request shall likewise be treated as if it were a transfer.
52. What amounts to incompetence on the part of a person is a matter to be
determined by the court having regard to all the relevant evidence and
the circumstances of the case.
REDUCTION OR INCREASE IN AUTHORIZED CAPITAL OR CAPITAL
53. The Company may by a resolution of Members only amend the Memorandum to
increase or reduce its authorized capital and in connection therewith
the Company may in respect of any unissued shares increase or reduce
the number of such shares, increase or reduce the par value of any such
shares or effect any combination of the foregoing.
54. Subject to the provisions relating to Members Reserved Matters, the
Company may amend the Memorandum to
(a) divide the shares, including issued shares, of a class or
series into a larger number of shares of the same class or
series; or
(b) combine the shares, including issued shares, of a class or
series into a smaller number of shares of the same class or
series, provided, however, that where shares are divided or
combined under (a) or (b) of this Article, the aggregate par
value of the new shares must be equal to the aggregate par
value of the original shares.
55. The capital of the Company may by a Resolution of Directors be
increased by transferring an amount of the surplus of the Company to
capital.
56. Subject to the provisions of the two next succeeding Articles, the
capital of the Company may by Resolution of Directors be reduced by
transferring an amount of the capital of the Company to surplus.
57. No reduction of capital shall be effected that reduces the capital of
the Company to an amount that immediately after the reduction is less
than the aggregate par value of all outstanding shares with par value
and all shares with par value held by the Company as treasury shares
and the aggregate of the amounts designated as capital of all
outstanding shares without par
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value and all shares without par value held by the Company as treasury
shares that are entitled to a preference, if any, in the assets of the
Company upon liquidation of the Company.
58. No reduction of capital shall be effected unless the directors
determine that immediately after the reduction the Company will be able
to satisfy its liabilities as they become due in the ordinary course of
its business and that the realizable assets of the Company will not be
less than its total liabilities, other than deferred taxes, as shown in
the books of the Company and its remaining capital, and, in the absence
of fraud, the decision of the directors as to the realizable value of
the assets of the Company is conclusive, unless a question of law is
involved.
MEETINGS OF MEMBERS
59. The directors of the Company may convene such meetings of the Members
of the Company at such times and in such manner and places within or
outside the British Virgin Islands as the directors consider necessary
or desirable.
60. Upon the written request of Members holding 50 percent or more of the
outstanding voting shares in the Company the directors shall convene a
meeting of Members.
61. The directors shall give not less than 10 days and not more than 60
days prior written notice of meetings of Members to those Persons whose
names on the date the notice is given appear as Members in the share
register of the Company and are entitled to vote at the meeting. Except
as otherwise required by law, notice of each meeting of Members,
whether an annual meeting of Members or a special meeting of Members,
shall state the purpose or purposes of the meeting, the place, date and
hour of the meeting and, unless it is an annual meeting of Members,
shall indicate that the notice is being issued by or at the direction
of the Person or Persons calling the meeting.
62. The directors may fix the date notice is given of a meeting of Members
as the record date for determining those shares that are entitled to
vote at the meeting.
63. A meeting of Members may be called on short notice:
(a) if Members holding not less than 90 percent of the total
number of shares entitled to vote on all matters to be
considered at the meeting, or 90 percent of the votes of each
class or series of shares where Members are entitled to vote
thereon as a class or series together with not less than a 90
percent majority of the remaining votes, have agreed to short
notice of the meeting, or
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(b) if all Members holding shares entitled to vote on all or any
matters to be considered at the meeting have waived notice of
the meeting and for this purpose presence at the meeting shall
be deemed to constitute waiver.
64. The inadvertent failure of the directors to give notice of a meeting to
a Member, or the fact that a Member has not received notice, does not
invalidate the meeting.
65. A Member may be represented at a meeting of Members by a proxy who may
speak and vote on behalf of the Member.
66. The instrument appointing a proxy shall be produced at the place
appointed for the meeting before the time for holding the meeting at
which the Person named in such instrument proposes to vote.
67. An instrument appointing a proxy shall be in substantially the
following form or such other form as the chairman of the meeting shall
accept as properly evidencing the wishes of the Member appointing the
proxy.
(Name of Company)
I/We _______________ being a member of the above Company with
______ shares HEREBY APPOINT _________________________________ of
________________ or failing him _________________ of _____________ to
be my/our proxy to vote for me/us at the meeting of members to be held
on the ___ day of ____________ and at any adjournment thereof. (Any
restrictions on voting to be inserted here.) Signed this ___ day of
____________ Member
68. The following shall apply in respect of joint ownership of shares:
(a) if two or more Persons hold shares jointly each of them may be
present in Person or by proxy at a meeting of Members and may
speak as a Member;
(b) if only one of the joint owners is present in Person or by
proxy he may vote on behalf of all joint owners, and
(c) if two or more of the joint owners are present in or by proxy
they must vote as one.
69. A Member shall be deemed to be present at a meeting of Members if he
participates by telephone or other electronic means and all Members
participating in the meeting are able to hear each other.
70. Subject to Article 71 of these Articles, a meeting of Members is duly
constituted if, at the commencement of the meeting, there are present
in person or by proxy not less than 50 percent of the votes of the
shares or class or series of shares
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entitled to vote on resolutions of Members to be considered at the
meeting. If a quorum be present, notwithstanding the fact that such
quorum may be represented by only one Person, then such Person may
resolve any matter and a certificate signed by such Person accompanied
where such Person be a proxy by a copy of the proxy form shall
constitute a valid resolution of Members.
71. With respect to any Members Reserved Matters, a meeting of Members is
duly constituted if, at the commencement of the meeting, at which a
quorum is present, there are present in person or by proxy each of the
holders of the issued and outstanding El Sitio Shares. If a quorum be
present, notwithstanding the fact that such quorum may be represented
by only one Person, then such Person may resolve any matter and a
certificate signed by such Person accompanied where such Person be a
proxy by a copy of the proxy form shall constitute a valid resolution
of Members. In case a quorum is not present at a meeting, the Members
attending such meeting shall take any measures necessary to make such
meeting ineffective, and thereby agree that any action taken at such
meeting (other than such measures) shall be void ab initio.
72. If within two hours from the time appointed for the meeting a quorum is
not present, the meeting, if convened upon the requisition of Members,
shall be dissolved; in any other case it shall stand adjourned to the
next business day at the same time and place or to such other time and
place as the directors may determine, and if at the adjourned meeting
there are present within one hour from the time appointed for the
meeting in person or by proxy not less than one third of the votes of
the shares or each class or series of shares entitled to vote on the
resolutions to be considered by the meeting, those present shall
constitute a quorum but otherwise the meeting shall be dissolved.
73. At every meeting of Members, the Chairman of the Board of Directors
shall preside as chairman of the meeting. If there is no Chairman of
the Board of Directors or if the Chairman of the Board of Directors is
not present at the meeting, the Members present shall choose some one
of their number to be the chairman. If the Members are unable to choose
a chairman for any reason, then the Person representing the greatest
number of voting shares present in person or by prescribed form of
proxy at the meeting shall preside as chairman.
74. The chairman may, with the consent of the meeting, adjourn any meeting
from time to time, and from place to place, but no business shall be
transacted at any
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adjourned meeting other than the business left unfinished at the
meeting from which the adjournment took place.
75. At any meeting of the Members the chairman shall be responsible for
deciding in such manner as he shall consider appropriate whether any
resolution has been carried or not and the result of his decision shall
be announced to the meeting and recorded in the minutes thereof. If the
chairman shall have any doubt as to the outcome of any resolution put
to the vote, he shall cause a poll to be taken of all votes cast upon
such resolution, but if the chairman shall fail to take a poll then any
Member present in person or by proxy who disputes the announcement by
the chairman of the result of any vote may immediately following such
announcement demand that a poll be taken and the chairman shall
thereupon cause a poll to be taken. If a poll is taken at any meeting,
the result thereof shall be duly recorded in the minutes of that
meeting by the chairman.
76. Any Person other than an individual shall be regarded as one Member and
subject to the specific provisions hereinafter contained for the
appointment of representatives of such Persons the right of any
individual to speak for or represent such Member shall be determined by
the law of the jurisdiction where, and by the documents by which, the
Person is constituted or derives its existence. In case of doubt, the
directors may in good faith seek legal advice from any qualified Person
and unless and until a court of competent jurisdiction shall otherwise
rule, the directors may rely and act upon such advice without incurring
any liability to any Member.
77. Any Person other than an individual which is a Member of the Company
may by resolution of its directors or other governing body authorize
such Person as it thinks fit to act as its representative at any
meeting of the Company or of any class of Members of the Company, and
the Person so authorized shall be entitled to exercise the same powers
on behalf of the Person which he represents as that Person could
exercise if it were an individual Member of the Company.
78. The chairman of any meeting at which a vote is cast by proxy or on
behalf of any Person other than an individual may call for a notarially
certified copy of such proxy or authority which shall be produced
within 7 days of being so requested or the votes cast by such proxy or
on behalf of such Person shall be disregarded.
79. Directors of the Company may attend and speak at any meeting of Members
of the Company and at any separate meeting of the holders of any class
or series of shares in the Company.
80. An action that may be taken by the Members at a meeting may also be
taken by a resolution of Members consented to in writing or by telex,
telegram, cable,
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facsimile or other written electronic communication, without the need
for any notice, but if any resolution of Members is adopted otherwise
than by the unanimous written consent of all Members, a copy of such
resolution shall forthwith be sent to all Members not consenting to
such resolution. The consent may be in the form of counterparts, each
counterpart being signed by one or more Members.
DIRECTORS
81. The first directors of the Company shall be appointed by the
subscribers to the Memorandum; and thereafter, the directors shall be
elected by the Members as follows:
the Initial Shareholders shall have the right to elect four
(4) directors to the Board of Directors. The Class A Members
shall have the right to elect five (5) directors (each, a
"Class A Preferred Director") to the Board of Directors. The
Ibero Group shall have the right to nominate two (2) Class A
Preferred Directors for so long as the Ibero Group shall own
ten percent (10%) or more of its holdings of El Sitio Shares
as of the date on which El Sitio Shares were first issued to
the Ibero Group on an as-converted basis or one (1) Class A
Preferred Director for so long as the Ibero Group shall own
one percent (1%) or more of El Sitio Shares on an as-converted
basis. If the Ibero Group owns less than one percent (1%) of
the El Sitio Shares on an as-converted basis, the Ibero Group
shall have the right to appoint an observer to the Board of
Directors, who shall be entitled to participate in the
meetings of the Board of Directors, but shall not have any
vote. Chestnut Hill (El Sitio), LLC ("Chestnut") shall have
the right to nominate the third of such directors for so long
as Chestnut shall own (i) two and one-half percent (2.5%) or
more of its holdings of El Sitio Shares as of the date on
which El Sitio Shares were first issued to Chestnut on an
as-converted basis or (ii) one percent (1%) or more of El
Sitio Shares on an as-converted basis. If Chestnut owns less
than one percent (1%) of El Sitio Shares on an as-converted
basis, Chestnut shall have the right to appoint an observer to
the Board of Directors, who shall be entitled to participate
in the meetings of the Board of Directors, but shall not have
any vote. IMPSAT Corporation ("IMPSAT") shall have the right
to nominate one (1) Class A Preferred Director to the Board of
Directors for so long as IMPSAT shall own (i) two and one-half
percent (2.5%) of its holdings of El Sitio Shares as of the
date on which El Sitio Shares were first issued to IMPSAT on
an as-converted basis or (ii) one percent (1%) or more of El
Sitio Shares on an as-converted basis. If IMPSAT owns less
than one percent (1%) of El Sitio Shares on an as-converted
basis,
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IMPSAT shall have the right to appoint an observer to the
Board of Directors who shall be entitled to participate in the
meetings of the Board of Directors, but shall not have any
vote. The Class B Members shall have the right to appoint an
observer to the Board of Directors who shall be entitled to
participate in the meetings of the Board of Directors, but
shall not have any vote. One (1) Class A Preferred Director
will be nominated by the unanimous vote of all of the
directors of the Company and shall be independent to any other
holder of common shares or Class A Preferred Shares.
For the purpose of the foregoing provision the term "El Sitio
Shares" means, collectively, the Common Shares, the Preferred
Shares and any other class of shares of the Company issued at
any time which has the right to vote in all matters, each as
described in the Memorandum of the Company.
(a) If prior to his election to the Board of Directors, any
director-nominee shall be unwilling or unable to serve as a
director of the Company, the Member which nominated such
director shall be entitled to nominate a replacement who shall
then be the director-nominee for such Member for purposes of
the foregoing provision.
(b) The Common Members may, at any time and from time to time,
with or without cause, remove any Common Director by
resolution of the Common Members. A Common Director may not be
removed from office without cause without the prior written
consent of the Common Members. The Class A Members may, at any
time and from time to time, with or without cause remove any
Class A Director by resolution of the Class A Members. A Class
A Director may not be removed from office without cause
without the prior written consent of the Class A Members.
82. The minimum number of directors shall be nine (9).
83. Each director shall hold office until the next annual meeting of
members or until his earlier death, resignation or removal.
84. A Class A Director or a Common Director may be removed from office,
with cause, by a resolution of Members.
85. A director may resign his office by giving written notice of his
resignation to the Company and the resignation shall have effect from
the date the notice is received by the Company or from such later date
as may be specified in the notice.
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86. Any vacancy of a Class A Director shall be filled by the Class A
Members, and any vacancy of a Common Director shall be filled by the
Common Members. A vacancy occurs through the death, resignation or
removal of a director, but a vacancy or vacancies shall not be deemed
to exist where one or more directors shall resign after having
appointed his or their successor or successors.
87. The Company may determine by Resolution of Directors to keep a register
of directors containing
(a) the names and addresses of the persons who are directors of
the Company;
(b) the date on which each person whose name is entered in the
register was appointed as a director of the Company; and
(c) the date on which each person named as director ceased to be a
director of the Company.
88. If the directors determine to maintain a register of directors, a copy
thereof shall be kept at the registered office of the Company and the
Company may determine by Resolution of Directors to register a copy of
the register with the Registrar of Companies.
89. With the prior or subsequent approval by a resolution of the Members,
the directors may, by a resolution of the directors, fix the emoluments
of directors with respect to respect to services to be rendered in any
capacity to the Company. On or before December 31 in each calendar year
(beginning December 1, 1999), the Company shall pay to (i) the Ibero
Group and Chestnut Hill (El Sitio), LLC a monitoring fee equal to
$300,000 per annum in arrears (pro rated for any partial year), which
shall be shared by them pro rata based on their respective interests in
the Company, (ii) IMPSAT Corporation a monitoring fee equal to $100,000
per annum in arrears (pro rated for any partial year), and (iii) Tower
Plus International Corp., SLI.COM and Militello Limited a monitoring
fee equal to $300,000 per annum in arrears (pro rated for any partial
year), which shall be shared by them as agreed by such Members, for so
long as the ownership interest in the Company of each of Tower Plus
International Corp., SLI.COM and Militello Limited is at least equal to
1% of the total capital of the Company. The Board of Directors shall
have the right to review the compensation paid hereunder beginning at
any time after December 31, 2001, and may (in its sole discretion)
reduce, eliminate, maintain or increase all such fees.
90. A director shall not require a share qualification.
POWERS OF DIRECTORS
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91. Subject to the provisions of these Articles and any resolution of
members, the business and affairs of the Company shall be managed by
the directors who may pay all expenses incurred preliminary to and in
connection with the formation and registration of the Company and may
exercise all such powers of the Company as are not by the Act or by the
Memorandum or these Articles required to be exercised by the Members of
the Company or reserved for the approval of the majority of the Class A
Directors, subject to any delegation of such powers as may be
authorized by these Articles and to such requirements as may be
prescribed by a resolution of Members; but no requirement made by a
resolution of Members shall prevail if it be inconsistent with these
Articles nor shall such requirement invalidate any prior act of the
directors which would have been valid if such requirement had not been
made.
92. The directors may, by a Resolution of Directors, appoint any person,
including a person who is a director, to be an officer or agent of the
Company. The Resolution of Directors appointing an agent may authorize
the agent to appoint one or more substitutes or delegates to exercise
some or all of the powers conferred on the agent by the Company.
93. Every officer or agent of the Company has such powers and authority of
the directors, including the power and authority to affix the Seal, as
are set forth in these Articles or in the Resolution of Directors
appointing the officer or agent, except that no officer or agent has
any power or authority with respect to the matters requiring a
Resolution of Directors under the Act.
94. Any director which is a body corporate may appoint any person its duly
authorized representative for the purpose of representing it at
meetings of the Board of Directors or with respect to unanimous written
consents.
95. The continuing directors may act notwithstanding any vacancy in their
body, save that if their number is reduced to their knowledge below the
number fixed by or pursuant to these Articles as the necessary quorum
for a meeting of directors, the continuing directors or director may
act only for the purpose of summoning a meeting of Members.
96. Subject to the Provisions of the Memorandum and these Articles, the
directors may by Resolution of Directors exercise all the powers of the
Company to borrow money and to mortgage or charge its undertakings and
property or any part thereof, to issue debentures, debenture stock and
other securities whenever money is borrowed or as security for any
debt, liability or obligation of the Company or of any third party.
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97. All cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments and all receipts for moneys paid to the Company,
shall be signed, drawn, accepted, endorsed or otherwise executed, as
the case may be, in such manner as shall from time to time be
determined by Resolution of Directors.
98. The Company may determine by Resolution of Directors to maintain at its
registered office a register of mortgages, charges and other
encumbrances in which there shall be entered the following particulars
regarding each mortgage, charge and other encumbrance:
(a) the sum secured;
(b) the assets secured;
(c) the name and address of the mortgagee, chargee or other
encumbrancer;
(d) the date of creation of the mortgage, charge or other
encumbrance; and
(e) the date on which the particulars specified above in respect
of the mortgage, charge or other encumbrance are entered in
the register.
99. The Company may further determine by a Resolution of Directors to
register a copy of the register of mortgages, charges or other
encumbrances with the Registrar of Companies.
PROCEEDINGS OF DIRECTORS
100. The directors of the Company or any committee thereof may meet at such
times and in such manner and places within or outside the British
Virgin Islands as the directors may determine to be necessary or
desirable, provided that a meeting of directors shall be held at least
once in every quarter of each calendar year unless otherwise determined
by a resolution of Members. Questions arising at any meeting shall be
determined by the affirmative votes of a simple majority of directors
present at such meeting, except for those matters which have been
specifically reserved as Directors Reserved Matters.
101. A director shall be deemed to be present at a meeting of directors if
he participates by telephone or other electronic means and all
directors participating in the meeting are able to hear each other.
102. A director shall be given not less than 3 days notice of meetings of
directors, but a meeting of directors held without 3 days notice having
been given to all directors shall be valid if all the directors
entitled to vote at the meeting who do not attend, waive notice of the
meeting and for this purpose, the presence of a director at a meeting
shall constitute waiver on his part. The inadvertent failure to give
notice of a meeting to a director, or the fact that a director has not
received the notice, does not invalidate the meeting.
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103. A director may by a written instrument appoint an alternate who need
not be a director and an alternate is entitled to attend meetings in
the absence of the director who appointed him and to vote or consent in
place of the director.
104. A meeting of directors is duly constituted for all purposes if at the
commencement of the meeting there are present in person or by alternate
not less than four (4) directors, except that with respect to those
matters which have been specifically reserved as Directors Reserved
Matters, a meeting of directors is duly constituted for all purposes if
at the commencement of the meeting there are present in person or by
alternate not less than four (4) directors including two (2) Class A
Directors.
105. At every meeting of the directors the Chairman of the Board of
Directors shall preside as chairman of the meeting. If there is no
Chairman of the Board of Directors or if the Chairman of the Board of
Directors is not present at the meeting the Vice-Chairman of the Board
of Directors shall preside. If there is no Vice-Chairman of the Board
of Directors or if the Vice-Chairman of the Board of Directors is not
present at the meeting the directors present shall choose some one of
their number to be chairman of the meeting.
106. An action that may be taken by the directors or a committee of
directors at a meeting may also be taken by a Resolution of Directors
or a committee of directors consented to in writing or by telex,
telegram, cable, facsimile or other written electronic communication by
all directors or all Members of the committee as the case may be,
without the need for any notice. The consent may be in the form of
counterparts, each counterpart being signed by one or more directors.
107. The directors shall cause the following corporate records to kept:
(a) minutes of all meetings of directors, Members, committees of
directors, committees of officers and committees of Members;
(b) copies of all resolutions consented to by directors, Members,
committees of directors, committees of officers and committees
of Members; and
(c) such other accounts and records as the directors by Resolution
of Directors consider necessary or desirable in order to
reflect the financial position of the Company.
108. The books, records and minutes shall be kept at the registered office
of the Company, its principal place of business or at such other place
as the directors determine.
109. The directors, by Resolution of Directors, shall designate two
permanently sitting committees, the Compensation Committee and the
Audit Committee.
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Each committee shall consist of three Members, two representatives to
be nominated by the Class A Members of which one shall be appointed by
the Ibero Group and one by Chestnut, and the other representative to be
nominated by the Initial Members.
110. Each committee of directors has such powers and authorities of the
directors, including the power and authority to affix the Seal, as are
set forth in the Resolution of Directors establishing the committee,
except that no committee has any power or authority to amend the
Memorandum or these Articles, to appoint directors or fix their
emoluments or to appoint officers or agents of the Company.
111. The meetings and proceedings of each committee of directors consisting
of three (3) or more directors shall be governed MUTATIS MUTANDIS by
the provisions of those Articles regulating the proceedings of
directors so far as the same are not superseded by any provisions in
the resolution establishing the committee.
OFFICERS
112. The Company may by Resolution of Directors appoint officers of the
Company at such times as shall be considered necessary or expedient.
Such officers may consist of a Chairman of the Board of Directors, a
Vice-Chairman of the Board of Directors, a President and one or more
Vice-Presidents, Secretaries and Treasurer and such other officers as
may from time to time be deemed desirable. Any number of offices may
be held by the same person.
113. The officers shall perform such duties as shall be prescribed at the
time of their appointment subject to any modification in such duties as
may be prescribed thereafter by Resolution of Directors or resolution
of Members, but in the absence of any specific allocation of duties it
shall be the responsibility of the Chairman of the Board of Directors
to preside at meetings of directors and Member, the Vice-Chairman to
act in the absence of the Chairman, the President to manage the day to
day affairs of the Company, the Vice-Presidents to act in order of
seniority in the absence of the President but otherwise to perform such
duties as may be delegated to them by the President, the Secretaries to
maintain the share register, minute books and records (other than
financial records) of the Company and to ensure compliance with all
procedural requirements imposed on the Company by applicable law, and
the Treasurer to be responsible for the financial affairs of the
Company.
114. The emoluments of all officers shall be fixed by the Compensation
Committee.
115. The officers of the Company shall hold office until their successor are
duly elected and qualified, but any officer elected or appointed by the
directors may
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be removed at any time, with or without cause, by Resolution of
Directors. Any vacancy occurring in any office of the Company may be
filled by Resolution of Directors.
CONFLICT OF INTERESTS
116. No Agreement or transaction between the Company and one or more of its
directors or any Person in which any director has a financial interest
or to whom any director is related, including as a director of that
other Person, is void or voidable for this reason only or by reason
only that the director is present at the meeting of directors or at the
meeting of the committee of directors that approves the agreement or
transaction or that the vote or consent of the director is counted for
that purpose if the material facts of the interest of each director in
the agreement or transaction are disclosed in good faith or are known
by the other directors.
117. A director who has an interest in any particular business to be
considered at a meeting of directors or Members may be counted for the
purposes of determining whether the meeting is duly constituted.
INDEMNIFICATION
118. Subject to the limitation hereinafter provided, the Company shall
indemnify against all expenses, including legal fees, and against all
judgments, fines and amounts paid in settlement and reasonably incurred
in connection with legal, administrative or investigative proceeding
against any Person who
(a) is or was a party or is threatened to be made a party to any
threatened, pending or completed proceedings, whether civil,
criminal, administrative or investigative, by reason of the
fact that the Person is or was a director, an officer or a
liquidator of the Company; or
(b) is or was, at the request of the Company, serving as a
director, officer or liquidator of, or in any other capacity
is or was acting for, another company or partnership, joint
venture, trust or other enterprise.
119. The Company shall only indemnify a Person if the Person acted honestly
and in good faith with a view to the best interests of the Company and,
in the case of criminal proceedings, the Person had no reasonable cause
to believe that his conduct was unlawful.
120. The decision of the directors as to whether the Person acted honestly
and in good faith and with a view to the best interests of the Company
and as to whether the Person had no reasonable cause to believe that
his conduct was unlawful is, in the absence of fraud, sufficient for
the purposes of these Articles, unless a question of law is involved.
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121. The termination of any proceedings by any judgment, order, settlement,
conviction or the entering of a nolle prosequi does not, by itself,
create a presumption that the Person did not act honestly and in good
faith and with a view to the best interests of the Company or that the
Person had reasonable cause to believe that his conduct was unlawful.
122. If a Person to be indemnified has been successful in defence of any
proceedings referred to above the Person is entitled to be indemnified
against all expenses, including legal fees, and against all judgments,
fines and amounts paid in settlement and reasonable incurred by their
Person in connection with the proceedings.
123. The Company may purchase and maintain insurance in relation to any
Person who is or was a director, an officer or a liquidator of the
Company, or who at the request of the Company is or was serving as a
director, an officer or a liquidator of, or in any other capacity is or
was acting for, another company or a partnership, joint venture, trust
or other enterprise, against any liability asserted against the Person
and incurred by the Person in that capacity, whether or not the Company
has or would have had the power to indemnify the Person against the
liability as provided in the Articles.
SEAL
124. The Company may have more than one Seal and references herein to the
Seal shall be references to every Seal which shall have been duly
adopted by Resolution of Directors. The directors shall provide for the
safe custody of the Seal and for an imprint thereof to be kept at the
Registered Office. Except as otherwise expressly provided herein the
Seal when affixed to any written instrument shall be witnessed and
attested to by the signature of a director or any other Person so
authorized from time to time by Resolution of Directors. Such
authorization may be before or after the Seal is affixed, may be
general or specific and may refer to any number of sealings. The
Directors may provide for a facsimile of the Seal and of the signature
of any director or authorized Person which may be reproduced by
printing or other means on any instrument and it shall have the same
force and validity as if the Seal had been affixed to such instrument
and the same had been signed as hereinbefore described.
DIVIDENDS
125. The Company may by a Resolution of Directors declare and pay dividends
in money, shares, or other property, but dividends shall only be
declared and paid out of surplus. In the event that dividends are paid
in specie the directors shall have responsibility for establishing and
recording in the Resolution of Directors authorizing the dividends a
fair and proper value for the assets to be so distributed.
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126. The directors may from time to time pay to the Members such interim
dividends as appear to the directors to be justified by the profits of
the Company.
127. The directors may, before declaring any dividend, set aside out of the
profits of the Company such sum as they think proper as a reserve fund,
and may invest the sum so set aside as a reserve fund upon such
securities as they may select.
128. No dividend shall be declared and paid unless the directors determine
that immediately after the payment of the dividend the Company will be
able to satisfy its liabilities as they become due in the ordinary
course of its business and the realizable value of the assets of the
Company will not be less than the sum of its total liabilities, other
than deferred taxes, as shown in its books of account, and its capital.
In the absence of fraud, the decision of the directors as to the
realizable value of the assets of the Company is conclusive, unless a
question of law is involved.
129. Notice of any dividend that may have been declared shall be given to
each Member in manner hereinaftermentioned and all dividends unclaimed
for 3 years after having been declared may be forfeited by Resolution
of Directors for the benefit of the Company.
130. No dividend shall bear interest as against the Company and no dividend
shall be paid on treasury shares or shares held by another company of
which the Company holds, directly or indirectly, share having more than
50 percent of the vote in electing directors.
131. A share issued as a dividend by the Company shall be treated for all
purposes as having been issued for money equal to the surplus that is
transferred to capital upon the issue of the share.
132. In the case of a dividend of authorized but unissued shares with par
value, an amount equal to the aggregate par value of the shares shall
be transferred from surplus to capital at the time of the distribution.
133. In the case of a dividend of authorized but unissued shares without par
value, the amount designated by the directors shall be transferred from
surplus to capital at the time of the distribution, except that the
directors must designate as capital an amount that is at least equal to
the amount that the shares are entitled to as a preference, if any, in
the assets of the Company upon liquidation of the Company.
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134. A division of the issued and outstanding shares of a class or series of
shares into a larger number of shares of the same class or series
having a proportionately smaller par value does not constitute a
dividend of shares.
ACCOUNTS AND AUDIT
135. The Company may by resolution of Members call for the directors to
prepare periodically a profit and loss account and a balance sheet. The
profit and loss account and balance sheet shall be drawn up so as to
give respectively a true and fair view of the profit and loss of the
Company for the financial period and a true and fair view of the state
of affairs of the Company as at the end of the financial period.
136. The Company may by resolution of Members call for the accounts to be
examined by auditors.
137. The first auditors shall be appointed by Resolution of Directors;
subsequent auditors shall be appointed by resolution of Members.
138. The auditors may be Members of the Company, but no director or other
officer shall be eligible to be an auditor of the Company during his
continuance in office.
139. The remuneration of the auditors of the Company
(a) in the case of auditors appointed by the directors, may be
fixed by Resolution of Directors; and
(b) subject to the foregoing, shall be fixed by resolution of
Members or in such manner as the Company may by resolution of
Members determine.
140. The auditors shall examine each profit and loss account and balance
sheet required to be served on every Member of the company or laid
before a meeting of the Members of the Company and shall state in a
written report whether or not
(a) in their opinion the profit and loss account and balance sheet
give a true and fair view respectively of the profit and loss
for the period covered by the accounts, and of the state of
affairs of the Company at the end of that period; and
(b) all the information and explanations required by the auditors
have been obtained.
141. The report of the auditors shall be annexed to the accounts and shall
be read at the meeting of Members at which the accounts are laid before
the Company or shall be served on the Members.
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142. Every auditor of the Company shall have a right of access at all times
to the books of account of the Company, and shall be entitled to
require from the directors and officers of the Company such information
and explanations as he thinks necessary for the performance of the
duties of the auditors.
143. The auditors of the Company shall be entitled to receive notice of, and
to attend any meetings of Members of the Company at which the Company's
profit and loss account and balance sheet are to be presented.
NOTICES
144. Any notice, information or written statement to be given by the Company
to Members may be served in the case of Members holding registered
shares in any way by which it can reasonably be expected to reach each
Member or by mail addressed to each Member at the address shown in the
share register.
145. Any summons, notice, order, document, process, information or written
statement to be served on the Company may be served by leaving it, or
by sending it by registered mail addressed to the Company, at its
registered office, or by leaving it with, or by sending it by
registered mail to, the registered agent of the Company.
146. Service of any summons, notice, order, document, process, information
or written statement to be served on the Company may be provided by
showing that the summons, notice, order, document, process, information
or written statement was delivered to the registered office or the
registered agent of the Company or that it was mailed in such time as
to admit to its being delivered to the registered office or the
registered agent of the Company in the normal course of delivery within
the period prescribed for service and was correctly addressed and the
postage was prepaid.
147. Any and all disputes between or among the Members not involving any
Class B Member arising in connection with or relating in any way to the
validity, construction, meaning, enforceability or performance of this
Agreement shall be settled by binding arbitration in accordance with
the rules of arbitration then in effect (the "ICC Rules") of the
International Chamber of Commerce (the "ICC"). Any Member or Members
electing to refer a matter to arbitration pursuant hereto (the
"Petitioner") shall promptly deliver written notice (the "Arbitration
Notice") to the other parties that it wishes to commence an arbitration
proceeding. The Arbitration Notice shall set forth the matter being
referred to arbitration and the name of the individual selected by the
Petitioner as one of the arbitrators.
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148. There shall be three (3) arbitrators, and each Member to the
arbitration shall select one (1) arbitrator. Within twenty days of
receipt of the Arbitration Notice, the other Member to such arbitration
(the "Respondent") shall appoint an arbitrator (who shall have
appropriate qualifications in relation to the matter in dispute) and
notify the Petitioner of such appointment and submit its counter
statement, if any, of the matter being referred to arbitration. If the
Respondent fails to appoint an arbitrator within such twenty (20) day
period, the Petitioner shall request the ICC President to appoint a
second arbitrator who shall have appropriate qualifications in relation
to the matter in dispute. Within twenty (20) days after appointment of
the second arbitrator, the two arbitrators shall appoint the third
arbitrator. If the two arbitrators fail to appoint the third arbitrator
within such twenty (20) day period, either Member to the arbitration
may request that the ICC President appoint the third arbitrator, who
shall have appropriate qualifications in relation to the matter in
dispute. All three (3) arbitrators shall be bilingual
(Spanish/English). In the event that there are more than two (2)
Members to such arbitration, all three (3) arbitrators shall be
appointed by the ICC President.
149. The arbitration proceedings shall be conducted in the English and
Spanish languages in London, England, in accordance with the ICC Rules,
and all documents in connection with any such proceedings shall be
submitted in the English or Spanish languages or with a complete and
accurate English or Spanish (as applicable) language translation. In
any arbitration, the decision of the arbitrators shall be final and
binding on the Members to the arbitration and judgment on the decision
may be entered in and enforced in any court of competent jurisdiction
in accordance with the New York Convention on the Recognition and
Enforcement of Arbitral Awards. The substantially prevailing Member in
such arbitration, in addition to all other relief provided, shall be
entitled to an award of all of its reasonable costs and expenses
including attorney fees and expenses and deposits and payments to the
ICC.
150. Each Member hereby agrees that each of the Members shall have the right
to seek appropriate emergency or equitable relief to preserve the
arbitral matter or to otherwise protect its rights pending resolution
of the arbitral matter, whether in New York, New York, Argentina or in
any other jurisdiction.
151. The Members agree to negotiate in good faith to resolve any dispute
involving the Class B Members regarding arising in connection with or
relating in any way to the validity, construction, meaning,
enforceability or performance of the Memorandum or Articles. If the
negotiations do not resolve the dispute to the reasonable satisfaction
of both parties to the dispute, then each such party shall nominate one
senior officer of the rank of Vice President or higher as its
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<PAGE>
representative. These representatives shall, within thirty (30) days of
a written request by either party to call such a meeting, meet in
person and alone (except for one assistant for each party) and shall
attempt in good faith to resolve the dispute. If the disputes cannot be
resolved by such senior managers in such meeting, the parties to the
dispute shall, if requested in writing by either party, meet within
thirty (30) days after such written notification for one day with an
impartial mediator and consider dispute resolution alternatives other
than litigation. If an alternative method of dispute resolution is not
agreed upon within thirty (30) days after the one-day mediation, either
party may begin litigation proceedings. This procedure shall be a
prerequisite before taking any additional action hereunder.
VOLUNTARY WINDING UP AND DISSOLUTION
152. The Company may voluntarily commence to wind up and dissolve by a
resolution of Members but if the Company has never issued shares it may
voluntarily commence to wind up and dissolve by resolution of director.
CONTINUATION
153. The Company may by resolution of Members or by a resolution passed
unanimously by all directors of the Company continue as a company
incorporated under the laws of a jurisdiction outside the British
Virgin Islands in the manner provided under those laws.
AMENDMENT AND TERMINATION OF ARTICLES
154. The definitions of "Class A Director", "Class A Member", "Class B
Member", "Directors Reserved Matters", "Initial Member" and "Members
Reserved Matters" contained in Article 1 of these Articles shall no
longer have effect upon a Qualifying IPO.
155. The phrase "in the Company (either Class A Preferred Shares or Class B
Preferred Shares)" in the definition of "Preferred Member", clause (c)
of the definition of "Resolution of Directors," the phrase "(i) Subject
to (ii) below" and clause (ii) of the definition of "Resolution of
Members" shall no longer have effect upon a Qualifying IPO.
156. Articles 8, 26-29, 38-45, 59, 66-67, 71, 81, 84, 86, 109-110 and
147-151 of these Articles shall no longer have effect upon a Qualifying
IPO.
157. The phrase "Subject to the provisions relating to Members Reserved
Matters" in Article 54, the phrase "Subject to Article 71 of these
Articles" in Article 70, the phrase ", except for those matters which
have been specifically reserved as Directors Reserved Matters" and the
phrase ", except that with respect to those matters which have been
specifically reserved as Directors Reserved Matters,
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<PAGE>
a meeting of directors is duly constituted for all purposes if at the
commencement of the meeting there are present in person or by alternate
not less than four (4) directors including two (2) Class A Directors"
in Article 104 shall no longer have effect upon a Qualifying IPO.
158. Upon and subsequent to a Qualifying IPO:
"CONSENT OF MEMBERS
(1) Notwithstanding any other provision of the Memorandum or these
Articles (other than paragraph (2)), a Resolution of the Members shall
be required in order for the Company to:
(a) Approve or adopt a share option or purchase plan or other
arrangement pursuant to which Common Shares or securities
convertible into Common Shares may be acquired by officers or
directors of the Company, provided that a Resolution of the
Members shall not be required: (i) where Common Shares or
securities convertible into Common Shares are issued to all
Members, (ii) where the plan or arrangement includes other
employees of the Company (such as an employee share option
plan), (iii) where Common Shares are issued to a Person not
previously employed by the Company as an inducement to such
Person's entering into an employment agreement with the
Company; or (iv) where the number of Common Shares which may
be issued under the plan or other arrangement or pursuant to
the exercise of rights attached to securities which are
convertible into Common Shares which are to be issued under
the plan or other arrangement does not exceed the lesser of 1%
of the number of Common Shares issued and outstanding assuming
that all securities which are convertible into Common Shares
are so converted , such number of shares as would constitute
1% of all the votes attached to the issued and outstanding
shares of the Company, or 25,000 Common Shares;
(b) issue Common Shares or securities convertible into Common
Shares resulting in a change of control of the Company;
(c) issue Common Shares or securities convertible into Common
Shares in connection with the acquisition of shares, stock or
assets of another Person if: (i) any director or officer of
the Company or Member holding 5% or more of the Common Shares
has a 5% or greater interest (or such Persons collectively
have a 10% or greater interest), directly or indirectly, in
the entity or assets to be acquired or in the consideration to
be paid in the transaction or series of related transactions,
and the number of Common Shares to be issued in connection
with the
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<PAGE>
acquisition or upon the exercise of rights attached to
securities which are to be issued in connection with the
acquisitions and which are convertible into Common Shares
could result in a 5% or more increase in issued and
outstanding Common Shares; or (ii) the number of Common Shares
to be issued in connection with the acquisition or upon the
exercise of rights attached to securities which are to be
issued in connection with the acquisition and which are
convertible into Common Shares constitute 20% of the Common
Shares of the Company outstanding prior to the issuance (other
than a public offering for cash).
(d) issue Common Shares or securities convertible into Common
Shares in connection with a transaction (other than a public
offering) involving: (i) the issue by the Company of Common
Shares (or securities convertible into or exercisable for
Common Shares) at a price less than the greater of book or
market value which together with sales by officers or
directors of the Company or Members holding 5% or more of the
Common Shares equals 20% or more of the Common Shares or 20%
(assuming the conversion of the securities into Common
Shares); or
(ii) the issue by the Company of Common Shares (or securities
convertible into or exercisable into Common shares) equal to
20% or more of the Common Shares (assuming the conversion of
the securities into Common Shares) outstanding before the
issuance for less than the greater of book or market value of
the shares.
For purposes of this paragraph (1), the term "control" means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract or otherwise. (2) A Resolution of Members is not
required for a transaction referred to in paragraph (1) if approval for the
transaction has been obtained from the NASDAQ National Market or other
securities exchange on which the Company's Common Shares are then listed and:
(a) the delay in obtaining a Resolution of the Members would seriously
jeopardize the financial viability of the Company; (y) the Audit
Committee of the Company has approved not seeking a resolution of
Members; and (z) the Company has given to all Members not later than
ten days before issuance of the Common Shares or securities convertible
into Common Shares notice that it does not intend to seek the
Resolution of the Members that would otherwise be required and
indicating that the Audit Committee has expressly approved proceeding
without obtaining a Resolution of Members.
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<PAGE>
For purposes of this Article, only shares actually issued and outstanding
(excluding treasury shares or shares held by a subsidiary) are to be used in
making any calculation. Unissued shares reserved for issuance upon conversion of
shares or upon exercise of options or warrants will not be regarded as
outstanding."
OTHER MATTERS - POST IPO
159. Upon and subsequent to a Qualifying IPO:
"A meeting of Members for the election of directors and for the
transaction of such other business as may properly come before the
meeting (an "Annual Meeting") shall be held at least once every
calendar year at such place, on such date, and at such time as the
Board of Directors shall each year determine. The directors of the
Company may convene such other meetings of the Members of the Company
at such times and in such manner and places within or outside the
British Virgin Islands as the directors consider necessary or
desirable."
160. Upon and subsequent to a Qualifying IPO:
"The Company shall solicit proxies and provide proxy statements for all
meetings of Members. The instrument appointing a proxy shall be
delivered to such place or places (if any) as may be specified for that
purpose in or by way of note to or in any document accompanying the
notice convening the meeting not less than forty-eight (48) hours
before the time appointed for holding the meeting or adjourned meeting
at which the person named in the instrument proposes to vote and in
default the instrument of proxy shall not be treated as valid. No
instrument appointing a proxy shall be valid after the expiration of
twelve (12) months from the date named in it as the date of its
execution. Delivery of an instrument appointing a proxy shall not
preclude a Member from attending and voting in person at the meeting
convened and in such event, the instrument appointing a proxy shall be
deemed to be revoked. A vote given in accordance with the terms of an
instrument of proxy shall be valid notwithstanding the previous death
or insanity of the principal, or revocation of the instrument of proxy
or of the authority under which it was executed, provided that no
notification in writing of such death, insanity or revocation shall
have been received by the Company at such place as may be specified for
the delivery of instruments of proxy in the notice convening the
meeting or other documents sent therewith two (2) hours at least before
the commencement of the meeting at which the instrument of proxy is
used."
161. Upon and subsequent to a Qualifying IPO:
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"An instrument appointing a proxy shall be in such form as the
directors may determine."
162. Upon and subsequent to a Qualifying IPO: "The first directors of the
Company shall be appointed by the subscribers to the Memorandum; and
thereafter, the directors shall be elected by the Members. At least two
of the Company's directors shall be "independent directors." For
purposes of these Articles, "independent directors" shall mean
directors that are not Affiliates of the Company.
163. Upon and subsequent to a Qualifying IPO: "The directors, by Resolution
of Directors, shall designate two permanently sitting committees, the
Compensation Committee and the Audit Committee. Each committee shall
consist of at least two independent directors."
164. Upon and subsequent to a Qualifying IPO:
"The Audit Committee shall: (i) make recommendations to the Board of
Directors as to the independent accountants to be appointed by the
Board of Directors; (ii) review with the independent accountants the
scope of their examinations; (iii) receive the reports of the
independent accountants for the purpose of reviewing and considering
questions relating to their examination and such reports; (iv) review,
either directly or through the independent accountants, the internal
accounting and auditing procedures of the Company; (v) review related
party transactions; and (vi) perform such other functions as may be
assigned to it from time to time by the Board of Directors. Each other
committee of directors has such powers and authorities of the
directors, including the power and authority to affix the Seal, as are
set forth in the Resolution of Directors establishing the committee,
except that no committee has any power or authority to amend the
Memorandum or these Articles, to appoint directors or fix their
emoluments or to appoint officers or agents of the Company."
165. Upon and subsequent to a Qualifying IPO:
"The Company shall prepare and serve on Members copies of an annual
report of the Company containing audited financial statements of the
Company and its Subsidiaries. The annual report shall be distributed to
Members at least 30 days prior to the Company's annual meeting of
Members, shall be laid before the Annual Meeting. The Company shall
cause such annual report to be filed with the NASDAQ National Market or
other securities exchange on which the Company's Common Shares are then
listed for trading at the time such annual report is distributed to
Members. The Company may by Resolution of Members
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call for the directors to prepare periodically a profit and loss
account and a balance sheet. The profit and loss account and balance
sheet shall be drawn up so as to give respectively a true and fair view
of the profit and loss of the Company for the financial period and a
true and fair view of the state of affairs of the Company as at the end
of the financial period. The Company shall make available to Members
any interim financial statements or report which the Company may be
required to file with the United States Securities and Exchange
Commission and any other United States federal or state regulatory
authority at the same time or as soon as practicable following filing
with such regulatory authority. If required by the NASDAQ National
Market or other securities exchange on which the Company's Common
Shares are then listed, the Company shall file copies of such financial
statements or reports therewith."
<PAGE>
Exhibit 4.1
Certificate Number__ _____ Shares
EL SITIO, INC.
a British Virgin Islands International Business Company
Common Shares
Authorised Share Capital $ 200,000,000 divided
into 200,000,000 Common Shares of
$ .01 par value each and 100,000,000 shares
of Preferred Stock of $.01 par value each
THIS CERTIFIES THAT: _________________ is the record holder of
___________________________ (________) Common Shares in El Sitio, Inc.
(the "Company"), transferable only on the share register of the Company.
This certificate and the shares represented hereby are issued and shall be
held subject to all of the provisions of the Amended and Restated Memorandum of
Association and Articles of Association of the Company and any amendments
thereto, to all of which the holder of this certificate, by acceptance hereof,
assents.
WITNESS the signature of the Company's duly authorized officers this _____
day of ___________, ___________.
___________________________________ ________________________________________
Daniel Rotsztain, Roberto Cibrian-Campoy, Chief
Chief Operating Officer Executive Officer
<PAGE>
SHARE TRANSFER
I/WE [Seller]
of [Address]
in consideration of the sum of _______________________ US Dollars.
paid or to be paid to me/us
by: [Purchaser]
[Address]
DO HEREBY TRANSFER
to: [Purchaser]
____________________________ shares of U.S. $___each
standing in my/our name in the books of the above Company
TO HOLD unto the said
[Purchaser]
his/her/their heirs executors administrators and assigns/it successors and
assigns subject to the several conditions on which I/we held same on the
execution hereof
AND I/WE the said
[Purchaser]
do hereby agree to take the said shares subject to the same conditions
AS WITNESS our hands and seals the ___ day of________ 19
Transferor Transferee
___________________________________
___________________________________
Witness Witness
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO DISTRIBUTION OR RESALE. THESE SECURITIES MAY NOT BE OFFERED,
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY, IN
THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AND ITS COUNSEL, OF AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
<PAGE>
Exhibit 10.1
================================================================================
EL SITIO INTERNATIONAL CORPORATION
STOCK PURCHASE AGREEMENT
June 21, 1999
================================================================================
<PAGE>
STOCK PURCHASE AGREEMENT, dated as of this 21st day of June, 1999
(this "Agreement"), among EL SITIO INTERNATIONAL CORPORATION, a corporation
organized and existing under the laws of the British Virgin Islands (the
"Company"), and each of the persons or entities set forth on Exhibit A (each, a
Purchaser).
W I T N E S S E T H:
WHEREAS, the Company desires to issue to the Purchasers, and the
Purchasers desire to purchase from the Company, the Preferred Shares (as such
term is defined below) as set forth below; and
WHEREAS, certain terms used in this Agreement are defined in Section
9.1 hereof;
NOW, THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter contained, the parties hereto hereby agree
as follows:
1. Sale and Purchase of Securities.
1.1 Sale and Purchase of Preferred Shares. Subject to the terms and
conditions of this Agreement, on the Closing Date (as defined in Section 3.1
hereof), the Company shall issue, sell and deliver to each of the Purchasers,
and each of the Purchasers shall purchase from the Company for the Purchase
Price (as defined in Section 2.1 hereof) that number of shares of Class A
Convertible Preferred Stock of the Company (the "Preferred Shares"), set forth
opposite such Purchaser's name on Exhibit A.
2. Purchase Price.
2.1 Amount of Purchase Price. The purchase price of the Preferred
Shares to be purchased pursuant to Section 1.1 by each Purchaser shall be as set
forth opposite such Purchaser's name on Exhibit A (the "Purchase Price"). The
Purchase Price shall be payable as provided in Section 2.2 hereof.
2.2 Payment of the Purchase Price. At the Closing (as defined in
Section 3.1 hereof), each Purchaser shall pay its Purchase Price by wire
transfer of immediately available funds or by such other method as may be
reasonably acceptable to the Company and such Purchaser, to the account of the
Company as shall have been designated in advance to the Purchasers by the
Company.
2.3 Barter. Washburn shall cause to be provided to the Company the
equivalent of Six Million Dollars ($6,000,000) in advertising time (the
"Advertising Time Credit") on any or all of the media networks owned or
controlled by Ibero-American Media Partners II Ltd. ("IAMP"), an Affiliate of
Washburn, in consideration for 853,994.06 Preferred Shares (the "Barter Shares")
purchased hereunder (at a purchase price of $7.02581 per share), subject to the
following terms and conditions:
(a) For a period of 18 months from the Closing Date (the "Credit
Period"), the Company shall have the right to cause Washburn to cause the
Company's (or its Subsidiaries')
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advertisements to be played on the media networks then owned or controlled by
IAMP in an amount necessary to exhaust the Advertising Time Credit. Schedule 2.3
sets forth a list of the media networks currently controlled by IAMP and other
media networks. In addition, in the event that the Company desires to run
advertisements on any media network not listed on Schedule 2.3 but with which
IAMP or its Affiliates have a business relationship (e.g., Univision), Washburn
agrees to use commercially reasonable efforts to place the Company's
advertisements on such other media network (but shall have no liability if
unable to do so), and if successful, the cost of such advertising may also be
charged against the Advertising Time Credit. It is the intent of the Company and
Washburn in entering into the agreements set forth in this Section 2.3 that
their relationship be governed by a spirit of good faith, fair dealing and
mutually beneficial usage of their respective assets. The usage of the
Advertising Time Credit will be determined by reference to the rate charged by
the applicable media network to other advertisers running advertisements during
the same programs, and the value of the advertising time actually used by the
Company and its Subsidiaries shall be deducted from the Advertising Time Credit.
Other than with regard to payment (for so long as there is any Advertising Time
Credit available), the Company shall be required to comply with any and all
requirements, procedures or standards (e.g., format, content restrictions,
scheduling, etc.) with which the applicable media network generally requires
other advertisers to comply. Each of the Company and Washburn agree to use
commercially reasonable efforts to establish a schedule for usage of the
Advertising Time Credit which meets their respective business objectives. At the
time advertisements are placed, the Company shall inform Washburn (or its
Affiliate) whether the cost of the advertising will be charged against the
Advertising Time Credit. In the event that at the end of the Credit Period, the
Barter Shares have been delivered to Washburn and the entire Advertising Time
Credit has not been used, any amount of the unused Advertising Time Credit (the
"Unused Credit") shall remain available to the Company to be used in the manner
contemplated by this paragraph for an additional six (6) month period.
Notwithstanding, the Company agrees to use commercially reasonable efforts to
utilize any Unused Credit as soon as is reasonably practicable following the end
of the Credit Period, and Washburn agrees that it shall use commercially
reasonable efforts to assist the Company in exhausting the Advertising Time
Credit during such six (6) month period.
(b) Washburn (or one of its Affiliates) shall deliver to the Company
a statement of the cost of advertisements placed by the Company in each quarter
which will be charged against the Advertising Time Credit (the "Quarterly
Usage"), as promptly as practicable following the end of each calendar quarter
in which the Company places advertising. Within five (5) business days
thereafter, the Company shall issue, sell and deliver to Washburn that number of
the Barter Shares as is equal to the result of dividing the Quarterly Usage by
7.02581; provided, that in the event that there remain any Barter Shares which
have not been delivered to Washburn on the expiration of the Credit Period, the
Company shall, within five (5) business days following the expiration of the
Credit Period, deliver to the Company all remaining unissued Barter Shares. The
Barter Shares shall be, when delivered to Washburn, duly and irrevocably
authorized and validly issued, fully paid and non-assessable, regardless of
whether the Advertising Time Credit is fully used. In addition to any other
rights or remedies Washburn may have, Washburn shall be authorized to cease
providing any advertising to the Company in the event that the Barter Shares are
not delivered to Washburn when due.
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<PAGE>
(c) The Company and Washburn agree to discuss in good faith a
possible transfer of ownership of a building in Buenos Aires, Argentina located
at Avenida Melian No. 2752, 1430 Buenos Aires, Argentina from Washburn to the
Company. In the event that the transfer of ownership proceeds, the Company
agrees to assign and transfer all of its rights in respect of the lease of the
offices located at Avenida Ingeniero Huergo 1167/Azopardo 1168 (Puerto Madero)
to Imagen Satelital, S.A. The terms of such transfer are expected to include,
among others, a valuation based on an independent appraisal of the building's
value, a reasonably prompt closing date following agreement on terms, and shall
be conditioned upon the receipt of all necessary correspondent and governmental
permits and approvals for Imagen Satelital S.A. (an Affiliate of Washburn) to
relocate its facilities from the building. In the event that the parties proceed
with this transfer, the Company shall be permitted to apply up to $3 million of
the Advertising Time Credit against the purchase price of the building.
3. Closing.
3.1 Closing Date. The closing of the sale and purchase of the
Preferred Shares (the "Closing") shall take place at such place or places as the
parties shall mutually agree and is anticipated to occur on July 2, 1999, or at
such other time, date or place as the parties hereto may mutually agree;
provided that all conditions to the Closing set forth in this Agreement have
been satisfied or waived by such date. The date on which the Closing is held is
referred to in this Agreement as the "Closing Date." At the Closing, the parties
shall execute and deliver the documents referred to in Section 8 hereof.
4. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchasers that:
4.1 Organization and Good Standing; Capitalization.
(a) The Company is duly organized and validly existing under the
laws of the British Virgin Islands and has the corporate power and authority to
own, lease and operate its properties and assets and to carry on its business as
now conducted and as it is proposed to be conducted, except where the lack
thereof would not have a Material Adverse Effect (as defined in Section 9). The
Company is duly qualified or authorized to do business as a foreign corporation
under the laws of each jurisdiction in which the conduct of its business or the
ownership of its properties or assets requires such qualification or
authorization except where the lack thereof would not have a Material Adverse
Effect.
(b) The authorized and issued capital stock of the Company
immediately prior to and immediately after the Closing and the legal and
beneficial ownership thereof is as set forth on Schedule 4.1(b). All the
outstanding shares of capital stock of the Company have been duly authorized,
and are validly issued, fully paid and non-assessable. Except as disclosed on
Schedule 4.1(b), (i) there is no option, warrant, call, right, commitment or
other agreement of any character to which the Company is a party, (ii) there are
no securities of the Company outstanding which upon conversion or exchange would
require, and (iii) there are no stock appreciation rights, or other similar
rights based on securities of the Company which, in the case of clause (i), (ii)
or (iii), would require the issuance, sale or transfer of any additional shares
of
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capital stock or other equity securities of the Company or other securities
convertible into, exchangeable for or evidencing the right to subscribe for or
purchase shares of capital stock or other equity securities of the Company.
Except as disclosed on Schedule 4.1(b) and other than this Agreement, the
Company is not a party to, nor is it aware of, any voting trust or other voting
agreement with respect to any of the securities of the Company or to any
agreement relating to the issuance, sale, redemption, transfer or other
disposition of the capital stock of the Company.
4.2 Authorization of Agreement; Enforceability. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and each other agreement, document, instrument and certificate to be executed by
the Company in connection with the consummation of the transactions contemplated
by this Agreement (the "Transaction Documents"), and to perform fully its
obligations hereunder and thereunder. The execution, delivery and performance by
the Company of this Agreement and the Transaction Documents have been duly
authorized by all necessary corporate action on the part of the Company and its
stockholders. This Agreement and each of the Transaction Documents have been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery thereof by the Purchasers, this Agreement
and each of the Transaction Documents constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
4.3 Subsidiaries, Joint Ventures, Partnerships, Etc.
(a) Schedule 4.3(a) hereof sets forth a true, complete and correct
list of each company or other entity in which the Company holds an interest of
greater than fifty percent (50%) (each such corporation or other entity is
referred to herein as a "Subsidiary" and, collectively, the "Subsidiaries").
Each Subsidiary is duly organized and validly existing in good standing (if
applicable) under the laws of the jurisdiction of its incorporation with
corporate power and corporate authority under such laws to own, lease and
operate its properties and conduct its business except, in each case, where the
lack thereof would not have a Material Adverse Effect; and each Subsidiary is
duly qualified to transact business as a foreign corporation and is in good
standing (if applicable) in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so qualify or
be in good standing would not result in a Material Adverse Change. All of the
issued and outstanding shares of capital stock of each Subsidiary which are
owned by the Company have been duly authorized and validly issued, and are fully
paid and non-assessable. The Company, directly or indirectly, owns the
percentage of capital indicated in Schedule 4.3(a) next to each such Subsidiary,
free and clear of any Liens, except as set forth in Schedule 4.3(a).
(b) The Company is not a party to any joint venture, partnership or
similar arrangement in which the Company or any of its Subsidiaries
participates.
4.4 Consents of Third Parties. None of the execution and delivery by
the Company of this Agreement and the Transaction Documents, the consummation of
the
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<PAGE>
transactions contemplated hereby or thereby, or compliance by the Company with
any of the provisions hereof or thereof will (a) conflict with, or result in the
breach of, any provision of the articles or certificate of incorporation or
by-laws of the Company, (b) conflict with, violate, result in the breach or
termination of, or constitute a default or give rise to any right of termination
or acceleration or right to increase the obligations or otherwise modify the
terms thereof under any Permit or Order to which the Company is a party or any
Contract to which the Company or any of its Subsidiaries is bound or by which
the Company or any of its properties or assets is bound, (c) constitute a
violation of any Law applicable to the Company or (d) result in the creation of
any Lien upon the properties or assets of the Company. Except as set forth on
Schedule 4.4 and other than those which have been obtained or made, no consent,
waiver, approval, Order, Permit or authorization of, or declaration or filing
with, or notification to, any Person or Governmental Body is required on the
part of the Company in connection with the execution and delivery of this
Agreement or the Transaction Documents, or the compliance by the Company with
any of the provisions hereof or thereof.
4.5 Authorization of Preferred Shares.
(a) On the Closing Date, the issuance, sale, and delivery of the
Preferred Shares to be purchased pursuant to Section 1.1 will have been duly
authorized by all requisite action of the Company, and, when issued, sold, and
delivered in accordance with this Agreement, the Preferred Shares will be
validly issued and outstanding, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof, and not subject to preemptive or
any other similar rights of the stockholders of the Company or others.
(b) On the Closing Date, the issuance, sale, and delivery of the
Common Stock to be delivered upon conversion of the Preferred Shares in
accordance with the terms of the Preferred Shares will have been duly authorized
by all requisite action of the Company and, when issued, sold, and delivered in
accordance with this Agreement, the Common Stock will be validly issued and
outstanding, fully paid and non-assessable, with no personal liability attaching
to the ownership thereof, and not subject to preemptive or any other similar
rights of the stockholders of the Company or others.
4.6 Financial Statements. Attached hereto as Schedule 4.6 are (a)
copies of the audited balance sheet of the Company and its Subsidiaries, on a
consolidated basis as of December 31, 1998, the income statement of the Company
and its Subsidiaries, on a consolidated basis for the fiscal year ended December
31, 1998, and the cash flow statement of the Company and its Subsidiaries, on a
consolidated basis for the fiscal year ended December 31, 1998 (the "Audited
Financial Statements") and (b) copies of the unaudited balance sheet of the
Company and its Subsidiaries, on a consolidated basis as of March 31, 1999, the
statement of income and retained earnings of the Company and its Subsidiaries,
on a consolidated basis for the three-month period ended March 31, 1999, and the
cash flow statement of the Company and its Subsidiaries, on a consolidated basis
for the three-month period ended March 31, 1999 (the "Unaudited Financial
Statements", and together with the Audited Financial Statements, the "Financial
Statements"). Each of the Financial Statements was prepared in good faith, is
complete and correct in all material respects, has been prepared in accordance
with GAAP and in conformity with the practices consistently applied by the
Company and its Subsidiaries and
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presents fairly the financial position, results of operations and cash flows of
the Company and its Subsidiaries as of the dates and for the periods indicated.
4.7 No Undisclosed Liabilities. Except as set forth on Schedule 4.7,
neither the Company nor any of its Subsidiaries has any liabilities (whether
accrued, absolute, contingent or otherwise, and whether due or to become due or
asserted or unasserted), except (a) obligations under Contracts described in
Schedule 4.15 or under Contracts that are not required to be disclosed thereon
as a result of dollar thresholds therein, (b) liabilities provided for in the
Financial Statements (other than liabilities which, in accordance with GAAP,
need not be disclosed), (c) liabilities (other than accounts payable) incurred
since the Audited Financial Statements, in the ordinary course of business
consistent with past practice, the sum of which is, in the aggregate, no greater
than $50,000, and (d) accounts payable in excess of those shown on the Financial
Statements, incurred in the ordinary course of business consistent with past
practice, the sum of which is, in the aggregate, not greater than $50,000.
4.8 Absence of Certain Developments. Except as set forth on Schedule
4.8 and since the date of the Audited Financial Statements:
(a) there has not been any Material Adverse Change nor has any event
occurred which could result in any Material Adverse Change;
(b) there has not been any declaration, setting a record date,
setting aside or authorizing the payment of, any dividend or other distribution
in respect of any shares of capital stock of the Company or any of its
Subsidiaries or any repurchase, redemption or other acquisition by the Company
or any of its Subsidiaries, of any of the outstanding shares of capital stock or
other securities of, or other ownership interest in, the Company or any of its
Subsidiaries;
(c) there has not been any transfer, issue, sale or other
disposition by the Company of any shares of capital stock or other securities of
the Company or any of its Subsidiaries or any grant of options, warrants, calls
or other rights to purchase or otherwise acquire shares of such capital stock or
such other securities;
(d) neither the Company nor any of its Subsidiaries has (i) awarded
or paid any bonuses to Employees or Representatives of the Company, (ii) entered
into any employment, deferred compensation, severance or similar agreements (nor
amended any such agreement), (iii) agreed to increase the compensation payable
or to become payable by the Company or any of its Subsidiaries to any of the
Company's Employees or Representatives, or (iv) agreed to increase the coverage
or benefits available under any severance pay, deferred compensation, bonus or
other incentive compensation, pension or other employee benefit plan, payment or
arrangement made to, for or with such Employees or Representatives, other than
in the ordinary course of business consistent with past practice which increases
in the aggregate do not exceed $50,000 in annual cost to the Company or any of
its Subsidiaries and consistent with the operating expense budget of the Company
or any of its Subsidiaries, and other than as may have been required by law or
insurers;
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(e) neither the Company nor any of its Subsidiaries has made any
loans, advances (other than advances to officers and employees of the Company or
its Subsidiaries which advances are made in the ordinary course of business and
do not exceed per individual the reasonable anticipated expenses for legitimate
business purposes), or capital contributions to, or investments in, any Person
or paid any fees or expenses to any Affiliate of the Company other than a
Subsidiary;
(f) neither the Company nor any of its Subsidiaries has transferred
or granted any rights under any Contracts, leases, licenses, agreements or
intangible property (as set forth in Section 4.12 hereof) used by the Company in
its business which could result in a Material Adverse Change;
(g) there has not been any damage, destruction or loss, whether or
not covered by insurance, with respect to the property or assets of the Company
or any of its Subsidiaries having a replacement cost of more than $10,000 for
any single loss or $50,000 for all such losses;
(h) neither the Company nor any of its Subsidiaries has mortgaged,
pledged or subjected to any Lien any of its assets, or acquired any assets for a
purchase price in excess of $50,000 in the aggregate or sold, assigned,
transferred, conveyed, leased or otherwise disposed of any assets of the Company
or any of its Subsidiaries for a sale price in excess of $50,000 in the
aggregate except for assets acquired or sold, assigned, transferred, conveyed,
leased or otherwise disposed of in the ordinary course of business;
(i) neither the Company nor any of its Subsidiaries has canceled or
compromised any debt or claim or amended, canceled, terminated, relinquished,
waived or released any Contract or right except in the ordinary course of
business consistent with past practice and which, individually or in the
aggregate, would not be material to the Company or any of its Subsidiaries;
(j) neither the Company nor any of its Subsidiaries has made any
binding commitment to make any capital expenditures or capital additions or
betterments in excess of $25,000 individually or $75,000 in the aggregate;
(k) neither the Company nor any of its Subsidiaries has incurred any
debts, obligations or liabilities, whether due or to become due, except current
liabilities incurred in the ordinary course of business, none of which current
liabilities (individually or in the aggregate) could result in a Material
Adverse Change;
(l) neither the Company nor any of its Subsidiaries has entered into
any transaction other than in the ordinary course of business except for (in the
case of the Company) this Agreement;
(m) neither the Company nor any of its Subsidiaries has encountered
any labor difficulties or labor union organizing activities;
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(n) neither the Company nor any of its Subsidiaries has made any
change in the accounting principles, methods or practices followed by it or
depreciation or amortization policies or rates theretofore adopted;
(o) neither the Company nor any of its Subsidiaries has disclosed to
any Person any material trade secrets except for disclosures made to Persons
subject to valid and enforceable confidentiality agreements;
(p) except in the ordinary course of business, neither the Company
nor any of its Subsidiaries has suffered or experienced any change in the
relationship or course of dealings between the Company and/or any of its
Subsidiaries and any of their suppliers or customers which supply goods or
services to the Company or any of its Subsidiaries or purchase goods or services
from the Company and or any of its Subsidiaries, which has had or is likely to
have a Material Adverse Effect; and
(q) neither the Company nor any of its Subsidiaries has made any
payment to, or received any payment from, or made or received any investment in,
or entered into any transaction or series of related transactions (including
without limitation, the purchase, sale, exchange or lease of assets, property or
services, or the making of a loan or guarantee) with any Affiliate in each case,
in excess of $50,000 or its equivalent (other than any transactions between or
among the Company and any of its Subsidiaries) (each, an "Affiliate
Transaction").
4.9 Taxes. The Company and each of its Subsidiaries has filed all
Tax returns (including statements of estimated Taxes owed) and reports required
to be filed within the applicable periods (subject to extensions) for such
filings and has paid all Taxes required to be paid, and has established adequate
reserves (net of estimated Tax payments already made) for the payment of all
Taxes payable in respect of the period subsequent to the last periods covered by
such returns. Such Tax returns and reports are true and correct in all material
respects. No deficiencies for any Tax are currently assessed against the Company
or any Subsidiary, and, no Tax returns of the Company or any Subsidiary have
ever been audited, and, to the knowledge of the Company, there is no such audit
pending or contemplated. Neither the Company nor any of its Subsidiaries has
received any notice of any audit of any of the Tax returns by any British Virgin
Islands or foreign taxing authority (including, without limitation, the
Argentine Direccion General Impositiva ("DGI") and Direccion General de Rentas).
There is no Tax lien, whether imposed by any federal, state or local taxing
authority, outstanding against the assets, properties or business of the Company
or any of its Subsidiaries other than Liens for Taxes which are not yet due.
Neither the Company nor any of its Subsidiaries has executed any waiver of the
statute of limitations on the assessment or collection of any Tax or
governmental charge. The Company and its Subsidiaries have properly charged,
collected and paid all applicable stamp, sales, use and other similar Taxes on
or before the Closing Date.
4.10 Real Property.
(a) Neither the Company nor any of its Subsidiaries owns any real
property.
(b) Schedule 4.10(b) sets forth a complete list of all real property
and interests in real property leased by the Company or any of its Subsidiaries
(each, a "Real Property Lease",
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and collectively, the "Real Property Leases") as lessee or lessor. The Company
or the applicable Subsidiary has good, legal and marketable title to the
leasehold estates in all Real Property Leases in each case free and clear of all
Liens. Neither the Company nor any Subsidiary has any reason to believe that
such title would not be insurable subject to customary exceptions.
(c) Each of the Real Property Leases is valid and enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity), and there is no default under any Real Property Lease by the Company or
the applicable Subsidiary or, to the knowledge of the Company, by any other
party thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder. The Company has
delivered or otherwise made available to the Purchasers true, correct and
complete copies of the Real Property Leases, together with all amendments,
modifications, supplements or side letters affecting the obligations of any
party thereunder.
(d) No previous or current party to any Real Property Lease has
given notice of or made a claim with respect to any breach or default
thereunder. With respect to those Real Property Leases that were assigned or
subleased to the Company or a Subsidiary by a third party, all necessary
consents to such assignments or subleases have been obtained.
4.11 Tangible Personal Property; Assets. Each of the Company and its
Subsidiaries has good, legal and marketable title to or valid leasehold
interests in, all of its personal property and assets. The personal property
owned by the Company or its Subsidiaries are held in each case free and clear of
all Liens, other than Permitted Liens. With respect to the personal property and
assets that the Company or any Subsidiary leases, the lessee thereunder is in
compliance with such leases except for such noncompliance as would not have a
Material Adverse Effect and the lessee holds a valid leasehold interest free and
clear of any Liens, other than Permitted Liens. All material items of personal
property and assets owned or leased by the Company and its Subsidiaries are in
good operating condition, normal wear and tear excepted.
4.12 Intangible Property. Each of the Company and its Subsidiaries
owns or possesses adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names, copyrights, manufacturing processes, software,
formulae, trade secrets and know how (collectively, "Intellectual Property")
necessary to the conduct of its business as conducted; if any such Intellectual
Property necessary to the conduct of the business as proposed to be conducted is
not owned or licensed to the Company or to any of its Subsidiaries, such
Intellectual Property is readily available to the Company on commercially
reasonable terms, and no claim is pending or, to the knowledge of the Company,
threatened to the effect that the operations of the Company or any Subsidiary
infringe upon or conflict with the asserted rights of any other Person under any
Intellectual Property, and the Company does not know of any basis for any such
claim (whether or not pending or threatened). No claim is pending or, to the
knowledge of the Company, threatened to the effect that any such Intellectual
Property owned or licensed by the Company or any Subsidiary, or which the
Company or a Subsidiary otherwise has the right to use, is invalid or
unenforceable by the Company or the applicable Subsidiary, and the Company does
not know of any basis for any such claim (whether or not pending or threatened).
Neither the Company
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nor any Subsidiary has granted or assigned to any other Person any right to
provide the services or proposed services of the Company and its Subsidiaries.
4.13 Technology. Except as set forth in Schedule 4.13, the products,
processes, proprietary technology and other proprietary know-how owned or used
by the Company and its Subsidiaries were completely developed by the Company's
full-time employees only; the concepts, inventions and original works of
authorship owned or used by the Company or its Subsidiaries were developed or
conceived by employees within the scope of their employment by the Company (or
the applicable Subsidiary) and are connected with the Company's and its
Subsidiaries' underlying products, processes and proprietary technology. Except
as set forth in Schedule 4.13, no independent contractors or consultants were
used or employed by the Company or a Subsidiary in the development of the
products, processes, proprietary technology and other proprietary know-how owned
or used by the Company and its Subsidiaries.
4.14 Real Property Holding Corporation. The Company is not a "United
States real property holding corporation" within the meaning of Section
847(c)(2) of the Code.
4.15 Material Contracts.
(a) Except as set forth on Schedule 4.15, neither the Company, any
Subsidiary nor any of their respective properties or assets is a party to or
bound by any (i) Contract not made in the ordinary course of business, or
involving a commitment or payment by the Company or any Subsidiary in excess of
$50,000 or, in the Company's belief, otherwise material to the business of the
Company or any Subsidiary, (ii) Contract among stockholders or granting a right
of first refusal or for a partnership or a joint venture or for the acquisition,
sale or lease of any assets or capital stock of the Company or any other Person
or involving a sharing of profits, (iii) mortgage, pledge, conditional sales
contract, security agreement, factoring agreement or other similar Contract with
respect to any real or tangible personal property of the Company or any
Subsidiary, (iv) loan agreement, credit agreement, promissory note, guarantee,
subordination agreement, letter of credit or any other similar type of Contract,
(v) Contract with any Governmental Body outside the ordinary course of business,
(vi) Contract with respect to the discharge, storage or removal of hazardous
materials or (vii) binding commitment or agreement to enter into any of the
foregoing. The Company has delivered or otherwise made available to the
Purchasers true, correct and complete copies of the Contracts listed on Schedule
4.15, together with all amendments, modifications, supplements or side letters
affecting the obligations of any party thereunder.
(b) (i) Each of the Contracts listed on Schedule 4.15 is valid and
enforceable against the Company or its Subsidiaries in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and there is no
default under any Contract listed on Schedule 4.15 by the Company or any of its
Subsidiaries which is likely to have a Material Adverse Effect or, to the
knowledge of the Company, by any other party thereto, and no event has occurred
that with the lapse of time or the giving of notice or both would constitute a
default by the Company thereunder which is likely to have a Material Adverse
Effect.
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(ii) No previous or current party to any Contract has given
written notice to the Company or any Subsidiary of or made a claim with respect
to any breach or default thereunder and the Company has no knowledge of any
notice of or claim with respect to any such breach or default.
(c) With respect to the Contracts listed on Schedule 4.15 that were
assigned to the Company or any Subsidiary by a third party, all necessary
consents to such assignment have been obtained.
4.16 Employee Benefits. Except as set forth on Schedule 4.16,
neither the Company nor any Subsidiary has in effect any employment agreements,
consulting agreements, deferred compensation, pension or retirement agreements
or arrangements, bonus, incentive or profit-sharing plans or arrangements, or
labor or collective bargaining agreements, written or oral. The Company and its
Subsidiaries are in compliance in all material respects with all applicable Laws
relating to labor, employment, fair employment practices, terms and conditions
of employment, and wages and hours.
4.17 Employees.
(a) To the knowledge of the Company, no key executive Employee and
no group of Employees or independent contractors of the Company or any
Subsidiary has any plans to terminate his, her or its employment or relationship
as an Employee or independent contractor with the Company or such Subsidiary.
(b) Schedule 4.17 sets forth a true and complete list of the name
and amount of annual compensation of (i) each Employee of the Company or any
Subsidiary whose current annual compensation is $50,000 or more, together with
such person's job title and amounts and forms of compensation and fringe and
severance benefits and (ii) each consultant, contractor or subcontractor
equivalent of the Company and its Subsidiaries whose annual compensation by the
Company or its Subsidiary is $50,000 or more.
(c) To the best of the Company's knowledge after reasonable inquiry,
no key executive Employee or any other Employee of the Company or any Subsidiary
is a party to or is otherwise bound by any agreement or arrangement (including,
without limitation, confidentiality agreements, non-competition agreements,
licenses, covenants, or commitments of any nature), or subject to any judgment,
decree, or Order of any court or Governmental Body, (i) that would conflict with
such Employee's obligation diligently to promote and further the interest of the
Company or such Subsidiary or (ii) that would conflict in any material respect
with the Company's (or the applicable Subsidiary's) business as now conducted or
as proposed to be conducted.
4.18 Litigation. There are no Legal Proceedings pending or, to the
knowledge of the Company, threatened that question the validity of this
Agreement or any of the Transaction Documents or any action taken or to be taken
by the Company in connection with the consummation of the transactions
contemplated hereby or thereby. Except as set forth on Schedule 4.18, there are
no Legal Proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company, any of its Subsidiaries or any of their
respective
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properties or assets, and there is no reasonable basis for any such Legal
Proceeding. There is no outstanding or, to the knowledge of the Company,
threatened Order of any Governmental Body against, in respect of or naming the
Company or any of its Subsidiaries or in respect of any of their respective
properties or assets or against the Company or its Subsidiaries.
4.19 Compliance with Laws; Permits.
(a) The Company and each Subsidiary is and at all times has been in
compliance in all material respects with all material Laws and material Orders
promulgated by any Governmental Body applicable to the Company or such
Subsidiary, or to the conduct of the business or operations of the Company or
such Subsidiary, or the use of any of their respective properties (including any
leased properties) and assets. Neither the Company nor any Subsidiary has
received any notices of violation or alleged violation of any such Law or Order
by any Governmental Body.
(b) The Company and each Subsidiary has all Permits necessary for
the conduct of its business where the failure to have such Permits could have a
Material Adverse Effect. The Company and each Subsidiary has complied in all
material respects with all conditions of such Permits applicable to it; no
default or violation, or event that with the lapse of time or giving of notice
or both would become a default or violation which could have a Material Adverse
Effect, has occurred in the due observance of any such Permit; all such Permits
are in full force and effect without further consent or approval of any Person;
and neither the Company nor any Subsidiary has received any notice from any
source to the effect that there is lacking any such material Permit required in
connection with the current operations of the Company or such Subsidiary.
4.20 Environmental and Safety Laws. Neither the Company nor any
Subsidiary is in violation of any applicable Laws relating to the environment or
occupational health where the failure to so comply could have a Material Adverse
Effect and safety and no material expenditures are or will be required in order
to comply with any such existing Laws.
4.21 Investment Company Act. The Company is not, nor is it directly
or indirectly controlled by or acting on behalf of, any Person that is an
investment company within the meaning of the Investment Company Act of 1940, as
amended.
4.22 Affiliate Transactions. Schedule 4.22 sets forth each Affiliate
Transaction of the Company and its Subsidiaries, including the parties, material
terms (including amounts due from the Company (or a Subsidiary) or owed to the
Company (or a Subsidiary)), restrictions and obligations of the Company and its
Subsidiaries in connection with each such Affiliate Transaction. Each such
Affiliate Transaction is on an arm's-length basis and on terms no less favorable
to the Company or a Subsidiary than could be obtained from non-related parties.
The Company has delivered or otherwise made available to the Purchasers true,
correct and complete copies of all written Contracts relating to such Affiliate
Transactions, together with all amendments, modifications, supplements or side
letters affecting the obligations of any party thereunder.
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4.23 Disclosure; Survival. There is no fact which has not been
disclosed to the Purchasers of which the Company has knowledge and which has had
or could reasonably be anticipated to result in a Material Adverse Change. All
representations and warranties set forth in this Agreement or in any writing or
certificate delivered in connection with this Agreement shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby for a period of sixty (60) days after delivery
of audited financial statements for 1999 (the "Survival Period") and shall not
be affected by any examination made for or on behalf of the Purchasers, the
knowledge of the Purchasers, or the acceptance by the Purchasers of any
certificate or opinion.
4.24 Insurance. There is in full force and effect one or more
policies of insurance issued by insurers of recognized responsibility, insuring
the Company, its Subsidiaries and their respective properties, business and
projects against such losses and risks, and in such amounts, as are customary in
the case of corporations of established reputation engaged in the same or
similar business and similarly situated. Neither the Company nor any Subsidiary
has been refused any insurance coverage sought or applied for, and the Company
has no reason to believe that the Company and its Subsidiaries will be unable to
renew its existing insurance coverage as and when the same shall expire upon
terms at least as favorable as those presently in effect, other than possible
increases in premiums that do not result from any act or omission of the Company
or the applicable Subsidiary. Schedule 4.24 sets forth a list of each insurance
policy (specifying the insurer, the amount of coverage, the type of insurance,
the policy number, the expiration date, the annual premium (current and for each
of the last three (3) years) and any pending claims thereunder) maintained by
the Company and its Subsidiaries relating to its properties, assets, business or
personnel, and each inspection report or recommendation, if any, during the last
three (3) years as to the conditions of the properties and assets owned, leased,
occupied or operated by it or the conduct of its business. Except as disclosed
on Schedule 4.24, neither the Company nor any Subsidiary is in default in any
material respect with respect to any provision contained in any insurance policy
maintained by the Company or any of its Subsidiaries, and neither the Company
nor any Subsidiary has failed to give any notice or present any presently
existing claims under any insurance policy in due and timely fashion.
4.25 Customers and Suppliers. Schedule 4.25 sets forth a list of the
ten (10) largest customers and the ten (10) largest suppliers of the Company and
its Subsidiaries and the dollar amount of purchases or sales which each such
customer or supplier represents. There exists no actual or, to the knowledge of
the Company, threatened termination or cancellation of the business conducted by
the Company or any Subsidiary with any customer, supplier or group of customers
or group of suppliers set forth on Schedule 4.25.
4.26 Year 2000. Each item of hardware, software, information
technology, embedded, or processor based system and/or any combination thereof,
used, developed, manufactured, distributed, licensed, transferred or delivered,
by the Company or any of its Subsidiaries (collectively, the "System"), shall be
able to correctly function, operate, process data or perform date related
calculations, including, but not limited to, calculating, comparing and
sequencing, from, into and between the years 1999 and 2000, accurately process,
provide and/or receive date data, including leap year calculations, into and
between the years 1999, 2000 and beyond, shall otherwise function as per the
specifications thereof before, during and following January 1, 2000. Neither
performance nor functionality of the System shall be
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affected by dates prior to, during and after January 1, 2000. A System
containing or calling on a calendar function including, without limitation, any
function indexed to the CPU clock, and any function providing specific dates or
days, or calculating spans of dates or days shall record, store, process,
provide and, where appropriate, insert, true and accurate dates and calculations
for dates and spans, before, during and following January 1, 2000. The System
shall have no lesser functionality or operability with respect to records
containing dates, before, during or after January 1, 2000 than heretofore with
respect to dates prior to January 1, 2000. The System shall be fully
interoperable and interface with any and all other systems, software and/or
hardware used by the Company, its Subsidiaries and their respective customers
before, during or after January 1, 2000, and/or otherwise exchange data,
including date related data therewith.
4.27 Financial Advisors. Except as set forth in Schedule 4.27, other
than Bear, Stearns & Co. Inc., no agent, broker, investment banker, finder,
financial advisor or other Person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee from the Company, directly
or indirectly, in connection with the transactions contemplated by this
Agreement or any Transaction Document and no Person is entitled to any fee or
commission or like payment from the Company in respect thereof based in any way
on agreements, arrangements or understandings made by or on behalf of the
Company.
4.28 Condition of Properties. All facilities, machinery, equipment,
fixtures, vehicles and other properties owned, leased or used by the Company and
its Subsidiaries are in good operating condition and repair, are reasonably fit
and usable for the purposes for which they are being used, are adequate and
sufficient for the Company and its Subsidiaries' respective businesses and
conform in all material respects with all applicable Laws.
4.29 Illegal or Unauthorized Payments; Political Contributions. The
operations and practices of the Company and its Subsidiaries have been conducted
at all times during the past five (5) years in compliance with the provisions of
the United States Foreign Corrupt Practices Act of 1977, as amended.
4.30 Pending Changes. To the actual knowledge of the Company, there
is no pending or threatened change in any Law which materially affects or could
materially affect the Company or the business, assets, liabilities, prospects,
properties, results of operations or condition (financial or otherwise) of the
Company or its Subsidiaries.
4.31 Securities Laws. The Company has complied with all applicable
U.S. federal and state securities laws in connection with the offer, issuance
and sale of the Preferred Shares. Prior to the Closing, neither the Company nor
anyone acting on its behalf has sold, offered to sell or solicited offers to buy
the Preferred Shares or similar securities to, or solicit offers with respect
thereto from, or entered into any preliminary conversations or negotiations
relating thereto with, any Person, so as to bring the issuance and sale of the
Preferred Shares under the registration provisions of the Securities Act, and
applicable state securities laws. Neither the Company nor any Person acting on
its behalf has offered the Preferred Shares to any Person by means of general or
public solicitation or general or public advertising, such as by newspaper or
magazine advertisements, by broadcast media, or at any seminar or meeting whose
attendees were solicited by such means.
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4.32 Backlog. Schedule 4.32 sets forth a list of Revenue and
Customer "Backlog" by customer as of June 7, 1999. Such list has been accurately
compiled, is true, correct and complete insofar as it purports to reflect
revenues actually generated, and represents the best good faith forecast of the
Company insofar as it purports to forecast revenues for periods after the date
hereof.
4.33 Accounts Receivable. The accounts receivable of the Company and
its Subsidiaries were created in the ordinary course of business and, to the
Company's knowledge, are fully collectible, without offset or other deduction,
subject to appropriate reserves in accordance with GAAP applied on a consistent
basis. Schedule 4.33 sets forth a good faith estimate of the accounts receivable
of the Company and its Subsidiaries as of June 1, 1999.
4.34 Registration Rights. Except for the rights granted under the
Transaction Documents, no Person has demand or other rights to cause the Company
to file any registration statement under the Securities Act relating to any
securities of the Company or any right to participate in any such registration
statement.
4.35 Books and Records. The books of account, ledgers, order books,
records and documents of the Company and its Subsidiaries accurately and
completely reflect all material information relating to the business of the
Company or the applicable Subsidiary, the location and collection of its assets,
and the nature of all transactions giving rise to the obligations or accounts
receivable of the Company or the applicable Subsidiary.
4.36 PFIC. The Company is not a "passive foreign investment company"
within the meaning of Section 1297 of the Code.
5. Representations and Warranties of the Purchasers.
Each Purchaser hereby represents and warrants to the Company that:
5.1 Capacity; Authorization. Each Purchaser has all legal capacity
to enter into this Agreement and to carry out its obligations hereunder.
Assuming due execution and delivery by the Company of this Agreement, this
Agreement will constitute a legal, valid and binding obligation of each
Purchaser, enforceable against each Purchaser in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
5.2 Investment Purposes. (a) Each Purchaser is acquiring the
Preferred Shares it has agreed to purchase for investment purposes only, for its
own account, and not as nominee or agent for any other Person, and not with a
view to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act, (b) it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, (c) it is an "accredited investor" within the meaning
of Rule 501 of Regulation D under the Securities Act, (d) the Company has made
available to it the opportunity to ask questions and to receive answers, and to
obtain information necessary to evaluate the merits and risks of this
investment, (e) each Purchaser understands, acknowledges and agrees that the
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Preferred Shares have not been registered under (and that the Company has no
present intention to register the Preferred Shares under) the U.S. Securities
Act or applicable state securities laws, and may not be sold or otherwise
transferred by the Purchasers to a United States person unless the Preferred
Shares have been registered under the U.S. Securities Act and applicable U.S.
state securities laws or are sold or transferred in a transaction exempt
therefrom, and (f) no broker has acted on behalf of such Purchaser in connection
with this Agreement, and there are no brokerage commissions, finders' fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with such Purchaser or any action taken
by such Purchaser.
5.3 Payment of Purchase Price. Each Purchaser has available
resources in order to pay to the Company the purchase price for the Preferred
Shares in accordance with the terms and conditions of this Agreement.
6. Further Agreements of the Parties.
6.1 Reserved Shares. For so long as the Preferred Shares are
convertible, the Company shall reserve that number of shares of Common Stock
issuable upon conversion of the Preferred Shares, which shares shall not be
subject to any preemptive or other similar rights.
6.2 Use of Proceeds. The Company shall use the proceeds from the
sale of the Preferred Shares under this Agreement for the following purposes:
advertising, brand positioning and development, production of proprietary and
third party content, product and technology development, expansion of local
sales operations, general corporate purposes and such other purposes as are
discussed in the Private Placement Memorandum.
6.3 Access to Information. The Purchasers and their Representatives
shall be entitled, upon reasonable notice, and at their own expense, to make
such investigation of the properties, business and operations of the Company and
such examination of the books, records and financial condition of the Company as
they reasonably request and to make extracts and copies of such books and
records. Any such investigation and examination shall be conducted during
regular business hours and under reasonable circumstances without material
interference with the Company's normal business operations, and the Company and
its Representatives shall cooperate fully therein. No investigation by the
Purchasers or their Representatives prior to or after the date of this Agreement
shall diminish or obviate any of the representations, warranties, covenants or
agreements of the Company contained in this Agreement or the Transaction
Documents. In order that the Purchasers may have full opportunity to make such
physical, business, accounting and legal review, examination of the affairs of
the Company and investigation as may be reasonably requested, the Company shall
cause its Representatives to cooperate fully with the Representatives of the
Purchasers in connection with such review and examination.
6.4 Confidentiality. Except as may be required by applicable law or
as otherwise agreed among the parties hereto, neither the Company, the
Purchasers nor any of their respective Affiliates shall at any time divulge,
disclose, disseminate, announce or release any information to any Person
concerning this Agreement, the Transaction Documents, the
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transactions contemplated hereby or thereby, any trade secrets or other
confidential information of the Company or the Purchasers, without first
obtaining the prior written consent of the other parties hereto; provided,
however, that the parties shall be entitled to disclose information with respect
to the Purchasers' investment in the Company on any reports the Purchasers
furnish to their investors or as otherwise required by Law.
6.5 Other Actions. The Company and the Purchasers agree to execute
and deliver such other documents and take such other actions as the other
parties may reasonably request for the purpose of carrying out the intent of
this Agreement and the Transaction Documents.
6.6 Year 2000 Covenant. The Company undertakes to promptly inform
the Purchasers of any material deficiency or expected cost in complying with the
"Year 2000" problem.
6.7. Indemnity.
(a) The Company agrees to indemnify, defend and hold harmless the
Purchasers (and their partners (and each officer and director thereof),
directors, officers, members, stockholders, Employees, Affiliates, agents and
permitted assigns) from and against any and all losses, claims, liabilities,
damages, deficiencies, costs or expenses (including interest, penalties, and
reasonable attorneys' fees, disbursements and related charges) (collectively,
"Losses") based upon, arising out of or otherwise in respect of any inaccuracy
in or breach of any representations, warranties, covenants or agreements of the
Company contained in this Agreement or the Transaction Documents; provided,
however, that the Purchasers shall have no right to indemnification hereunder
unless and until its Losses, when aggregated with any and all other Losses which
the Purchasers may have against the Company, exceed $250,000. The provisions of
this Section 6.7(a) shall survive the termination of this Agreement for a period
equal to the Survival Period.
(b) Each Purchaser agrees, severally and not jointly, to indemnify,
defend and hold harmless the Company (and its directors, officers, members,
stockholders, Employees, Affiliates, agents and permitted assigns) from and
against any and all Losses based upon, arising out of or otherwise in respect of
any inaccuracy in or breach by it of any representations, warranties, covenants
or agreements of such Purchaser (and no other) contained in this Agreement.
6.8 Material Advertising Commitments. During the Credit Period, the
Company agrees to purchase at least $4 million of advertising time on the media
networks owned by IAMP and its Affiliates (the "Networks"), in addition to
advertising the cost of which is applied against the Advertising Time Credit,
and Washburn agrees that it, together with its Affiliates and related companies,
and third parties identified by Washburn and its Affiliates, will purchase at
least $2 million of advertising time on the websites maintained by the Company
and its subsidiaries (the "Sites"). All such advertising purchases shall be made
on an arm's length basis, on usual and customary commercial terms; provided,
that Washburn shall use commercially reasonable efforts to purchase (or to cause
its Affiliates, related companies and third parties to purchase) advertising
time on the Sites during the calendar quarter following the
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calendar quarter in which the Company purchases advertising time on the
Networks, in the 2:1 proportion reflected in the $4 million and $2 million
commitments described above.
6.9 Other Affirmative Covenants of the Company. Without limiting any
other covenants and provisions hereof, the Company covenants and agrees that
until the consummation of a Qualifying IPO, it will perform and observe the
following covenants and provisions, and will cause each Subsidiary, if and when
such Subsidiary exists, to perform and observe such of the following covenants
and provisions as are applicable to such Subsidiary:
(a) The Company shall pay and discharge, and cause each Subsidiary
to pay and discharge, all Taxes, assessments and governmental charges or levies
imposed upon it or upon its income, profits or business, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a Lien or charge upon any
properties of the Company or any Subsidiary, provided that neither the Company
nor any Subsidiary shall be required to pay any such Tax, assessment, charge,
levy or claim which is being contested in good faith and by appropriate
proceedings if the Company or any Subsidiary shall have set aside on its books
sufficient reserves, if any, with respect thereto. The Company shall pay and
cause each Subsidiary to pay, when due, or in conformity with customary trade
terms, all lease obligations, all trade debt, and all other indebtedness
incident to the operations of the Company or its Subsidiaries, except such as
are being contested in good faith and by proper proceedings if the Company or
Subsidiary concerned shall have set aside on its books sufficient reserves, if
any, with respect thereto.
(b) The Company shall maintain insurance with a reputable insurance
company or association in such amount and covering such risks as is customary
coverage covering its properties and businesses customarily carried by companies
engaged in similar businesses and owning similar properties in the same general
areas in which the Company or any Subsidiary operates for the type and scope of
its properties and businesses and the Company shall maintain, and cause each
Subsidiary to maintain, such insurance. The Company will not cause or permit any
assignment of the proceeds of the life insurance policies specified in the first
sentence of this paragraph and will not borrow against such policies. The
Company will add the Purchasers as a notice party to such policies and will
request that the issuer(s) of such policies provide such designee with at least
ten (10) days' notice before either such policy is terminated (for failure to
pay premiums or otherwise) or assigned, or before any change is made in the
designation of a beneficiary thereof.
(c) The Company shall preserve and maintain (except where
noncompliance will not result in a Material Adverse Effect) and, unless the
Company deems it not to be in its best interests, cause each Subsidiary to
preserve and maintain, its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
or lease of its properties. The Company shall use commercially reasonable best
efforts to secure, preserve and maintain (except where noncompliance will not
result in a Material Adverse Effect) and cause each Subsidiary to use
commercially reasonable best efforts to secure, preserve and maintain (except
where noncompliance will not result in a Material Adverse Effect), all licenses
and other rights to use patents, processes, licenses, Permits,
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trademarks, trade names, inventions, intellectual property rights or copyrights
owned or possessed by it and deemed by the Company to be material to the conduct
of its business or the business of any Subsidiary.
(d) The Company shall comply (except where noncompliance will not
result in a Material Adverse Effect), and cause each Subsidiary to comply, with
the requirements of all applicable Laws and Orders of any Governmental Body,
where noncompliance would have a Material Adverse Effect.
(e) The Company shall keep, and cause each Subsidiary to keep,
adequate records and books of account in which complete entries will be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and any Subsidiary, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, returns of merchandise,
obsolescence, amortization, Taxes, bad debts and other purposes in connection
with its business shall be made.
(f) The Company shall use commercially reasonable best efforts to
maintain and preserve, and cause each Subsidiary to use commercially reasonable
best efforts to maintain and preserve, all of its properties and assets,
necessary for the proper conduct of its business, in good repair, working order
and condition, ordinary wear and tear excepted, including, without limitation,
the maintenance and preservation of any material patents, licenses, Permits or
agreements being used by the Company in its business as now operated and as now
proposed to be operated.
(g) The Company shall promptly, fully and in detail, inform the
Board of Directors of any substantive discussions, offers or contracts relating
to possible financings of any nature for the Company, whether initiated by the
Company or any other Person, except for (i) arrangements with trade creditors,
and (ii) utilization by the Company or any Subsidiary of commercial lending
arrangements with financial institutions.
(h) The Company shall at all times maintain provisions in its
Memorandum and Articles of Association indemnifying all directors against
liability to the maximum extent permitted under the laws of the British Virgin
Islands.
(i) The Company shall obtain a Noncompetition Agreement in the form
attached hereto as Exhibit B from each of Daniel Rotsztain and Roberto
Cibrian-Campoy.
(j) On or before December 31 in each calendar year (beginning
December 31, 1999), the Company shall pay to (i) the Ibero Group (as defined in
the Stockholders Agreement) and Chestnut Hill (El Sitio), LLC, a monitoring fee
equal to $300,000 per annum in arrears (pro rated for any partial year), which
shall be shared by them pro rata based on their respective interests in the
Company, and (ii) the directors of the Company appointed by the Initial
Stockholders (as defined in the Stockholders Agreement), a directors fee equal
to $300,000 per annum in arrears (pro rated for any partial year), which shall
be shared by them as agreed by such directors, in the case of each director for
so long as the ownership interest in the Company of the stockholder that
nominated such director is at least equal to 1% of the total capital of the
Company. The board of directors of the Company shall have the right to review
the
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compensation paid hereunder beginning at any time after December 31, 2001, and
may (in its sole discretion) reduce, eliminate, maintain or increase all such
fees.
7. Other Obligations of the Parties.
7.1 Certain Notifications. At all times prior to the Closing, each
party hereto shall as promptly as reasonably practicable notify the others in
writing of the occurrence of any event of which it obtains knowledge which will
result, or in the opinion of such party has a reasonable prospect of resulting,
in the failure to satisfy the conditions specified in Section 8 hereof.
7.2 Public Announcements. The parties hereto agree to consult
promptly with each other prior to issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
7.3 Furnishing Information. Each of the parties hereto will, as soon
as practicable after reasonable request therefor, furnish all the information
concerning it required for inclusion in any statement or application made by any
of them to any governmental or regulatory body in connection with the
transactions contemplated by this Agreement.
8. Conditions to Closing.
8.1 Conditions of Obligations of the Purchasers. The obligation of
the Purchasers to purchase and pay for the Preferred Shares which it has agreed
to purchase on the Closing Date is subject to the fulfillment in all material
respects prior to or on the Closing Date of the following conditions, any of
which may be waived in whole or in part by the Purchasers:
(a) Representations and Warranties. The representations and
warranties of the Company under this Agreement shall be deemed to have been made
again on the Closing Date (other than those representations and warranties made
expressly as of a date prior to the Closing Date) and shall then be true and
correct.
(b) Compliance with Agreement. The Company shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by the Company on or before the Closing Date.
(c) Approvals. The Company shall have obtained any and all consents,
waivers, approvals or authorizations, with or by any Governmental Body or any
other Person required for the valid execution of this Agreement and the
transactions contemplated hereby.
(d) No Injunction. No Governmental Body or any other Person shall
have issued an Order which shall then be in effect restraining or prohibiting
the completion of the transactions contemplated hereby, nor shall any such Order
be threatened or pending.
(e) No Material Adverse Change. Since December 31, 1998, there shall
not have been a Material Adverse Change.
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(f) Certificate of Officer. The Company shall have delivered to the
Purchasers a certificate dated the Closing Date, executed by its Chief Executive
Officer, certifying the satisfaction of the conditions specified in paragraphs
(a), (b), (c), (d), (e) and (h) of this Section 8.1.
(g) Opinions of the Company's Counsel. The Purchasers shall have
received from Paul, Hastings, Janofsky & Walker, LLP, U.S. counsel for the
Company, and from Hewlett, Beck & Arad, British Virgin Islands counsel for the
Company, favorable opinions dated the Closing Date, in form and substance
satisfactory to the Purchasers and their counsel.
(h) Memorandum. Amendments to the Articles of Incorporation
providing for the terms, preferences, designations and other rights of the
Preferred Stock set forth in Exhibit C hereto shall have been duly adopted and
executed and filed with the appropriate authorities in the British Virgin
Islands, the Company shall not have adopted or filed any other document
designating terms, relative rights or preferences of the Preferred Shares, the
Articles of Incorporation shall be in full force and effect as of the Closing
under the laws of the British Virgin Islands and shall not have been amended or
modified, and a certified copy of the Memorandum shall have been delivered to
counsel for the Purchasers.
(i) Registration Rights Agreement and Stockholders Agreement. The
Purchasers shall have received from each of the parties thereto (other than the
Purchasers) executed versions of the Stockholders Agreement and the Registration
Rights Agreement on the Closing Date, in the form attached hereto as Exhibits D
and E.
(j) Supporting Documents. The Purchasers shall have received the
following:
(i) Copies of resolutions of the Board and the stockholders of
the Company, certified by the Secretary of the Company, authorizing and
approving the amendments reflected in the Certificate of Designation and, as to
the Board, the execution, delivery and performance of this Agreement and the
Transaction Documents and the issuance of the Preferred Shares, the form of
by-laws of the Company, the forms of stock certificates, and all other documents
and instruments to be delivered pursuant hereto and thereto; and
(ii) A certificate of incumbency executed by the Secretary of
the Company certifying the names, titles and signatures of the officers
authorized to execute the documents referred to in subparagraph (i) above and
further certifying that the articles or certificate of incorporation and by-laws
of the Company delivered to the Purchasers at the time of the execution of this
Agreement have been validly adopted and have not been amended or modified.
(k) Updating of Information. The Company shall have promptly
delivered to the Purchasers any information concerning events subsequent to the
date of this Agreement which is necessary to supplement the information
contained in or made a part of the representations and warranties contained
herein, including the schedules provided in connection with this Agreement, or
delivered by the Company pursuant to any of the covenants contained herein, in
order that the information contained herein or so delivered be complete and
accurate in all material respects as of the Closing Date. Notwithstanding the
preceding sentence, for
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purposes of determining the parties' rights and obligations under this
Agreement, the schedules delivered by the Company shall be deemed to include
only that information contained therein on the date of this Agreement.
8.2 Conditions of Company's Obligations. The Company's obligation to
issue and sell the Preferred Shares to the Purchasers on the Closing Date is
subject to the fulfillment prior to or on the Closing Date of the following
conditions, any of which may be waived in whole or in part by the Company:
(a) Representations and Warranties. The representations and
warranties of the Purchasers under this Agreement shall be deemed to have been
made again on the Closing Date and shall then be true and correct in all
material respects.
(b) Payment of Purchase Price. Each Purchaser shall have delivered
its Purchase Price specified in Section 2.1 hereof.
(c) No Injunction. No Governmental Body or any other Person shall
have issued an Order which shall then be in effect restraining or prohibiting
the completion of the transactions contemplated hereby, nor shall any such Order
be threatened or pending.
9. Miscellaneous.
9.1 Certain Definitions.
"Affiliate" of any Person means any Person that directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including with its correlative
meanings, "controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through ownership
of securities or partnership or other ownership interests, by contract or
otherwise). For the purposes of Section 8.2(d), the Purchaser shall not be
deemed to be an Affiliate of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Common Stock" means the ordinary shares, par value $1.00 per share,
of the Company.
"Contract" means any contract, agreement, indenture, note, bond,
loan, instrument, lease, conditional sales contract, mortgage, license,
franchise, insurance policy, commitment or other arrangement or agreement,
whether written or oral.
"Dollars" or "$" means the currency of the United States or its
foreign currency equivalent at the time the determination is made.
"Employee" means any current employee, office consultant,
independent contractor, agent, officer or director of the Company.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
"GAAP" means generally accepted accounting principles, as in effect
in the United States.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).
"Law" means any federal, state, local or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement or
guideline.
"Legal Proceeding" means any judicial, administrative or arbitral
actions, suits, proceedings (public or private), claims or governmental
proceedings.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or similar laws) of any jurisdiction and including any lien or
charge arising by statute or other law.
"Material Adverse Change" means any material adverse change in the
business, assets, liabilities, prospects, properties, results of operations or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole.
"Material Adverse Effect" means any event, circumstance, condition,
fact, effect, or other matter which has had or could reasonably be expected to
have a material adverse effect (i) on the business, assets, liabilities,
prospects, properties, results of operations or condition (financial or
otherwise) of the Seller and its Subsidiaries taken as a whole or (ii) on the
ability of the Seller and such subsidiaries to perform on a timely basis any
material obligation under this Agreement or to consummate the transactions
contemplated hereby.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"Permits" means any approvals, authorizations, consents, licenses,
permits or certificates by or of any Governmental Body.
"Permitted Liens" shall mean (a) Liens for ad valorem real or
personal property taxes or assessments not at the time due and (b) Liens in
respect of pledges or deposits under workers' compensation laws or similar
legislation, carriers', warehousemen's, mechanics', laborers', and materialmen's
and similar liens, if the obligations secured by such Liens are not then
delinquent.
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"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
"Qualifying IPO" means an underwritten initial public offering of
shares of common stock of the Corporation pursuant to an effective registration
statement under the Securities Act of 1933, as then in effect (or any comparable
statement under any similar federal statute then in force or effect) in which
the cumulative gross proceeds to the Company are equal to or greater than $35.0
million and the price per share paid in the public offering is greater than 3.0
times the then applicable Conversion Price.
"Register" means to register under the Securities Act and applicable
state securities laws for the purpose of effecting a public sale of securities.
"Representatives" of a Person means its officers, Employees, agents,
legal advisors and accountants.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same shall be in effect at the time.
"Taxes" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value-added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
9.2 Expenses.
(a) At the Closing, the Company shall reimburse the Purchasers for
the reasonable out-of-pocket fees and expenses incurred by the Purchasers in
connection with the transactions contemplated hereby. The Company agrees that
such fees and expenses incurred through the Closing Date may be deducted by the
Purchasers from the Purchase Price payable at the Closing.
(b) The Company shall pay its own other out-of-pocket expenses and
all stamp and other Taxes which may be payable in respect of the execution and
delivery of this Agreement, the Transaction Documents, or the issuance, delivery
or acquisition of the Preferred Shares.
(c) The Company further agrees to reimburse the Purchasers on demand
for the Purchasers' reasonable out-of-pocket fees and expenses incurred in
connection with any amendment to or waiver or enforcement of this Agreement.
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9.3 Specific Performance. Each of the parties hereto acknowledges
and agrees that the breach of this Agreement would cause irreparable damage to
the other parties hereto and that the other parties hereto will not have an
adequate remedy at law. Therefore, the obligations of each of the parties hereto
under this Agreement shall be enforceable by a decree of specific performance
issued by any court of competent jurisdiction, and appropriate injunctive relief
may be applied for and granted in connection therewith. Such remedies shall,
however, be cumulative and not exclusive and shall be in addition to any other
remedies which any party may have under this Agreement or otherwise.
9.4 Further Assurances. The Company and the Purchasers agree to
execute and deliver such other documents or agreements as may be necessary or
desirable for the implementation of this Agreement and the consummation of the
transactions contemplated hereby.
9.5 Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
Borough of Manhattan, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action or proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section 9.10
hereof.
9.6 Entire Agreement; Amendments and Waivers. This Agreement
(including the schedules and exhibits hereto) represents the entire
understanding and agreement among the parties hereto with respect to the subject
matter hereof and can be amended, supplemented or changed, and any provision
hereof can be waived, only by written instrument making specific reference to
this Agreement signed by the parties hereto. No action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranty, covenant or agreement
contained herein. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach. No
failure on the part of any party to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
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9.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
the principles of conflict of laws thereunder which would specify the
application of the law of another jurisdiction.
9.8 Headings; Interpretive Matters. The section headings of this
Agreement are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement. No provision of this Agreement
will be interpreted in favor of, or against, any of the parties hereto by reason
of the extent to which any such party or its counsel participated in the
drafting thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.
9.9 Confidentiality. Each party hereto covenants and agrees to treat
any non-public information provided to it by the Company concerning the business
and finances of the Company ("Corporate Information") as confidential and agrees
further that it will not use, exploit, reproduce, disclose or provide Corporate
Information to any third party (other than any agents of the parties who are
bound by substantially similar obligations of confidentiality) on its own behalf
or otherwise, except with the consent of the Company or as required by law,
legal process or any federal or state regulatory body having jurisdiction over
such party. The provisions of this Section 9.9 shall not apply to any
information which:
(a) was within the public domain prior to the time of disclosure of
Corporate Information to the receiving party or which comes into the public
domain other than as a result of a breach by the party of this Section 9.9;
(b) was in the possession of the receiving party or any of its
officers, directors, employees, agents, principals, or Affiliates) before the
receiving party received the Corporate Information;
(c) was rightfully acquired by the receiving party from a third
party without, to the knowledge of the receiving party, any restriction or any
obligation of confidentiality; or
(d) was independently developed by the receiving party without any
use or reference to the Corporate Information.
The provisions of this Section 9.9 shall survive the termination of
this Agreement, either in whole or as to any party, for a period of two (2)
years.
9.10 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally, telecopied or mailed by certified mail, return receipt requested, to
the parties at the address or telecopier number indicated in the signature pages
hereof.
All notices are effective upon receipt or upon refusal if properly
delivered.
9.11 Severability. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in effect.
27
<PAGE>
9.12 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third-party beneficiary rights in any Person not a party to this Agreement
except as provided below. No assignment of this Agreement or of any rights or
obligations hereunder may be made by the Company or the Purchasers (by operation
of law or otherwise) without the prior written consent of the other parties
hereto and any attempted assignment without the required consents shall be void;
provided, however, that the Purchasers may assign this Agreement and any or all
rights and obligations hereunder, in whole or in part, to any Affiliate of the
Purchasers, but any such assignment shall not relieve the Purchasers of its
obligations hereunder. In addition, and whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of the
Purchasers as a purchaser or holder of Preferred Shares (or any securities
pursuant to which such Preferred Shares may be converted or exercised into) are
also for the benefit of and enforceable by, any subsequent holder of such
Preferred Shares who acquires the lesser of (i) $5,000,000 in original purchase
price value of the Preferred Shares other than pursuant to open-market purchases
or (ii) fifty percent (50%) of the number of Preferred Shares purchased by the
Purchasers pursuant hereto. Upon any permitted assignment, the references in
this Agreement to the Purchasers shall also apply to any such assignee unless
the context otherwise requires.
9.13 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
[The rest of this page has been intentionally left blank]
28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first written above.
EL SITIO INTERNATIONAL CORPORATION
By: /s/ Roberto Cibrian-Campoy
------------------------------------------
Title:
Notice address:
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attention: Roberto Cibrian-Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue, 31st Floor
New York, New York 10022
Attention: Neil A. Torpey
Telephone: (212) 318-6034
Telecopier: (212) 318-4090
<PAGE>
WASHBURN ENTERPRISES, INC.
By: /s/ [ILLEGIBLE]
------------------------------------------
Title: Authorized Signatory
Notice address:
c/o 404 Washington Avenue
8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
<PAGE>
CHESTNUT HILL (EL SITIO), LLC
By: /s/ Mark Greely
------------------------------------------
Title: SVP
Notice address:
c/o GCC Investments, Inc.
1300 Boylston Street
Chestnut Hill, MA 02647
Attn: Michael A. Greeley
Telephone: (617) 975-3222
Telecopier: (617) 975-3201
with a copy to:
Phillip J. Szabla
Vice President and General Counsel
GC Companies, Inc.
1300 Boylston Street
Chestnut Hill, MA 02467
Telephone: (617) 264-8098
Telecopier: (617) 264-8206
<PAGE>
IBERO-AMERICAN MEDIA PARTNERS II LTD.
By: /s/ Benjamin Moody
------------------------------------------
Title: Authorized Representative
Notice Address:
c/o 404 Washington Avenue
8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
<PAGE>
EXHIBIT A
Number of
Name Class A Preferred Percentage Purchase Price
- ---- ----------------- ---------- --------------
Ibero-American Media 3,131,313.00 23.680% $22,000,000
Partners II Ltd.
Washburn Enterprises, Inc. 853,994.45 6.458% $6,000,000
Chestnut Hill (El Sitio), LLC 725,895.29 5.489% $5,100,000
<PAGE>
Exhibit 10.2
An Exodus Proposed Solution
Designed Specifically for
[LOGO]
El Sitio USA
(www.elsitio.com)
June 10, 1999
Prepared by:
Carlos E. Ortega
Account Executive
(408) 346-2461
[email protected]
<PAGE>
INTERNET DATA CENTER SERVICES
ORDER FORM
Customer Name: El Sitio USA
Form Date: 06/01/99
Form No.: 0601-3ceo
Installation Site(s): New Jersey
Type of Service(s): New [X] Upgrade [_]
Additional [_] Cancellation [_]
<TABLE>
<CAPTION>
Service Provider Services
- ------------------------------------------------------------------------------------------------------------------------------------
Internet Data Brief Description Qty Unit Service Extended Extended
Center Services (Detailed description attached) Price Provider Non- Monthly
Discount Recurring Fees
Fees
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ISP-FAST-U5 5Mbps base Fast Ethernet with 1 $6,800 30% $4,760
100Mbps burstability
- ------------------------------------------------------------------------------------------------------------------------------------
ISP-FAST-SU Setup Fast Ethernet Network 1 $3,450 30% $2,415
- ------------------------------------------------------------------------------------------------------------------------------------
ISP-VDC Virtual Data Center 2 $7,000 30% $9,800
(7' x 8'4 Full Racks enclosed area)
- ------------------------------------------------------------------------------------------------------------------------------------
ISP-VDC-SU Setup Virtual Data Center 1 $3,300 30% $2,310
- ------------------------------------------------------------------------------------------------------------------------------------
EXO-MMS-BAS Manage Monitoring Service Enhanced 32 $0 $0
(Standard per application server)
- ------------------------------------------------------------------------------------------------------------------------------------
EXO-FAST-LB-SU-NEW Set-up for EXO-FAST or EXO-FAST-D100LB 1 $500 30% $350
- ------------------------------------------------------------------------------------------------------------------------------------
EXO-FAST-LB Additional Load Balanced line 100Mbps 1 $500 30% $350
- ------------------------------------------------------------------------------------------------------------------------------------
EXO-POWER-30 30 Amp Power Circuit (208v) 1 $360 30% $252
- ------------------------------------------------------------------------------------------------------------------------------------
EXO-POWER-SU Power Circuit Setup 1 $280 30% $196
- ------------------------------------------------------------------------------------------------------------------------------------
BIG-HA BIG/ip HA Fault-tolerant solution 1 $29,990 15% $25,492
- ------------------------------------------------------------------------------------------------------------------------------------
3620 Cisco 3620 2-slot Modular Router, AC 2 $6,900 20% $11,040
Cisco 3620 IP, Power Cable, 110V,
1-Port Fast Ethernet Network Module
(TX Only) x2 (see next page config.)
- ------------------------------------------------------------------------------------------------------------------------------------
CON-SNT-3620 SMARTnet Maintenance 2 600 $1,200
- ------------------------------------------------------------------------------------------------------------------------------------
EXO-SIOS-C Operating System Installation (per 32 $330 15% $8,976
Class 1 server
- ------------------------------------------------------------------------------------------------------------------------------------
EXO-SIAP Application Software Installation 8 $190 15% $1,292
(per server) Cluster. Includes the
SQL 7.0 Installation
- ------------------------------------------------------------------------------------------------------------------------------------
EXO-SIHW Site Hardware Installation and 32 $47.50 $1,292
Wiring (per Server)
- ------------------------------------------------------------------------------------------------------------------------------------
Total: $54,563 $15,162
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Usage above 5 Mbps:
- --------------------------------------------------------------------------------
Internet Data Brief Description Qty Per Megabit
Center Services (Detailed description attached)
- --------------------------------------------------------------------------------
EXO-ETHER-VU10 Variable Usage Cost per Megabit Above 1 $1,215
Base Amount ($/megabit)
- --------------------------------------------------------------------------------
Note:
o Systems Administration (hourly) at $190.00 Hr.
o Please note that all Engineering time is based on an estimate if project
goes beyond the estimated times, charges will be made accordingly.
<PAGE>
INTERNET DATA CENTER SERVICES
Order Form
Form Number: 0602-8
Date: 6/2/99
(Valid for 30 days)
Customer: El Sitio USA
<TABLE>
<CAPTION>
Cisco 3620 Router:
- -------------------------------------------------------------------------------------------------------------------
Product Number: Description Qty Unit Price Extended
Price
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3620 Cisco 3620 2-slot Modular Router, AC 2 $2,900 $5,80[ILLEGIBLE]
- -------------------------------------------------------------------------------------------------------------------
SF362C-11.3.5T Cisco 3620 IP 2 $0 $[ILLEGIBLE]
- -------------------------------------------------------------------------------------------------------------------
CAB-AC Power Cable, 110V 2 $0 $[ILLEGIBLE]
- -------------------------------------------------------------------------------------------------------------------
NM-IFE-TX 1-Port Fast Ethernet Network Module (TX Only) 4 $2,000 $8,0[ILLEGIBLE]
- -------------------------------------------------------------------------------------------------------------------
Sub Total $13,8[ILLEGIBLE]
Less 20 % ($1,03[ILLEGIBLE]
Sub Total $11,0[ILLEGIBLE]
- -------------------------------------------------------------------------------------------------------------------
CON-SNT-3620 SMARTnet Maintenance 2 $600 $1,2[ILLEGIBLE]
- -------------------------------------------------------------------------------------------------------------------
Exodus Total $12,2[ILLEGIBLE]
- -------------------------------------------------------------------------------------------------------------------
Lead time - 5 days delivery Shipping cost and tax will be added upon delivery
</TABLE>
EXODUS COMMUNICATIONS, INC. PROPRIETARY AND CONFIDENTIAL (rev 6/98)
<PAGE>
EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES ORDER FORM
SERVICES AND PRICES
Customer Name: El Sitio USA
Form Date: 06/10/99
Form No.: 0601-3ceo & 0602-8
IMPORTANT INFORMATION:
(1) By submitting this Internet Data Center Services Order Form (Form) to
Exodus Communications, Inc. (Exodus), Customer hereby places an order for
the Internet Data Center Services described herein pursuant to the terms
and conditions of the Internet Data Center Services Agreement between
Customer and Exodus (IDC Agreement).
(2) Billing, with the exception of Setup Fees, will commence on the earlier of
the Installation Date indicated below or the date Customer actually
installs its equipment or Exodus begins providing Internet Data Center
Services. All Setup Fees will be billed upon receipt of a Customer signed
IDC Services Order Form.
(3) Exodus will provide the Internet Data Center Services pursuant to the
terms and conditions of the IDC Agreement, which incorporates this Form.
The terms of this Form supersede, and by accepting this Form Exodus hereby
rejects, any conflicting or additional terms provided by Customer in
connection with Exodus' provision of Internet Data Center Services. If
there is a conflict between this Form and any other form provided by
Customer and accepted by Exodus, the Form with the latest date will
control.
(4) Exodus will not be bound by or required to provide Internet Data Center
Services pursuant to this Form or the IDC Agreement until each is signed
by an authorized representative of Exodus.
Customer to complete:
CUSTOMER HAS READ, UNDERSTANDS AND HEREBY SUBMITS THIS ORDER.
<TABLE>
<S> <C> <C> <C>
Installation date:
------------------------------------
Submitted by: Submission Date:
------------------------------------ ---------------------------------
(Authorized Signature) (Effective Date of IDC Agreement)
Print Name:
------------------------------------
Title:
------------------------------------
Exodus Communications, Inc. Acceptance
___________________________________ Date: __________________________
(Authorized Signature)
</TABLE>
EXODUS COMMUNICATIONS, INC. PROPRIETARY AND CONFIDENTIAL (rev 6/98)
<PAGE>
EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES AGREEMENT
THIS INTERNET CENTER SERVICES AGREEMENT (this "Agreement") is made effective as
of the Submission Date (_________________ ____, 199____) indicated in the
initial Internet Data Center Services Order Form accepted by Exodus, by and
between Exodus Communications, Inc. ("Exodus") and the customer identified below
("Customer").
PARTIES:
CUSTOMER NAME: ___________________________________________________
ADDRESS: ___________________________________________________
___________________________________________________
PHONE: ___________________________________________________
FAX: ___________________________________________________
EXODUS COMMUNICATIONS, INC.
2650 San Tomas Expressway
Santa Clara, CA 95051
Phone: (408) 346-2200
Fax: (408) 346-2420
1. INTERNET DATA CENTER SERVICES.
Subject to the terms and conditions of this Agreement, during the term of this
Agreement, Exodus will provide to Customer the services described in the
Internet Data Center Services Order Form(s) ("IDC Services Order Form(s)")
accepted by Exodus, or substantially similar services if such substantially
similar services would provide Customer with substantially similar benefits
("Internet Data Center Services"). All IDC Services Order Forms accepted by
Exodus are incorporated herein by this reference, each as of the Submission Date
indicated in such form.
2. FEES AND BILLING.
2.1 Fees. Customer will pay all fees due according to the IDC Services
Order Form(s).
2.2 Billing Commencement. Billing for Internet Data Center Services, other
than Setup Fees, indicated in the initial IDC Services Order Form shall commence
on the earlier to occur of (i) the "Installation Date" indicated on the initial
IDC Services Order Form, regardless of whether Customer has commenced use of the
Internet Data Services, unless Customer is unable to install the Customer
Equipment and/or use the Internet Data Center Services by the Installation Date
due to the fault of Exodus, then billing will not begin until the date Exodus
has remedied such fault and (ii) the date the "Customer Equipment" (Customer's
computer hardware and other tangible equipment, as identified in the Customer
Equipment List which is incorporated herein by this reference) is placed by
Customer in the "Customer Area" (the portion(s) of the Internet Data Centers, as
defined in Section 3.1 below, made available to Customer hereunder for the
placement of Customer Equipment) and is operational. All Setup Fees will be
billed upon receipt of a Customer signed IDC Services Order Form. In the event
that Customer orders additional Internet Data Center Services, billing for such
services shall commence on the date Exodus first provides such additional
Internet Data Center Services to Customer or as otherwise agreed to by Customer
and Exodus.
2.3 Billing and Payment Terms. Customer will be billed monthly in advance
of the provision of Internet Data Center Services, and payment of such fees will
be due within thirty (30) days of the date of each Exodus invoice. All payments
will be made in U.S. dollars. Late payments hereunder will accrue interest at a
rate of one and one-half percent (1 1/2%) per month, or the highest rate allowed
by applicable law, whichever is lower. If in its judgment Exodus determines that
Customer is not creditworthy or is otherwise not financially secure, Exodus may,
upon written notice to Customer, modify the payment terms to require full
payment before the provision of Internet Date Center Services or other
assurances to secure Customer's payment obligation hereunder.
2.4 Taxes. All payments required by this Agreement are exclusive of all
national, state, municipal or other governmental excise, sales, value-added,
use, personal property, and occupational taxes, excises, withholding taxes and
obligations and other levies now in force or enacted in the future, all of which
Customer will be responsible for and will pay in full, except for taxes based on
Exodus' net income.
3. CUSTOMER'S OBLIGATIONS.
3.1 Compliance with Law and Rules and Regulations. Customer agrees that
Customer will comply at all times with all applicable laws and regulations and
Exodus' general rules and regulations relating to its provision of Internet Data
Center Services, as updated by Exodus from time to time ("Rules and
Regulations"). Customer acknowledges that Exodus exercised no control whatsoever
over the content of the information passing through its sites containing the
Customer Area and equipment and facilities used by Exodus to provide Internet
Data Center Services ("Internet Data Centers"), and that it is the sole
responsibility of Customer to ensure that the information it transmits and
receives complies with all applicable laws and regulations.
3.2 Customer's Costs. Customer agrees that it will be solely responsible,
and at Exodus's request will reimburse Exodus, for all costs and expenses (other
than those included as part of the Internet Data Center Services and except as
otherwise expressly provided herein) it incurs in connection with this
Agreement.
3.3 Access and Security. Customer will be fully responsible for any
charges, costs, expenses (other than those included in the Internet Data Center
Services), and third party claims that may result form its use of, or access to,
the Internet Data Centers and/or the Customer Area including but not limited to
any unauthorized use of any access devices provided by Exodus hereunder. Except
with the advanced written consent of Exodus, Customer's access to the Internet
Data Centers will be limited solely to the individuals identified and authorized
by Customer to have access to the Internet Data Centers and the Customer Area in
accordance with this Agreement, as identified in the Customer Registration From,
as amended from time to time, which is hereby incorporated by this reference
("Representatives").
3.4 No Competitive Services. Customer may not at any time permit any
Internet Data Center Services to be utilized for the provision of any services
that compete with any Exodus services, without Exodus' prior written consent.
3.5 Insurance.
(a) Minimum Levels. Customer will keep in full force and effect during the
term of this Agreement: (i) comprehensive general liability insurance in an
amount not less than $5 million per occurrence for bodily injury and property
damage; (ii) employer's liability insurance in an amount not less than $1
million per occurrence; and (iii) workers' compensation insurance in an amount
not less than that required by applicable law. Customer also agrees that it
will, and will be solely responsible for ensuring that its agents (including
contractors and subcontractors) maintain, other insurance at levels no less than
those required by applicable law and customer in Customer's and its agents'
industries.
(b) Certificates of Insurance. Prior to installation of any Customer
Equipment in the Customer Area, Customer will furnish Exodus with certificates
of insurance which evidence the minimum levels of insurance set forth above.
(c) Naming Exodus as an Additional Insured. Customer agrees that prior to
the installation of any Customer Equipment, Customer will cause its insurance
provider(s) to name Exodus as an additional insured and notify Exodus in writing
of the effective date thereof.
4. CONFIDENTIAL INFORMATION
4.1 Confidential Information. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, technology, and products, including
the terms and conditions of this Agreement ("Confidential Information").
Confidential Information will include, but not be limited to, each party's
proprietary software and customer information. Each party agrees that it will
not use in any way, for its own account or the account of any third party,
except as expressly permitted by this Agreement, nor disclose to any third party
(except as required by law or to that party's attorneys, accountants and other
advisors as reasonably necessary), any of the other party's Confidential
Information and will take reasonable precautions to protect the confidentiality
of such information.
4.2 Exceptions. Information will not be deemed Confidential Information
hereunder if such information: (i) is known to the receiving party prior to the
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party; (ii)
becomes known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one having an
obligation of confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except through a breach
of this Agreement by the receiving party; or (iv) is independently developed by
the receiving party.
5. REPRESENTATIONS AND WARRANTIES.
5.1 Warranties by Customer.
(a) Customer Equipment. Customer represents and warrants that it owns or
has the legal right and authority, and will continue to own or maintain the
legal right and authority during the term of this Agreement, to place and use
the Customer Equipment as contemplated by this Agreement. Customer further
represents and warrants that its placement, arrangement, and use of the Customer
Equipment in the Internet Data Centers complies with the Customer Equipment
Manufacturer's environmental and other specifications.
(b) Customer's Business. Customer represents and warrants that Customer's
services, products, materials, data, information and Customer Equipment used by
Customer in connection with this Agreement as well as Customer's and its
permitted customer's and users' use of the Internet Data Center Services
(collectively, "Customers' Business") does not as of the Installation Date, and
will not during the term of this Agreement operate in any manner that would
violate any applicable law or regulation.
(c) Rules and Regulations. Customer has read the Rules and Regulations and
represents and warrants that Customer and Customer's Business are currently in
full compliance with the Rules and Regulations, and will remain so at all times
during the term of this Agreement.
(d) Breach of Warranties. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
remedies available at law or in equity, Exodus will have the right immediately,
in Exodus' sole discretion, to suspend any related Internet Data Center Services
if deemed reasonably necessary by Exodus to prevent any harm to Exodus and its
business.
5.2 Warranties and Disclaimers by Exodus.
5.2(a) Service Level Warranty. In the event Customer experiences any
of the following and Exodus determines in its reasonable judgment that such
inability was caused by Exodus' failure to provide Internet Data Center Services
for reasons within Exodus' reasonable control and not as a result of any actions
or inactions of Customer or any third
EXODUS COMMUNICATIONS, INC. CONFIDENTIAL AND PROPRIETARY (rev 6/98) Page 1
<PAGE>
parties(including Customer Equipment and third party equipment), Exodus will,
upon Customer's request in accordance with paragraph (iii) below, credit
Customer's account as described below:
(i) Inability to Access the Internet (Downtime). If Customer is
unable to transmit and receive information from Exodus' Internet Data Centers
(i.e., Exodus' LAN and WAN) to other portion of the Internet because Exodus
failed to provide the Internet Data Center Services for more than fifteen (15)
consecutive minutes, Exodus will credit Customer's account the pro-rata
connectivity charges (i.e., all bandwidth related charges) for (1) day of
service, up to an aggregate maximum credit of connectivity charges for seven (7)
days of service in any one calendar (1) month. Exodus' scheduled maintenance of
the Internet Data Centers and Internet Data Center Services, as described in the
Rules and Regulations, shall not be deemed to be a failure of Exodus to provide
Internet Data Center Services. For purposes of the foregoing, "unable to
transmit and receive" shall mean sustained packet loss in excess of 50% based on
Exodus' measurements.
(ii) Packet Loss and Latency. Exodus does not proactively monitor
the packet loss or transmission latency of specific customers. Exodus does,
however, proactively monitor the aggregate packet loss and transmission latency
within its LAN and WAN. In the event that Exodus discovers (either from its own
efforts or after being notified by Customer) that Customer is experiencing
packet loss in excess of one percent (1%) ("Excess Packet Loss") or transmission
latency in excess of 120 milliseconds round trip time (based on Exodus'
measurements) between any two Internet Data Centers within Exodus' U.S. network
(collectively, "Excess Latency", and with Excess Packet Loss "Excess Packet
Loss/Latency"), and Customer notifies Exodus (or confirms that Exodus has
notified Customer), Exodus will take all actions necessary to determine the
source of Excess Packet Loss/Latency.
(A) Time to Discover Source of Excess Packet Loss/Latency;
Notification of Customer. Within two (2) hours of discovering the existence of
Excess Packet Loss/Latency, Exodus will determine whether the source of the
Excess Packet Loss/Latency is limited to the Customer Equipment and the Exodus
equipment connecting the Customer Equipment to Exodus' LAN ("Customer Specific
Packet Loss/Latency"). If the Excess Packet Loss/Latency is not a Customer
Specific Packet Loss/Latency, Exodus will determine the source of the Excess
Packet Loss/Latency within two (2) hours after determining that it is not a
Customer Specific Packet Loss/Latency. In any event, Exodus will notify Customer
of the source of the Excess Packet Loss/Latency within sixty (60) minutes after
identifying the source.
(B) Remedy of Excess Packet Loss/Latency. IF the Excess Packet
Loss/Latency remedy is within the sole control of Exodus, Exodus will remedy the
Excess Packet Loss/Latency within two (2) hours of determining the source of the
Excess Packet Loss/Latency. If the Excess Packet Loss/Latency is caused from
outside of the Exodus LAN or WAN, Exodus will notify Customer and will use
commercially reasonable efforts to notify the party(ies) responsible for the
source and cooperate with it(them) to resolve the problem as soon as possible.
(C) Failure to Determine Source and/or Resolve Problem. In the
event that Exodus is unable to determine the source of and remedy the Excess
Packet Loss/Latency within the time periods described above (where Exodus was
solely in control of the source), Exodus will credit Customer's account the
pro-rata connectivity charges for one (1) day of service for every two (2) hours
after the time periods described above that it takes Exodus to resolve the
problem, up to an aggregate maximum credit of connectivity charges for seven (7)
days of service in any one (1) month.
(iii) Customer Must Request Credit: To receive any of the credits
described in this section 5.2(a), Customer must notify Exodus within three (3)
business days from the time Customer becomes eligible to receive a credit.
Failure to comply with this requirement will forfeit Customer's right to receive
a credit.
(iv) Remedies Shall Not Be Cumulative; Maximum Credit: In the event
that Customer is entitled to multiple credits hereunder arising from the same
event, such credits shall not be cumulative and Customer shall be entitled to
receive only the maximum single credit available for such event. In no event
will Exodus be required to credit Customer in any one (1) calendar month
connectivity charges in excess of seven (7) days of service. A credit shall be
applied only to the month in which there was the incident that resulted in the
credit. Customer shall not be eligible to receive any credits for periods in
which Customer received any Internet Data Center Services free of charge.
(v) Termination Option for Chronic Problems: If, in any single
calendar month, Customer would be able to receive credits totaling fifteen (15)
or more days (but for the limitation in paragraph (iv) above) resulting from
three (3) or more events during such calendar month or, if any single event
entitling customer to credits under paragraph 5.2(a)(i) exists for a period of
eight (8) consecutive hours, then, Customer may terminate this Agreement for
cause and without penalty by notifying Exodus within five (5) days following the
end of such calendar month. Such termination will be effective thirty (30) days
after receipt of such notice by Exodus.
THIS WARRANTY DOES NOT APPLY TO ANY INTERNET DATA CENTER SERVICES THAT EXPRESSLY
EXCLUDE THIS WARRANTY (AS DESCRIBED IN THE SPECIFICATION SHEETS FOR SUCH
PRODUCTS). THIS SECTION 5.2(a) STATES CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR
ANY FAILURE BY EXODUS TO PROVIDE INTERNET DATA CENTER SERVICES.
(b) No Other Warranty. EXCEPT FOR THE EXPRESS WARRANTY SET OUT IN
SUBSECTION (a) ABOVE, THE INTERNET DATA CENTER SERVICES ARE PROVIDED ON AN "AS
IS" BASIS, AND CUSTOMER'S USE OF THE INTERNET DATA CENTER SERVICES IS AT ITS OWN
RISK. EXODUS DOES NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS
AND/OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE,
AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE.
EXODUS DOES NOT WARRANT THAT THE INTERNET DATA CENTER SERVICES WILL BE
UNINTERRUPTED, ERROR FREE, OR COMPLETELY SECURE.
(c) Disclaimer of Actions Caused by and/or Under the Control of Third
Parties. EXODUS DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM EXODUS'
INTERNET DATA CENTERS AND OTHER PORTIONS OF THE INTERNET. SUCH FLOW DEPENDS IN
LARGE PART ON THE PERFORMANCE OF INTERNET SERVICES PROVIDED OR CONTROLLED BY
THIRD PARTIES. AT TIMES, ACTIONS OR INACTIONS CAUSED BY THESE THIRD PARTIES CAN
PRODUCE SITUATIONS WHICH EXODUS' CUSTOMERS' CONNECTIONS TO THE INTERNET (OR
PORTIONS THEREOF) MAY BE IMPAIRED OR DISRUPTED. ALTHOUGH EXODUS WILL USE
COMMERCIALLY REASONABLE EFFORTS TO TAKE ACTIONS IT DEEMS APPROPRIATE TO REMEDY
AND AVOID SUCH EVENTS, EXODUS CANNOT GUARANTEE THAT THEY WILL NOT OCCUR.
ACCORDINGLY, EXODUS DISCLAIMS ANY AND ALL LIABILITY RESULTING FROM OR RELATED TO
SUCH EVENTS.
6. LIMITATIONS OF LIABILITY.
6.1 Personal Injury. EACH REPRESENTATIVE AND ANY OTHER PERSONS VISITING
THE INTERNET DATA CENTERS DOES SO AT ITS OWN RISK AND EXODUS ASSUMES NO
LIABILITY WHATSOEVER FOR ANY HARM TO SUCH PERSONS RESULTING FROM ANY CAUSE OTHER
THAN EXODUS' NEGLIGENCE OR WILLFUL MISCONDUCT RESULTING IN PERSONAL INJURY TO
SUCH PERSONS DURING SUCH A VISIT.
6.2 Damage to Customer Equipment or Business. EXODUS ASSUMES NO LIABILITY
FOR ANY DAMAGE TO, OR LOSS RELATING TO, CUSTOMER'S BUSINESS RESULTING FROM ANY
CAUSE WHATSOEVER. CERTAIN CUSTOMER EQUIPMENT, INCLUDING BUT NOT LIMITED TO
CUSTOMER EQUIPMENT LOCATED ON CYBERRACKS, MAY BE DIRECTLY ACCESSIBLE BY OTHER
CUSTOMERS. EXODUS ASSUMES NO LIABILITY FOR ANY DAMAGE TO, OR LOSS OF, ANY
CUSTOMER EQUIPMENT RESULTING FROM ANY CAUSE OTHER THAN EXODUS' GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT. TO THE EXTENT EXODUS IS LIABLE FOR ANY DAMAGE TO, OR LOSS
OF, THE CUSTOMER EQUIPMENT FOR ANY REASON, SUCH LIABILITY WILL BE LIMITED SOLELY
TO THE THEN-CURRENT VALUE OF THE CUSTOMER EQUIPMENT.
6.3 Exclusions. EXCEPT AS SPECIFIED IN SECTIONS 6.1 AND 6.2, IN NO EVENT
WILL EXODUS BE LIABLE TO CUSTOMER, ANY REPRESENTATIVE, OR ANY THIRD PARTY FOR
ANY CLAIMS ARISING OUT OF OR RELATED TO THIS AGREEMENT, CUSTOMER EQUIPMENT,
CUSTOMER'S BUSINESS OR OTHERWISE, AND ANY LOST REVENUE, LOST PROFIT, REPLACEMENT
GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES, INCIDENTAL, PUNITIVE, INDIRECT OR
CONSEQUENTIAL DAMAGES, LOSS OF DATA, OR INTERRUPTION OR LOSS OF USE OF SERVICE
OR OF ANY CUSTOMER EQUIPMENT OR CUSTOMER'S BUSINESS, EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER THEORY OF CONTRACT, [ILLEGIBLE]
(INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
6.4 Maximum Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, EXODUS'S MAXIMUM AGGREGATE LIABILITY TO CUSTOMER RELATED TO OR IN
CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT PAID BY
CUSTOMER TO EXODUS HEREUNDER FOR THE PRIOR TWELVE (12) MONTH PERIOD.
6.5 Customer's Insurance. Customer agrees that it will not pursue any
claims against Exodus for any liability Exodus may have under or relating to
this Agreement unless Customer first makes claims against Customer's insurance
provider(s) and such insurance provider(s) finally resolve(s) such claims.
6.6 Basis of the Bargain; Failure of Essential Purpose. Customer
acknowledges that Exodus has set its prices and entered into this Agreement in
reliance upon the limitations of liability and disclaimers of warranties and
damages set forth herein, and that the same form an essential basis of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if found to have failed of their essential purpose.
7. INDEMNIFICATION.
7.1 Exodus' Indemnification of Customer. Exodus will indemnify, defend and
hold Customer harmless from and against any and all costs, liabilities, losses,
and expenses (including, but not limited to, reasonable attorneys' fees)
(collectively, "Losses") resulting from any claim, suit, action, or proceeding
(each, and "Action") brought against Customer alleging (i) the infringement of
any third party registered U.S. copyright or issued U.S. patent resulting from
the provision of Internet Data Center Services pursuant to this Agreement (but
excluding any infringement contributorily caused by Customer's Business or
Customer Equipment) and (ii) personal injury to Customer's Representatives from
Exodus's gross negligence or willful misconduct.
7.2 Customer's Indemnification of Exodus. Customer will indemnify, defend
and hold Exodus, its affiliates and customers harmless from and against any and
all Losses resulting from or arising out of any Action brought by or against
Exodus, its affiliates or customers alleging: (a) with respect to the Customer's
Business: (i) infringement or misappropriation of any intellectual property
rights; (ii) defamation, libel, slander, obscenity, pornography, violation of
the rights of privacy or publicity; or (iii) spamming, or any other offensive,
harassing or illegal conduct or violation of the Rules and Regulations; (b) any
damage or destruction to the Customer Area, the Internet Data Centers or the
equipment of Exodus or any other customer by Customer or Representative(s) of
Customer's designees; or (c) any other damage arising from the Customer
Equipment or Customer's Business.
7.3 Notice. Each party will provide the other party with prompt written
notice upon of [ILLEGIBLE] existence of any such event of which it becomes
aware, and an opportunity to participate in the defense thereof.
8. TERM AND TERMINATION.
8.1 Term. This Agreement will be effective for a period of one (1) year
from Installation Date, unless earlier terminated according to the provisions of
this Section. The Agreement will automatically renew for additional terms of one
(1) year each.
8.2 Termination.
(a) For Convenience.
(i) By Customer During First Thirty Days. Customer may terminate this
Agreement for convenience by providing written notice to Exodus at any time
during the thirty (30) day period beginning on the Installation Date.
EXODUS COMMUNICATIONS, INC. CONFIDENTIAL AND PROPRIETARY (rev 6/98) Page 2
<PAGE>
(ii) By Either Party. Either party may terminate this Agreement for
convenience at any time effective after the first (1st) anniversary of the
Installation Date by providing ninety (90) days' prior written notice to the
other party at any time thereafter.
(b) For Cause. Either party will have the right to terminate this
Agreement if: (i) the other party breaches any material term or condition of
this Agreement and fails to cure such breach within thirty (30) days after
receipt of written notice of the same, except in the case of failure to pay
fees, which must be cured within five (5) days after receipt of written notice
from Exodus; (ii) the other party becomes the subject of a voluntary petition in
bankruptcy or any voluntary proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors: or (iii) the other
party becomes the subject of any involuntary petition in bankruptcy or any
involuntary proceeding relating to insolvency, receivership, liquidation or
composition for the benefit of creditors, if such petition or proceeding is not
dismissed within sixty (60) days of filing.
8.3 No Liability for Termination. Neither party will be liable to the
other party for any termination or expiration of this Agreement in accordance
with its terms.
8.4 Effect of Termination. Upon the effective date of expiration or
termination of this Agreement: (a) Exodus will immediately cease providing the
Internet Data Center Services; (b) any and all payment obligations of Customer
under this Agreement will become due immediately; (c) within thirty (30) days
after such expiration or termination, each party will return all Confidential
Information of the other party in its possession at the time of expiration or
termination and will not make or retain any copies of such Confidential
Information except as required to comply with any applicable legal or accounting
record keeping requirement; and (d) Customer will remove from the Internet Data
Centers all Customer Equipment and any of its other property within five (5)
days of such expiration or termination and return the Customer Area to Exodus in
the same condition as it was on the Installation Date, normal wear and tear
excepted. If Customer does not remove such property within such five-day period,
Exodus will have the option to (i) move any and all such property to secure
storage and charge Customer for the cost of such removal and storage, and/or
(ii) liquidate the property in any reasonable manner.
8.5 Customer Equipment as Security. In the event that Customer fails to
pay Exodus all amounts owed Exodus under this Agreement when due, Customer
Agrees that upon written notice, Exodus may take possession of any Customer
Equipment and store it, at Customer's expense, until taken in full or partial
satisfaction of any lien or judgment, all without being liable to prosecution or
for damages.
8.6 Survival. The following provisions will survive any expiration or
termination of the Agreement: Sections 2, 3, 4, 5, 6, 7, 8 and 9.
9. MISCELLANEOUS PROVISIONS.
9.1 Force Majeure. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement
due to any cause beyond its reasonable control, including act of war, acts of
God, earthquake, flood, embargo, riot, sabotage, labor shortage or dispute,
governmental act or failure of the Internet, provided that the delayed party:
(a) gives the other party prompt notice of such cause, and (b) uses its
reasonable commercial efforts to correct promptly such failure or delay in
performance.
9.2 No Lease. This Agreement is a services agreement and is not intended
to and will not constitute a lease of any real or personal property. Customer
acknowledges and agrees that (i) it has been granted only a license to occupy
the Customer Space and use the Internet Data Centers and any equipment provided
by Exodus in accordance with this Agreement, (ii) Customer has not been granted
any real property interest in the Customer Space or Internet Data Centers, and
(iii) Customer has no rights as a tenant or otherwise under any real property or
landlord/tenant laws, regulations, or ordinances. For good cause, including the
exercise of any rights under Section 8.5 above, Exodus may suspend the right of
any Representative or other person to visit the Internet Data Centers.
9.3 Marketing. Customer agrees that Exodus may refer to Customer by trade
name and trademark, and may briefly describe Customer's Business, in Exodus'
marketing materials and web site. Customer hereby grants Exodus a license to use
any Customer trade names and trademarks solely in connection with the rights
granted to Exodus pursuant to this Section 9.3.
9.4 Governmental Regulations. Customer will not export, re-export,
transfer, or make available, whether directly or indirectly, any regulated item
or information to anyone outside the U.S. in connection with this Agreement
without first complying with all export control laws and regulations which may
be imposed by the U.S. Government and any country or organization of nations
within whose jurisdiction Customer operates or does business.
9.5 Non-Solicitation. During the period beginning on the Installation Date
and ending on the first anniversary of the termination or expiration of this
Agreement in accordance with its terms, Customer agrees that it will not, and
will ensure that its affiliates do not, directly or indirectly, solicit or
attempt to solicit for employment any persons employed by Exodus during such
period.
9.6 Governing Law; Dispute Resolution, Severability; Waiver. This
Agreement is made under and will be governed by and construed in accordance with
the laws of the State of California (except that body of law controlling
conflicts of law) and specifically excluding from application to this Agreement
that law known as the United Nations Convention on the International Sale of
Goods. Any dispute relating to the terms, interpretation or performance of this
Agreement (other than claims for preliminary injunctive relief or other
pre-judgment remedies) will be resolved at the request of either party through
binding arbitration. Arbitration will be conducted in Santa Clara County,
California, under the rules and procedures of the Judicial Arbitration and
Mediation Society ("JAMS"). The parties will request that JAMS appoint a single
arbitrator possessing knowledge of online services agreements; however the
arbitration will proceed even if such a person is unavailable. In the event any
provision of this Agreement is held by a tribunal of competent jurisdiction to
be contrary to the law, the remaining provisions of this Agreement will remain
in full force and effect. The waiver of any breach or default of this Agreement
will not constitute a waiver of any subsequent breach or default, and will not
act to amend or negate the rights of the waiving party.
9.7 Assignments; Notices. Customer may not assign its rights or delegate
its duties under this Agreement either in whole or in part without the prior
written consent of Exodus, except that Customer may assign this Agreement in
whole as part of a corporate reorganization, consolidation, merger, or sale of
substantially all of its assets. Any attempted assignment or delegation without
such consent will be void. Exodus may assign this Agreement in whole or in part.
This Agreement will bind and inure to the benefit of each party's successors and
permitted assigns. Any notice or communication required or permitted to be given
hereunder may be delivered by hand, deposited with an overnight courier, sent by
confirmed facsimile, or mailed by registered or certified mail, return receipt
requested, postage prepaid, in each case to the address of the receiving party
indicated on the signature page hereof, or at such other address as may
hereafter be furnished in writing by either party hereto to the other. Such
notice will be deemed to have been given as of the date it is delivered, mailed
or sent, whichever is earlier.
9.8 Relationship of Parties. Exodus and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between Exodus and
Customer. Neither Exodus nor Customer will have the power to bind the other or
incur obligations on the other's behalf without the other's prior written
consent, except as otherwise expressly provided herein.
9.9 Entire Agreement; Counterparts. This Agreement, including all
documents incorporated herein by reference, constitutes the complete and
exclusive agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces any and all prior or contemporaneous
discussions, negotiations, understandings and agreements, written and oral,
regarding such subject matter. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
Customer's and Exodus' authorized representatives have read the foregoing and
all documents incorporated therein and agree and accept such terms effective as
of the date first above written.
CUSTOMER EXODUS COMMUNICATIONS, INC.
Signature: Signature:
--------------------------- --------------------------
Print name: __________________________ Print name: _________________________
Title: __________________________ Title: _________________________
EXODUS COMMUNICATIONS, INC. CONFIDENTIAL AND PROPRIETARY (rev 6/98) Page 3
<PAGE>
EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES AGREEMENT
THE INTERNET DATA CENTER SERVICES AGREEMENT (this "Agreement") is made effective
as of the Submission Date (June 14, 1999) indicated in the initial Internet Data
Center Services Order Form accepted by Exodus, by and between Exodus
Communications, Inc. ("Exodus") and the customer identified below ("Customer").
PARTIES:
CUSTOMER NAME: EL SITIO USA
---------------------------------------
ADDRESS: 6161 BLUE LAGOON DR.
---------------------------------------
MIAMI FL 33126
---------------------------------------
PHONE: 305.262.4500
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FAX: 305.262.6645
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EXODUS COMMUNICATIONS, INC.
2650 San Tomas Expressway
Santa Clara, CA 99051
Phone: (408) 346-2200
Fax: (408) 346-2420
1. INTERNET DATA CENTER SERVICES.
Subject to the terms and conditions of this Agreement, during the term of this
Agreement, Exodus will provide to Customer the services described in the
Internet Data Center Services Order Form(s) ("IDC Services Order Form(s)")
accepted by Exodus, or substantially similar services if such substantially
similar services would provide Customer with substantially similar benefit
("Internet Data Center Services"). All IDC Services Order Forms accepted by
Exodus are incorporated herein by this reference, each as of the Submission date
indicated in such form.
2. FEES AND BILLING.
2.1 Fees. Customer will pay all fees due according to the IDC Services
Order Form(s).
2.2 Billing Commencement. Billing for Internet Data Center Services, other
than Setup Fees, indicated in the initial IDC Services Order Form shall commence
on the earlier to occur of (i) the "Installation Date" indicated in the initial
IDC Services Order Form, regardless of whether Customer has commenced use of the
Internet Data Center Services, unless Customer is unable to install the Customer
Equipment and/or use the Internet Data Center Services by the Installation Date
due to the fault of Exodus, then billing will not begin until the date Exodus
has remedied such fault and (ii) the date the "Customer Equipment" (Customer's
computer hardware and other tangible equipment, as identified in the Customer
Equipment List which is incorporated herein by this reference) is placed by
Customer in the "Customer Area" (the portion(s) of the Internet Data Centers, as
defined in Section 3.1 below, made available to Customer hereunder for the
placement of Customer Equipment) and is operational. All Setup Fees will be
billed upon receipt of a Customer signed IDC Services Order Form. In the event
that Customer orders additional Internet Data Center Services, billing for such
services shall commence on the date Exodus first provides such additional
Internet Data Center Services to Customer or as otherwise agreed to by Customer
and Exodus.
2.3 Billing and Payment Terms. Customer will be billed monthly in advance
of the provision of Internet Data Center Services, and payment of such fees will
be due within thirty (30) days of the date of such Exodus invoice. All payments
will be made in U.S. dollars. Late payment hereunder will accrue interest at a
rate of one and one-half percent (1 1/2%) per month, or the highest rate allowed
by applicable law, whichever is lower. If in its judgment Exodus determines that
Customer is not creditworthy or is otherwise not financially secure, Exodus may,
upon written notice to Customer, modify the payment terms to require full
payment before the provision of Internet Data Center Services or other
assurances to secure Customer's payment obligations hereunder.
2.4 Taxes. All payments required by this Agreement are exclusive of all
national, state, municipal or other governmental excise, sales, value-added,
use, personal property, and occupational taxes, excises, withholding taxes and
obligations and other levies now in force or exacted in the future, all of which
Customer will be responsible for and will pay in full, except for taxes based on
Exodus' net income.
3. CUSTOMER'S OBLIGATIONS.
3.1 Compliance with Law and Rules and Regulations. Customer agrees that
Customer will comply at all times with all applicable laws and regulations and
Exodus' general rules and regulations relating to its provision of Internet Data
Center Services, as updated by Exodus from time to time ("Rules and
Regulations"). Customer acknowledges that Exodus exercises no control whatsoever
over the content of the information passing through its sites containing the
Customer Area and equipment and facilities used by Exodus to provide Internet
Data Center Services ("Internet Data Centers"), and that it is the sole
responsibility of Customer to assure that the information it transmits and
receives complies with all applicable laws and regulations.
3.2 Customer's Costs. Customer agrees that it will be solely responsible,
and at Exodus's request will reimburse Exodus, for all costs and expenses (other
than those included as part of the Internet Data Center Services and except as
otherwise expressly provided herein) it incurs in connection with this
Agreement.
3.3 Access and Security. Customer will be fully responsible for any
charges, costs, expenses (other than those included in the Internet Data Center
Services), and third party claims that may result from its use of, or access to,
the Internet Data Centers and/or the Customer Area including but not limited to
any unauthorized use of any access devices provided by Exodus hereunder. Except
with the advanced written consent of Exodus, Customer's access to the Internet
Data Centers will be limited solely to the individuals identified and authorized
by Customer to have access to the Internet Data Centers and the Customer Area in
accordance with this Agreement, as identified in the Customer Registration Form,
as amended from time to time, which is hereby incorporated by this reference
("Representatives").
3.4 No Competitive Services. Customer may not at any time permit any
Internet Data Center Services to be utilized for the provision of any services
that compete with any Exodus services, without Exodus' prior written consent.
3.5 Insurance.
(a) Minimum Levels. Customer will keep in full force and effect during the
term of this Agreement" (i) comprehensive general liability insurance in an
amount not less than $[Illegible] million per occurrence for bodily injury and
property damage; (ii) employer's liability insurance in an amount not less than
$1 million per occurrence; and (iii) workers' compensation insurance in an
amount not less than that required by applicable law. Customer also agrees that
it will, and will be solely responsible for ensuring that its agents (including
contractors and subcontractors) maintain, other insurance at levels no less than
those required by applicable law and customary in Customer's and its agents'
industries.
(b) Certificates of Insurance. Prior to installation of any Customer
Equipment in the Customer Area, Customer will furnish Exodus with certificates
of insurance which evidence the minimum levels of insurance set forth above.
(c) Naming Exodus as an Additional Insured. Customer agrees that prior to
the installation of any Customer Equipment, Customer will cause its insurance
provider(s) to name Exodus as an additional insured and notify Exodus in writing
of the effective date thereof.
4. CONFIDENTIAL INFORMATION.
4.1 Confidential Information. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, technology, and products, including
the terms and conditions of this Agreement ("Confidential Information").
Confidential Information will include, but not be limited to, each party's
proprietary software and customer information. Each party agrees that it will
not use in any way, for its own account or the account of any third party,
except as expressly permitted by this Agreement, not disclose to any third party
(except as required by law or in that party's attorneys, accountants and other
advisors as reasonably necessary), any of the other party's Confidential
Information and will take reasonable precautions to protect the confidentiality
of such information.
4.2 Exceptions. Information will not be deemed Confidential Information
hereunder if such information: (i) is known to the receiving party prior to
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party; (ii)
becomes known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one having an
obligation of confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except through a breach
of this Agreement by the receiving party; or (iv) is independently developed by
the receiving party.
5. REPRESENTATIONS AND WARRANTIES.
5.1 Warranties by Customer.
(a) Customer Equipment. Customer represents and warrants that it owns or
has the legal right and authority, and will continue to own or maintain the
legal right and authority during the term of this Agreement, to place and use
the Customer Equipment as contemplated by this Agreement. Customer further
represents and warrants that its placement, arrangement, and use of the Customer
Equipment in the Internet Data Centers complies with the Customer Equipment
Manufacturer's environmental and other specifications.
(b) Customer's Business. Customer represents and warrants that Customer's
services, products, materials, data, information and Customer Equipment used by
Customer in connection with this Agreement as well as Customer's and its
permitted customers' and users' use of the Internet Data Center Services
(collectively, "Customer's Business") does not as of the Installation Date, and
will not during the term of this Agreement operate in any manner that would
violate any applicable law or regulation.
(c) Rules and Regulations. Customer has read the Rules and Regulations and
represents and warrants that Customer and Customer's Business are currently in
full compliance with the Rules and Regulations, and will remain so at all times
during the term of this Agreement.
(d) Breach of Warranties. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
remedies available at law or in equity, Exodus will have the right immediately,
in Exodus' sole discretion, to suspend any related Internet Data Center Services
if deemed reasonably necessary by Exodus to prevent any harm to Exodus and its
business.
5.2 Warranties and Disclaimers by Exodus.
5.2(a) Service Level Warranty. In the event Customer experiences any
of the following and Exodus determines in its reasonable judgment that such
inability was caused by Exodus' failure to provide Internet Data Center Services
for reasons within Exodus' reasonable control and not as a result of any actions
or inactions of Customer or any third
<PAGE>
parties (including Customer Equipment and third party equipment), Exodus will,
upon Customer's request in accordance with paragraph (iii) below, credit
Customer's account as described below:
(i) Inability to Access the Internet (Downtime). If Customer is
unable to transmit and receive information from Exodus' Internet Data Centers
(i.e., Exodus' LAN and WAN) to other portions of the Internet because Exodus
failed to provide the Internet Data Center Services for more than fifteen (15)
consecutive minutes, Exodus will credit Customer's account the pro-rata
connectivity charges (i.e., all band width related charges) for one (1) day of
service, up to an aggregate maximum credit of connectivity charges for seven (7)
days of service in any one calendar (1) month. Exodus' scheduled maintenance of
the Internet Data Centers and Internet Data Center Services as described in the
Rules and Regulations, must not be deemed to be a failure of Exodus to provide
Internet Data Center Services. For purposes of the foregoing, "unable to
transmit and receive" shall mean sustained partial loss in excess of 50% based
on Exodus' measurements.
(ii) Packet Loss and Latency. Exodus does not proactively monitor
the packet loss or transmission latency of specific customers. Exodus does,
however, proactively monitor the aggregate packet loss and transmission latency
within LAN and WAN. In the event that Exodus discovers (either from its own
efforts or after being notified by Customer) that Customer is experiencing
packet loss in excess of one percent (1%) ("Excess Packet Loss") or transmission
latency in excess of 120 milliseconds round trip time (based on Exodus'
measurements) between any two Internet Data Centers within Exodus' U.S. network
(collectively, "Excess Latency", and with Excess Packet Loss "Excess Packet
Loss/Latency") and Customer notifies Exodus (or confirms that Exodus has
notified Customer), Exodus will create all actions necessary to determine the
source of the Excess Packet Loss Latency.
(A) Time to Discover Source of Excess Packet Loss/Latency:
Notification of Customer. Within two (2) hours of discovering existence of
Excess Packet Loss/Latency, Exodus will determine whether the source of the
Excess Packet Loss/Latency is limited to the Customer Equipment and the Exodus
equipment connecting the Customer Equipment to Exodus' LAN ("Customer Specific
Packet Loss/Latency"). If the Excess Packet Loss/Latency is not a Customer
specific Packet Loss/Latency, Exodus will determine the source of the Excess
Packet Loss/Latency within two (2) hours after determining that it is not a
Customer Specific Packet Loss/Latency. In any event, Exodus will notify Customer
of the source of the Excess Packet Loss/Latency within sixty (60) minutes after
identifying the source.
(B) Remedy of Excess Packet Loss/Latency. If the Excess Packet
Loss/Latency remedy is within the sole control of Exodus, Exodus will remedy the
Excess Packet Loss/Latency within two (2) hours of determining the source of the
Excess Packet Loss/Latency. If the Excess Packet Loss/Latency is caused from
outside of the Exodus LAN or WAN, Exodus will notify Customer and will use
commercially reasonably efforts to notify the party(ies) responsible for the
source and cooperate with it (them) to resolve the problem as soon as possible.
(C) Failure to Determine Source and/or Resolve Problem: In the
event that Exodus is unable to determine the source and remedy the Excess Packet
Loss/Latency within the time periods described above (where Exodus was solely in
control of the source), Exodus will credit Customer's account the pro-rata
connectivity charges for one (1) day of service for every two (2) hours after
the time periods described above that it takes Exodus to resolve the problem, up
to an aggregate maximum credit of connectivity charges for seven (7) days of
service in any one (1) month.
(iii) Customer Must Request Credit: To receive any of the credit described
in this section 5.2(a), Customer must notify Exodus within three (3) business
days from the time Customer becomes eligible to receive credit. Failure to
comply with this requirement will forfeit Customer's right to receive a credit.
(iv) Remedies Shall Not Be Cummulative; Maximum Credit: In the event that
Customer is entitled to multiple credit hereunder arising from the same event,
such credits shall not be cummulative and Customer shall be entitled to receive
only the maximum single credit available for such event. In no event will Exodus
be required to credit Customer in any one (1) calendar month connectivity
charges in excess of seven (7) days of service. A credit shall be applied only
to the month in which there was the incident that resulted in the credit.
Customer shall not be eligible to receive any credit for periods in which
Customer received any Internet Data Center Services free of charge.
(v) Termination Option for Chronic Problems: If, in any single calendar
month, Customer would be able to receive credits totaling fifteen (15) or more
days (but for the limitation in paragraph (iv) above) resulting from three (3)
or more events during such calendar month or, if any single event [ILLEGIBLE]
customer to credits under paragraph 5.2(a)(i) exists for a period of eight (8)
consecutive hours, then, Customer may terminate this Agreement for cause and
without penalty by notifying Exodus within five (5) days following the end of
such calendar month. Such termination will be effective thirty (30) days after
receipt of such notice by Exodus.
THIS WARRANTY DOES NOT APPLY TO ANY INTERNET DATA CENTER SERVICES THAT EXPRESSLY
EXCLUDE THIS WARRANTY (AS DESCRIBED IN THE SPECIFICATION SHEETS FOR SUCH
PRODUCTS). THIS SECTION 5.2(a) STATES CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR
ANY FAILURE BY EXODUS TO PROVIDE INTERNET DATA CENTER SERVICES.
(b) No Other Warranty. EXCEPT FOR THE EXPRESS WARRANTY SET OUT IN
SUBSECTION (a) ABOVE, THE INTERNET DATA CENTER SERVICES ARE PROVIDED ON AN "AS
IS" BASIS, AND CUSTOMER'S USE OF THE INTERNET DATA CENTER SERVICES IS AT ITS OWN
RISK. EXODUS DOES NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS
AND/OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO WARRANTIES OF
[ILLEGIBLE] FITNESS FOR A PARTICULAR PURPOSE, [ILLEGIBLE] AND TITLE, AND ANY
WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICE. EXODUS
DOES NOT WARRANT THAT THE INTERNET DATA CENTER SERVICES WILL BE UNINTERRUPTED,
ERROR-FREE OR COMPLETELY SECURE.
(c) Disclaimer of Actions Caused by and/or Under the Control of Third
Parties. EXODUS DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM EXODUS'
INTERNET DATA CENTERS AND OTHER PORTIONS OF THE INTERNET. SUCH FLOW DEPENDS IN
LARGE PART ON THE PERFORMANCE OF INTERNET SERVICES PROVIDED OR CONTROLLED BY
THIRD PARTIES. AT TIMES, ACTIONS OR INACTIONS CAUSED BY THESE THIRD PARTIES CAN
PRODUCE SITUATIONS IN WHICH EXODUS' CUSTOMERS' CONNECTIONS TO THE INTERNET (OR
PORTIONS THEREOF) MAY BE IMPAIRED OR DISRUPTED. ALTHOUGH EXODUS WILL USE
COMMERCIALLY REASONABLE EFFORTS TO TAKE ACTIONS IT DEEMS APPROPRIATE TO REMEDY
AND AVOID SUCH EVENTS, EXODUS CANNOT GUARANTEE THAT THEY WILL NOT OCCUR.
ACCORDINGLY, EXODUS DISCLAIMS ANY AND ALL LIABILITY RESULTING FROM OR RELATED TO
SUCH EVENTS.
6. LIMITATIONS OF LIABILITY.
6.1 Personal Injury. EACH REPRESENTATIVE AND ANY OTHER PERSONS VISITING
THE INTERNET DATA CENTERS DOES SO AT ITS OWN RISK AND EXODUS ASSUMES NO
LIABILITY WHATSOEVER FOR ANY HARM TO SUCH PERSONS RESULTING FROM ANY CAUSE OTHER
THAN EXODUS' NEGLIGENCE OR WILLFUL MISCONDUCT RESULTING IN PERSONAL INJURY TO
SUCH PERSONS DURING SUCH A VISIT.
6.2 Damage to Customer Equipment or Business. EXODUS ASSUMES NO LIABILITY
FOR ANY DAMAGE TO, OR LOSS RELATING TO, CUSTOMER'S BUSINESS RESULTING FROM ANY
CAUSE WHATSOEVER. CERTAIN CUSTOMER EQUIPMENT, INCLUDING BUT NOT LIMITED TO
CUSTOMER EQUIPMENT LOCATED ON CYBERRACKS, MAY BE DIRECTLY ACCESSIBLE BY OTHER
CUSTOMERS. EXODUS ASSUMES NO LIABILITY FOR ANY DAMAGE TO, OR LOSS OF, ANY
CUSTOMER EQUIPMENT RESULTING FROM ANY CAUSE OTHER THAN EXODUS' GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT. TO THE EXTENT EXODUS IS LIABLE FOR ANY DAMAGE TO, OR LOSS
OF, THE CUSTOMER EQUIPMENT FOR ANY REASON, SUCH LIABILITY WILL BE LIMITED SOLELY
TO THE THEN-CURRENT VALUE OF THE CUSTOMER EQUIPMENT.
6.3 Exclusions. EXCEPT AS SPECIFIED IN SECTIONS 6.1 AND 6.2, IN NO EVENT
WILL EXODUS BE LIABLE TO CUSTOMER, ANY REPRESENTATIVE, OR ANY THIRD PARTY FOR
ANY CLAIMS ARISING OUT OF OR RELATED TO THIS AGREEMENT. CUSTOMER EQUIPMENT,
CUSTOMER'S BUSINESS OR OTHERWISE, AND ANY LOST REVENUE, LOSS PROFITS,
REPLACEMENT GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES, INCIDENTAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF DATA OR INTERRUPTION OR LOSS OF USE
OF SERVICE OR OF ANY CUSTOMER EQUIPMENT OR CUSTOMER'S BUSINESS, EVEN IF ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER THEORY OF CONTRACT, TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
6.4 Maximum Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, EXODUS'S MAXIMUM AGGREGATE LIABILITY TO CUSTOMER RELATED TO OR IN
CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT PAID BY
CUSTOMER TO EXODUS HEREUNDER FOR THE PRIOR TWELVE (12) MONTH PERIOD.
6.5 Customer's Insurance. Customer agrees that it will not pursue any
claims against Exodus for any liability Exodus may have under or relating to
this Agreement until Customer first makes claims against Customer's insurance
provider(s) and such insurance provider(s) finally resolve(s) such claims.
6.6 Basis of the Bargain; Failure of Essential Purpose. Customer
acknowledges that Exodus has set its prices and entered into this Agreement in
reliance upon the limitations of liability and the disclaimers of warranties and
damages set forth herein and that the same form an essential basis of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if found to have failed of their essential purpose.
7. INDEMNIFICATION
7.1 Exodus's Indemnification of Customer. Exodus will indemnify, defend
and hold Customer harmless from and against any and all costs, liabilities,
losses, and expenses (including, but not limited to, reasonable attorneys' fees)
(collectively, "Losses") resulting from any claim, suit, action or proceeding
(each, as "Action") brought against Customer alleging (i) the infringement of
any third party registered U.S. copyright or issued U.S. parent resulting from
the provision of Internet Data Center Services pursuant to this Agreement (but
excluding any infringement contributorily caused by Customer's Business or
Customer Equipment) and (ii) personal injury to Customer's Representatives from
Exodus's gross negligence or willful [ILLEGIBLE].
7.2 Customer's Indemnification of Exodus. Customer will indemnify, defend
and hold Exodus, its affiliates and customer harmless from and against any and
all Losses resulting from or arising out of any Action brought by or against
Exodus, its affiliates or customers alleging: (a) with respect to the Customer's
Business: (i) infringement or misappropriation of any intellectual property
rights; (ii) defamation, libel, slander, obscenity, pornography, or violation of
the rights of privacy or publicity; (iii) spamming, or any other offensive,
harassing or illegal conduct or violation of the Rules and Regulations; (b) any
damage or destruction to the Customer Area, the Internet Data Centers or the
equipment of Exodus or any other customer by Customer or Representative(s) or
Customer's designees; or (c) any other damage arising from the Customer
Equipment or Customer's Business.
7.3 Notice. Each party will provide the other party prompt written notice
upon of the existence of any such event of which it becomes aware, and an
opportunity to participate in the defense thereof.
8. TERM AND TERMINATION.
8.1 Term. This Agreement will be effective for a period of one (1) year
from the Installation Date, unless earlier terminated according to the
provisions of this Section 8. The Agreement will automatically renew for
additional terms of one (1) year each.
8.2 Termination.
(a) For Convenience.
(i) By Customer During First Thirty Days. Customer may terminate this
Agreement for convenience by providing written notice to Exodus at any time
during the thirty (30) day period beginning on the Installation Date.
EXODUS COMMUNICATIONS, INC. CONFIDENTIAL AND PROPRIETARY (rev 6/98) Page 2
<PAGE>
(ii) By Either Party. Either Party may terminate this Agreement for
convenience at any time effective after the first (1st) anniversary of the
Installation Date by providing ninety (90) days prior written notice to the
other party at any time thereafter.
(b) For Cause. Either party will have the right to terminate this
Agreement if: (i) the other party breaches any material term or condition of
this Agreement and fails to cure such breach within thirty (30) days after
receipt of written notice of the same, except in the case of failure to pay
fees, which must be cured within five (5) days after receipt of written notice
from Exodus: (ii) the other party becomes the subject of a voluntary petition in
bankruptcy or any involuntary proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors: or (iii) the other
party becomes the subject of any involuntary petition in bankruptcy or any
involuntary proceeding relating to insolvency, receivership, liquidation, or
composition for the benefit of creditors, if such petition or proceeding is not
dismissed within sixty (60) days of filing.
8.3 No liability for Termination. Neither party will be liable to the
other for any termination or expiration of this Agreement in accordance with its
terms.
8.4 Effect of Termination. Upon the effective date of expiration or
termination of this Agreement (a) Exodus will immediately cease providing the
Internet Data Center Services; (b) any and all payment obligations of Customer
under this Agreement will become due immediately; (c) within thirty (30) days
after such expiration or termination, each party will return all Confidential
Information of the other party in its possession at the time of expiration or
termination and will not make or retain any copies of such Confidential
Information except as required to comply with any applicable legal or accounting
record keeping requirement; and (d) Customer will remove from the Internet Data
Centers all Customer Equipment and any of its other property within the Internet
Data Centers within five (5) days of such expiration or termination and return
the Customer Area to Exodus in the same condition as it was on the Installation
Date, normal wear and tear excepted. If Customer does not remove such property
with such five-day period, Exodus will have the option to (i) move any and all
such property to secure storage and charge Customer for the cost of such removal
and storage, and/or (ii) liquidate the property in any reasonable manner.
8.5 Customer Equipment as Security. In the event that Customer fails to
pay Exodus all amounts owed Exodus under this Agreement when due, Customer
Agrees that upon written notice, Exodus may take possession of any Customer
Equipment and store it, at Customer's expense, until taken in full or partial
satisfaction of any lien or judgement, all without being liable to prosecution
or for damages.
8.6 Survival. The following provisions will survive any expiration or
termination of the Agreement: Sections 2, 3, 4, 5, 6, 7, 8 and 9.
9. MISCELLANEOUS PROVISIONS.
9.1 Force Majeure. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement
due to any cause beyond its reasonable control, including act of war, acts of
God, earthquake, flood, embargo, riot, sabotage, labor shortage or dispute,
governmental act or failure of the Internet, provided that the delayed party:
(a) gives the other party prompt notice of such cause and (b) uses its
reasonable commercial efforts to correct promptly such failure or delay in
performance.
9.2 No Lease. This Agreement is a services agreement and is not intended
to and will not constitute a lease of any real or personal property. Customer
acknowledges and agrees that (i) it has been granted only a license to occupy
the Customer Space and use the Internet Data Centers and any equipment provided
by Exodus in accordance with this Agreement, (ii) Customer has not been granted
any real property interest in the Customer Space or Internet Data Centers, and
(iii) Customer has no rights as a tenant or otherwise under any real property or
landlord/tenant laws, regulations, or ordinances. For good cause, including the
exercise of any rights under Section 8.5 above, Exodus may suspend the right of
any Representative or other person to visit the Internet Data Centers.
9.3 Marketing. Customer agrees that Exodus may refer to Customer by trade
name and trademark and may briefly describe Customer's Business in Exodus
marketing materials and web site. Customer hereby grants Exodus a license to use
any Customer trade names and trademarks solely in connections with the rights
granted in Exodus persons to this Section 9.3.
9.4 Government Regulations. Customer will not export, re-export, transfer,
or make available, whether directly or indirectly, any regulated item or
information to anyone outside the U.S. in connection with this Agreement without
first complying with all export control laws and regulations which may be
imposed by the U.S. Government and any country or organization of nations within
whose jurisdiction Customer operates or does business.
9.5 Non-Solicitation. During the period beginning on the Installation Date
and ending on the first anniversary of the termination or expiration of this
Agreement in accordance with its terms, Customer agrees that it will not, and
will ensure that its affiliates do not, directly or indirectly, solicit or
attempt to solicit for employment any persons employed by Exodus during such
period.
9.6 Governing Law: Dispute Resolution, Severability: Waiver. This
Agreement is made under and will be governed by and construed in accordance with
the laws of the State of California (except that body of law controlling
conflicts of law) and specifically excluding from application to this Agreement
that law known as the United Nations Convention on the International Sale of
Goods. Any dispute relating to the terms, interpretation or performance of this
Agreement (other than claims for preliminary injunctive relief or other
pre-judgement remedies) will be resolved at the request of either party through
binding arbitration. Arbitration will be conducted in Santa Clara County,
California, under the rules and procedures of the Judicial Arbitration and
Mediation Society ("JAMS"). The parties will request that JAMS appoint a single
arbitrator possessing knowledge of [ILLEGIBLE] services agreements; however the
arbitration will proceed even if such a person is unavailable. To the extent any
provision of this Agreement is held by a tribunal of competent jurisdiction to
be contrary to the law, the remaining provisions of this Agreement will receive
in full force and effect. The waiver of any breach or default of this Agreement
will not constitute a waiver of any subsequent breach or default, and will not
act to amend or negate the rights of the waiving party.
9.7 Assignment: Notices. Customer may not assign its rights or delegate
its duties under this Agreement either in whole or in part without the prior
written consent of Exodus, except that Customer may assign this Agreement in
whole as part of a corporate reorganization, consolidation, merger, or sale of
substantially all of its assets. Any attempted assignment or delegation without
such consent will be void. Exodus may assign this Agreement in whole or part.
This Agreement will bind and inure to the benefit of each party's successors and
permitted assigns. Any notice or communication required or permitted to be given
hereunder may be delivered by hand, deposited with an overnight carrier, sent by
confirmed facsimile, or mailed by registered or certified mail, return receipt
requested, postage prepaid, in each case to the address of the receiving party
indicated on the signature page hereof, or at such other address as may
hereafter be furnished in writing by either party hereto to the other. Such
notice will be deemed to have been given as of the date it is delivered, mailed
or sent, whichever is earlier.
9.8 Relationship of Parties. Exodus and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between Exodus and
Customer. Neither Exodus nor Customer will have the power to bind the other or
incur obligations on the other's behalf without the other's prior written
consent, except as otherwise expressly provided herein.
9.9 Entire Agreement; Counterparts. This Agreement, including all
documents incorporated herein by reference, constitutes the complete and
exclusive agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces any and all prior or contemporaneous
discussions, negotiations, understandings and agreements, written and oral,
regarding such subject matter. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
Customer's and Exodus's authorized representatives have read the foregoing and
all documents therein and agree and accept such terms effective as of the date
first above written.
CUSTOMER EXODUS COMMUNICATIONS, INC.
Signature:____________________ Signature:_______________________________
Print Name: __________________ Print Name: _____________________________
Title: _______________________ Title: __________________________________
EXODUS COMMUNICATIONS, INC. CONFIDENTIAL AND PROPRIETARY (rev 6/98) Page 3
<PAGE>
EXODUS COMMUNICATIONS, INC.
Equipment Purchase Agreement
This Equipment Purchase Agreement (the "Agreement") is entered into
between Exodus Communications, Inc. ("Exodus") and El Sitio USA (the "Customer")
is entered into as of 8/13, 1999 (the "Effective Date").
NOW, THEREFORE, in consideration of the premises and mutual promises
herein contained, Customer agrees to purchase and Exodus agrees to deliver to
Customer the equipment (the "Equipment") set forth on Order Form attached hereto
as Exhibit A as follows:
1. SHIPPING AND HANDLING. All Equipment is provided FOB vendor facility.
Shipment will be made as specified by Customer and Customer is solely
responsible for all expenses in connection with the delivery of the Equipment.
The Equipment will be deemed accepted by Customer upon shipment.
2. PURCHASE PRICE AND TAXES. Customer shall pay to Exodus the purchase
price as defined on Exhibit A hereto ("Purchase Price") for each item of
Equipment. Customer hereby grants and Exodus reserves a purchase money security
interest in the Equipment and the proceeds thereof as a security for its
obligations hereunder until payment of the full Purchase Price to Exodus. The
Purchase Price is due and payable within thirty (30) days of shipment of the
Equipment. Customer shall pay all taxes and other governmental charges assessed
in connection with the sale, use or possession of the Equipment including,
without limitation, any and all sales and/or use taxes and personal property
taxes (other than taxes on Exodus' net income).
3 TITLE. Customer shall acquire title to the Equipment upon full payment
of the purchase price(s) set forth herein. Notwithstanding the foregoing, Exodus
and any licensor of rights to Exodus shall retain title to and rights in the
intellectual property (whether or not subject to parent or copyright) and
content contained in the materials supplied under the terms of this Agreement.
4. SELECTION OF EQUIPMENT; MANUFACTURER WARRANTY. Customer acknowledges
that is has selected the Equipment and disclaims any statements made by Exodus.
Customer acknowledges and agrees that use and possession of the Equipment by
Customer shall be subject to and controlled by the terms of any manufacturer's
or, if appropriate, supplier's warranty, and Customer agrees to look solely to
the manufacturer or, if appropriate, supplier with respect to all mechanical,
service and other claims, and the right to enforce all warranties made by said
manufacturer are hereby, to the extent Exodus has the right, assigned to
Customer. THE FOREGOING WARRANTY IS THE EXCLUSIVE WARRANTY AND IS IN LIEU OF ANY
ORAL REPRESENTATION AND ALL OTHER WARRANTIES AND DAMAGES, WHETHER EXPRESSED,
IMPLIED OR STATUTORY. EXODUS HAS NOT MADE NOR DOES MAKE ANY OTHER WARRANTIES OF
ANY KIND, EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, OR OF NONINFRINGEMENT OF
THIRD PARTY RIGHTS AND AS TO EXODUS AND ITS ASSIGNEES, CUSTOMER PURCHASES THE
EQUIPMENT "AS IS".
5. LIMITATION OF LIABILITY. Exodus' entire liability for any damages which
may arise hereunder, for any cause whatsoever, and regardless of the form of
action, whether in contract or in tort, including Exodus' negligence, or
otherwise, shall be limited to the Purchase Price paid by Customer for the
Equipment. IN NO EVENT WILL EXODUS BE LIABLE FOR ANY SPECIAL, INDIRECT,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES, OR FOR ANY LOSS OF BUSINESS OR PROSPECTIVE
BUSINESS OPPORTUNITIES, PROFITS, SAVINGS, INFORMATION, USE OR OTHER COMMERCIAL
OR ECONOMIC LOSS, EVEN IF EXODUS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
6. GOVERNING LAW; DISPUTE RESOLUTION. This Agreement is made under and
will be governed by and construed in accordance with the laws of the State of
California (except that body of law controlling conflicts of law) and
specifically excluding from application to this Agreement that law known as the
United Nations Convention on the International Sale of Goods. The parties will
endeavor to settle amicably by mutual discussions any disputes, differences, or
claims whatsoever related to this Agreement. Failing such amicable settlement,
any controversy, claim, or dispute arising under or relating to this Agreement,
including the existence, validity, interpretation, performance, termination or
breach thereof, the parties to this Agreement hereby consent to jurisdiction and
venue in the courts of the state of California and in the U.S. District Courts
in the City of San Francisco, California.
7. MISCELLANEOUS. The above terms and conditions are the only terms and
conditions upon which Exodus is willing to sell the Equipment and supersede all
previous agreements, promises or representations, oral or written. Any
additional or different terms in any purchase order or other response by
Customer shall be deemed objected to by Exodus without need of further notice of
objection, and shall be of no effect or in any way binding upon Exodus. No
waiver of any breach or default by or failure to require strict performance of
Customer shall waive any other breach or default. This Agreement may be executed
in two or more counterparts, each of which will be deemed an original, but all
of which together shall constitute one and the same instrument. Once signed, any
reproduction of this Agreement made by reliable means (e.g. photocopy,
facsimile) is considered an original. This Agreement may be changed only by a
written document signed by authorized representatives of Exodus and Customer.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the Effective
Date first set out above.
EXODUS COMMUNICATIONS INC. CUSTOMER:
By: By:
---------------------------------- ----------------------------------
Name: Name:
-------------------------------- --------------------------------
Title: Title:
------------------------------- -------------------------------
Equipment Purchase Agreement (Standard Rev. 05/99)
EXODUS CONFIDENTIAL AND PROPRIETARY
<PAGE>
Exhibit 10.3
Agreement #____________
IMPSAT
ImpSat USA IP-Internet Backbone & Co-location Service Agreement
1. Service Coverage for: El SITIO USA.
2. (Customer) Billing Address: 6161 Blue Lagoon Drive, Suite 400, Miami, FL
33126
<TABLE>
<CAPTION>
IP-Internet Backbone
U.S. Customer: Service Location ImpSat Teleport Wilton Manors X Piscataway ___
Location Houston ____
<S> <C> <C>
----------------------------------------------------
Street 6161 Blue Lagoon Drive
----------------------------------------------------
City/State Miami, Florida
----------------------------------------------------
Telephone (305) 262-4500
----------------------------------------------------
Facsimile (305) 262-6645
----------------------------------------------------
Attention Maggie Masforroll
----------------------------------------------------
Non-U.S. Customer: Service Location
----------------------------------------------------
Street Avenida Belgrano 845 4to.A
----------------------------------------------------
City/State 1092-Buenos Aires. Argentina
----------------------------------------------------
Telephone 54-11-4343-5309
----------------------------------------------------
Facsimile 54-11-4343-5309/4343-9122
----------------------------------------------------
Attention Alfredo Jimenez
----------------------------------------------------
</TABLE>
B. Transmission Rate: 4,096 Kbps
-----
C. Type of Service: |X| IP-Internet Backbone & Co-location
|_| CIR ______ PVC _____
Note: The transmission rate is equivalent to the Internet Backbone Access
Guaranteed Bandwidth provided to the customer. ImpSat USA will also provide
co-location for customer's equipment hosted in 3 1/2 racks and 7 x 24 monitoring
service.
3. Service Term: 36 Months, beginning on the date of service acceptance.
4. INTERNET Electronic Mail Address for Notice of Acceptance Certification:
INTERNET electronic mail address to which IMPSAT USA is certification that
the circuit is ready (in accordance with Section 1 on page 2 of this
Agreement.
E-mail Address: [email protected]
5. Price Schedule: (not including any fees, charges, taxes, and/or
withholdings including but not limited to contributions to universal
service mechanisms)
- --------------------------------------------------------------------------------
Monthly Recurring Charges:
Communications Service $ 6,240.00
Non-Recurring Charges:
Engineering, Installation, & Commissioning: $ 0.00
- --------------------------------------------------------------------------------
6. Signature - By signing below, Customer requests the provision of the
services described herein for the specified term. IMPSAT USA agrees to
those services for the specified term, and Customer agrees to the Terms
and Conditions and Conditions of Service, installation, and Maintenance on
pages 2,3,4 and 5.
Customer ImpSat USA, Inc.
Signed ____________________________ __________________________
Name (Print)_______________________ __________________________
Title _____________________________ __________________________
Date ______________________________ __________________________
- --------------------------------------------------------------------------------
04/29/99 El Sitio Page
- --------------------------------------------------------------------------------
<PAGE>
Agreement #____________
impsat
TERMS AND CONDITIONS
IMPSAT USA and Customer agree that this Service Agreement shall be
governed by the following terms and conditions
1. Service Acceptance
Acceptance of service shall be deemed to occur upon IMPSAT USA's
certification that service related equipment and service has been
installed and upon certification of the service by Customer. For each
such service, Customer shall provide an INTERNET electronic mail address
to which IMPSAT USA shall send such certification. Certification of the
service by Customer shall be deemed to have occurred twenty-four (24)
hours after certification is sent by IMPSAT USA unless Customer certifies
in writing to IMPSAT USA within that period that the service is
experiencing a high rate of errors and provides evidence thereof. If
Customer does not accept the service, IMPSAT USA shall retest the service
and equipment for a period of (24) hours. If service is found to be
acceptable, and/or is determined that the problem exists in the Customers
equipment, IMPSAT USA, shall then have the right to commence billing for
the service as of the original certification date.
2. Price Schedule (not including taxes applicable in each country). The
prices for the communications services shall be as set forth in the
Service Agreement on page 1 for each service and each term of service
stated therein. These prices are in U.S. dollars and are net to IMPSAT USA
in all cases. Customer shall be responsible for the payment of any and all
applicable fees, charges, taxes, and/or withholdings including, but not
limited to contributions to Universal Service support mechanisms on the
service at the time of invoice by IMPSAT USA and its affiliates providing
service at the non-USA service sites.
3. Termination by Customer. Customer may terminate Service upon sixty (60)
days written notice to IMPSAT USA's corporate office, computed from the
date of receipt by IMPSAT USA of the notice. The termination of this
Agreement for any reason shall extinguish all of IMPSAT USA's obligations
to provide, and Customer's obligations to accept IMPSAT USA service but
shall not relieve either party of any remaining obligations that are
applicable under this Agreement.
4. Payment Schedule A. Non-recurring charge shall be invoiced 100% within
five (5) working days of Agreement signature and 50% within five (5)
working days of acceptance of service. Customer shall pay invoiced amount
in full within ten (10) calendar days of the invoice date. B. The monthly
recurring charge will be invoiced at the beginning of each month for
service beginning on the first (1st) day of same month Customer
shall pay this invoice in full no later than the 15th of each month. C.
Payments not made as provided in Clauses 4A, 4B, shall accrue interest at
the rate of one and one-half percent (1.5%) per month, or at the highest
rate allowed by law, whichever is less, from the invoice date until paid.
Failure of Customer to pay any amounts when due shall constitute
sufficient cause for IMPSAT USA to terminate service to Customer under
this Agreement.
5. Renewal and Cancellation of Service After Expiration of Agreement At
the end of the Agreement term, service will be automatically renewed for a
like period unless Customer signs a new service Agreement or cancels the
service in writing as provided herein at least sixty (60) days prior to
the expiration of the service period. The rate for service shall be at the
price and on the terms and conditions of IMPSAT USA then in effect at the
time of renewal.
6. Confidential Information
6.1 Confidential Information. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, technology, and products, including
the terms and conditions of this Agreement ("Confidential Information").
Confidential Information will include, but not be limited to, each party's
proprietary software and Customer information. Each party agrees that it will
not use in any way, for its own account or the account of any third party,
except as expressly permitted by this Agreement, nor disclose to any third
party (except as required by law or to that party's attorneys, accountants
and other advisors as reasonably necessary), any of the other party's
Confidential Information and will take reasonable precautions to protect the
confidentiality of such information.
6.2 Exceptions. Information will not be deemed Confidential Information
hereunder if such information: (i) is known to the receiving party prior to
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party;
(ii) becomes known (independently of disclosure by the disclosing party) to
the receiving party directly or indirectly from a source other than one
having an obligation of confidentiality to the disclosing party;
(iii) becomes publicly known or otherwise ceases to be secret or
confidential, except through a breach of this Agreement by the receiving
party; or (iv) is independently developed by the receiving party.
7. Representations and Warranties
7.1 Warranties by Customer.
(a) Customer Equipment. Customer represents and warrants that it owns
or has the legal right and authority, and will continue to own or maintain
the legal right and authority during the term of this Agreement, to place and
use the Customer Equipment as contemplated by this Agreement. Customer
further represents and warrants that its placement, arrangement, and use of
the Customer Equipment in the Internet Data Centers comply with the Customer
Equipment Manufacturer's environmental and other specifications.
- --------------------------------------------------------------------------------
04/29/99 El Sitio Page
- --------------------------------------------------------------------------------
<PAGE>
Agreement #____________
impsat
(b) Customer's Business. Customer represents and warrants that
Customer's services, products, materials, data, information and Customer
Equipment used by Customer in connection with this Agreement as well as
Customer's and its permitted customers' and users' use of the Internet Data
Center Services (collectively, "Customer's Business") does not as of the
Installation Date, and will not during the term of this Agreement operate in
any manner that would violate any applicable law or regulation.
(c) Breach of Warranties. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition any other
remedies available at law or in equity, IMPSAT USA will have the right
immediately, in IMPSAT USA's sole discretion, to suspend any related Internet
Data Center Services if deemed reasonably necessary by IMPSAT USA to prevent
any harm to IMPSAT USA and its business.
7.2 Warranties and Disclaimers by IMPSAT USA.
7.2 (a) Service Level Warranty. In the event Customer experiences any
of the following and IMPSAT USA determines in its reasonable judgment that
such inability was caused by IMPSAT USA's failure to provide Internet Data
Center Services for reasons within IMPSAT USA's reasonable control and not as
a result of any actions or inaction of Customer or any third parties
(including Customer Equipment and third party equipment), IMPSAT USA will,
upon Customer's request in accordance with paragraph (iii) below, credit
Customer's account as described below:
(i) Inability to Access the Internet (Downtime). If Customer is
unable to transmit and receive information from IMPSAT USA's Internet Data
Centers (i.e., IMPSAT USA's LAN and WAN) to other portions of the Internet
because IMPSAT USA failed to provide the Internet Data Center Services,
IMPSAT USA will credit Customer's account the pro-rata connectivity charges
(i.e., all bandwidth-related charges) according to the table below. IMPSAT
USA's scheduled maintenance of the Internet Data Centers and Internet Data
Center Services, shall not be deemed to be a failure of IMPSAT USA to provide
Internet Data Center Services. IMPSAT USA must notify the Customer of any
maintenance or related tasks that may cause a service downtime. Any service
interruption without a prior notification shall be deemed to be failure of
IMPSAT USA. For purposes of the foregoing, "unable to transmit and receive"
shall mean sustained packet loss in excess of 50% based on IMPSAT USA's
measurements.
Total Monthly Outage Time Service credit percentage
------------------------- -------------------------
Less than or equal to 1 hour 5%
Greater than one hour 10%
Greater than two hours 20%
(ii) Packet Loss and Latency. IMPSAT USA does not proactively
monitor the packet loss or transmission latency of specific customers. IMPSAT
USA does, however, proactively monitor the aggregate packet loss and
transmission latency within its LAN and WAN. In the event that IMPSAT USA
discovers (either from its own efforts or after being notified by Customer)
that Customer is experiencing packet loss in excess of one percent (1%)
("Excess Packet Loss") or transmission latency in excess of 120 milliseconds
round trip time (based on IMPSAT USA'S measurements) between IMPSAT USA
Internet Data Centers and the Internet Backbone (collectively, "Excess
Latency," and with Excess Packet Loss "Excess Packet Loss/Latency"), and
Customer notifies IMPSAT USA (or confirms that IMPSAT USA has notified
Customer), IMPSAT USA will take all actions necessary to determine the source
of the Excess Packet Loss/Latency.
(A) Time to Discover Source of Excess Packet Loss/Latency;
Notification of Customer. Within two (2) hours of discovering the existence
of Excess Packet Loss/Latency, IMPSAT USA will determine whether the source
of the Excess Packet Loss/Latency is limited to the Customer Equipment and
the IMPSAT USA equipment connecting the Customer Equipment to IMPSAT USA'S
LAN ("Customer Specific Packet Loss/Latency"). If the Excess Packet
Loss/Latency is not a Customer Specific Packet Loss/Latency, IMPSAT/ USA will
determine the source of the Excess Packet Loss/Latency within two (2) hours
after determining that it is not a Customer Specific Packet Loss/Latency. In
any event, IMPSAT USA will notify Customer of the source of the Excess Packet
Loss/Latency within sixty (60) minutes after identifying the source.
(B) Remedy of Excess Packet Loss/Latency. If the Excess Packet
Loss/Latency remedy is within the sole control of IMPSAT USA, IMPSAT USA will
remedy the Excess Packet Loss/Latency within two (2) hours of determining the
source of the Excess Packet Loss/Latency. If the Excess Packet Loss/Latency is
caused from outside of the IMPSAT USA LAN or WAN, IMPSAT USA will notify
Customer and will use commercially reasonable efforts to notify the party(ies)
responsible for the source and cooperate with it(them) to resolve the problem as
soon as possible.
(C) Failure to Determine Source and/or Resolve Problem. In the
event that IMPSAT USA is unable to determine the source of and remedy the Excess
Packet Loss/Latency within the time periods described above (where IMPSAT USA
was solely in control of the source), IMPSAT USA will credit Customer's account
the pro-rata connectivity charges according to the table below after the time
period described above that it takes IMPSAT USA to resolve the problem.
Time passed Service Credit percentage
----------- -------------------------
Less than or equal to two hours 5%
Greater than two hours 10%
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04/29/99 El Sitio Page 3
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<PAGE>
Agreement #____________
impsat
(iii) Customer Must Request Credit: To receive any of the credits
described in this section 5.2(a), Customer must notify IMPSAT USA within
three (3) business days from the time Customer becomes eligible to receive a
credit. Failure to comply with this requirement will waive Customer's right
to receive a credit.
(iv) Remedies Shall Not Be Cumulative: Maximum Credit: In the
event that Customer is entitled to multiple credits hereunder arising from
the same event, such credits shall not be cumulative and Customer shall be
entitled to receive only the maximum single credit available for such event.
A credit shall be applied only to the month in which there was the incident
that resulted in the credit. Customer shall not be eligible to receive any
credits for periods in which Customer received any Internet Data Center
Services free of charge.
(A) Service credits issued in any month under this Service
Level Guarantee under this Agreement will not exceed 30%
of the monthly recurring charges.
(B) Service credits issued during a Contract Year under this
Service Level Guarantee under this Agreement will not
exceed 20% of Customer's Services invoiced during
the Contract Year.
(v) Termination Option for Chronic Problems: If, in any single
calendar month, Customer would be able to receive credits resulting from
three (3) or more events during such calendar month or, if any single event
entitling customer to credits under paragraph 5.2(a)(i) exists for a
period of twelve (12) consecutive hours, then, Customer may terminate this
Agreement for cause and without penalty by notifying IMPSAT USA within five (5)
days following the end of such calendar month. Such termination will be
effective thirty 30 days after receipt of notice by IMPSAT USA.
(b) No Other Warranty. EXCEPT FOR THE EXPRESS WARRANTY SET OUT IN
SUBSECTION (a) ABOVE, THE INTERNET DATA CENTER SERVICES ARE PROVIDED ON AN
"AS IS" BASIS, AND CUSTOMER'S USE OF THE INTERNET DATA CENTER SERVICES IS AT
ITS OWN RISK. IMPSAT USA DOES NOT MAKE, AND HEREBY Disclaims, ANY AND ALL
OTHER EXPRESS AND/OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT AND TITLE, AND ANY WARRANTIES ARISING FROM A COURSE OF
DEALING, USAGE, OR TRADE PRACTICE. IMPSAT USA DOES NOT WARRANT THAT THE
INTERNET DATA CENTER SERVICES WILL BE UNINTERRUPTED, ERROR-FREE, OR
COMPLETELY SECURE.
(c) Disclaimer of Actions Caused by and/or Under the Control of Third
Parties. IMPSAT USA DOES NOT AND CANNOT CONTROL FLOW OF DATA TO OR FROM
IMPSAT USA'S INTERNET DATA CENTERS AND OTHER PORTIONS OF THE INTERNET. SUCH
FLOW DEPENDS IN LARGE PART ON THE PERFORMANCE OF INTERNET SERVICES PROVIDED
OR CONTROLLED BY THIRD PARTIES. AT TIMES, ACTIONS OR INACTIONS CAUSED BY
THESE THIRD PARTIES CAN PRODUCE SITUATIONS IN WHICH IMPSAT USA'S CUSTOMERS'
CONNECTIONS TO THE INTERNET (OR PORTIONS THEREOF) MAY BE IMPAIRED OR
DISRUPTED. ALTHOUGH IMPSAT USA WILL USE COMMERCIALLY REASONABLE EFFORTS TO
TAKE ACTIONS IT DEEMS APPROPRIATE TO REMEDY AND AVOID SUCH EVENTS, IMPSAT USA
CANNOT GUARANTEE THAT THEY WILL NOT OCCUR. ACCORDINGLY, IMPSAT USA DISCLAIMS
ANY AND ALL LIABILITY RESULTING FROM OR RELATED TO SUCH EVENTS.
8. Limitations of Liability.
8.1 PERSONAL Injury. EACH REPRESENTATIVE AND ANY OTHER PERSONS VISITING
THE INTERNET DATA CENTERS DOES SO AT ITS OWN RISK AND IMPSAT USA ASSUMES NO
LIABILITY WHATSOEVER FOR ANY HARM TO SUCH PERSONS RESULTING FROM ANY CAUSE
OTHER THAN IMPSAT USA'S NEGLIGENCE OR WILLFUL MISCONDUCT RESULTING IN
PERSONAL INJURY TO SUCH PERSONS DURING SUCH A VISIT.
8.2 Damage to Customer Equipment or Business. IMPSAT USA ASSUMES NO
LIABILITY FOR ANY DAMAGE TO, OR LOSS RELATING TO CUSTOMER'S BUSINESS
RESULTING FROM ANY CAUSE WHATSOEVER. CERTAIN CUSTOMER EQUIPMENT, INCLUDING
BUT NOT LIMITED TO CUSTOMER EQUIPMENT LOCATED ON CYBERRACKS, MAY BE DIRECTLY
ACCESSIBLE BY OTHER CUSTOMERS. IMPSAT USA ASSUMES NO LIABILITY FOR ANY DAMAGE
TO, OR LOSS OF, ANY CUSTOMER EQUIPMENT RESULTING FROM ANY CAUSE OTHER THAN
IMPSAT USA'S NEGLIGENCE OR WILLFUL MISCONDUCT. TO THE EXTENT IMPSAT USA IS
LIABLE FOR ANY DAMAGE TO, OR LOSS OF, THE CUSTOMER EQUIPMENT FOR ANY REASON,
SUCH LIABILITY WILL BE LIMITED SOLELY TO THE THEN-CURRENT VALUE OF THE
CUSTOMER EQUIPMENT.
8.3 EXCLUSIONS. EXCEPT AS SPECIFIED IN SECTIONS 6.1 AND 6.2, IN NO
EVENT WILL IMPSAT USA BE LIABLE TO CUSTOMER'S REPRESENTATIVE, OR ANY THIRD
PARTY FOR ANY CLAIMS ARISING OUT OF OR RELATED TO THIS AGREEMENT, CUSTOMER
EQUIPMENT, CUSTOMER'S BUSINESS OR OTHERWISE, AND ANY LOST REVENUE, LOST
PROFITS, REPLACEMENT GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES,
INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF DATA, OR
INTERRUPTION OR LOSS OF USE OF SERVICE OR OF ANY CUSTOMER EQUIPMENT OR
CUSTOMER'S BUSINESS, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT
LIABILITY OR OTHERWISE.
8.4 Maximum Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, IMPSAT USA'S MAXIMUM AGGREGATE LIABILITY TO CUSTOMER RELATED
TO OR IN CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT PAID
BY CUSTOMER IMPSAT USA HEREUNDER FOR THE PRIOR TWELVE (12) MONTH PERIOD.
8.5 Customer's Insurance. Customer agrees that it will not pursue any
claims against IMPSAT USA for any liability IMPSAT USA may have under or
relating to this Agreement until Customer first makes claims against
Customer's insurance provider(s) and such insurance provider(s) finally
resolve(s) such claims.
8.6 Basis of the Bargain; Failure of Essential Purpose. Customer
acknowledges that IMPSAT USA has set its prices and entered into this
Agreement in reliance upon the limitations of liability and the disclaimers
of warranties and damages set forth herein, and that the same form an
essential basis of the bargain between the parties. The parties agree not to
pursue remedies contrary to the limitations and exclusive of liability and
disclaimers specified in this Agreement will survive and apply even if
available remedies are found to have failed of their essential purpose. This
section shall survive the termination of the Agreement.
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<PAGE>
Agreement #____________
impsat
9. Force Majeure.
Neither party shall be in default or otherwise liable for any delay in or
failure of performance under this Agreement if such delay or failure
arises by any reason beyond that party's reasonable control, including any
Act of God, the elements, earthquake, flood, fire, provided however,
that lack of funds shall not be deemed to be a reason beyond a party's
reasonable control. The parties will promptly inform and consult with
each other as to any Force Majeure events that, in their judgment, are or
could be the cause of a delay or failure in the performance of this
Agreement.
10. Assignment.
The service or any rights or obligations associated therewith may not be
assigned or in any way transferred by Customer without the prior written
consent of IMPSAT USA.
11. Intellectual and other Property Rights.
Customer shall not acquire any intellectual or other property rights in or
to items, which IMPSAT USA may develop or use while providing the
service described in this Agreement. IMPSAT USA shall own all such rights.
12. Non-Waiver.
No forbearance by either party to enforce any provision under this
Agreement or any right existing under this Agreement shall constitute
waiver of such provisions or right or be deemed to perfect an amendment or
modification of this Agreement.
13. Jurisdiction and Governing Law.
This Agreement shall be governed by the laws of the State of Florida,
except for those laws pertaining to the choice of law. Both parties hereby
agree to submit to the exclusive jurisdiction of the courts of the State
of Florida.
13. Use Restrictions.
Customer shall comply with any restrictions on Customer's receipt of
Service applicable in any country in which Customer uses service (such
country a "Country of Use"). Customer shall obtain all licenses that are
required in a Country of Use for use of the service. Customer shall
indemnify and hold IMPSAT USA harmless from any claims, damages, losses,
liabilities, or judgements resulting from Customer's breach of the
obligations of this Paragraph.
14. Default and Termination:
A.(i) If either party breaches any term or condition of this Agreement and
such breach can reasonably be cured (other than default for event
specified in Section 13 B), the non-defaulting party shall notify the
defaulting party in writing and grant the defaulting party a minimum
period of 15 days to cure such default following the date of the notice.
The nondefaulting party may, in its discretion, grant additional time
in which to cure as the defaulting party may require if the
nondefaulting party reasonably believes that the defaulting party is
diligently pursuing a cure for the breach.
(ii) If the defaulting party does not cure the default within such 15-day
period, or if, at any time during the additional period granted for cure,
the non-defaulting party reasonably believes that the defaulting party is
not making diligent efforts to cure the default, the non-defaulting party
may immediately terminate this Agreement by written notice to the
defaulting party.
B. Any of the following events will constitute a default of this Agreement
by Customer and give IMPSAT USA the right to terminate Agreement upon 5
days notice to Customer.
(i) Nonpayment of any portion of the nonrecurring charge within 15
days of the date such payment becomes due,
(ii) Nonpayment of any portion of the monthly recurring charge
within 15 days of date such payment becomes due, or
(iii) If Customer is held in any judicial or administrative
proceeding to be in breach of this Agreement.
15. Billing Disputes.
If Customer in good faith disputes any portion of any IMPSAT USA invoice,
Customer shall submit within fifteen (15) days following the date of
invoice, full payment of the undisputed portion of the invoice, and
written documentation identifying and substantiating the disputed
amount. If Customer does not report a dispute within the fifteen (15) day
period Customer shall have waived its dispute rights for that invoice
IMPSAT USA and Customer agree to use their respective best efforts to
resolve any dispute with fifteen (15) days after IMPSAT USA receives
written notice of the dispute from Customer. Any disputed amounts resolved
in favor of Customer shall be credited to Customer's account on the next
invoice following resolution of the dispute. Any disputed amounts
determined to be payable to IMPSAT USA shall within ten (10) days of
the resolution of the dispute. Any dispute arising out of or relating to
this agreement which has not been resolved by the good faith efforts of
the parties will be settled by binding arbitration. Any controversy or
claim arising out of or relating to this Agreement shall be finally
settled by arbitration in Fort Lauderdale, Florida and shall be resolved
under the laws of the State of Florida. The arbitration shall be conducted
before a single arbitrator in accordance with the commercial rules and
practices of the American Arbitration Association then in effect.
16. Entire Agreement.
The attached Conditions of Service, Installation, and Maintenance and any
future Supplemental Agreement relating to this service are an integral
part of the present Agreement. This Agreement constitutes the entire and
exclusive statement of the rights, obligations and understandings of the
parties with respect to the service stated herein. If any term or
provision of this Agreement shall be held invalid or unenforceable, the
remainder of this Agreement shall not be affected thereby and each term
and provision hereof shall be valid and enforced to the fullest extent
permitted by law. All subsequent orders placed by Customer and accepted by
IMPSAT USA under this Agreement will become an integral part of this
Agreement.
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04/29/99 El Sitio Page 5
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<PAGE>
Agreement #____________
impsat
CONDITIONS OF SERVICE
"IMPSAT USA" shall mean IMPSAT USA, Inc., affiliated IMPSAT companies,
their contractors, subcontractors or assignees
FIRST: CUSTOMER RESPONSIBILITY
The customer will be responsible for:
a) The physical, electrical and mechanical installation of the equipment at
the racks space assigned by ImpSat USA.
b) The software configuration of each equipment and the IP routing
configuration through the Internet backbone access provided by ImpSat
USA.
c) Remote monitoring of the equipment once installed.
d) Provide verbal instructions to ImpSat USA's teleport engineers for
maintenance purposes and related tasks, which may include tape
back ups processes.
SECOND: IMPSAT RESPONSIBILITY
ImpSat USA will be responsible for:
a) Provide Internet Backbone Access with guaranteed bandwidth according to
item 2.B of the Service Agreement.
b) Provide full management of a customer's data backup process. Impsat
personnel can conduct this procedure according to a predefined
schedule or on an on-demand basis.
c) Provide assistant on a 7x24 basis for maintenance purposes and related
tasks.
d) ImpSat USA must ensure that the following conditions are met in the room
where customer's equipment is going to be installed:
d.1) AC monophase voltage supplied by on-line UPS with the following
specifications:
Voltage: 110 Volts +/- 5% (220V available upon notification with
Service Order)
Frequency: 60 Hz +/- 5% (50 Hz available upon notification with
Service Order)
d.2) Ambient conditions:
Temperature: From 10 degrees to 30 degrees Celsius
Humidity: 10% to 90% relative humidity, non-condensing
d.3) Grounding connector with ground resistance always below 3 Ohms.
Voltage between ground line and neutral line must not exceed 1 volt
RMS, under any circumstances.
d.4) Air filtering to avoid the presence of dust inside the room,
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04/29/99 El Sitio Page 6
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<PAGE>
Exhibit 10.4
TV Azteca, S.A. de C.V.
Perifexico Sur, No. 4121
Col. Fuentes del Pedregal
14141 Mexico, D.F.
February 11, 1999
El Sitio International Corporation
Avenida Belgrano, 845
Fourth Floor
1092 Buenos Aires
Argentina
LETTER AGREEMENT
Ladies and Gentlemen:
Subject to the terms and conditions set forth below, El Sitio
International Corporation ("El Sitio") hereby agrees to sell, and TV Azteca,
S.A. de C.V. ("TVA") hereby agrees to purchase in exchange for certain services,
certain shares of preferred stock of El Sitio.
1. Shares to be Purchased. (a) TVA will purchase from El Sitio newly
issued shares ("Shares") or preferred stock of El Sitio that are fungible with
the Shares to be offered in the private placement currently contemplated by El
Sitio (the "Private Placement"), in exchange for Consideration (as defined in
paragraph 2), on a quarterly basis over a period of three years. Beginning on
the last day of the three-month period after Closing (as defined in paragraph
6), and every successive three-month period thereafter, El Sitio agrees to issue
and transfer Shares to TVA in an amount equal to (x) the Consideration TVA is
deemed to provide during the relevant three-month period (as set forth in
Schedule A), divided by (y) the Share Price. For purposes of this letter
agreement, "Share Price" means the price per Share at which the Shares are sold
by El Sitio in the Private Placement.
(b) El Sitio represents and warrants that, when issued to TVA in
accordance with this letter agreement, the Shares purchased by TVA hereunder,
including, without limitation, any
<PAGE>
2.
additional Shares purchased pursuant to paragraph 3, will be duly authorized,
validly issued, fully paid and nonassessable.
(c) In the event of any failure by El Sitio to issue and transfer Shares
in accordance with paragraph 1(a) or if the representation and warranty
described in paragraph 1(b) shall prove to be incorrect in any material respect,
without prejudice to any other remedy provided by law, TVA will be entitled to
cease performance of the services described in paragraphs 2, 3 and 5.
2. Consideration. (a) In consideration for the purchase of Shares,
TVA agrees to provide El Sitio with television advertising time on TVA's
television channels equivalent in value to the following amounts (which amounts
shall be based on rates actually charged to similarily-situated clients of TVA
at the time): (i) US$1,500,000 in the first year; (ii) US$1,000,000 in the
second year; and (iii) US$1,000,000 in the third year. For purposes of
calculating the amount of Shares to be issued under paragraph 1, in any given
year, TVA shall be deemed to provide one-fourth of the advertising due in such
year during each quarter of such year. The net present value of such advertising
time, calculated using an annual discount rate of 30%, shall constitute the
"Consideration" for purposes of this letter agreement. Schedule A sets forth for
each quarter of each year during which TVA is obligated to deliver advertising
time, the actual value and the net present value of the advertising time TVA
will be deemed to have delivered.
(b) El Sitio shall use TVA's standard service order form to request
the times and/or channels which it elects for advertising and TVA will treat
such a request in the same manner in which treats similar requests from
cash-paying clients. The value of television advertising time made available to
El Sitio will qualify as Consideration regardless of whether El Sitio actually
uses such time; provided that if El Sitio does not use all the advertising time
to which it is entitled in any given year, TVA agrees to provide El Sitio with
advertising time of an equivalent value (measured at the then applicable rates)
which El Sitio may use at a future date, so long as such future date shall be no
later than 42 months after Closing.
<PAGE>
3.
3. Purchase of Additional Shares. TVA agrees to use reasonable
efforts to enter into barter arrangements with third parties (i) to reduce El
Sitio's cash infrastructure and promotional costs related to office space and
other overhead expenses, and (ii) to reduce El Sitio's cash costs related to the
promotional event described in paragraph 5(b), in the event that such event is
held at a location at which TVA has barter arrangement in place. Any cash
savings for El Sitio obtained by TVA through such arrangements (as mutually
agreed in good faith by the parties hereto) shall be treated as additional
consideration for the purchase of Shares. Promptly (and in any event within 15
days) after realizing any such cash savings, El Sitio agrees to issue Shares in
an amount equal to (x) such additional consideration, divided by (y) the Share
Price.
4. Subscription Agreement. Following execution of this letter
arrangement the parties shall commence preparation of a definitive subscription
agreement (the "Subscription Agreement"), which shall conform to the terms and
provisions of this letter agreement and, to the extent not inconsistent
therewith, shall contain substantially the same covenants, conditions to the
parties' obligations, indemnities, representations and warranties and other
applicable provisions of any subscription agreement or understanding entered
into by El Sitio and any equity investor in connection with the Private
Placement. The Subscription Agreement shall be executed by the parties no later
than the Closing.
5. Other Agreements. In connection with the sale an purchase of
Shares, El Sitio and TVA agree to the following undertakings (the definitive
terms of which shall be incorporated into the Subscription Agreement or an
ancillary agreement).
(a) Barter Arrangement. For a three-year period after the Closing,
El Sitio will provide TVA with advertising space on El Sitio's internet site
with a value equivalent to US$500,000 per year and TVA will provide El Sitio
with advertising time on any of TVA's television channels with a value
equivalent to US$500,000 per year. The amount of such advertising space or time,
as the case may be, shall be determined based on the rates charged to
similarly-situated clients of the respective party at the time. Any advertising
space received by TVA hereunder may be used by TVA or any of TVA's current or
future clients, provided that
<PAGE>
4.
TVA may not grant use of such space (i) to more than five of TVA's clients in
any given year and (ii) to any TVA client to which it is granted such space in
the preceding year. Any advertising time received by El Sitio pursuant to this
paragraph 5(a) may be used by El Sitio alone or in conjunction with up to a
maximum of two sponsors of El Sitio per airing. El Sitio may not sell or
transfer such advertising time to third parties.
(b) Promotional Event. In consideration for the other agreements
provided herein, TVA agrees to assist El Sitio in organizing and holding an
event at a location in Mexico City to be selected by El Sitio, to which TVA will
invite its advertising clients, for the purpose of promoting El Sitio and
selling advertising space on El Sitio's internet site. TVA will not bear any
cost or expense associated with such event, although TVA agrees to use its
reasonable efforts to reduce costs as described in paragraph 3. All use of TVA's
name in connection with such event is subject to the prior consent of TVA, which
consent shall not be unreasonably withheld.
(c) Commissions. El Sitio agrees to pay to TVA a commission upon the
consummation by TVA of any sale of advertising space on El Sitio's internet
site, including, without limitation, additional sales made to repeat clients
during the three-year period after the Closing. El Sitio will be entitled to
give its prior consent (not to be unreasonably withheld) as to the form of any
sales proposal used by TVA and the identity of a potential client. The amount of
such commission shall be a percentage of the contract value of each sale made,
determined as follows: (i) 15% for sales with a contract value equal to less
than US$40,000; (ii) 30% for sales with a contract value between US$400,001 and
US$80,000; and (iii) 50% for sales with a contract greater than US$80,000. In
the event that any amount of tax is required to be withheld in respect of any
payments made by El Sitio hereunder, El Sitio shall be responsible for the
deduction and payment to any tax authority of any such taxes and shall increase
the amount of the payment to TVA by such additional amounts as are necessary so
that the amount actually received by TVA after the withholding and payments of
such taxes (including in respect of such additional amounts) is equal to the
payment due hereunder; provided that no such additional amounts shall be payable
in respect of any taxes imposed by Mexico on the net income of TVA or taxes
imposed by reason of any connection between TVA and a taxing jurisdiction other
than
<PAGE>
5.
entering into or enforcing its rights under this letter agreement or receiving
payment hereunder. Commissions shall be payable within 15 days following the
receipt of payment for a sale by El Sitio.
6. Conditions to Closing. The closing of transactions contemplated
hereunder (the "Closing") shall occur concurrently with the consummation of the
Private Placement if the following conditions are met:
(i) consummation of the Private Placement with an aggregate
investment of not less than US$15,000,000;
(ii) execution of the Subscription Agreement and, if applicable, any
ancillary agreements, in each case, in a form satisfactory to TVA in
its sole discretion;
(iii) TVA's satisfaction, in its sole discretion, with the results
of its legal, accounting, tax and business due diligence review of
El Sitio, its subsidiaries, and any of its affiliates, including,
without limitation, the operations, business, assets, liabilities
and prospects of such entities or persons;
(iv) the absence of any material adverse change in the condition
(financial or otherwise), results of operations, assets,
liabilities, businesses, properties or prospects of El Sitio, any of
its subsidiaries or any of its affiliates after the date of this
letter agreement; and
(v) the receipt of all necessary regulatory, governmental,
shareholders, board of directors and third party approvals, waivers
and comments (El Sitio hereby representing that it has or will
obtain the same prior to the Closing).
7. Conduct of Business: Access. Following the execution of this letter
agreement and until the consummation of the transactions contemplated hereunder,
El Sitio will give TVA
<PAGE>
6.
(and its representatives, accountants and counsel) access to El Sitio's
personnel, accountants, properties, records and financial statements and all
other documents and other information concerning its business and operations as
TVA may reasonably request.
8. Confidentiality. TVA agrees to treat confidentially all of the
documents and information received from El Sitio pursuant to the terms of this
letter agreement and will not disclose any of such information to any third
party except as required by law. TVA hereby authorizes El Sitio to disclose the
execution of this letter agreement and the terms hereof in any offering
materials distributed in connection with the Private Placement, provided that
the final text of such disclosure will be subject to the prior review and
comment of TVA. Except as required by law or other competent authority, each of
El Sitio and TVA agrees that it will not make any other public disclosure of the
execution of this letter agreement or of the terms hereof without the prior
consent of the other party, which consent shall not be unreasonably withheld.
9. Termination. This letter agreement shall terminate on the earlier
of (i) the Closing and (ii) July 1, 1999 unless this letter agreement is
extended in writing by mutual agreement of the parties hereto; provided that the
terms of paragraphs 8, 12 and 13 shall survive such termination.
10. Further Assurances. El Sitio and TVA hereby agree to do such
further things and to execute such further documents as may be necessary or
desirable to effectuate this letter agreement and the transactions contemplated
herein.
11. Brokers. Each party hereto represents and warrants to the other
party that it has not employed any broker or finder in connection with this
letter agreement and the transactions contemplated hereunder; provided that the
parties acknowledge that Bear Stearns & Co. Inc. has been employed by El Sitio
in connection with the Private Placement. El Sitio will be solely responsible
for any fees and expenses owed to Bear Stearns & Co. Inc.
<PAGE>
7.
12. Indemnification. El Sitio hereby agrees to indemnify and hold
harmless TVA and its affiliates and their respective directors, officers,
agents, employees and controlling parties (hereinafter collectively referred to
as an "Indemnified Party"), from and against any and all losses, liabilities,
expenses, damages, claims or proceedings (including legal fees and expenses)
which any of them may pay, incur or be subject to, arising out of or relating to
the Private Placement (whether or not consummated). El Sitio will be not liable
under the foregoing indemnification provision for any expense of TVA referred to
in paragraph 13 or to the extent that any loss, liability, expense, claim or
proceeding is finally judicially determined to have resulted primarily from
TVA's bad faith or gross negligence.
13. Fees and Expenses. TVA and El Sitio shall each bear their own
fees and expenses, including, without limitation, fees and disbursements of
attorneys or other advisors, incurred in connection with the execution of this
letter agreement or the transactions contemplated hereby (except insofar as
TVA's fees and expenses arise out of any claim or proceeding referred to in
paragraph 12, which shall be borne as required in paragraph 12).
14. Arbitration. Any controversy, conflict or dispute of any nature
arising out of or relating to this letter agreement (and, when executed, the
Subscription Agreement) shall be settled exclusively and finally by arbitration
carried out in New York, New York, United States of America and judgment on the
award may be entered by any court having jurisdiction. The arbitration shall be
conducted and finally settled by three arbitrators in accordance with the Rules
of Conciliation and Arbitration (the "ICC Rules") of the International Chamber
of Commerce ("the ICC") in effect on the date hereof. One arbitrator shall be
appointed by each of El Sitio and TVA and the third arbitrator, who shall be the
chairperson, shall be selected by the two party-appointed arbitrators or,
failing appointment of any party's arbitrator or agreement by the two
party-appointed arbitrators within 15 days after the notice of intent to
arbitrate is filed with the ICC (or such other period as may be agreed by the
two sides to such arbitration), by the ICC in accordance with the ICC Rules. The
parties hereto agree that each arbitrator appointed in connection herewith shall
be fluent in English and shall be licensed to practice law in the State of New
York. Each of the parties hereto agrees, in connection with the enforcement of
any arbitral
<PAGE>
8.
award rendered pursuant to this letter agreement, to submit to the exclusive
jurisdiction of the state and federal courts in the State of New York.
15. Governing Law. This letter agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to principles of conflicts of laws; provided that the arbitration provisions set
forth herein and any arbitration conducted thereunder shall be governed
exclusively by the Federal Arbitration Act, Title 9, United State Code to the
exclusion of any state or municipal law of arbitration and by the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Please confirm that the foregoing correctly sets forth the
understandings between El Sitio and TVA by signing this letter agreement and
returning the duplicate of this letter agreement enclosed herewith, whereupon
this letter agreement shall constitute a binding agreement between us.
Sincerely,
TV AZTECA, S.A. DE C.V.
By /s/ Adrian Steckel
------------------------------------
Name: Adrian Steckel
Title: Chief Financial Officer
<PAGE>
9.
Accepted and agreed to as of the date first above written:
EL SITIO INTERNATIONAL CORPORATION
By: /s/ Roberto Cibrian-Campoy
------------------------------------
Name:
Title:
<PAGE>
10.
Schedule A
Net Present Value of Advertising Time
Deemed to be Delivered by TV Azteca, S.A. de C.V.
Year/Quarter Actual Value Net Present Value
of Advertising Time of Advertising
Time
1/Q1 US$375,000 US$359,012
1/Q2 US$375,000 US$336,220
1/Q3 US$375,000 US$314,875
1/Q4 US$375,000 US$294,885
2/Q1 US$250,000 US$184,109
2/Q2 US$250,000 US$172,421
2/Q3 US$250,000 US$161,474
2/Q4 US$250,000 US$151,223
3/Q1 US$250,000 US$141,622
3/Q2 US$250,000 US$132,631
3/Q3 US$250,000 US$124,211
3/Q4 US$250,000 US$116,325
Total US$3,500,000 US$2,489,010
/s/ [ILLEGIBLE]
/s/ Adrian Steckel
<PAGE>
Exhibit 10.5
EL SITIO INTERNATIONAL CORPORATION
SUBSCRIPTION AGREEMENT
Dated as of August 31, 1999
<PAGE>
THIS SUBSCRIPTION AGREEMENT, dated as of this 31st day of August.
1999 (this "Agreement"), by and between El Sitio International Corporation, a
corporation organized and existing under the laws of the British Virgin Islands
(the "Company"), and TV Azteca, S.A. de C.V., a corporation organized and
existing under the laws of Mexico (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company desires to issue to the Purchaser, and the
Purchaser desires to purchase from the Company, Shares (as such term is defined
below) in exchange for the Purchaser providing the Company television
advertising time; and
WHEREAS, certain terms used in this Agreement are defined in Section
6.1 hereof;
NOW, THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Sale and Purchase of Securities.
1.1 Sale and Purchase of Shares. Subject to the terms and conditions
of this Agreement, the Company shall issue, sell and deliver to the Purchaser,
and the Purchaser shall purchase from the Company 355,478 shares of Class A
Preferred Stock, par value $1.00 per share, of the Company ("Shares").
2. Purchase Price.
2.1 Amount of Consideration. The Purchaser agrees to provide the
Company with television advertising time worth US$3,500,000 over a period of
three (3) years, beginning on July 2, 1999, on the Purchaser's television
channels (which amounts shall be based on rates actually charged to
similarly-situated clients of the Purchaser at the time) as set forth on
Schedule A. For purposes of calculating the number of Shares to be issued
pursuant to this Agreement, the value of the advertising time provided by the
Purchaser shall be the net present value of such advertising time, which has
been calculated by applying an annual discount rate of 30% and equals
US$2,489,010.
2.2 Additional Consideration. The Purchaser agrees to use reasonable
efforts to enter into barter arrangements with third parties to reduce the
Company's cash infrastructure and promotional costs related to office space and
other overhead expenses. Any cash savings for the Company obtained by the
Purchaser through such arrangements (as mutually agreed in good faith by the
parties hereto) shall be treated as "Additional Consideration" for the purchase
of Shares. Within 15 days after realizing any such cash savings, the Company
agrees to issue Shares in an amount equal to (x) such Additional Consideration
divided by (y) US$7.00186.
<PAGE>
3. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser that:
3.1 Organization and Good Standing: Capitalization. The Company is
duly organized and validly existing under the laws of the British Virgin Islands
and has the corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now conducted and as it is
proposed to be conducted. The Company is duly qualified or authorized to do
business as a foreign corporation and, except as specifically stated therein, is
in good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties or assets requires such
qualification or authorization.
3.2 Authorization of Agreement: Enforceability. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform fully its obligations hereunder and thereunder. The execution,
delivery and performance by the Company of this Agreement has been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery thereof by the Purchaser,
this Agreement constitutes the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with its respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
3.3 Authorization of Shares. The issuance, sale and delivery of the
Shares to be purchased pursuant to Section 1.1 have been duly authorized by all
requisite action of the Company, and, when issued, sold, and delivered in
accordance with this Agreement, the Shares will be validly issued and
outstanding, fully paid and non-assessable, with no personal liability attaching
to the ownership thereof, and not subject to preemptive or any other similar
rights of the stockholders of the Company or others.
3.4 Changes. The representations and warranties set forth in Section
4 of a certain Stock Purchase Agreement dated as of June 21, 1999 (the "Stock
Purchase Agreement"), among El Sitio International Corporation and each of the
persons or entities set forth on Exhibit A thereto (a copy of which
representations and warranties are attached hereto), were true and correct as of
the date of such Stock Purchase Agreement; there has been no material adverse
change in the Company, or its business or prospects since June 21, 1999.
4. Representations and Warranties of the Purchaser.
2
<PAGE>
The Purchaser hereby represents and warrants to the Company that:
4.1 Capacity; Authorization. The Purchaser is duly organized and
validly existing under the laws of Mexico and has the corporate power to carry
on its business as now conducted. The Purchaser has all requisite corporate
authority to execute and deliver this Agreement and to perform fully its
obligations hereunder and thereunder. Assuming due execution and delivery by the
Company of this Agreement, this Agreement will constitute a legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
4.2 Investment Purposes. (a) The Purchaser is acquiring the Shares
it has agreed to purchase for investment purposes only, for its own account, and
not as nominee or agent for any other Person, and not with a view to, or for
resale in connection with, any distribution thereof within the meaning of the
Securities Act, (b) it has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment, (c) it is an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act, (d) the Company has made available to it
the opportunity to ask questions and to receive answers, and to obtain
information necessary to evaluate the merits and risks of this investment, and
the Purchaser believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Shares, (e) the
Purchaser understands, acknowledges and agrees that the Shares have not been
registered under (and that the Company has no present intentions to register the
Shares under) the U.S. Securities Act or applicable U.S. state securities law,
and may not be sold or otherwise transferred by the Purchaser to a United States
person unless the Shares have been registered under the U.S. Securities Act and
applicable U.S. state securities laws or are sold or transferred in a
transaction exempt therefrom, and (f) no broker has acted on behalf of the
Purchaser in connection with this Agreement, and there are no brokerage
commissions, finders' fees or commissions payable in connection therewith based
on any agreement, arrangement or understanding with the Purchaser or any action
taken by the Purchaser.
5. Further Agreements of the Parties.
5.1 Confidentiality. Except as may be required by applicable law or
as otherwise agreed among the parties hereto, neither the Company nor the
Purchaser nor any of their respective Affiliates (as such term is defined below)
shall at any time divulge, disclose, disseminate, announce or release any
information to any Person concerning this Agreement, the transactions
contemplated hereby or any trade secrets or other confidential information of
the Company or the Purchaser, without first obtaining the prior written consent
of the other parties hereto; provided, however, that each party to this
Agreement shall be entitled to disclose information with respect to the
Purchaser's investment in the Company on any reports the Purchaser furnishes to
its investors or as otherwise required by law.
3
<PAGE>
5.2 Extension. If, after three (3) years from July 2, 1999, the
Purchaser has not provided the Company with television advertising time worth
US$3,500,000, this Agreement shall be automatically extended for an additional
twelve (12) months (the "Extension Period"). During the Extension Period, the
Purchaser shall make a reasonable effort to provide the Company with advertising
time such that the total amount of advertising time received by the Company
under this Agreement equals US$3,500,000. Any unused advertising amounts after
the Extension Period shall be deemed surrendered and the Purchaser's obligations
under this Agreement will cease to exist.
5.3 Ratification of Other Undertakings. In connection with the sale
and purchase of Shares, the Company and the Purchaser hereby ratify the
undertakings set forth in paragraph 5 of a certain Letter Agreement, dated
February 11, 1999, by and between the Company and the Purchaser (the "Letter
Agreement"). The undertakings pertain to barter arrangements, a promotional
event and commissions.
5.4 Registration Rights. The Company will use all reasonable efforts
to cause the Purchaser to become a party to that certain Registration Rights
Agreement, by and among El Sitio International Corporation and the holders of
its Class A Preferred Stock, dated as of July 2, 1999.
5.5 Reservation of Shares. The Company will reserve a number of its
common shares sufficient to enable the Purchaser to convert the Shares into
common shares pursuant to the Memorandum of Association of the Company.
6. Miscellaneous.
6.1 Certain Definitions.
"Affiliate" of any Person means any Person that directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including with its correlative
meanings, "controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through ownership
of securities or partnership or other ownership interests, by contract or
otherwise).
"law" means any federal, state, local or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement or
guideline.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
4
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same shall be in effect at the time.
6.2 Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
Borough of Manhattan, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action or proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any suit, action or proceeding by
the mailing of a copy thereof in accordance with the provisions of Section 6.5
hereof.
6.3 Entire Agreement; Amendments and Waivers. This Agreement
(including the schedules and exhibits hereto) and the surviving provisions
contained in the Letter Agreement as per paragraph 9 thereof represent the
entire understanding and agreement among the parties hereto with respect to the
subject matter hereof and thereof and can be amended, supplemented or changed,
and any provision hereof and thereof can be waived, only by written instrument
making specific reference thereto signed by the parties hereto.
6.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
the principles of conflict of laws thereunder which would specify the
application of the law of another jurisdiction.
6.5 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally, telecopied or mailed by certified mail, return receipt requested, to
the parties at the following addresses (or to such other address as a party may
have specified by notice given to the other party pursuant to this provision):
5
<PAGE>
If to the Company:
El Sitio International Corporation
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Telephone: 54114-343-9122
Telecopier: 54114 343-9122, ext. 104
Attention: Robert Cibrian-Campoy
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue, 31st Floor
New York, New York 10022
Attention: Neil A. Torpey
Telephone: (212) 318-6034
Telecopier: (212) 318-4090
If to the Purchaser:
TV Azteca, S.A. de C.V.
Periferico Sur, No. 4121
Col. Fuentes de Pedregal
14141 Mexico, D.F.
Telephone: 011-525420-1302
Telecopier: 011-525420-1409
Attention: Adrian Steckel
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, N.Y. 10006
Telephone: 212-225-2584
Telecopier: 212-225-3999
Attention: Leslie N. Silverman
All notices are effective upon receipt or upon refusal if properly
delivered.
6.6 Severability. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in effect.
6.7 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, except that neither
6
<PAGE>
party may assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of the other party.
6.8 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or have
caused this Agreement to be executed, by their respective officers thereunto
duly authorized, as of the date first written above.
EL SITIO INTERNATIONAL CORPORATiON,
as the Company
By: /s/ Roberto Cibrian-Campoy
------------------------------------
Name: Roberto Cibrian-Campoy
Title: President, CEO
TV AZTECA, SA. de C.V.,
as the Purchaser
By: Adrian Steckel
------------------------------------
Name:
Title:
8
<PAGE>
SCHEDULE A
Net Present Value of Advertising Time
Deemed to be Delivered by TV Azteca, S.A. de C.V.
Actual Value Net Present Value of
Year/Quarter of Advertising Time Advertising Time
------------ ------------------- ----------------
1999/Q3* US$375,000 US$359,012
1999/Q4 US$375,000 US$336,220
2000/Q1 US$375,000 US$314,875
2000/Q2 US$375,000 US$294,885
2000/Q3 US$250,000 US$184,109
2000/Q4 US$250,000 US$172,421
2001/Q1 US$250,000 US$161,474
2001/Q2 US$250,000 US$151,223
2001/Q3 US$250,000 US$141,622
2001/Q4 US$250,000 US$132,631
2002/Q1 US$250,000 US$124,211
2002/Q2 US$250,000 US$116,325
Total US$3,500,000 US$2,489,010
- ----------
* As of the date of this Agreement, US$139,221 of advertising time has been
provided to the Company by the Purchaser, and such amount will be credited
towards the advertising time to be delivered in the third quarter of 1999.
<PAGE>
Exhibit 10.6
================================================================================
REGISTRATION RIGHTS AGREEMENT
by and among
EL SITIO INTERNATIONAL CORPORATION
and
THE HOLDERS OF ITS CLASS A CONVERTIBLE PREFERRED STOCK
July 2, 1999
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT, dated as of July 2, 1999, is entered into by and
among El Sitio International Corporation, a British Virgin Islands corporation
(the "Corporation"), and the holders of the Corporation's Class A Convertible
Preferred Stock, par value $1.00 per share, listed on Schedule A hereof
(collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, on the date hereof (the "Closing"), the Stockholders are
purchasing the Corporation's Class A Convertible Preferred Stock, par value
$1.00 per share (the "Preferred Stock");
WHEREAS, concurrently herewith, the Stockholders have executed a
stockholders agreement relating to board representation, transfers and other
matters in relation to their holding of the Preferred Stock (the "Stockholders
Agreement");
WHEREAS, in order to induce the Stockholders to make the purchases
described above, and in connection with such purchases to protect the rights of
all of the Stockholders, the Stockholders and the Corporation wish to establish
certain agreements relating to the grant by the Corporation to the Stockholders
of registration and other related rights.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE 1. Certain Definitions.
For the purposes of this Agreement, the following terms shall have
the respective meanings set forth below:
"Affiliate" means, with respect to any person, (i) any other person
of which securities or other ownership interests representing more than fifty
percent (50%) of the voting interests are, at the time such determination is
being made, owned, Controlled or held, directly or indirectly, by such person,
or (ii) any other person which, at the time such determination is being made, is
Controlling, Controlled by or under common Control with, such person. As used
herein, "Control," whether used as a noun or verb, refers to the possession,
directly or indirectly, of the power to direct, or cause the direction of, the
management or policies of a person, whether through the ownership of voting
securities or otherwise.
"Agreement" means this Agreement, as from time to time assigned,
supplemented, amended or modified in accordance with the terms hereof.
"Board" means the Board of Directors of the Corporation.
"Commission" means the United States Securities and Exchange
Commission.
<PAGE>
"Dollars" or "$" means the currency of the United States or its
foreign currency equivalent at the time the determination is made.
"Initial Stockholders" means collectively Roberto Vivo-Chaneton,
Guillermo J. Liberman, Tower Plus International Corp., Roberto Cibrian-Campoy,
Hector A Sierra, Hector R. Bandoni, Sergio S. Monti, Damian Said, and Alberto E.
Tapia.
"Restricted Shares" means any shares of Stock which have not been
registered under the Securities Act and which are owned by any Stockholder.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"Stock" means shares of the Corporation's ordinary shares, par value
$1.00 per share.
"Stockholder" means any person who is a party to this Agreement
(other than the Corporation) and any permitted transferee of such person who
agrees to be bound by the terms hereof.
ARTICLE 2. Registration Rights
2.1 Demand Registration.
(a) Upon notice to the Corporation from Stockholder(s) holding in
the aggregate $15.0 million or more of the Restricted Shares (or Preferred
Shares which are convertible into Restricted Shares), such Stockholders (the
"Requesting Stockholders") shall have the right to request in writing a
registration of such shares of Stock that are (or which would be upon
conversion) Restricted Shares. Such request (a "Demand Request") by the
Requesting Stockholders shall (i) specify the number of Restricted Shares which
each Requesting Stockholder intends to sell or dispose of, and (ii) state the
intended method or methods by which the Requesting Stockholder intends to sell
or dispose of such Restricted Shares. Upon receipt of a Demand Request pursuant
to this Section 2.1, the Corporation shall (as requested) (i) cause to be filed,
within the later of (x) ninety (90) days of the date of delivery to the
Corporation of the Demand Request, or (y) one hundred eighty (180) days after
the effectiveness of the most recently filed registration statement by the
Corporation, a registration statement covering such Restricted Shares which the
Corporation has been so requested to register, providing for the registration
under the Securities Act of such Restricted Shares to the extent necessary to
permit the disposition of such Restricted Shares so to be registered in
accordance with the intended method of distribution specified in such Demand
Request, provided, that the Corporation may delay making such filing or taking
such action by not more than one hundred twenty (120) days if the Corporation,
prior to the time it would otherwise have been required to file such
registration statement or take such action, determines in good faith that the
filing of such registration statement or the taking of such action would require
the disclosure of material, non-public information that, in the reasonable
judgment of the Corporation, would be detrimental to the Corporation if so
disclosed (and a delay would be likely to reduce the detrimental effect of such
disclosure or obviate the need for such disclosure to be made, or would
otherwise adversely affect a financing, acquisition, disposition, merger or
other material transaction), (ii) shall use its
2
<PAGE>
best efforts to have such registration statement declared effective by the
Commission as soon as practicable thereafter, and (iii) refrain from filing any
other registration statements with respect to any other securities of the
Corporation until such date which is one hundred eighty (180) days following
effectiveness of the registration statement filed in response to the Demand
Request. Subject to any existing written agreement between the Corporation and
Bear, Stearns & Co. Inc., the underwriter shall be selected by the Requesting
Stockholders and shall be reasonably acceptable to the Corporation for any
registration pursuant to this Section 2.1.
(b) In the event that the Corporation is required to file a
registration statement covering any Restricted Shares of any Requesting
Stockholder(s) pursuant to Section 2.1(a) above, the Corporation shall be
permitted to include newly-issued securities ("Piggyback Securities") in such
registration. Notwithstanding the foregoing, if the managing underwriter of such
proposed registration determines and advises in writing that the inclusion of
all Piggyback Securities proposed to be included in the underwritten public
offering would interfere with the successful marketing of the Requesting
Stockholders' Restricted Shares, then the Corporation shall not be permitted to
include any Piggyback Securities in excess of the amount, if any, of Piggyback
Securities which the managing underwriter of such underwritten offering shall
reasonably and in good faith agree in writing to include in such offering in
excess of any amount to be registered for the Requesting Stockholder(s). The
Piggyback Securities that are excluded from the underwritten public offering
pursuant to the preceding sentence shall be withheld from the market by the
Corporation for a period, not to exceed 180 days from the closing of such
underwritten public offering, that the managing underwriter determines is
necessary in order to effect such underwritten public offering.
(c) The Corporation shall not be required to comply with more than
four (4) Demand Requests, at least one (1) of which shall be reserved for
IAMP(El Sitio) Investments Ltd. (and its affiliates) and at least one (1) of
which shall be reserved for the Initial Stockholders.
2.2 Piggyback Registration.
(a) Each time that the Corporation proposes for any reason to
register any of its Stock under the Securities Act (a "Proposed Registration"),
other than pursuant to a registration statement on Form F-4 or Form F-8 or
similar or successor forms, the Corporation shall promptly give written notice
of such Proposed Registration to the holders of the Restricted Shares (which
notice shall be given not less than thirty (30) days prior to the expected
effective date of the Corporation's registration statement) and shall offer such
holders the right to request inclusion of any of such holder's Restricted Shares
in the Proposed Registration. No registration pursuant to this Section 2.2 shall
relieve the Corporation of its obligation to register Restricted Shares pursuant
to Section 2.1.
(b) Each Stockholder shall have twenty (20) days from the receipt of
such notice to deliver to the Corporation a written request specifying the
number of Restricted Shares such Stockholder intends to sell and such
Stockholder's intended method of disposition. Any Stockholder shall have the
right to withdraw such Stockholder's request for inclusion of such Stockholder's
Restricted Shares in any registration statement pursuant to this Section 2.2 by
giving written notice to the Corporation of such withdrawal. Subject to Section
2.3 below, the Corporation shall include in such registration statement all such
Restricted Shares so requested to
3
<PAGE>
be included therein; provided, however, that the Corporation may at any time
withdraw or cease proceeding with any such Proposed Registration if it shall at
the same time withdraw or cease proceeding with the registration of all other
equity securities originally proposed to be registered.
(c) In the event that the Proposed Registration by the Corporation
is, in whole or in part, an underwritten public offering of securities of the
Corporation, any request under Section 2.2(b) hereof must specify that the
Restricted Shares be included in the underwriting on the same terms and
conditions as the shares of Stock, if any, otherwise being sold through
underwriters under such registration.
2.3 Priority on Registrations.
(a) If the managing underwriter advises the Corporation that the
inclusion of such Restricted Shares would cause a Material Adverse Effect, the
Corporation will be obligated to include in such registration statement, as to
each Stockholder, only a portion of the Restricted Shares such Stockholder has
requested be registered equal to the ratio which such Stockholder's requested
Restricted Shares bears to the total number of Restricted Shares requested to be
included in such registration statement by all Stockholders who have requested
that their Restricted Shares be included in such registration statement, in the
case of Stockholders exercising rights under Section 2.2 hereof. It is
acknowledged by the Stockholders, that pursuant to the foregoing provision, the
securities to be included in such registration shall be allocated (x) if such
registration has been initiated by the Corporation for securities to be offered
by the Corporation, first to the Corporation, second to Stockholders exercising
their piggyback right and third to all others requesting securities to be
included therein and (y) if such registration has been initiated by Requesting
Stockholders requesting a Demand Registration, first to such Requesting
Stockholders, second to the Corporation if it exercises its piggyback right and
third to all others requesting securities to be included therein. If as a result
of the provisions of this Section 2.3(b) any Stockholder shall not be entitled
to include all of its Restricted Shares in a registration that such Stockholder
has requested to be so included, such Stockholder may withdraw such
Stockholder's request to include Restricted Shares in such registration
statement. The Restricted Shares that are excluded from the underwritten public
offering pursuant to the preceding sentence shall be withheld from the market by
the Stockholders for a period, not to exceed 180 days from the closing of such
underwritten public offering, that the managing underwriter determines as
necessary in order to effect such underwritten public offering.
(b) No Stockholder may participate in any registration statement
hereunder unless such Stockholder completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements, and other documents
reasonably required under the terms of such underwriting arrangements, including
an opinion of its counsel; provided, however, that no such Stockholder shall be
required to make any representations or warranties in connection with any such
registration other than representations and warranties as to (i) such
Stockholder's ownership of its Restricted Shares to be sold or transferred free
and clear of all liens, claims, and encumbrances, (ii) such Stockholder's power
and authority to effect such transfer, and (iii) such matters pertaining to
compliance with securities laws as may be reasonably requested.
2.4 Registration Procedures. Whenever any Stockholder has requested
that any Restricted Shares be registered pursuant to the provisions of this
Article 2, the Corporation
4
<PAGE>
will use its commercially reasonable efforts to effect the registration and the
sale of such Restricted Shares in accordance with the intended method of
disposition thereof as set forth in the written request, and pursuant thereto
the Corporation shall:
(a) prepare and file with the Commission registration statement(s)
with respect to such securities on the appropriate forms, and use its best
efforts to cause such registration statement(s) to become and remain effective
in accordance with Section 2.4(b) hereof and in accordance with all laws, rules
and regulations applicable thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement(s) and the prospectus(es) used in
connection therewith as may be necessary to keep such registration statement(s)
effective until the earlier of (i) the sale of all Restricted Shares covered
thereby or (ii) the date required therefor by the underwriters in the
underwriting agreement, and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all Restricted Shares covered
by such registration statement(s);
(c) furnish to each Stockholder participating in such registration
pursuant to Section 2.1 or Section 2.2 (each, a "Participating Stockholder")
such number of copies of any summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as the Stockholder may reasonably request in order
to facilitate the public sale or other disposition of such Restricted Shares;
(d) use its best efforts to register or qualify the Restricted
Shares covered by such registration statement(s) under the securities or blue
sky laws of such jurisdictions as the Participating Stockholder shall reasonably
request and do any and all other acts or things which may be necessary or
advisable to enable the Participating Stockholders to consummate the public sale
or other disposition in such jurisdictions of such Restricted Shares; provided,
however, that the Corporation shall not be required to consent to general
service of process for all purposes in any jurisdiction where it is not then
subject to process, qualify to do business as a foreign corporation where it
would not be otherwise required to qualify or submit to liability for state or
local taxes where it is not otherwise liable for such taxes;
(e) at any time when a prospectus relating thereto covered by such
registration statement(s) is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 2.4(b) hereof, promptly
notify each Stockholder and each underwriter and (if requested by any such
Stockholder) confirm such notice in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed and, with
respect to a registration statement or any post-effective amendment, when the
same has become effective, (ii) of the issuance by any state securities or other
regulatory authority of any order suspending the qualification or exemption from
qualification of any of the Restricted Shares under state securities or blue sky
laws or the initiation of any proceedings for that purpose, and (iii) of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing and, at the request of any Participating
Stockholder, prepare, file and furnish to such Participating Stockholder a
reasonable number of
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copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such shares, such
prospectus shall not include an 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 in the light of the circumstances then
existing;
(f) if the Corporation has delivered preliminary or final
prospectuses to any Participating Stockholder and after having done so the
prospectus is amended to comply with the requirements of the Securities Act, the
Corporation shall promptly notify such Participating Stockholder and, if
requested, the Participating Stockholder shall immediately cease making offers
of Restricted Shares and return all prospectuses to the Corporation. The
Corporation shall promptly provide the Participating Stockholder with revised
prospectuses and, following receipt of the revised prospectuses, the
Participating Stockholder shall be free to resume making offers of the
Restricted Shares;
(g) furnish, at the request of the Participating Stockholder on the
date such Restricted Shares are delivered to the underwriters for sale in
connection with a registration pursuant to this Article 2, if such Restricted
Shares are being sold through underwriters, or, if such Restricted Shares are
not being sold through underwriters, on the date that the registration statement
with respect to such Restricted Shares becomes effective, (i) an opinion, dated
such date, of the counsel representing the Corporation for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Participating Stockholders and (ii) a letter dated such date, from the
independent certified public accountants of the Corporation, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and the Participating Stockholders;
(h) if any proposed registration effected pursuant to Section 2.1 or
Section 2.2 involves an underwritten public offering, (i) subject to Section
2.1, select a reputable managing underwriter to underwrite such public offering,
(ii) cause all Restricted Shares to be listed for trading on the principal
national securities exchange (including, without limitation, the NASDAQ National
Market System) (as defined in the Securities and Exchange Act of 1934, as
amended) where the Corporation's Stock is listed for trading, and (iii) enter
into (x) an underwriting agreement with the underwriter providing for such
representations, warranties, covenants, conditions and indemnities as may be
requested by the underwriter and (y) a deposit agreement with a depositary, if
applicable, providing for such representations, warranties, covenants,
conditions and indemnities as may be requested by the depositary;
(i) before filing a registration statement or amendment thereto,
furnish to each Participating Stockholder and its counsel and other
representatives and the underwriters, if any, copies of each such registration
statement or amendment proposed to be filed, which documents shall be made
available on a timely basis for review and comment by the Participating
Stockholders, the underwriters (if any) and their respective representatives;
(j) make generally available to the Corporation's security holders
an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act, as promptly as
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practicable, but in any event no later than forty-five (45) days after the end
of the 12-month period beginning with the first day of the Corporation's first
fiscal quarter commencing after the effective date of a registration statement,
which earnings statement shall cover said 12-month period, and which requirement
will be deemed to be satisfied if the Corporation timely files complete and
accurate information on Forms 20-F and 6-K under the Exchange Act and otherwise
complies with Rule 158 under the Securities Act;
(k) if requested by the managing underwriter or any Participating
Stockholder, promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or any Participating
Stockholder reasonably requests to be included therein, including, without
limitation, with respect to the Restricted Shares being sold by such
Participating Stockholder, the purchase price being paid therefor by the
underwriters and with respect to any other terms of the underwritten offering of
the Restricted Shares to be sold in such offering, and promptly make all
required filings of such prospectus supplement or post-effective amendment;
(l) as promptly as practicable after filing with the SEC of any
document which is incorporated by reference into a registration statement (in
the form in which it was incorporated), deliver a copy of each such document to
each Participating Stockholder;
(m) cooperate with the Participating Stockholders and the managing
underwriter to facilitate the timely preparation and delivery of certificates
(which shall not bear any restrictive legends unless required under applicable
law) representing securities sold under any registration statement (if any), and
enable such securities to be in such denominations and registered in such names
as the managing underwriter or such sellers may request and keep available and
make available to the Corporation's transfer agent prior to the effectiveness of
such registration statement a supply of such certificates;
(n) promptly make available for inspection by any Participating
Stockholder, any underwriter participating in any disposition pursuant to any
registration statement, and any attorney, accountant or other agent or
representative retained by any such Participating Stockholder or underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Corporation (collectively, the
"Records"), as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Corporation's officers, directors
and employees to supply all information requested by any such Inspector in
connection with such registration statement; provided, that, unless the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in the registration statement or the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction,
the Corporation shall not be required to provide any information under this
subparagraph (n) if (A) the Corporation believes, after consultation with
counsel for the Corporation, that to do so would cause the Corporation to
forfeit an attorney-client privilege that was applicable to such information or
(B) if either (i) the Corporation has requested and been granted from the SEC
confidential treatment of such information contained in any filing with the SEC
of documents provided supplementally or otherwise or (ii) the Corporation
reasonably determines in good faith that such Records are confidential and so
notifies the Inspectors in writing unless prior to furnishing any such
information with respect to (A) or (B) such Participating Stockholder requesting
such information agrees to enter into a
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confidentiality agreement in customary form and subject to customary exceptions;
and provided, further, that each Participating Stockholder agrees that it will,
upon learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Corporation and allow the Corporation at its
expense, to undertake appropriate action and to prevent disclosure of the
Records deemed confidential;
(o) provide a CUSIP number for the Restricted Shares included in any
registration statement not later than the effective date of such registration
statement;
(p) cooperate with each Participating Stockholder and each
underwriter participating in the disposition of such Restricted Shares and their
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. ("NASD");
(q) during the period when the prospectus is required to be
delivered under the Securities Act, promptly file all documents required to be
filed with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act;
(r) notify each Participating Stockholder promptly of any request by
the SEC for the amending or supplementing of such registration statement or
prospectus or for additional information;
(s) prepare and file with the SEC promptly any amendments or
supplements to such registration statement or prospectus which, in the opinion
of counsel for the Corporation or the managing underwriter, is required in
connection with the distribution of the Restricted Shares;
(t) advise each Participating Stockholder, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order by
the SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for such purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued;
and
(u) if the Participating Stockholders so request, to request
acceleration of effectiveness of the registration statement from the Commission,
provided at the time of such request the Corporation does not, in good faith,
believe it is necessary to amend further the registration statement in order to
comply with the provisions of this Section 2.4. If the Corporation wishes to
further amend the registration statement prior to requesting acceleration, it
shall have five (5) business days to so amend prior to requesting acceleration.
2.5 Suspension of Dispositions. Each Participating Stockholder
agrees that upon receipt of any notice (a "Suspension Notice") from the
Corporation of the happening of any event of the kind described in Section
2.4(e)(iii), such Participating Stockholder will forthwith discontinue
disposition of Restricted Shares until such Participating Stockholder's receipt
of the copies of the supplemented or amended prospectus, or until it is advised
in writing (the "Advice") by the Corporation that the use of the prospectus may
be resumed, and has received copies of any additional or supplemental filings
which are incorporated by reference in the prospectus, and, if so directed by
the Corporation, such Participating Stockholder will deliver to
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the Corporation all copies, other than permanent file copies then in such
Participating Stockholder's possession, of the prospectus covering such
Restricted Shares current at the time of receipt of such notice. In the event
the Corporation shall give any such notice, the time period regarding the
effectiveness of registration statements set forth in Section 2.4(b) hereof
shall be extended by the number of days during the period from and including the
date of the giving of the Suspension Notice to and including the date when each
seller of Restricted Shares covered by such registration statement shall have
received the copies of the supplemented or amended prospectus or the Advice. The
Corporation shall use its commercially reasonable efforts and take such actions
as are reasonably necessary to render the Advice as promptly as practicable.
2.6 Cooperation upon a Registration. The Stockholders and the
Corporation agree that, in connection with any exercise of registration rights
pursuant to this Article 2, the Stockholders will authorize, and will authorize
and direct the Board to take, such actions as are necessary and appropriate to
effectuate such registration. In addition, each Participating Stockholder agrees
to cooperate fully with the Corporation and the underwriters of any underwritten
public offering in the preparation of all documentation necessary or desirable
to effectuate any registration of any Restricted Shares under the Securities Act
pursuant to this Article 2, or registration or qualification of any Restricted
Shares pursuant to Section 2.4(d) hereof. In addition, the Corporation agrees to
cooperate fully with the Participating Stockholders in connection with any such
registration or qualification.
2.7 Limitations. Notwithstanding anything in this Agreement to the
contrary, if requested in writing by the managing underwriter, if any, of any
underwritten public offering of the Corporation's capital stock pursuant to this
Article 2, each Stockholder agrees not to offer, sell, contract to sell or
otherwise dispose of any shares of capital stock of the Corporation except as
part of such underwritten public offering within thirty (30) days before or one
hundred and eighty (180) days after the effective date of the registration
statement filed with respect to said offering, unless expressly authorized to do
so by the managing underwriter.
2.8 Expenses. The Corporation shall pay all expenses incurred by the
Corporation in complying with Sections 2.1, 2.2 and 2.4 hereof, including,
without limitation, all registration and filing fees (including all expenses
incident to filing with the NASD), fees and expenses of complying with the
securities or blue sky laws of all such jurisdictions in which the Restricted
Shares are proposed to be offered and sold (including reasonable fees and
disbursements of counsel in connection with blue sky qualification of Restricted
Shares), rating agency fees, printing expenses, messenger and delivery expenses,
the Corporation's internal expenses (including without limitation all salaries
and expenses of its officers and employees performing legal or accounting
duties), fees and expenses incurred in connection with any listing of the
Restricted Shares, fees and expenses of counsel for the Corporation and its
independent certified public accountants (including the expenses of any special
audit or cold comfort letters required by or incident to such performance),
securities act liability insurance (if the Corporation elects to obtain such
insurance) and fees and disbursements of underwriters (to the extent the
Corporation is liable therefor under the terms of any underwriting agreement),
whether or not any registration statement becomes effective; provided, however,
that all underwriting discounts and selling commissions applicable to the
Restricted Shares covered by registrations effected pursuant to Section 2.1 or
Section 2.2 hereof shall be borne by the Participating Stockholders, in
proportion to the number of Restricted Shares sold by each such Participating
Stockholder, and
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except as expressly provided in this Section 2.8, in no event shall the
Corporation pay any fees or expenses attributable to any counsel, accountants or
other persons retained or employed by the Participating Stockholders. Further to
the foregoing, the Corporation shall pay all reasonable and customary expenses
incurred by any Participating Stockholder, including, without limitation, all
reasonable expenses and fees of one (1) firm of counsel for all Participating
Stockholders (which shall be selected by a majority (based on the number of
Restricted Securities to be sold) of the Participating Stockholders), plus, to
the extent reasonably necessary, one (1) firm of local counsel for all of the
Participating Stockholders in each state or country where reasonably necessary
(the "Expenses").
2.9 Indemnification.
(a) In the event of any registration of any Restricted Shares under
the Securities Act pursuant to this Article 2 or registration or qualification
of any Restricted Shares pursuant to Section 2.4(d) hereof, the Corporation
shall indemnify and hold harmless each Participating Stockholder, each
underwriter of such shares, if any, each broker or any other person acting on
behalf of the Participating Stockholders, each director, officer, employee and
partner of any of the foregoing and each other person, if any, who controls any
of the foregoing persons, within the meaning of the Securities Act (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities or
expenses, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of, are related
to, result from or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any registration statement under which
such Restricted Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any document incident to registration or qualification of any
Restricted Shares pursuant to Section 2.4(d) hereof, or arise out of, are
related to, result from or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or, with respect to any prospectus,
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or any violation by the Corporation of the
state securities or blue sky laws applicable to the Corporation and relating to
action or inaction required of the Corporation in connection with such
registration or qualification under such state securities or blue sky laws and
the Corporation shall reimburse on demand each Indemnified Person for any legal
or any other costs and expenses reasonably incurred by any of them in connection
with investigating, preparing for, defending or settling any such loss, claim,
damage, liability or action by any governmental agency or body; provided,
however, that the Corporation shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, preliminary or final
prospectus or amendment or supplement thereto or any document incident to
registration or qualification of any Restricted Shares pursuant to Section
2.4(d) hereof, in reliance upon and in conformity with written information
furnished to the Corporation by any Participating Stockholder, underwriter,
broker, other person or controlling person specifically for use in the
preparation thereof or arises out of or is based upon the Indemnified Person's
failure to deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Corporation has furnished such
Indemnified Person with a sufficient number of copies of the same; provided
further, that the
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Corporation shall not be liable for any settlement made without its prior
written consent, such consent not to be unreasonably withheld.
(b) Before Restricted Shares shall be included in any registration
pursuant to this Article 2, each Participating Stockholder will furnish to the
Corporation in writing such information and affidavits as the Corporation
reasonably requests for use in connection with any registration statement and
prospectus, and each such Participating Stockholder and any underwriter acting
on its behalf shall have agreed to indemnify and hold harmless (in the same
manner and to the same extent as set forth in paragraph (a) above) the
Corporation, each director of the Corporation, each officer of the Corporation
who signs such registration statement, every other Participating Stockholder and
any person who controls the Corporation within the meaning of the Securities
Act, with respect to any untrue statement or omission from such registration
statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, if such untrue statement or omission was
made in reliance upon and in conformity with written information furnished to
the Corporation by the Participating Stockholder or such underwriter for use in
the preparation of such registration statement, preliminary prospectus, final
prospectus or amendment or supplement; provided, however, that the maximum
amount of liability in respect of such indemnification shall be limited to an
amount equal to the net proceeds actually received by such Participating
Stockholder from the sale of Restricted Shares effected pursuant to such
registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in Section 2.9(a) or
(b) hereof, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 2.9, give prompt written
notice to the latter of the commencement of such action (provided that the
failure to give such notice shall not limit the rights of such indemnified party
unless and to the extent such failure is prejudicial to its ability to defend
such action). In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and, after notice to such indemnified party from the
indemnifying party of its election to assume the defense thereof; provided,
however, that, if any indemnified party shall have reasonably concluded that
there may be one or more legal defenses available to such indemnified party
which are different from, in conflict with or additional to those available to
the indemnifying party, or that such claim or litigation involves or could
reasonably be expected to have an effect upon matters beyond the scope of the
indemnity agreement provided in this Section 2.9, or if the indemnifying party
fails to take diligent action to defend such claim within twenty (20) days
following notice thereof from the indemnified party, the indemnifying party
shall not have the right to assume the defense of such action on behalf of such
indemnified party, or that such claim or litigation involves or could have an
effect upon matters beyond the scope of the indemnity agreement provided in this
Section 2.9, or if the indemnifying party fails to take diligent action to
defend such claim within twenty (20) days following notice thereof from the
indemnified party, and such indemnifying party shall reimburse such indemnified
party and any person controlling such indemnified party for the fees and
expenses of counsel retained by the indemnified party which are reasonably
related to the matters covered by the indemnity agreement provided in this
Section 2.9. If the indemnifying party does assume its own defense, from such
time the indemnified party shall bear the expenses of its own separate counsel.
If such
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defense is not assumed by the indemnifying party as permitted hereunder, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its written consent, which consent shall not be
unreasonably withheld. If such defense is assumed by the indemnifying party
pursuant to the provisions hereof, such indemnifying party shall not make any
settlement of the applicable claim indemnified against hereunder without the
written consent of the indemnified party or parties, which consent shall not be
unreasonably withheld. An indemnifying party that is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party and any other such indemnified party with respect to such
claim, unless in the reasonable judgment of any indemnified party, a conflict of
interest may exist between such indemnified party with respect to such claim, in
which event the indemnifying party shall be obligated to pay the reasonable fees
and disbursements of such additional counsel or counsels.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which an Indemnified Person
makes a claim for indemnification pursuant to this Section 2.9, but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced
notwithstanding the fact that this Section 2.9 provides for indemnification in
such case, then the Corporation and the Participating Stockholder will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject as is appropriate to reflect, as between the indemnifying party,
on the one hand, and the indemnified party on the other hand, the relative fault
of the indemnifying party, on the one hand, and the indemnified party, on the
other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, it being understood that the
parties acknowledge that the overriding equitable consideration to be given
effect in connection with this provision is the ability of one party or the
other to correct the statement or omission which resulted in such losses,
claims, damages or liabilities, and that it would not be just and equitable if
contribution pursuant hereto were to be determined by pro rata allocation or by
any other method of allocation which does not take into consideration the
foregoing equitable considerations. Notwithstanding the foregoing, (i) the
Participating Stockholder will not be required to contribute any amount in
excess of the proceeds to it of all Restricted Shares sold by it pursuant to
such registration statement, (ii) no underwriter shall be required to contribute
any amount in excess of the proceeds to it from the offering pursuant to such
registration statement, and (iii) no person or entity guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Securities Act,
shall be entitled to contribution from any person or entity who is not guilty of
such fraudulent misrepresentation. If indemnification is available under this
Section 2.9, the indemnifying parties shall indemnify each indemnified party to
the full extent provided in Section 2.9(a) and 2.9(b) without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 2.9(d).
(e) Notwithstanding any of the foregoing, if in connection with an
underwritten public offering of any Restricted Shares, the Corporation, the
Participating Stockholder and the underwriters enter into an underwriting or
purchase agreement relating to such offering which contains provisions covering
indemnification among the parties, the
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indemnification provided thereunder shall be in addition to (and not in lieu of)
the indemnification provided to the Stockholders hereunder.
(f) The indemnification and contribution required by this Section
2.9 shall be made by periodic payment of the amount thereof during the course of
the investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred; provided, that if a court of competent
jurisdiction finally determines that any Indemnified Person which has received
payments hereunder does not have an indemnification right under Section 2.9 for
any reason, then such Indemnified Person shall within five (5) days of such
final determination, refund all amounts received hereunder to the Corporation.
(g) The indemnification and contribution provided for hereunder will
remain in full force and effect regardless of any investigation made by or on
behalf of any Indemnified Person and will survive the transfer of securities.
ARTICLE 3. Miscellaneous
3.1 Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communication required or permitted to be given by any
provision of this Agreement shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by registered mail or
telecopied with acknowledgment of receipt sent by telecopier, registered mail or
delivered in person, as the case may be, to such party at the address or
telecopier number, as the case may be, set forth on the signature pages hereto
or to such other address or telecopier number, as the case may be, as such party
may from time to time designate in writing to the other parties. All such
notices, requests, consents and other communications shall be deemed to have
been received: (a) in the case of personal delivery or registered mail, on the
date of receipt; or (b) in the case of telecopying, on the date of
acknowledgment thereof.
3.2 Amendment and Waiver. No change or modification of, or waiver of
compliance with, this Agreement shall be valid unless the same shall be in
writing and signed by all of the parties hereto.
3.3 Termination. This Agreement may be terminated at any time by an
instrument in writing signed by all of the parties hereto. This Agreement shall
terminate automatically as to any Stockholder which transfers all of its
Restricted Shares. Unless sooner terminated, this Agreement shall terminate
eight (8) years from the date hereof, unless, at any time within one (1) year
prior to such date, all of the parties extend its duration for as many
additional periods, each not to exceed eight (8) years, as they may desire.
3.4 No Waiver. No failure or delay on the part of the Stockholders
or any of them in exercising any right, between the Corporation and the
Stockholders or any of them shall operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the simultaneous or later exercise of any other right, power or privilege. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies which the Stockholders or any of them would otherwise
have. No notice to or demand on the Corporation in any case shall entitle the
Corporation to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of
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the Stockholders or any of them to take any other or further action in any
circumstances without notice or demand.
3.5 Specific Performance. Each party to this Agreement acknowledges
that the other parties will suffer irreparable injury in the event of any breach
of any provision of this Agreement and that therefore the remedy at law for any
breach or threatened breach of any such provision of this Agreement will be
inadequate. Accordingly, upon a breach or threatened breach of any such
provision of this Agreement by any party hereto, the other parties shall, in
addition and without prejudice to any of the rights and remedies they may have,
be entitled as a matter of right, without proof of actual damages, to seek
specific performance of such provisions of this Agreement and to such other
injunctive or equitable relief to enforce, or prevent any violations (whether
anticipatory, continuing or future) of, such provisions of this Agreement.
3.6 Counterparts and Headings. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument. All headings and
any cover page or table of contents are inserted for convenience or reference
only and shall not affect its meaning or interpretation.
3.7 Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice-versa.
3.8 Expenses. Except as provided in Section 2.8 hereto, each of the
parties to this Agreement shall bear its own expenses, including, without
limitation, the fees and disbursements of its respective counsel, in connection
with the negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby.
3.9 Governing Law. This Agreement will be governed by, and construed
and enforced in accordance with, the laws of the State of New York, U.S.A.,
without regard to its conflict of law rules.
3.10 Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
Borough of Manhattan, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action or proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section 3.1
hereof.
14
<PAGE>
3.11 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the Corporation and its successors, and each
of the Stockholders and their respective executors, administrators and personal
representatives and heirs and their successors and assigns.
3.12 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
invalid or unenforceable, the remaining provisions hereof shall nevertheless
continue in full force and effect as though the illegal, invalid or
unenforceable provisions were not a part hereof, and the parties shall exert
their best efforts to amend this Agreement to include a provision which is
legal, valid and enforceable and which carries out the original intent of the
parties.
3.13 Complete Agreement. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous arrangements or understandings, whether
written or oral, between or among any of the parties hereto, with respect to the
subject matter hereof.
3.14 Further Assurances. Each of the parties to this Agreement
agrees to execute such other documents and take such other action as may be
reasonably necessary to implement and carry out the intent of this agreement.
3.15 Confidentiality. Each Stockholder covenants and agrees to treat
any non-public information provided to it by the Corporation concerning the
business and finances of the Corporation ("Corporate Information") as
confidential and agrees further that it will not use, exploit, reproduce,
disclose or provide Corporate Information to any third party (other than any
agents of the Stockholder who are bound by substantially similar obligations of
confidentiality) on its own behalf or otherwise, except with the consent of the
Corporation or as required by law, legal process or any federal or state
regulatory body having jurisdiction over such Stockholder. The provisions of
this Section 3.15 shall not apply to any information which:
(a) was within the public domain prior to the time of disclosure of
Corporate Information to the Stockholder or which comes into the public domain
other than as a result of a breach by the Stockholder of this Section 3.15;
(b) was in the possession of the Stockholder (or any of its
officers, directors, employees, agents, principals, or affiliates) before the
Stockholder received the Corporate Information;
(c) was rightfully acquired by the Stockholder from a third party
without, to the knowledge of the Stockholder, any restriction or any obligation
of confidentiality; or
(d) was independently developed by the Stockholder without any use
or reference to the Corporate Information.
The provisions of this Section 3.15 shall survive the termination of
this Agreement, either in whole or as to any Stockholder, for a period of two
(2) years.
15
<PAGE>
3.16. Failure to Execute. Failure of any party to execute this Agreement renders
this Agreement void as to the non-executing party, but such Agreement shall be
valid and binding as to all other parties that execute such Agreement.
[The rest of this page has been intentionally left blank]
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the day and year first above written.
EL SITIO INTERNATIONAL CORPORATION
By: /s/ Roberto Cibrian-Campoy
------------------------------------------
Title:
Notice Address:
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attention: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier:(54 11) 4343-9122, ext. 104
with a copy to:
Paul, Hastings, Janofsky & Walker, LLP
399 Park Avenue, 31st Floor
New York, New York 10022
Attn: Neil A. Torpey
Telephone: (212) 318-6034
Telecopier: (212) 318-4090
<PAGE>
IAMP (EL SITIO) INVESTMENS LTD.
By: /s/ Jose Santos
------------------------------------------
Title: FOR WESTLAW LIMITED -- Director
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
<PAGE>
WASHBURN ENTERPRISES INC.
By: /s/ Amaya Ariztoy
------------------------------------------
Title: Authorized Signatory
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
<PAGE>
CHESTNUT HILL (EL SITIO), LLC
By: /s/ Michael Greeley
------------------------------------------
Title: SVP
Notice Address:
c/o GCC Investments, Inc.
1300 Boylston Street
Chestnut Hill, MA 02467
Attn: Michael A. Greeley
Telephone: (617) 975-3222
Telecopier: (617) 975-3201
with a copy to:
Phillip J. Szabla
Vice President and General Counsel
GC Companies, Inc.
1300 Boylston Street
Chestnut Hill, MA 02467
Telephone: (617) 264-8098
Telecopier: (617) 264-8206
<PAGE>
ROBERTO VIVO-CHANETON
By: /s/ Roberto Vivo-Chaneton
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
GUILLERMO J. LIBERMAN
By: /s/ Guillermo J. Liberman
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
TOWER PLUS INTERNATIONAL CORP.
By: /s/ Nicholas Juan
------------------------------------------
Title: PRESIDENT
Notice Address:
<PAGE>
ROBERTO CIBRIAN-CAMPOY
By: /s/ Roberto Cibrian-Campoy
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
HECTOR R. BANDONI
By: /s/ Hector R. Bandoni
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
SERGIO S. MONTI
By: /s/ Sergio S. Monti
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
HECTOR A. SIERRA
By: /s/ Hector A. Sierra
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
ALBERTO E. TAPIA
By: /s/ Alberto E. Tapia
------------------------------------------
Notice Address: [Illegible]
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
DAMIAN SAID
By: /s/ Damian Said
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
COMPANIA DE INVERSIONES MONTEVIDEO BVI
By: /s/ Marial Ramos
------------------------------------------
Title: Marial Ramos
Notice Address:
Plaza Indepencia 831/508
----------------------------------
MONTEVIDEO, URUGUAY
----------------------------------
TELEPHONE (05982) 901-44-29
----------------------------------
----------------------------------
----------------------------------
<PAGE>
HENRY B. WILSON TRUST
By: /s/ Henry B. Wilson
------------------------------------------
Title:
Notice Address:
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
<PAGE>
VAMAGRA S.A.
By: /s/ Emilio Alfredo Graviar
------------------------------------------
Title: Emilio Alfredo Graviar -- apoderado
Notice Address:
c/o Piedras 172 4th floor
-------------------------------------
1070 Buenos Aires, Argentina
-------------------------------------
Attn: Emilio Alfredo Graviar
-------------------------------------
Telephone: (54) 11 4342-6909
-------------------------------------
-------------------------------------
<PAGE>
JULIEN SEVAUX
By: /s/ Julien Sevaux
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
ELINSTAR INTERNATIONAL CORPORATION
By: /s/ Carlos Korn
------------------------------------------
Title:
Notice Address:
<PAGE>
RENEE SAENZ ARMAS
By: /s/ Renee Saenz Armas
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
GILLES DARD
By: /s/ Gilles Dard
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
SUMMIT INVESTMENT MANAGEMENT LTD.
By: /s/ [Illegible]
------------------------------------------
Title:
Notice Address:
c/o Av. Belgrano 845 (4th)
-------------------------------
1092 Buenos Aires, Argentina
-------------------------------
Attn: Horacio Milberg
-------------------------------
Tel: (54 11) 4343-6700
-------------------------------
Fax: (54 11) 4343-2355
-------------------------------
<PAGE>
GUSTAVO BLUFSTEIN
By: /s/ Gustavo Blufstein
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
HELIANE STEDEN
By: /s/ Heliane Steden
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
JORGE AMY
By: /s/ Jorge Amy
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
ROBERTO J. GARAT
By: /s/ Roberto J. Garat
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
SLI.COM INC.
By: /s/ Guillermo Liberman
------------------------------------------
Name: Guillermo Liberman
Title: President
<PAGE>
DANIEL ROTSZTAIN
By: /s/ Daniel Rotsztain
------------------------------------------
Title:
Notice Address:
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
<PAGE>
DUNAS OVERSEAS LTD
By: /s/ Nicolas Juan
------------------------------------------------
Name: NICOLAS JUAN
Title: PRESIDENT
c/o Estudio Guyer & Regules
------------------------------------------
Plaza Independencia 811, P.B.
------------------------------------------
11100 Montevideo
------------------------------------------
Uruguay
------------------------------------------
Tel: (05982) 902 1515
------------------------------------------
<PAGE>
ALFREDO JIMENEZ DE ARECHAGA
By: /s/ Alfredo Jimenez De Arechaga
------------------------------------------
Title:
Notice Address:
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
<PAGE>
RAFAEL BUSTAMENTE
By: /s/ Rafael Bustamente
------------------------------------------
Title:
Notice Address:
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
<PAGE>
QUANTUM DOLPHIN PLC
By: /s/ Marcelo Mindlin
------------------------------------------
Title: Director
Notice Address:
BOLIVAR 108 1st FLOOR
--------------------------------------
(1066) BUENOS AIRES
--------------------------------------
ARGENTINA
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE>
Exhibit 10.7
[LETTERHEAD OF EL SITIO]
STOCK OPTION PLAN
<PAGE>
EL SITIO INTERNATIONAL CORPORATION
1999 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 and/or Right
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. "Committee" means the committee appointed by the board to administer
the Plan.
1.6. "Common Stock" means the shares of the Company, par value $1.00 per
share, of the Company.
1.7. "BVI" means British Virgin Islands.
1.8. "Company" means EL SITIO INTERNATIONAL Corporation, a BVI
corporation.
1.9. "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.
1.10. "Date of Grant" means the date on which an Option or Right granted
under the Plan.
1.11. "Director" means a member of the Board of Directors of the Company
or any Affiliate.
1.12. "Eligible Individual" means (i) any Employee or Director or (ii) any
consultant or advisor to the Company or an Affiliate who renders bona fide
<PAGE>
services to the Company or an Affiliate.
1.13. "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.
1.14. "Fair Market Value" means the fair market value of a Share as
determined by the Committee pursuant to a reasonable method adopted in good
faith for such purpose.
1.15. "Incentive Stock Option" means an Option granted under the Plan that
qualifies as an incentive stock option under Section 422 of the code and that
the Company designates as such in the Agreement granting the Option.
1.16. "Nonstatutory Stock Option" means an Option granted under the Plan
that is not an Incentive Stock Option.
1.17. "Option" means an option to purchase Shares granted under the Plan.
1.18. "Option Period" means the period during which an Option may be
exercised.
1.19. "Option Price" means the price per Share at which an Option may be
exercised. The Option Price shall be determined by the Committee, provided,
however, that, in the case of Incentive Stock Options the Option Price shall not
be less than the Fair Market Value as of the Date of Grant. Notwithstanding the
foregoing, in the case of an Incentive Stock Option granted to an Optionee who
(applying the rules of Section 424(d) of the Code) owns stock possessing more
than ten percent of the total combined voting power of all classes of stock of
the Company or an Affiliate (a "Ten-Percent Stockholder"), the Option Price
shall not be less than one hundred and ten percent (110%) of the Fair Market
Value on the Date of Grant. The Option Price of any Option shall be subject to
adjustment to the extent provided in Article 10 hereof.
1.20. "Optionee" means an Eligible Individual to whom an Option or Right
has been granted.
1.21. "Plan" means the EL SITIO INTERNATIONAL Corporation 1999 Stock
Option Plan.
1.22. "Related Option" means the Option in connection with which, or by
amendment to which, a specified Right is granted.
<PAGE>
1.23. "Related Right" means the Right granted in connection with, or by
amendment to, a specified Option.
1.24. "Right" means a stock appreciation right granted under the Plan in
accordance with the terms of Section 7.
1.25. "Right Period" means the period during which a Right may be
exercised.
1.26. "Share" means a share of Common Stock.
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 Committee shall administer the Plan and shall have plenary authority,
in its discretion, to award Options and Rights to Eligible Individuals, subject
to the provisions of the Plan. The Committee shall have plenary authority and
discretion, subject to the provisions of the Plan, to determine which Eligible
Individuals shall be granted Options and/or Rights, the time or times at which
Options or Rights are granted and the terms (which terms need not be identical)
of all Options and Rights including, but not limited to, the Option Price, the
number of Shares subject to an Option, whether an Option shall be an Incentive
Stock Option or a Nonstatutory Stock Option, any provisions relating to vesting,
any circumstances in which Options or Rights terminate or Shares may be
repurchased by the Company. In making these determinations, the Committee 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 Committee in its
discretion shall deem relevant. Subject to the provisions of the Plan, the
Committee shall have plenary authority to construe 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 no limited to, any
determination to accelerate the vesting of outstanding Options or Rights. The
determinations of the Committee on the matters referred to in this Article 3
shall be binding and final.
4. Eligibility
<PAGE>
Options and Rights may be granted only to Eligible Individuals, provided,
however, that only Employees who have commenced employment with the Company and
its Affiliates shall be eligible to receive Incentive Stock Options. No Eligible
Individual shall be granted Options or Rights totally more than 15% 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 number of Shares
that may be issued under the Plan is 620,000.
5.2 If an Option or right expires or terminates for any reason (other than
by reason of the exercise of a Related Option or Related Right) without having
been fully exercised, the unissued Shares which had been subject to such Option
shall become available for the grant of additional Options or Rights.
5.3 Upon exercise of a Right (regardless of whether the Right is settled
in cash or Shares), the number of Shares with respect to which the Right is
exercised shall be charged against the number of Shares issuable under the Plan
and shall not become available for the grant of other Awards.
6. Options
6.1 Options granted under the Plan shall be either Incentive Stock Options
or Nonstatutory Stock Options, as designated by the Committee. Each Option
granted under the Plan shall be clearly identified either as an Incentive Stock
Option or 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 Committee may specify.
6.2 The Option Period for Options granted to Eligible Individuals shall be
determined by the Committee and specifically set forth in the Agreement,
provided, however, that an Option shall not be exercisable after ten years (five
years in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder) from its Date of Grant.
7. Rights
7.1 Rights granted under the Plan shall be evidenced by an Agreement
specifying the terms and conditions of the grant.
<PAGE>
7.2 A Right may be granted under the Plan:
(a) in connection with, and at the same time as, the grant of an Option
under the Plan;
(b) by amendment of an outstanding Option granted under the Plan; or
(c) independently of any Option granted under the Plan.
7.3 A right granted under Section 7.2(a) or Section 7.2(b) of this Plan is
a Related Right. A Related Right may, in the Committee's discretion, apply to
all or any portion of the Shares subject to the Related Option.
7.4 A Right may be exercised in whole or in part as provided in the
applicable Agreement, and, subject to the terms of the Agreement, entitles an
Optionee to receive, without payment to the Company (but subject to required tax
withholding), either cash or that number of Shares (equal to the highest whole
number of Shares), or a combination thereof, in an amount or having a fair
market value determined as of the Date of Exercise not to exceed the number of
Shares subject to the portion of the Right exercised multiplied by an amount
equal to the excess of (i) the Fair Market Value on the Date of Exercise of the
Right over (ii) either (A) the Fair Market Value on the Date of Grant of the
Right if it is not a Related Right, or (B) the Option Price as provided in the
Related Option if the Right is a Related Right.
7.5 The Right Period shall be determined by the Committee and specifically
set forth in the applicable Agreement, subject to the following conditions:
(a) a Right will expire no later than the earlier of (1) ten years from
the Date of Grant, or (2) in the case of a Related Right, the expiration of the
Related Option;
(b) a Right may be exercised only when the Fair Market Value on the Date
of Exercise exceeds either (1) the Fair Market Value on the Date of Grant of the
Right if it is not a Related Right, or (2) the Option Price of the Related
Option if the Right is a Related Right; and
(c) a Right that is a Related Right to an Incentive Stock Option may be
exercised only when and to the extent the Related Option is exercisable.
7.6 The exercise, in whole or in part, of a Related Right shall cause a
reduction in the number of Shares subject to the Related Option equal to the
number of Shares with respect to which the Related Right is exercised.
Similarly,
<PAGE>
the exercise, in whole or in part, of a Related Option shall cause a
reduction in the number of Shares subject to the Related Right equal to the
number of Shares with respect to which the Related Option is exercised.
8. Exercise of Options and Rights
8.1 An Option or Right 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
Committee may prescribe, accompanied, in the case of an Option, by full payment
of the Option Price for the Shares with respect to which the Option is exercised
as provided in Section 8.2 hereof.
8.2 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 Committee, in its sole discretion, may provide in an Agreement that
part or all of such 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 Committee of a properly executed exercise
notice and irrevocable instructions to a registered securities broker approved
by the Committee to sell Shares and promptly deliver cash to the Company; (c) by
delivery of a promissory note as provided in Section 8.3 hereof, or (d) by
surrender to the Company of an Option (or a portion thereof) that has become
exercisible 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.
8.3 To the extent provided in an Agreement and permitted by applicable
law, the Committee 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 Committee 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 8.3 shall be payable upon such terms as may be determined by the
Committee, 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
<PAGE>
Committee.
9. Restrictions on Transfer
Options and Rights shall not be transferable other than by will or the
laws of descent and distribution. An Option or Right 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 Committee shall deem appropriate and (iii) as are required
by applicable law.
10. 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,
reclassifcation, reorganization, reincorporation, combination or exchange of
shares, merger, consolidation, liquidation or similar change incorporate
structure, the Committee may, in its discretion, proved for a substitution for
or adjustment in (i) the number and class of Shares subject to outstanding
Options or Rights, (ii) the Option Price of outstanding Options the base price
upon which payments under Rights that are not Related Rights are determined, and
(iii) the aggregate number and class of Shares that may be issued under the
Plan.
11. Termination or Amendment
The Board may amend, alter, suspend or terminate the Plan in any respect
at any time; provided, however, that after the Plan has been approved by the
stockholders of the Company, 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.
12. Modification, Extension and Renewal of Options; Substituted Options
12.1 Subject to the terms and conditions of the Plan, the Committee may
modify, extend or renew the terms of any outstanding Options and Rights, or
<PAGE>
accept the surrender of outstanding Options and Rights 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 and Rights in substitution therefor (to the extent
not theretofore exercised). Any such substituted Options or Rights 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 or Right shall, without the
consent of the Optionee, alter or impair any of the Optionee's rights or
obligations under such Option.
12.2 Anything contained herein to the contrary notwithstanding, Options
and Rights may, at the discretion of the Committee, 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 Committee 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.
13. 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. Options and Rights
may be granted prior to stockholder approval of the Plan, and the date on which
any such Option or Right is granted shall be the Date of Grant for all purposes
provided that (a) each such Option or Right shall be subject to stockholders
approval of the Plan, (b) no Option or Right may be exercised prior to such
stockholder approval, and (c) any such Option or Right shall be void ab initio
if such stockholder approval is not obtained.
14. Witholding
The Company's obligation to deliver Shares or pay any amount pursuant to
the terms of any Option or Right shall be subject to the satisfaction of
applicable federal, state and local tax and social security, if applicable,
withholding requirements. To the extent provided in the applicable Agreement and
in accordance with rules prescribed by the Committee, an Optionee may
<PAGE>
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.
15. Term of the Plan
Unless sooner terminated by the Board pursuant to Article 11, the Plan
shall terminate on December 1, 2008 and no Options or Rights may be granted
after such date. The termination of the Plan shall not affect the validity of
any Option or Right outstanding on the date of termination.
16. Indemnification of Committee
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee 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 hereof
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 interest of the Company.
17. General Provisions
17.1 The establishment of the Plan shall not confer upon any Eligible
Individual any legal or equitable right against the Company, any Affiliate or
the Committee except as expressly provided in the Plan.
17.2 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.
17.3 Neither the adoption of this Plan nor its submission to the
stockholders, shall 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 requirements of stockholder
approval
<PAGE>
upon the same.
17.4 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.
17.5. The Plan shall be governed, construed and administered in accordance
with the laws of the State of New York, United States of American. Any conflict
or judicial claim should be exclusively submit the New York Courts.
17.6. The Committee may require each person acquiring Shares pursuant to
Options or Rights 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
Committee 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 another restrictions as the Committee 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 Committee 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 Committee deems appropriate to reflect restrictions contained
in this Plan or in the applicable Agreement or to comply with the BVI General
Corporation law.
17.7 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 Committee, the approval of all regulatory bodies deemed necessary by the
Committee, and without complying to the Committee's complete satisfaction, with
all rules and regulations, under federal, state or local law deemed applicable
by the Committee
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN ENROLLMENT FORM
To enroll in your company's Employee Stock Purchase Plan ("ESPP"), please
complete this form, read the ESPP Terms & Conditions ("THE AGREEMENT"), separate
and retain it for your records and return the form to your employer:
Please print the information requested below. For your permanent home address
please enter the street address of the location you consider your permanent and
primary residence. Do not enter a Post Office Box number or temporary address.
- --------------------------------------------------------------------------------
Your Name
- --------------------------------------------------------------------------------
Your Permanent Home Address City Zip Code
- --------------------------------------------------------------------------------
Your Country of Citizenship Your Company division work location
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Documento Nacional de Identidad (I.D. Number)
<PAGE>
- --------------------------------------------------------------------------------
OPTION NUMBER
- --------------------------------------------------------------------------------
OPTIONEE
- --------------------------------------------------------------------------------
DATE OF GRANT
- --------------------------------------------------------------------------------
OPTION PRICE
- --------------------------------------------------------------------------------
COVERED SHARES
- --------------------------------------------------------------------------------
EL SITIO INTERNATIONAL CORPORATION
1999 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. "Change of Control" means the occurrence of any of the
following event 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 13
d-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
<PAGE>
converted into voting securities of the surviving entity or the parent thereof)
least 50% of the combined voting power of the voting securities of the Company
or such surviving entity, or the parent thereof, 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 at the Board 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. "Committee" means the committee charged, pursuant to the
provisions of the Plan, with the administration of the Plan.
1.7. "Common Stock" means the shares of the Company, par value US$
1.00 per share, of the Company.
1.8. "Company" means EL SITIO INTERNATIONAL Corporation.
1.9. "Covered Shares" means the number of Shares subject to the
Option set forth as the "Covered Shares" on page 1 of this Agreement.
1.10. "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.
1.11. "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;
<PAGE>
(d) one hundred eighty (180) days 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.
1.12. "Date of Grant" means the date set forth as the "Date of
Grant" on page 1 of this Agreement in EL SITIO INTERNATIONAL Corporation 1999
Stock Option Plan.
1.13. "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 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 reasonable acceptable to the Optionee or the Optionee's
doctor and such doctor shall have concurred in the conclusion of the Optionee's
doctor.
1.14. "Employment" means the Optionee's employment with the Company
and its Affiliates, including service as a director.
1.15. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.16. "Existing Stockholders" means EL SITIO Stockholders existing
at the moment of the Grant Date.
1.17. "Fair Market Value" means the fair market value of a Share as
determined by the Committee pursuant to a reasonable method adopted in good
faith for such purpose.
1.18. "Good Cause" means a termination of the grant of the Plan
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,
<PAGE>
which adversely affects the operations, prospects or reputation of the Company;
or (3) conviction of a felony or other crime involving moral turpitude.
1.19. "Option" means the nonstatutory stock option granted to the
Optionee in Section 2 of this Agreement.
1.20. "Option Price" means the dollar amount per Share set forth as
the "Option Price" on page 1 of this Agreement, provided, however, that it the
shares of the Corporation are listed on any Stock Exchange, the share price
shall be the price of the shares traded in such exchange. The exercise price
shall never be greater than the market price determined by such exchange.
1.21. "Optionee" means the person identified as the "Optionee" on
page 1 of this Agreement.
1.22. "Plan" means the EL SITIO INTERNATIONAL Corporation 1999 Stock
Option Plan.
1.23. "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.
1.24. "Public Market" means, and shall be deemed to exist, if (i) 3
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.
1.25. "Securities Act" means the Securities Act of 1933, as amended.
1.26. "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 the number of Share equal to the Covered Shares, exercisable at the
Option Price.
3. Terms of the Option.
<PAGE>
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 exercises with
respect to such Covered Shares.
3.3. Vesting Schedule.
(a) On each of the first, second and third anniversaries of the Date
of Grant, the Option shall vest as to twenty percent, thirty percent and fifty
percent, respectively, of the Covered Shares, 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). Or, the Optionee may exercise the 100%
of his option at the end of the third anniversary.
(b) On the fourth anniversary of the Date of Grant, the Option shall
vest as to the remainder of the Covered Shares.
(c) Notwithstanding the provisions of Sections 3.3(a) and (b), (i)
in the event that a Change of Control shall occur on or after the first
anniversary of the Date of Grant, all unvested portions of the Option set forth
in said Sections 3.3(a) and (b) shall vest in full, including any portion of the
Option not yet exercised because of decision of the Optionee of because of non
yet compliance of vesting schedule required by the Plan 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 Committee 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 Committee notifies the Optionee to the
contrary, the form attached to this Agreement as Exhibit A shall be used to
exercise the Option.
<PAGE>
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 Committee, which approval shall
be in the Committee'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 descents 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 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 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, 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 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, 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
<PAGE>
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 Committee 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
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.
<PAGE>
7.2. Legends. The Optionee agrees that the certificates evidencing
the Shares issued upon exercise of the Option may include any legend which the
Committee 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 Committee 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:
EL SITIO INTERNATIONAL Corporation
Belgrano 845
Buenos Aires, Argentina
Attention: President
Facsimile: 011-5411-4343-2355
If to the Optionee, to the address set forth beneath the Optionee's signature on
the signature page hereof.
<PAGE>
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 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: EL SITIO INTERNATIONAL CORPORATION
By : _________________________
Name: : _________________________
Title : President
Accepted and agreed to as of the Date of Grant.
_________________________
Optionee:
Address:
<PAGE>
EXHIBIT A
EXERCISE OF OPTION
Board of Directors
El Sitio Corporation
1092 Av. Belgrano 845
Buenos Aires, Argentina
Ladies and Gentlemen:
The undersigned, the Optionee under the Nonstatutory Stock Option
Agreement identified as Option No. 1 (the "Agreement"), granted pursuant to the
EL SITIO INTERNATIONAL Corporation 1999 Stock Option Plan (the "Plan"), hereby
irrevocably elects to exercise the option granted in such Agreement (the
"Option") to purchase [whole numbers only] Common Stock shares, par value ______
per share, (the "Shares") of EL SITIO INTERNATIONAL Corporation (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.
<PAGE>
Dated: __________ __________________________
(Signature of Optionee)
Date Received by
EL SITIO INTERNATIONAL Corporation: _____________
Received by: _____________
<PAGE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made as of June 18,
1999, by and between El Sitio International Corporation ("El Sitio") a British
Virgin Islands company, and Roberto Cibrian-Campoy ("Executive").
WHEREAS, El Sitio wishes to assure itself of the services of
Executive for the period provided in this Agreement, and Executive is willing to
provide such services to El Sitio for said period, and upon the other terms and
conditions hereinafter provided; and
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Services Provided. El Sitio agrees to utilize the services of
Executive, and Executive agrees to provide such services for the period stated
in Paragraph 2 hereof and upon the other terms and conditions herein provided.
2. Term and Duties.
(a) Term of Agreement. The term of this Agreement will
commence as of the date hereof (the "Commencement Date") and will continue
through the date three (3) years after the Commencement Date (the "Termination
Date"). On the Termination Date, this Agreement will be renewed for a new
three-year term commencing on such Termination Date and thereafter for
successive three year periods unless either El Sitio or Executive notifies the
other in writing, no later than ninety (90) days prior to the Termination Date
(or the end of such renewal period, as applicable), that it does not intend to
renew this Agreement. If El Sitio notifies Executive that it does not intend to
renew this Agreement, such notice will be considered an Event of Termination as
defined in Paragraph 5 herein, and benefits will be payable to Executive as
specified in Paragraph 5.
(b) Termination Prior to Expiration of the Term. This
Agreement may also be terminated prior to the end of the initial term or any
renewal term hereof.
(c) Duties. During the period of Executive's employment
hereunder, Executive shall serve, as long as El Sitio's business is conducted
through El Sitio (or another legal entity), as President and Chief Executive
Officer of El Sitio (or as principal executive officer of such other legal
entity), or (ii) if the business of El Sitio ceases to be conducted through a
separate legal entity (i.e., El Sitio's business is conducted as a "division" of
a legal entity), as the principal executive in charge of the division through
which El Sitio's business is conducted. Except for illness, vacation periods,
and reasonable leaves of absence, Executive shall devote all of his business
time, attention, skill and efforts
Cibrian-Campoy Employment Agreement
<PAGE>
to the faithful performance of his duties in said office, and will use his best
efforts to further El Sitio's business interests.
3. Compensation and Reimbursement of Expenses.
(a) Compensation. For all services rendered by Executive to El
Sitio during the term of this Agreement, El Sitio shall pay Executive a base
salary of FIFTEEN THOUSAND DOLLARS ($15,000) per month, based on a year of
thirteen (13) months (with 1.5 months' salary being paid Executive in June and
December) (the "Base Salary") and a bonus of no less than SEVEN THOUSAND DOLLARS
($7,000) per annum payable on or about year-end. The Base Salary shall be paid
in accordance with El Sitio's normal payroll practices. The Base Salary shall
increase on each anniversary of the date hereof pursuant to a resolution adopted
by the Compensation Committee of the Board of Directors.
(b) Reimbursement of Expenses and Administrative Support. El
Sitio shall pay or reimburse Executive for all reasonable travel, relocation (if
applicable) and other expenses incurred by Executive in performing his
obligations under this Agreement. El Sitio further agrees to furnish Executive
with office space and administrative support, and any other assistance and
accommodations as shall be reasonably required by Executive in the performance
his duties under this Agreement.
(c) Stock Options. The parties acknowledge that Executive has
been granted and shall in the future be granted options to purchase stock of El
Sitio pursuant to certain of El Sitio incentive stock option plans (the "ISO
Plans") and pursuant to certain other such options which may be granted at the
discretion of the Board of Directors of El Sitio.
(d) Vacation. Executive shall be entitled to four (4) weeks
paid vacation in each calendar year.
(e) Deductions. All payments made under this Agreement shall
be subject to such deductions at the source as from time to time may be required
to be made pursuant to any law, regulation or order.
4. Participation in Benefit Plans.
(a) Participation. In addition to the payments provided in
paragraphs 3 and 5 hereof, Executive will participate, for the term of this
Agreement and during the Severance Period (as defined in Paragraph 5(b)), in all
El Sitio benefit programs for which key executives are or shall become eligible,
on the same terms as other key executives of El Sitio.
Cibrian-Campoy Employment Agreement
-2-
<PAGE>
(b) Incapacity. In the event that Executive shall, by reasons
of illness or mental or physical disability or incapacity, be unable to perform
the duties and responsibilities required to be performed by him on behalf of El
Sitio, the Base Salary payments as specified in Paragraph 3(a) herein shall
continue for a period of one hundred eighty (180) days, then such payments shall
be suspended. Such payments shall be resumed upon the assumption by Executive of
his activities on behalf of El Sitio as called for herein.
5. Payments to Executive Upon Termination of Agreement.
(a) Termination. Upon the occurrence of an Event of
Termination during the term of this Agreement, the provisions of this Paragraph
5 shall apply. As used in this Agreement, an "Event of Termination" shall mean
and include any one or more of the following:
(i) The termination by El Sitio of this Agreement for
any reason (including, but not limited to, El Sitio's election
not to renew this Agreement pursuant to Paragraph 2(a) hereof)
other than "cause" (as defined in Paragraph 6 herein); or
(ii) Executive's termination of this Agreement, pursuant
to:
A. a material change by El Sitio of the
Executive's responsibilities or assignments, which change
would cause Executive's responsibilities or assignments to
become of less responsibility or importance from the
assignments and responsibilities described in Paragraph 2
above, and any such material change shall be deemed a
continuing breach of this Agreement; or
B. any other breach of this Agreement by El
Sitio.
Upon the occurrence of any event described in clauses A or B above,
Executive shall have the right to elect to terminate this Agreement, upon not
less than thirty (30) days prior written notice given within a reasonable period
of time not to exceed, except in case of a continuing breach, three (3) calendar
months after the event giving rise to said right to elect.
(b) Continuation of Benefits. Upon the occurrence of an Event
of Termination, in addition to any amounts payable pursuant to Section 3 hereof,
El Sitio shall pay monthly to Executive the compensation described an Paragraph
3 herein, including the Base Salary. Such payments shall commence on the first
day of the month following the date of termination hereof and shall continue
until the Termination Date (or the end of the renewal period, as applicable) or
twenty-four (24) months, whichever is greater (the "Severance
Cibrian-Campoy Employment Agreement
-3-
<PAGE>
Period"). During the Severance Period, Executive shall continue to receive all
other benefits to which Executive was entitled under Paragraphs 3 and 4 hereof.
(c) Offset. If Executive becomes employed other than with El
Sitio, after an Event of Termination, but prior to the date at which the
continued Base Salary, Bonus and-other payments would have expired, any salary
received by Executive as a result of such employment will be subtracted from any
payments due Executive from El Sitio under Paragraph 5(b) hereunder.
6. Termination for Breach by Executive.
(a) Conditions for Termination. Executive shall be considered
in breach of this Agreement, and the Agreement subject to termination by El
Sitio, in the following events (each, a "cause");
(i) Willful disobedience of lawful instructions of the
Board of Directors of El Sitio by Executive which continues
after being afforded a reasonable opportunity to cure such
disobedience; or
(ii) The commission of a felony by Executive; or
(iii) Gross negligence by Executive in carrying out his
duties on behalf of El Sitio.
(b) Notice. In the event El Sitio elects to terminate this
Agreement pursuant to Paragraph 6(a), El Sitio shall have a thirty (30) day
written notice of termination to Executive setting out, in detail, the reasons
for termination. Upon the expiration of such thirty (30) day notice period this
Agreement shall be wholly terminated subject to the payment to executive of any
remuneration or other amounts owing pursuant hereto.
7. Effect of Prior Agreements. This Agreement contains the full and
complete understanding between the parties hereto with respect to the subject
matter hereof and supersedes any prior agreement between El Sitio or any
predecessor of El Sitio and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to Executive of
a kind elsewhere provided and not expressly provided in this Agreement.
8. Binding Agreement This Agreement shall be binding upon, and inure
to the benefit of Executive and El Sitio and their respective permitted
successors and assigns. Notwithstanding any provision herein to the contrary, in
the event of a sale (whether by an asset acquisition, merger, consolidation,
stock acquisition or similar transaction), this
Cibrian-Campoy Employment Agreement
-4-
<PAGE>
Agreement may be assigned by El Sitio or assumed by a purchaser of El Sitio or
El Sitio's assets.
9. Modification and Waiver.
(a) Amendment of Agreement. This Agreement may not be modified
or amended except by an instrument in writing signed by the parties hereto.
(b) Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein, and each such
waiver shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than that specifically waived.
10. Governing Law. This Agreement shall be governed by the laws of
the State of New York, without regard to the conflict of laws principles
thereof.
11. Ownership.
(a) Treatment of Improvements. Executive hereby covenants and
agrees that, during the continuance of his employment hereunder, all rights,
title and interest in and to any intellectual or industrial properly, including
without limitation, all works, ideas, processes, systems, and improvements to El
Sitio operations (hereinafter, collectively, the "Improvements"), that are
created or suggested by Executive in connection with his duties at El Sitio, and
each of them, together with all patents and trademarks therein, if any, shall be
and remain the exclusive property of El Sitio and of El Sitio's assignees and
successors.
(b) Full Disclosure. Executive hereby covenants and agrees to
fully disclose all such Improvements, as and when such are created and shall
promptly upon El Sitio's request, and without further consideration other than
that provided for herein, but at no expense to Executive, to make all such
applications, execute all such papers, and do all such things as may be
necessary or desirable so that the ownership of such Improvements shall vest
in El Sitio and so that El Sitio may obtain, own and exploit, for its own
benefit and in all respects, such Improvements
12. Mutual Release. At the end or the Severance Period, upon receipt
by Executive of all payments required by Paragraph 5(b) herein, the parties
hereto will be deemed to have mutually irrevocably and unconditionally released
all claims, promises, debts, causes of action or similar rights of any type or
nature that either party has or had which in any way relate to or arise from
this Agreement The parties hereto, further agree, upon and
Cibrian-Campoy Employment Agreement
-5-
<PAGE>
after the effectiveness of such releases, not to criticize, denigrate or
otherwise disparage any other person or entity described in this Agreement.
[Rest of page intentionally left blank]
Cibrian-Campoy Employment Agreement
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<PAGE>
IN WITNESS THEREOF, El Sitio has caused this Agreement to be
executed and its seal to be affixed hereunto by its duly authorized officer, and
Executive has signed this Agreement, all as of the day and year first above
written.
EL SITIO INTERNATIONAL CORPORATION
By: /s/ Roberto Cibrian-Campoy
------------------------------------
Roberto Cibrian-Campoy
---------------------------------------
Roberto Cibrian-Campoy
<PAGE>
Exhibit 10.9
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made as of June 18,
1999, by and between El Sitio International Corporation ("El Sitio"), a British
Virgin Islands company, and Daniel Rotsztain ("Executive").
WHEREAS, El Sitio wishes to assure itself of the services of
Executive for the period provided in this Agreement, and Executive is willing to
provide such services to El Sitio for said period, and upon the other terms and
conditions hereinafter provided; and
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Services Provided. El Sitio agrees to utilize the services of
Executive, and Executive agrees to provide such services, for the period stated
in Paragraph 2 hereof and upon the other terms and conditions herein provided.
2. Term and Duties.
(a) Term of Agreement. The term of this Agreement will
commence as of the date hereof (the "Commencement Date") and will continue
through the date three (3) years after the Commencement Date (the "Termination
Date"). On the Termination Date, this Agreement will be renewed for a new
three-year term commencing on such Termination Date and thereafter for
successive three-year renewals periods unless either El Sitio or Executive
notifies the other in writing, no later than ninety (90) days prior to the
Termination Date (or the end of such renewal period, as applicable), that it
does not intend to renew this Agreement. If El Sitio notifies Executive that it
does not intend to renew this Agreement, such notice will be considered an Event
of Termination as defined in Paragraph 5 herein, and benefits will be payable to
Executive as specified in Paragraph 5.
(b) Termination Prior to Expiration of the Term. This
Agreement may also be terminated prior to the end of the initial term or any
renewal term hereof.
(c) Duties. During the period of Executive's employment
hereunder, Executive shall serve, as long as El Sitio's business is conducted
through El Sitio (or another legal entity), as President and Chief Executive
Officer of El Sitio (or as principal executive officer of such other legal
entity), or (ii) if the business of El Sitio ceases to be conducted through a
separate legal entity (i.e., El Sitio's business is conducted as a "division"
of a legal entity), as the principal executive in charge of the division
through which El Sitio's business is conducted. Except for illness, vacation
periods and reasonable
Rotsztain Employment Agreement
<PAGE>
leaves of absence, Executive shall devote all of his business time, attention,
skill and efforts to the faithful performance of his duties in said office, and
will use his best efforts to further El Sitio's business interests.
3. Compensation and Reimbursement of Expenses.
(a) Compensation. For all services rendered by Executive to El
Sitio during the term of this Agreement, El Sitio shall pay Executive a base
salary of FIFTEEN THOUSAND DOLLARS ($15,000) per month, based on a year of
thirteen (13) months (with 1.5 months' salary being paid Executive in June and
December) (the "Base Salary") and a bonus of no less than SEVEN THOUSAND DOLLARS
($7,000) per annum payable on or about year-end. The Base Salary shall be paid
in accordance with El Sitio's normal payroll practices. The Base Salary shall
increase on each anniversary of the date hereof pursuant to a resolution of the
Compensation Committee adopted by the Board of Directors of the Company.
(b) Reimbursement of Expenses and Administrative Support. El
Sitio shall pay or reimburse Executive for all reasonable travel, relocation (if
applicable) and other expenses incurred by Executive in performing his
obligations under this Agreement. El Sitio further agrees to furnish Executive
with office space and administrative support, and any other assistance and
accommodations as shall be reasonably required by Executive in the performance
of his duties under this Agreement.
(c) Stock Options. The parties acknowledge that Executive has
been granted and shall in the future be granted options to purchase stock of El
Sitio pursuant to certain of El Sitio's incentive stock option plans (the "ISO
Plans") and pursuant to certain other such options which may be granted at the
discretion of the Board of Directors of El Sitio.
(d) Vacation. Executive shall be entitled to four (4) weeks
paid vacation in each calendar year.
(e) Deductions. All payments made under this Agreement shall
be subject to such deductions at the source as from time to time may be required
to be made pursuant to any law, regulation or order.
4. Participation in Benefit Plans.
(a) Participation. In addition to the payments provided in
Paragraphs 3 and 5 hereof, Executive will participate, for the term of this
Agreement and during the Severance Period (as defined Paragraph 5(b)), in all El
Sitio benefit programs for
Rotsztain Employment Agreement
-2-
<PAGE>
which key executives are or shall become eligible, on the same terms as other
key executives of El Sitio.
(b) Incapacity. In the event that Executive shall, by reasons
of illness or mental or physical disability or incapacity, be unable to perform
the duties and responsibilities required to be performed by him on behalf of El
Sitio, the Base Salary payments as specified in Paragraph 3(a) herein shall
continue for a period of one hundred eighty (180) days, then such payments shall
be suspended. Such payments shall be resumed upon the assumption by Executive of
his activities on behalf of El Sitio as called for herein.
5. Payments to Executive Upon Termination of Agreement.
(a) Termination. Upon the occurrence of an Event of
Termination during the term of this Agreement, the provisions of this Paragraph
5 shall apply. As used in this Agreement, an "Event of Termination" shall mean
and include any one or more of the following:
(i) The termination by El Sitio of this Agreement for
any reason (including, but not limited to, El Sitio's election
not to renew this Agreement pursuant to Paragraph 2(a) hereof)
other than "cause" (as defined in Paragraph 6 therein); or
(ii) Executive's termination of this Agreement, pursuant
to:
A. a material change by El Sitio of the
Executive's responsibilities or assignments, which change
would cause Executive's responsibilities or assignments to
become of less responsibility or importance from the
assignments and responsibilities described in Paragraph 2
above, and any such material change shall be deemed a
continuing breach of this Agreement; or
B. any other breach of this Agreement by El Sitio.
Upon the occurrence of any event described in clauses A or B above,
Executive shall have the right to elect to terminate this Agreement, upon not
less than thirty (30) days prior written notice given within a reasonable period
of time not to exceed, except in case of a continuing breach, three (3) calendar
months after the event giving rise to said right to elect.
(b) Continuation of Benefits. Upon the occurrence of an Event
of Termination, in addition to any amounts payable pursuant to Section 3 hereof,
El Sitio shall pay monthly to Executive the compensation described in Paragraph
3 herein, including the Base Salary. Such payments shall commence on the first
day of the month following the date of
Rotsztain Employment Agreement
-3-
<PAGE>
termination hereof and shall continue until the Termination Date (or the end of
the renewal period, as applicable) or twenty-four (24) months, whichever is
greater (the "Severance Period"). During the Severance Period, Executive shall
continue to receive all other benefits to which Executive was entitled under
Paragraphs 3 and 4 hereof.
(c) Offset. If Executive becomes employed, other than with El
Sitio, after an Event of Termination, but prior to the date at which the
continued Base Salary, Bonus and other payments would have expired, any salary
received by Executive as a result of such employment will be subtracted from any
payments due Executive from El Sitio under Paragraph 5(b) hereunder.
6. Termination for Breach by Executive.
(a) Conditions for Termination. Executive shall be considered
in breach of this Agreement, and the Agreement subject to termination by El
Sitio, in the following events (each a "cause"):
(i) Willful disobedience of lawful instructions of the
Board of Directors of El Sitio by Executive which continues
after being afforded a reasonable opportunity to cure such
disobedience; or
(ii) The commission of a felony by Executive; or
(iii) Gross negligence by Executive in carrying out his
duties on behalf of El Sitio.
(b) Notice. In the event El Sitio elects to terminate this
Agreement pursuant to Paragraph 6(a), El Sitio shall give a thirty (30) day
written notice of termination to Executive setting out, in detail, the reasons
for termination. Upon the expiration of such thirty (30) day notice period this
Agreement shall be wholly terminated subject to the payment to Executive of any
remuneration or other amounts owing pursuant hereto.
7. Effect of Prior Agreements. This Agreement contains the full and
complete understanding between the parties hereto with respect to the subject
matter hereof and supersedes any prior agreement between El Sitio or any
predecessor of El Sitio and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to Executive of
a kind elsewhere provided and not expressly provided in this Agreement.
8. Binding Agreement. This Agreement shall be binding upon, and
inure to the benefit of Executive and El Sitio and their respective permitted
successors and assigns. Notwithstanding any provision herein to the contrary, in
the event of a sale (whether by an asset
Rotsztain Employment Agreement
-4-
<PAGE>
acquisition, merger, consolidation, stock acquisition or similar transaction)
this Agreement may be assigned by El Sitio or assumed by a purchaser of El Sitio
or El Sitio's assets.
9. Modification and Waiver.
(a) Amendment of Agreement. This Agreement may not be modified
or amended except by an instrument in writing signed by the parties hereto
(b) Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein, and each such
waiver shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than that specifically waived.
10. Governing Law. This Agreement shall be governed by the laws of
the State of New York, without regard to the conflict of laws principles
thereof.
11. Ownership.
(a) Treatment of Improvements. Executive hereby covenants and
agrees that during the continuance of his employment hereunder, all rights,
title and interest in and to any intellectual or industrial property, including
without limitation, all works ideas, processes, systems, and improvements to El
Sitio's operations (hereinafter, collectively the "Improvements"), that are
created or suggested by Executive in connection with his duties at El Sitio and
each of them, together with all patents and trademarks therein, if any, shall be
and remain the exclusive property of El Sitio and of El Sitio's assignees and
successors.
(b) Full Disclosure. Executive hereby covenants and agrees to
fully disclose all such Improvements, as and when such are created and shall
promptly upon El Sitio's request and without further consideration other than
that provided for herein, but at no expense to Executive, to make all such
applications, execute all such papers, and do all such things as may be
necessary or desirable so that the ownership of such Improvements shall vest in
El Sitio and so that El Sitio may obtain, own and exploit, for its own benefit
and in all respects, such Improvements.
12. Mutual Release. At the end of the Severance Period, upon
receipt by Executive of all payments required by Paragraph 5(b) herein, the
parties hereto will be deemed to have mutually irrevocably and unconditionally
released all claims, promises, debts, causes of action or similar rights of any
type or nature that either party has or had which in any way relate to or arise
from this Agreement. The parties hereto further agree, upon and after the
Rotsztain Employment Agreement
-5-
<PAGE>
effectiveness of such releases, not to criticize, denigrate or otherwise
disparage any other person or entity described in this Agreement.
[Rest of page intentionally left blank]
Rotsztain Employment Agreement
-6-
<PAGE>
IN WITNESS THEREOF, El Sitio has caused this Agreement to be
executed and its seal to be affixed hereunto by its duly authorized officer, and
Executive has signed this Agreement; all as of the day and year first above
written.
EL SITIO INTERNATIONAL CORPORATION
By: /s/ Daniel Rotsztain
------------------------------------
Daniel Rotsztain
---------------------------------------
Daniel Rotsztain
<PAGE>
Exhibit 10.10
NONCOMPETE AGREEMENT
AGREEMENT, dated as of July 2, 1999, by and between El Sitio
International Corporation, a British Islands corporation, with its principal
offices at Avenida Belgrano 845, 4th Floor, 1092 Buenos Aires, Argentina (the
"Company") and Roberto Cibrian-Campoy (the "Executive).
IN CONSIDERATION of the employment of the Executive by the Company
and the premises and the mutual covenants set forth below, the parties hereby
agree as follows:
1. Confidential Information, Ownership of Documents;
Non-Competition.
(a) Confidential Information. Executive shall hold the
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall been obtained by Executive during
Executive's employment by the Company and which is not generally available
public knowledge (other than as a result of acts by Executive in violation of
this Agreement). Except as may be required or appropriate in connection with his
carrying out his duties under this Agreement, Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
any legal process, or as is necessary in connection with any adversarial
proceeding against the Company (in which case Executive shall use his reasonable
best efforts in cooperation with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction), communicate or divulge
any such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records,
files, drawings, documents, models, equipment, and the like relating to the
Company's business, which Executive has control over shall not be removed from
the Company's premises without its written consent, unless such removal is in
the furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of employment. Executive
shall assign to the Company all rights to trade secrets and other products
relating to the Company's business developed by him alone or in conjunction with
others at any time while employed by the Company.
(c) Protection of Business. During the period of employment of
the Executive by the Company and until the first anniversary of the date of
termination of Executive's employment with the Company ("Date of Termination"),
the Executive will not (i) engage, anywhere within the geographical areas in
which Company or any of its subsidiaries
<PAGE>
(the Designated Entities") are conducting their business operations or providing
services as of the Date of Termination, in any Spanish or Portuguese language
portal or content network which is being engaged by the Designated Entities as
of the Date of Termination or pursue or attempt to develop any project known to
Executive and which the Designated Entities are actively pursuing, developing or
attempting to develop as of the Date of Termination, directly or indirectly,
alone, in association with or as a shareholder, principal agent, partner,
officer, director, employee or consultant of any other organization, (ii) divert
to any entity which is engage in any business conducted by the Designated
Entities in the same geographic area as the Designated Entities, any project or
customer of any of the Designated Entities, or (iii) solicit any officer,
employee (other than secretarial staff) or consultant of any of the Designated
Entities to leave the employ of any of the Designated Entities. Notwithstanding
the preceding sentence, Executive shall not be prohibited from owning less than
one five (5%) percent of any publicly traded corporation, which is in
competition with the Company. If, at any time. The provisions of this Section
1(c) shall be determined to be invalid or unenforceable, by reason of being
vague or unreasonable as to area, duration or scope of activity, this Section
1(c) shall be considered divisible and shall become and be immediately amended
to only such area, duration and scope of activity as shall be determined to be
reasonable and enforceable by the court or other body having jurisdiction over
the matter; and Executive agrees that this Section 1(c) as so amended shall be
valid and binding as through any invalid or unenforceable provision had not been
included herein.
(d) Injunctive Relief. In the event of breach of or threatened
breach of this Section 1, Executive agrees that the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in
this Section 1, the termination of Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 1.
2. Successors; Binding Agreement.
(a) Company's Successors. No rights or obligation of the
Company under this Agreement may be assigned or transferred except that the
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) Executive's Successors. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution.
2
<PAGE>
3. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have duly given when delivered either personally or by
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to Executive:
c/o Avenida Belgrano 845, 4th Floor
1092, Buenos Aires, Argentina
Telecopier: (5411) 4343-9122, Ext. 104
If to the Company:
Avenida Belgrano 845, 4th Floor
1092, Buenos Aires, Argentina
Telecopier: (5411) 4343-9122, Ext. 104
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
4. Miscellaneous. No provisions of this agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter thereof have been made by either party which are not set forth
expressly in this Agreement. The respective termination of employment and the
termination of this Agreement to the extent necessary for the intended
preservation of such rights and obligations. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York without regard to its conflicts of law principles.
5. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but al of which
together will constitute one and the same instrument.
7. Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect to the subject mater contained herein and
supersede all prior
3
<PAGE>
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto in respect of such subject matter. Any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled.
8. Withholding. All payments hereunder shall be subject to any
required withholding of Federal, state and local taxes pursuant to any
applicable law or regulation.
9. Noncontravention. The Company represents that the Company is not
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or declaration of trust, or any
agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
10. Section Headings. The section headings in this Employment
Agreement are for convenience of reference only, and they form no part of this
Agreement and shall not affect its interpretation.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first above written.
EL SITIO INTERNATIONAL CORPORATION
By: /s/ Roberto Vivo-Chaneton
---------------------------------------
Name:
Title
EXECUTIVE
By: /s/ Roberto Cibrian-Campoy
---------------------------------------
Roberto Cibrian-Campoy
5
<PAGE>
Exhibit 10.11
NONCOMPETE AGREEMENT
AGREEMENT, dated as of July 2, 1999, by and between El Sitio
International Corporation, a British Islands corporation, with its principal
offices at Avenida Belgrano 845, 4th Floor, 1092 Buenos Aires, Argentina (the
"Company") and Daniel Rotsztain (the "Executive).
IN CONSIDERATION of the employment of the Executive by the Company
and the premises and the mutual covenants set forth below, the parties hereby
agree as follows:
1. Confidential Information, Ownership of Documents;
Non-Competition.
(a) Confidential Information. Executive shall hold the
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall been obtained by Executive during
Executive's employment by the Company and which is not generally available
public knowledge (other than as a result of acts by Executive in violation of
this Agreement). Except as may be required or appropriate in connection with his
carrying out his duties under this Agreement, Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
any legal process, or as is necessary in connection with any adversarial
proceeding against the Company (in which case Executive shall use his reasonable
best efforts in cooperation with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction), communicate or divulge
any such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records,
files, drawings, documents, models, equipment, and the like relating to the
Company's business, which Executive has control over shall not be removed from
the Company's premises without its written consent, unless such removal is in
the furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of employment. Executive
shall assign to the Company all rights to trade secrets and other products
relating to the Company's business developed by him alone or in conjunction with
others at any time while employed by the Company.
(c) Protection of Business. During the period of employment of
the Executive by the Company and until the first anniversary of the date of
termination of Executive's employment with the Company ("Date of Termination"),
the Executive will not (i) engage, anywhere within the geographical areas in
which Company or any of its subsidiaries
<PAGE>
(the Designated Entities") are conducting their business operations or providing
services as of the Date of Termination, in any Spanish or Portuguese language
portal or content network which is being engaged by the Designated Entities as
of the Date of Termination or pursue or attempt to develop any project known to
Executive and which the Designated Entities are actively pursuing, developing or
attempting to develop as of the Date of Termination, directly or indirectly,
alone, in association with or as a shareholder, principal agent, partner,
officer, director, employee or consultant of any other organization, (ii) divert
to any entity which is engage in any business conducted by the Designated
Entities in the same geographic area as the Designated Entities, any project or
customer of any of the Designated Entities, or (iii) solicit any officer,
employee (other than secretarial staff) or consultant of any of the Designated
Entities to leave the employ of any of the Designated Entities. Notwithstanding
the preceding sentence, Executive shall not be prohibited from owning less than
one five (5%) percent of any publicly traded corporation, which is in
competition with the Company. If, at any time. The provisions of this Section
1(c) shall be determined to be invalid or unenforceable, by reason of being
vague or unreasonable as to area, duration or scope of activity, this Section
1(c) shall be considered divisible and shall become and be immediately amended
to only such area, duration and scope of activity as shall be determined to be
reasonable and enforceable by the court or other body having jurisdiction over
the matter; and Executive agrees that this Section 1(c) as so amended shall be
valid and binding as through any invalid or unenforceable provision had not been
included herein.
(d) Injunctive Relief. In the event of breach of or threatened
breach of this Section 1, Executive agrees that the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in
this Section 1, the termination of Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 1.
2. Successors; Binding Agreement.
(a) Company's Successors. No rights or obligation of the
Company under this Agreement may be assigned or transferred except that the
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) Executive's Successors. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution.
2
<PAGE>
3. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have duly given when delivered either personally or by
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to Executive:
c/o Avenida Belgrano 845, 4th Floor
1092, Buenos Aires, Argentina
Telecopier: (5411) 4343-9122, Ext. 104
If to the Company:
Avenida Belgrano 845, 4th Floor
1092, Buenos Aires, Argentina
Telecopier: (5411) 4343-9122, Ext. 104
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
4. Miscellaneous. No provisions of this agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter thereof have been made by either party which are not set forth
expressly in this Agreement. The respective termination of employment and the
termination of this Agreement to the extent necessary for the intended
preservation of such rights and obligations. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York without regard to its conflicts of law principles.
5. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but al of which
together will constitute one and the same instrument.
7. Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect to the subject mater contained herein and
supersede all prior
3
<PAGE>
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto in respect of such subject matter. Any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled.
8. Withholding. All payments hereunder shall be subject to any
required withholding of Federal, state and local taxes pursuant to any
applicable law or regulation.
9. Noncontravention. The Company represents that the Company is not
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or declaration of trust, or any
agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
10. Section Headings. The section headings in this Employment
Agreement are for convenience of reference only, and they form no part of this
Agreement and shall not affect its interpretation.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first above written.
EL SITIO INTERNATIONAL CORPORATION
By: /s/ Roberto Cibrain-Campoy
---------------------------------------
Name:
Title:
EXECUTIVE
By: /s/ Daniel Rotsztain
---------------------------------------
Daniel Rotsztain
5
<PAGE>
Exhibit 10.12
AMENDMENT NO. 1 TO THE STOCK PURCHASE AGREEMENT
This Amendment No. 1 (this "Amendment") is made as of July 2, 1999
to that certain Stock Purchase Agreement (the "Stock Purchase Agreement") dated
as of June 21, 1999 by and among El Sitio International Corporation, a British
Virgin Islands company (the "Company"), Ibero-American Media Partners II Ltd.,
a Cayman Islands company ("IAMP"), Washburn Enterprises Inc., a British Virgin
Islands company ("Washburn") and Chestnut Hill (El Sitio), LLC a Delaware
limited liability company.
WHEREAS IAMP assigned and delegated all rights and obligations with
respect to the Stock Purchase Agreement to IAMP (El Sitio) Investments Ltd., and
IAMP (El Sitio) Investments Ltd. assumed all such rights and obligations in
accordance with the terms of the Assignment and Assumption Agreement; and
WHEREAS the parties hereto are parties to the Stock Purchase
Agreement and such parties desire to amend the terms of the Securities Purchase
Agreement as provided herein.
NOW THEREFORE, the parties hereto, in consideration of the mutual
agreements herein contained and the promises herein expressed, and for other
good consideration acknowledged by each of them to be satisfactory and adequate,
do hereby agree as follows:
1. Capitalized Terms. Capitalized terms used herein but not defined
herein have the meanings given to them in the Stock Purchase Agreement.
2. Amendments. Pursuant to Section 9.6 of the Stock Purchase
Agreement, the parties hereto agree to the following amendments:
(a) The first paragraph of Section 2.3 of the Stock Purchase
Agreement is hereby deleted in its entirety and replaced with the following
paragraph:
"2.3 Barter. Washburn shall cause to be provided to the Company the
equivalent of Six Million Dollars ($6,000,000) in advertising time (the
"Advertising Time Credit") on any or all of the media networks owned or
controlled by Ibero-American Media Partners II Ltd. ("IAMP"), an Affiliate of
Washburn, in consideration for 856,916 Preferred Shares (the "Barter Shares")
purchased hereunder, subject to the following terms and conditions:"
(b) Subsection (b) of Section 2.3 of the Stock Purchase Agreement is
hereby deleted in its entirety and replaced with the following paragraph:
"(b) Washburn (or one of its Affiliates) shall deliver to the Company a
statement of the cost of advertisements placed by the Company in each quarter
which will be charged against the Advertising Time Credit (the "Quarterly
Usage"), as promptly as practicable following the end of each calendar quarter
in which the Company places advertising. Within five (5) business days
thereafter, the Company shall issue, sell and deliver to Washburn that number of
the Barter Shares as is equal to the result of dividing the Quarterly Usage by
7.00186; provided, that in the event that there remain any Barter Shares which
have not been delivered to Washburn on the expiration of the Credit Period, the
Company shall, within five (5) business days following the expiration of the
Credit Period, deliver to the Company all remaining unissued Barter Shares.
<PAGE>
The Barter Shares shall be, when delivered to Washburn, duly and irrevocably
authorized and validly issued, fully paid and non-assessable, regardless of
whether the Advertising Time Credit is fully used. In addition to any other
rights or remedies Washburn may have, Washburn shall be authorized to cease
providing any advertising to the Company in the event that the Barter Shares are
not delivered to Washburn when due."
(c) Exhibit A to the Stock Purchase Agreement is hereby deleted in
its entirety and replaced with the Exhibit A attached hereto.
3. Entire Agreement. This Amendment, together with the Stock
Purchase Agreement, contains the entire agreement of the parties with respect to
the subject matter hereof and no representations, inducements, promises or
agreements, oral or otherwise, between the parties not embodies herein shall be
of any force or effect.
4. Governing Law. This Amendment shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
5. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[The rest of this page has been intentionally left blank]
2
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have duly executed this Amendment as of the day first above written.
EL SITIO INTERNATIONAL CORPORATION
By: /s/ Roberto Cibrian Campoy
------------------------------------
Name: ROBERTO CIBRIAN CAMPOY
Title: CHIEF EXECUTIVE OFFICER
EL SITIO INTERNATIONAL CORP
IAMP (EL SITIO) INVESTMENTS LTD.
By:
------------------------------------
Name:
Title:
WASHBURN ENTERPRISES INC.
By:
------------------------------------
Name:
Title:
CHESTNUT HILL (EL SITIO), LLC
By:
------------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have duly executed this Amendment as of the day first above written.
EL SITIO INTERNATIONAL CORPORATION
By:
------------------------------------
Name:
Title:
IAMP (EL SITIO) INVESTMENTS LTD.
By: /s/ Jose Santos
------------------------------------
Name: FOR WESTLAW LIMITED
Title: Director
WASHBURN ENTERPRISES INC.
By:
------------------------------------
Name:
Title:
CHESTNUT HILL (EL SITIO), LLC
By:
------------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have duly executed this Amendment as of the day first above written.
EL SITIO INTERNATIONAL CORPORATION
By:
------------------------------------
Name:
Title:
IAMP (EL SITIO) INVESTMENTS LTD.
By:
------------------------------------
Name:
Title:
WASHBURN ENTERPRISES INC.
By: /s/ Amaya Ariztoy
------------------------------------
Name: AMAYA ARIZTOY
Title: Authorized Signatory
CHESTNUT HILL (EL SITIO), LLC
By:
------------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have duly executed this Amendment as of the day first above written.
EL SITIO INTERNATIONAL CORPORATION
By:
------------------------------------
Name:
Title:
IAMP (EL SITIO) INVESTMENTS LTD.
By:
------------------------------------
Name:
Title:
WASHBURN ENTERPRISES INC.
By:
------------------------------------
Name:
Title:
CHESTNUT HILL (EL SITIO), LLC
By: /s/ Michael Greeley
------------------------------------
Name: SVP
Title: Michael Greeley
<PAGE>
EXHIBIT A
Number of
Name Class A Preferred Percentage(1) Purchase Price
- ---- ----------------- ------------- --------------
Ibero-American Media 3,142,025 23.70% $22,000,000
Partners II Ltd.
Washburn Enterprises, Inc. 856,916 6.46% $6,000,000
Chestnut Hill (El Sitio), LLC 728,378 5.49% $5,100,000
- ----------
(1) Assumes full conversion of all convertible securities, the exercise of
already granted options under the Company stock option plan, and the delivery of
all preferred shares under the barter agreements with Washburn and TV Azteca.
4
<PAGE>
Exhibit 10.13
================================================================================
STOCKHOLDERS AGREEMENT
by and among
THE STOCKHOLDERS OF
EL SITIO INTERNATIONAL CORPORATION
July 2, 1999
================================================================================
<PAGE>
STOCKHOLDERS AGREEMENT, dated as of July 2, 1999, entered into by
and among IAMP (El Sitio) Investments Ltd., a British Virgin Islands corporation
("IAMP"), Washburn Enterprises Inc., a British Virgin Islands corporation
("Washburn"), Chestnut Hill (El Sitio), LLC, a Delaware limited liability
company ("Chestnut"), Bear, Stearns & Co. Inc., a Delaware corporation, the
individuals referred to in Exhibit A hereto (the "Bear, Stearns Purchasers"),
the Initial Stockholders (as defined herein) and El Sitio International
Corporation, a British Virgin Islands Corporation.
IAMP, Washburn, Chestnut, the Bear, Stearns Purchasers, and the
Initial Stockholders are collectively referred to herein as the "Stockholders."
W I T N E S S E T H:
WHEREAS, immediately prior to the Closing (as defined below), the
Initial Stockholders each own, beneficially and of record, such number of shares
of each class of the capital stock of El Sitio International Corporation (the
"Corporation") as are set forth on Exhibit 1(a) hereto;
WHEREAS, on the date hereof (the "Closing"), IAMP, Washburn,
Chestnut and the Bear Stearns Purchasers are purchasing certain of the
Corporation's Class A Convertible Preferred Shares, in the amounts set forth on
Exhibit 1(b) hereto;
WHEREAS, immediately following the Closing, each Stockholder will
own, beneficially and of record, the number of shares of each class of the
Corporation's capital stock set forth on Exhibit 1(c) hereto; and
WHEREAS, the Stockholders wish to establish certain agreements
relating to voting, transfers and other matters as provided herein.
NOW, THEREFORE, in consideration of the premises, mutual covenants
and agreements herein contained and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE 1. Certain Definitions
For the purposes of this Agreement, the following terms shall have
the respective meanings set forth below:
"Affiliate" means, with respect to any person, any other person
which, at the time such determination is being made, is Controlling, Controlled
by or under common Control with, such person. As used herein, "Control," whether
used as a noun or verb, refers to the possession, directly or indirectly, of the
power to direct, or cause the direction of, the management or policies of a
person, whether through the ownership of voting securities or otherwise.
"Agreement" means this Agreement, as from time to time assigned,
supplemented, amended or modified in accordance with the terms hereof.
"Board" means the Board of Directors of the Corporation.
<PAGE>
"Class A Preferred" means the Class A Preferred Stock of the
Corporation.
"Cause" means, with respect to any director, such individual's (i)
commission of an act involving the reckless disregard of his duties to the
Corporation or any of its subsidiaries, (ii) conviction in a criminal proceeding
(other than a misdemeanor), or (iii) suffering under a mental or physical
condition which has rendered such individual for a period of 180 consecutive
days during the term of this Agreement totally incapacitated and incompetent to
carry out the responsibilities of a director of the Corporation.
"El Sitio Stock" means, collectively, the ordinary shares, par value
$1.00 per share, of the Corporation, the Class A Convertible Preferred Stock of
the Corporation, and any other class of capital stock of the Corporation issued
at any time hereafter which has the right to vote in all matters, each as
described in the Memorandum of the Corporation.
"Ibero Group" means Stockholders which are Affiliates of IAMP (El
Sitio) Investments Ltd.
"Initial Interest" means the Interest on the date hereof of each
Stockholder.
"Initial Stockholders" means, collectively, Roberto Vivo-Chaneton,
Guillermo J. Liberman, Tower Plus International Corp., Roberto Cibrian-Campoy,
Hector A. Sierra, Hector R. Bandoni, Sergio S. Monti, Damian Said, Compania de
Inversiones Montevideo BVI, Henry B. Wilson Trust, Vamagra S.A., Julien Sevaux,
Quantum Dolphin plc, Renee Saenz Giles Dard, Summit Investment Management Ltd.,
Gustavo Blufstein, Helaine Steden, Jorge Ami, Roberto J. Garat and Alberto E.
Tapia, and the term "Initial Stockholder" means one of them.
"Interest" of a Stockholder means the aggregate voting interest
represented by the El Sitio Stock directly or indirectly held, as of the date of
determination, by such Stockholder, expressed as a percentage of the total
aggregate voting interest represented by the El Sitio Stock directly or
indirectly held by all of the Stockholders.
"Memorandum" means the Memorandum and Articles of Association of the
Corporation in the form attached hereto as Exhibit 2.
"Registration Rights Agreement" means the agreement of even date
herewith among the Corporation and the Stockholders, relating to the granting by
the Corporation to the Stockholders of certain registration rights, attached
hereto as Exhibit 3.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar U.S. federal law then in force.
"Stockholder" means any person who is a party to this Agreement and
any permitted transferee of such person who agrees to be bound by the terms
hereof in accordance with the terms of Section 5.11.
ARTICLE 2. Corporate Governance
2
<PAGE>
2.1. Board of Directors. It is agreed that there shall be up to
seven (7) members and seven (7) alternate members of the Board, all to be
elected at the same time and serving for a term of one fiscal year, and the
Memorandum shall so provide. Each director shall be entitled to vote on all
matters presented to the Board, except as expressly provided herein.
2.2 Election and Removal of Directors.
(a) The Initial Stockholders shall have the right in any election of
directors to the Board to select four (4) directors. Each Stockholder agrees
that the holders of Class A Preferred shall have the right to nominate three (3)
directors to the Board, two (2) of which shall be nominated by the Ibero Group
for so long as the Ibero Group shall own ten percent (10%) or more of its
current holdings of El Sitio Stock on an as-converted basis or one (1) for so
long as the Ibero Group shall own one percent (1%) or more of El Sitio Stock on
an as-converted basis. If the Ibero Group owns less than one percent (1%) of El
Sitio Stock on an as-converted basis, the Ibero Group shall have the right to
appoint an observer to the Board, who shall be entitled to participate in the
meetings of the Board, but shall not have any vote. Chestnut shall have the
right to nominate the third of such directors for so long as Chestnut shall own
(i) two and one-half percent (2.5%) or more of the El Sitio Stock on an
as-converted basis or (ii) one percent (1%) or more of El Sitio Stock on an
as-converted basis. If Chestnut owns less than one percent (1%) of El Sitio
Stock on an as-converted basis, Chestnut shall have the right to appoint an
observer to the Board, who shall be entitled to participate in the meetings of
the Board, but shall not have any vote.
(b) If, prior to his election to the Board, any director-nominee
shall be unwilling or unable to serve as a director of the Corporation, the
Stockholder which nominated such director shall be entitled to nominate a
replacement who shall then be the director-nominee for such Stockholder for
purposes of this Article 2. Except as set forth in Section 2.2(c) and to the
extent the Stockholders shall otherwise agree in writing, each Stockholder
agrees not to take any action or to cause the Corporation to take any action to
remove or replace any director (or any alternate therefor) nominated by another
Stockholder.
(c) Each Stockholder agrees to vote in favor of each other's
nominees upon initial election and upon replacement. In particular, upon the
written request of any other Stockholder, each Stockholder agrees to take all
actions available to it, including, without limitation, voting or acting by
written consent, with respect to all of the El Sitio Stock that it is entitled
to vote or so act, to (i) remove from the Board any member who had been
nominated by such other Stockholder and (ii) appoint any new member designated
by such other Stockholder to fill any vacancy on the Board caused by removal,
resignation or death of a member originally nominated by such other Stockholder.
A Stockholder shall have the right to cause the removal of any director
(including those nominated by another Stockholder) for Cause, and upon notice
from a Stockholder of its desire to remove a director for Cause, setting forth a
description of the facts and circumstances which constitute "Cause," each
Stockholder agrees to take any action necessary to remove such member of the
Board for Cause, if Cause exists.
(d) The Stockholders agree that the Memorandum shall provide for
certain notice, quorum and voting requirements for action of the Board and agree
not to take any action inconsistent with such provisions. The Memorandum shall
provide for quarterly meetings of the
3
<PAGE>
Board unless a majority in Interest of the Stockholders otherwise agree. Special
meetings of the Board may be held by conference telephone or any other means
consistent with British Virgin Islands law.
2.3. Board Action.
(a) Except as provided in Section 2.3(b) below or in the Memorandum
or in applicable law, all actions of the Board shall require the affirmative
vote of four (4) directors. Unless prohibited by applicable law, the directors
shall be permitted to vote on any matter brought before the Board. The
Stockholders and the Corporation agree to take any action necessary or desirable
to effect the foregoing.
(b) The Stockholders agree that the matters set forth below will
require the affirmative vote of the majority of the directors nominated by the
holders of the Class A Preferred Stock:
(i) any guarantees, loans or contractual obligations to make
loans, in either case made by the Corporation or any Subsidiary to third
parties, in an amount which, jointly or severally, exceeds $50,000;
(ii) execution by the Corporation or any Subsidiary of
contracts with suppliers or service companies in any amount which requires
annual or single payments which exceed $75,000 above and beyond any budgeted
item in the long term and annual business plans;
(iii) approval of the Corporation's long term business plan
and any material modifications thereto;
(iv) approval of the Corporation's Annual Budget and any
material modifications thereto;
(v) incurrence of debt by the Corporation or any Subsidiary in
amounts not contemplated by the Corporation's long term business plan and annual
business plan;
(vi) granting of Liens (other than purchase money security
interests) on assets (including stock of any Subsidiary) of the Corporation or
any Subsidiary not contemplated by the Corporation's long term business plan and
annual business plan;
(vii) any disposition outside the ordinary course of business
of assets (including stock of any Subsidiary) of the Corporation or any
Subsidiary having a fair value of more than $100,000 which constitute less than
all or substantially all of the assets of the Corporation;
(viii) any transactions between the Corporation or any of its
Subsidiaries, on the one hand, and any Stockholder or any of its Affiliates, on
the other hand;
(ix) reductions in capital for any reason;
4
<PAGE>
(x) public listing of securities of the Corporation on a
securities exchange (except in connection with the exercise of demand
registration rights pursuant to the Registration Rights Agreement), other than
in connection with a public offering which (x) raises at least $35.0 million net
proceeds for the Corporation, (y) is made at a price per share at least equal to
3.0 times the conversion price on the Class A Preferred, and (z) the shares
offered in which are listed on the NASDAQ National Market System, or any other
U.S. national securities exchange.
(xi) issuance of equity securities or securities convertible
into or exchangeable for equity securities of the Corporation; and
(xii) distribution of dividends by the Corporation.
(c) If in any year the Board shall fail to approve a business plan
for the next fiscal year, the Corporation's existing long term business plan in
effect for the immediately preceding Fiscal Year (adjusted for the growth rate
and inflation adjustments set forth therein) shall continue in effect.
2.4. Special Shareholder Voting Requirements.
(a) Each Stockholder agrees not to vote in favor of any of the
matters described in this Section 2.4(a) unless Stockholders holding at least
fifty percent (50%) of the Class A Preferred have voted in favor of such
matters. These matters are as follows:
(i) changes in legal structure of the Company (other than the
creation of a subsidiary);
(ii) merger, consolidation or spin-off involving the
Corporation or sales of all or substantially all of the assets of the
Corporation;
(iii) redemption of capital stock of the Corporation and any
other stock repurchases, as well as a subsequent resale of such repurchased
stock, in excess of $50,000, except that, with respect to employment related
buy-backs, the Corporation may redeem or repurchase such capital stock without
approval of the Class A Preferred; provided, however, that any such employment
related buy-back is carried out in accordance with a severance arrangement;
(iv) insolvency, protection measures against creditors,
bankruptcies or any other voluntary or judicial financial restructuring
procedures;
(v) entry by the Corporation into any business other than the
Internet Business or any other service;
(vi) dissolution, winding up or voluntary liquidation of the
Corporation;
5
<PAGE>
(vii) modification of the benefits, advantages and conditions
of redemption or amortization of one or more classes of preferred shares, or the
creation of a new class of Stock which has rights which are senior to the Class
A Preferred;
(viii) creation by the Corporation of beneficial interests;
and
(ix) any amendments to the Memorandum relating to the
foregoing items.
(b) Each of the Stockholders will receive at least ten (10) calendar
days prior written notice of any meeting of Stockholders. In case a quorum is
not present at a meeting, the Stockholders attending such meeting shall take any
measures necessary to make such meeting ineffective, and hereby agree that any
action taken at such meeting (other than such measure) shall be void ab initio.
Except as provided in Section 2.4(a) above, actions requiring approval of the
Stockholders will be approved by a vote of a majority of the Stockholders
entitled to vote thereon and present in person or represented by proxy (or any
greater percentage which may be required under applicable law), at any duly
convened meeting of Stockholders at which a quorum is present.
2.5. Right to Inspect Records. Each Stockholder shall have the right
to inspect and examine the books, records, files, long term business plans and
other business plans, and other documents of the Corporation upon reasonable
notice to the Corporation and at reasonable times and in a manner so as not to
disrupt business operations. In addition, the Stockholders agree to cause the
Corporation to provide any and all information reasonably required by any
Stockholder in order to comply with any legal, tax or regulatory requirements
applicable to such Stockholder.
2.6. Financial Reporting. The Corporation shall furnish to the
Stockholders:
(a) as soon as available, and in any event within one hundred twenty
(120) days after the end of the first fiscal year of the Corporation following
the Closing (as defined in the Stock Purchase Agreement executed among IAMP,
Washburn, Chestnut and the Corporation of even date herewith) and within ninety
(90) days after the end of each fiscal year thereafter, (i) an audited financial
statement of the Corporation and its Subsidiaries as of the end of such fiscal
year, together with the related statements of income, stockholders' equity and
cash flows for the fiscal year then ended, prepared in accordance with Argentine
GAAP, together with a reconciliation of such statements to United States GAAP,
and certified by a "Big 5" firm of independent public accountants selected by
the Board and approved by the Stockholders, such approval not to be unreasonably
withheld (the "Annual Financial Statement"); and (ii) any related management
letters from such accounting firm. The Annual Financial Statement shall also
include comparative statements from the prior fiscal year and the most recent
Annual Budget (as defined below) delivered by the Corporation pursuant to
Section 2.6(d) hereof;
(b) as soon as available, and in any event within thirty (30) days
after the end of each quarter in each fiscal year (other than the last quarter
in each fiscal year) a balance sheet of the Corporation and its Subsidiaries and
the related statements of income, stockholders' equity and cash flows, unaudited
but prepared in accordance with United States GAAP (except that such
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unaudited financial statement need not contain all of the required footnotes and
is subject to normal, recurring non-material year end adjustments), and
certified by the chief financial officer of the Corporation (the "Quarterly
Balance Sheet"). The Quarterly Balance Sheet shall be accompanied by a quarterly
management report describing the current status of the Corporation and its
Subsidiaries and their operations and prospects. The Quarterly Balance Sheet
should be prepared as of the end of such quarter with statements of income,
stockholders' equity and cash flows for such quarter and for the period from the
beginning of the fiscal year to the end of such quarter, in each case with
comparative statements for the prior fiscal year and the most recent Annual
Budget delivered by the Corporation pursuant to 2.6(d) hereof, and which shall
specifically note and describe all expenditures (in any single transaction or
series of related transactions) in excess of $50,000 not included in the most
recent Annual Budget delivered by the Corporation pursuant to Section 2.6(d)
hereof;
(c) as soon as available, and in any event no later than twenty (20)
days after the end of each month, statements of income and cash flow, unaudited
but prepared in accordance with United States GAAP (except that such unaudited
financial statement need not contain all of the required footnotes and is
subject to normal, recurring non-material year-end adjustments) and certified by
the chief financial officer of the Corporation, and any other reports that are
prepared by the management of the Corporation for the Board.
(d) as soon as available, and in any event no later than sixty (60)
days prior to the start of each fiscal year, capital and operating expense
budget, cash flow projections and income and loss projections for the
Corporation and its Subsidiaries in respect of such fiscal year and an annual
business plan (the "Annual Budget"), all itemized in reasonable detail and
prepared on a monthly basis, and, promptly after preparation, any revisions to
any of the foregoing;
(e) promptly, any document relating to the affairs of the
Corporation and its Subsidiaries delivered to all of the Stockholders; and
(f) promptly, notice, and in any event within ten (10) days after
notice has been received by the Corporation or its Subsidiaries, of any material
litigation or an adverse event, claim, dispute or any other development which
may be deemed material to the operations, assets or properties of the
Corporation or its Subsidiaries.
2.7. Ethical Business Practices. Each Stockholder agrees, severally
and not jointly, not to offer or give on behalf of the Corporation or any of its
Subsidiaries, and the Corporation agrees not to offer or give, either directly
or through a Third Party, anything of value to: (a) any government official, any
political party or official thereof, or any candidate for political office; (b)
any customer or member of the government; or (c) any other Person, in any such
case while knowing or having reason to know that all or a portion of such money
or thing of value may be offered, given or promised, directly or indirectly, to
any customer or member of the government or candidate for political office for
the purpose of the following: (i) influencing any action or decision of such
Person, in his or its official capacity, including a decision to fail to perform
his or its official function; (ii) inducing such Person to use his or its
influence with any government or instrumentality thereof to effect or influence
any act or decision of such government or instrumentality in order to assist the
Corporation in obtaining or retaining
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business for, or with, or directing business to, any Person; or (iii) where such
payment would constitute a bribe, kickback or illegal or improper payment.
2.8. Liability Insurance. The Corporation will maintain in full
force and effect directors' and officers' liability insurance with a reputable,
financially stable insurance company in such amounts and on such usual and
customary terms (including, without limitation, as to coverage for claims
against directors following the termination of their Board service) as the Board
shall authorize from time to time.
2.9. Compensation Committee and Audit Committee. The board of
directors of the Corporation shall have two permanently sitting committees, the
Compensation Committee and the Audit Committee, which committees shall be
comprised of three members each. The Stockholders agree that two (2)
representatives shall be appointed to each committee by the holders of the Class
A Preferred, of which one (1) representative shall be appointed by Ibero Group
to each of the committees as long as the Ibero Group retains its Board seat, and
one (1) representative shall be appointed by Chestnut to each of the committees
as long as Chestnut retains its Board seat. One (1) representative shall be
appointed by the Initial Stockholders to each of the committees.
ARTICLE 3. Transfers of Shares; Preemptive Rights
3.1. Restriction on Transfer. The El Sitio Stock held by any
Stockholder and comprising its Interest ("Covered Stock") shall not be
transferable, directly or indirectly, except upon the conditions specified in
this Article 3, which conditions are intended in part to ensure compliance with
the provisions of the Securities Act in respect of any disposition of any
Covered Stock or any interest therein which would constitute a sale thereof
within the meaning of the Securities Act (a "Transfer"). As used in this Article
3, the term "Transferor" refers to the transferor (whether by voluntary or
involuntary means) of any Covered Stock, the term "Other Stockholder" means the
Stockholder which is not the Transferor, and the term "Subject Shares" means the
shares of Covered Stock that have been or are to be Transferred.
3.2. Involuntary Transfers. In the event that an Involuntary
Transfer (as hereinafter defined) by any Stockholder of any Covered Stock may
occur, the following procedures shall apply:
(a) The Stockholder to be deprived or divested of Covered Stock by
the Involuntary Transfer shall promptly give written notice of such Involuntary
Transfer in reasonable detail to the Corporation and to the Other Stockholders
and the person or persons who take or propose to take any interest in the
Subject Shares as a result of such Involuntary Transfer (the "Transferee") shall
hold such interest subject to the rights of the Other Stockholder as set forth
below.
(b) Upon receipt of the notice referred to in Section 3.2(a) above
or upon discovery of such Involuntary Transfer, the Corporation shall cause the
appraisal referred to in Section 3.2(c) to be made and each of the Other
Stockholders shall have the irrevocable option, but not the obligation, for a
period of sixty (60) days following receipt by all Other Stockholders of the
results of such appraisal, to purchase the Subject Shares, subject to the terms
set forth
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herein. Each Other Stockholder may exercise the option for the number of Subject
Shares which bears the same relation to the total number of Subject Shares as
(x) such Other Stockholder's Interest bears to (y) the aggregate Interest then
held by all of the Other Stockholders exercising such option (and purchasing
Subject Shares under Section 3.2(c) below), or for such other number of Subject
Shares as all of the Other Stockholders exercising such option may agree in
writing. In the event that the Other Stockholders elect to purchase, in the
aggregate, less than all of the Subject Shares, then the Other Stockholders
shall have no right to purchase any of the Subject Shares.
(c) The closing for any such sale of Subject Shares to one or more
Other Stockholders shall be at the offices of the Corporation on a mutually
satisfactory business day within fifteen (15) days after the expiration of such
sixty (60) day period. The purchase price per share of any Subject Shares
purchased pursuant to this Section 3.2 shall be the amount which is equal to the
fair value, as of the Valuation Date (as hereinafter defined), of a Subject
Share, as such fair value is determined by an independent appraiser selected by
the Corporation and reasonably acceptable to the Stockholders holding, in the
aggregate, the majority of the aggregate Interests, and all costs of any such
appraisal shall be paid by the Corporation. The "Valuation Date" shall be the
last day of the calendar quarter immediately preceding the Involuntary Transfer.
(d) For purposes of this Agreement, the term "Involuntary Transfer"
shall mean any involuntary sale, transfer, encumbrance or other disposition by
or in which any Stockholder shall be deprived or divested of any right, title or
interest in or to any Covered Stock, including, without limitation, any levy of
execution, transfer in connection with bankruptcy, judicial reorganization,
insolvency or similar proceedings or any transfer to a public officer or agency
pursuant to any abandoned property or escheat law; provided that any Transfer
complying with Section 3.3, Section 3.4, Section 3.5 or Section 3.6 hereof shall
not be deemed to be an "Involuntary Transfer."
3.3. Rights of First Offer. Except as otherwise expressly provided
in Sections 3.4 and 3.5 hereof, each Stockholder hereby agrees that it shall not
effect a Transfer of any Covered Stock, except in accordance with the following
procedures:
(a) In the event that a Stockholder wishes to make a Transfer of any
Covered Stock, the Transferor shall first deliver to the Other Stockholders a
written notice (the "Offer Notice"), which Offer Notice shall (i) specify the
terms, including the number of shares of Covered Stock to be sold, and the price
per share at which the Transferor proposes to Transfer such Covered Stock, and
(ii) be irrevocable for a period of fifteen (15) days after delivery thereof,
offering (the "Offer") to the Other Stockholders all of the Subject Shares
proposed to be sold by the Transferor at the purchase price and on the terms
specified therein. Each of the Other Stockholders shall have the right and
option, at its sole discretion, for a period of fifteen (15) days after delivery
of the Offer Notice (the "Acceptance Period"), to accept all, but not less than
all, of the Subject Shares (pro rata among such Other Stockholders so electing
on the basis of the number of shares of El Sitio Stock owned by such Other
Stockholders) offered at a price equal to the purchase price and upon the other
terms stated in the Offer Notice. Such acceptance may be made by delivery of a
written notice to the Transferor within said fifteen (15) day period, which
notice shall specify whether such Stockholder wishes to purchase more than its
pro rata share, if
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Other Stockholders decline to purchase, and if so, the maximum purchase such
Stockholder elects to make. In the event that any Stockholder elects not to
exercise its pro rata right to purchase, the Other Stockholder(s) shall have the
right to purchase the Subject Shares otherwise allocable to the
non-participating Stockholder pro rata to their participation in the Offer,
subject to the limits set forth in the applicable Acceptance Notice. In the
event that the Other Stockholders elect not to purchase all of the Subject
Shares, then the Other Stockholders shall have no right to purchase all or any
portion of such Subject Shares and the Transferor shall be free to Transfer the
Subject Shares in accordance with Section 3.3(c). A Stockholder electing to
purchase Subject Shares pursuant to this Section 3.3 is referred to herein as a
"Purchasing Stockholder").
(b) Notwithstanding anything to the contrary contained in Section
3.3 hereof, in the event the Transferor is one of the (i) Initial Stockholders,
the other Initial Stockholders will have a priority right of first offer with
respect to any Subject Shares offered by an Initial Stockholder, in accordance
with the terms and conditions of the Syndication Agreement among the Initial
Stockholders and dated as of June 10, 1999, before any such right may be
exercised by the Stockholders of any other class or (ii) holders of Class A
Preferred, the other holders of Class A Preferred will have a priority right of
first offer with respect to any Class A Preferred offered by a holder of Class A
Preferred, before any such right may be exercised by the other Stockholders.
(c) Transfers, if any, of Subject Shares to the Purchasing
Stockholder under the terms of this Section 3.3 shall be made at the offices of
the Corporation or any other address acceptable to the Corporation on a mutually
satisfactory business day within fifteen (15) days after the expiration of the
Acceptance Period. The Transferor shall deliver the Subject Shares by delivering
shares, duly endorsed for transfer, against payment of the purchase price
thereof, in accordance with the terms of the Offer.
(d) If effective acceptance shall not be received pursuant to
Section 3.3(a) above, with respect to all Covered Stock offered for sale
pursuant to the Offer Notice, then the Transferor may Transfer all or any part
of the El Sitio Stock so offered for sale at a price not less than the price,
and on terms not more advantageous to the purchaser than the terms stated in the
Offer Notice at any time within one hundred eighty (180) days after the
expiration of the Acceptance Period.
(e) In the event that any Stockholder exercises a purchase right
under Section 3.3(a) and then fails to consummate such purchase in accordance
with the terms of the Offer Notice (each such Stockholder, a "Defaulting
Stockholder"), then, in addition to any remedies at law or in equity that the
Transferor may have in respect of such failure, the Defaulting Stockholder shall
thereafter cease to have any right to receive offers or purchase shares pursuant
to Section 3.3(a).
3.4. Exempt Transfers. Anything contained herein to the contrary
notwithstanding, the provisions of Sections 3.3, 3.5 and 3.6 shall not be
applicable to a Transfer (i) to an Affiliate of a Stockholder or for the benefit
of an Affiliate or family member of a Stockholder, if made solely for personal
tax or estate planning purposes, or (ii) in an offering pursuant to the exercise
of registration rights under the Registration Rights Agreement, provided
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such Affiliate executes all documents (including the representation that such
Transfer may be effected without registration under the applicable provisions of
the Securities Act and state securities or blue sky laws) deemed reasonably
necessary by the Other Stockholder to cause the Affiliate to become a party to,
and be bound by, the terms of this Agreement.
3.5. Tag-Along Rights.
(a) Right to Participate in Sale. Notwithstanding any other
provision hereof, if any Stockholder party hereto (such Stockholders, together
with their Affiliates, the "Selling Stockholder(s)") proposes to enter into an
agreement with a third party to sell or otherwise dispose of for value (such
sale or other disposition for value being referred to as a "Tag-Along Sale") El
Sitio Stock held by it to a third party who is not an Affiliate (any such party,
a "Third Party") pursuant to a bona fide transaction (or series of related
transactions) in which securities representing an aggregate Interest of fifty
percent (50%) or more will be sold to a Third Party, then the Selling
Stockholder(s) shall afford the other Stockholder(s) (the "Tag-Along
Stockholder") the opportunity to require that the sale by the Selling
Stockholder(s) be conditioned upon such Third Party purchasing that number of
shares of El Sitio Stock owned by such Tag-Along Stockholder which delivers a
Tag-Along Notice in accordance with Section 3.5(c) equal to the product (rounded
up to the nearest whole number) of (i) the quotient determined by dividing (A)
the number of shares of El Sitio Stock owned by such Tag-Along Stockholder, by
(B) the number of shares of El Sitio Stock owned by the Selling Stockholders and
all Tag-Along Stockholders which are selling shares of El Sitio Stock in the
contemplated Tag-Along Sale, and (ii) the number of shares of El Sitio Stock
proposed to be sold by all Stockholders in the contemplated Tag-Along Sale. In
negotiating a Tag-Along Sale, the Selling Stockholder(s) shall provide (i) that
the only representations, warranties or covenants which any Tag-Along
Stockholder shall be required to make in connection with any Transfer are
representations and warranties with respect to its own ownership of the shares
to be sold by it and its ability to convey title thereto free and clear of
liens, encumbrances or adverse claims, its due organization, its due
authorization, execution and delivery of the definitive purchase agreement (if
applicable), enforceability of such purchase agreement against it and no
conflict of it with such purchase agreement, and (ii) that the liability of the
Tag-Along Stockholder with respect to any representation and warranty made in
connection with any Transfer is the several liability of such Tag-Along
Stockholder (and not joint with any other person) and that such liability is
limited to the amount of proceeds actually received by such Tag-Along
Stockholder; provided, however, that the foregoing shall not limit the
obligations of such Tag-Along Stockholder, and such Tag-Along Stockholder hereby
expressly agrees to be bound by and be subject to, any escrow or other holdback
arrangement (on a pro rata basis based on the number of shares sold by such
Tag-Along Stockholder in proportion to all shares of the Corporation sold in
such Tag-Along Sale) provided for in the agreement relating to the Tag-Along
Sale.
(b) Sale Notice. The Selling Stockholder(s) shall provide each
Tag-Along Stockholder and the Corporation with written notice (the "Tag-Along
Sale Notice") not less than thirty (30) days prior to the proposed date of the
Tag-Along Sale (the "Tag-Along Sale Date"). Each Tag-Along Sale Notice shall be
accompanied by a copy of any agreement relating to the Tag-Along Sale (if
available) and shall set forth: (i) the name and address of the Third Party in
the Tag-Along Sale; (ii) the number of shares proposed to be Transferred by the
Selling Stockholder(s); (iii) the proposed amount and form of consideration to
be paid for such shares
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expressed on a per share basis and the terms and conditions of payment offered
by the Third Party; (iv) the aggregate number of shares of the Corporation held
of record by the Selling Stockholder(s) as of the close of business on the day
immediately preceding the date of the Tag-Along Notice (the "Tag-Along Notice
Date"); (v) confirmation that the Third Party has been informed of the
"Tag-Along Rights" provided for herein and has agreed to purchase shares from
any Tag-Along Stockholder in accordance with the terms hereof; and (vi) the
Tag-Along Sale Date.
(c) Tag-Along Notice. Any Tag-Along Stockholder wishing to
participate in the Tag-Along Sale shall provide written notice (the "Tag-Along
Notice") to the Selling Stockholder(s) no less than fifteen (15) days prior to
the Tag-Along Sale Date. The Tag-Along Notice shall set forth the number of
shares of El Sitio Stock that such Tag-Along Stockholder elects to include in
the Tag-Along Sale. The Tag-Along Notice given by any Tag-Along Stockholder
shall constitute such Tag-Along Stockholder's binding agreement to sell the
shares specified in the Tag-Along Notice on the terms and conditions applicable
to the Tag-Along Sale; provided, however, that in the event that there is any
material change in the material terms and conditions of such Tag-Along Sale
applicable to the Tag-Along Stockholder (including, but not limited to, any
decrease in the purchase price that occurs other than pursuant to an adjustment
mechanism set forth in the agreement relating to the Tag-Along Sale) after such
Tag-Along Stockholder gives its Tag-Along Notice, then, notwithstanding anything
herein to the contrary, the Tag-Along Stockholder shall have the right to
withdraw from participation in the Tag-Along Sale with respect to all of its
shares affected thereby. If the Third Party does not consummate the purchase of
all the shares requested to be included in the Tag-Along Sale by any Tag-Along
Stockholder on terms and conditions which are no more favorable in any material
respect to the Selling Stockholder (except as otherwise provided herein), then
the Selling Stockholder(s) shall not consummate the Tag-Along Sale of any of its
shares to the Third Party. If a Tag-Along Notice from any Tag-Along Stockholder
is not received by the Selling Stockholder(s) prior to the fifteen (15) day
period specified above, the Selling Stockholder(s) shall have the right to
consummate the Tag-Along Sale without the participation of such Tag-Along
Stockholder, but only on terms and conditions which are no more favorable in any
material respect to the Selling Stockholder (and in any event, at no greater a
purchase price, except as the purchase price may be adjusted pursuant to the
agreement regarding the relevant sale or other disposition) than as stated in
the Tag-Along Sale Notice and only if such Tag-Along Sale occurs on a date
within one hundred eighty (180) days of the Tag-Along Sale Date. If such
Tag-Along Sale does not occur within such one hundred eighty (180) day period,
the shares of El Sitio Stock that were to be subject to such Tag-Along Sale
thereafter shall continue to be subject to all of the restrictions contained in
this Agreement.
(d) Delivery of Shares. On the Tag-Along Sale Date, each Tag-Along
Stockholder shall deliver the shares to be sold in connection with the Tag-Along
Sale to the Third Party by delivering shares, duly endorsed for transfer,
against delivery of immediately available funds in the amount of the purchase
price for such shares.
(e) No Waiver. Any election in any instance by a Stockholder not to
exercise its rights to participate in a Tag-Along Sale under this Section 3.5
shall not constitute a waiver of such rights with respect to any other proposed
Transfer of shares of the Corporation which would trigger such rights.
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3.6. Drag-Along Rights.
(a) Grant of Drag-Along Rights. If any Stockholder party hereto
(such Stockholders, together with their Affiliates, the "Selling
Stockholder(s)") proposes to enter into an agreement with a third party to sell
or otherwise dispose of for value (such sale or other disposition for value
being referred to as a "Drag-Along Sale") El Sitio Stock held by it to a third
party who is not an Affiliate (any such party, a "Third Party") pursuant to a
bona fide transaction (or series of related transactions) in which securities
representing an aggregate Interest of fifty percent (50%) or more will be sold
to a Third Party, then the remaining Stockholder(s) (the "Drag-Along
Stockholder") shall, upon the written request of the Selling Shareholder(s),
sell to such Third Party (i) El Sitio Stock owned by such Drag-Along Stockholder
equal to (A) the number of shares of El Sitio Stock owned by such Drag-Along
Stockholder multiplied by (B) a fraction ("Drag-Along Fraction"), the numerator
of which is the number of shares of El Sitio Stock, the Selling Shareholder(s)
intend to sell pursuant to this Section 3.6 and the denominator of which is the
aggregate number of shares of El Sitio Stock owned by the Selling
Shareholder(s), and (ii) warrants owned by such Drag-Along Stockholder
representing the right to acquire a number of shares equal to (A) the number of
shares underlying such Drag-Along Stockholders warrants multiplied by (B) the
Drag-Along Fraction, contemporaneously with the sale of such El Sitio Stock by
the Selling Stockholder(s), for, with respect to the El Sitio Stock, the same
consideration and on the same terms as those provided by such Third Party to the
Selling Stockholder(s) and, with respect to the warrants, for the same
consideration and on the same terms as those provided by such Third Party to the
Selling Stockholder(s) less the aggregate exercise price for the warrants so
transferred.
(b) Exercise of Drag-Along Right. The Drag-Along Right shall be
exercisable by written notice given by the Selling Stockholder(s) to each
Drag-Along Stockholder, containing the price and other material terms of the
proposed sale and the date of the closing of the proposed sale (the "Drag-Along
Sale Date"), which date shall not be less than twenty (20) nor more than sixty
(60) calendar days after the date of such notice.
(c) Delivery of Shares. On the Drag-Along Sale Date, each Drag-Along
Stockholder shall deliver the shares to be sold in connection with the
Drag-Along Sale to the Third Party by delivering shares, duly endorsed for
transfer, against delivery of immediately available funds in the amount of the
purchase price for such shares.
3.7. Transfers in Violation of Agreement. If any voluntary Transfer
of El Sitio Stock is made or attempted contrary to the provisions of this
Agreement (such Transfer, an "Unauthorized Transfer"), the Other Stockholders
shall have the right to purchase all or part of such El Sitio Stock from the
owner thereof or the owner's transferee at any time before or after the Transfer
at a purchase price per share equal to (i) if any shares of El Sitio Stock are
listed for trading on NASDAQ or the Bolsa de Comercios de Buenos Aires, the
lesser of (x) eighty percent (80%) of the thirty (30) day average closing price
over the thirty day period immediately preceding the date of the initial
Transfer contrary to this Agreement, or (y) eighty percent (80%) of the thirty
(30) day average closing price for the thirty days immediately preceding the
date of exercise of the right granted to the Other Stockholders herein, or (ii)
if no shares of El Sitio Stock are listed for trading on NASDAQ or the Bolsa de
Comercios de Buenos Aires, the lesser of (x) eighty percent (80%) of the Fair
Value at the time of the initial transfer that was contrary to this
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Agreement, or (y) eighty percent (80%) of the Fair Value at the time of the
Other Stockholders' purchase of such El Sitio Stock. The term "Fair Value" shall
mean the amount at which the El Sitio Stock would change hands between an
independent, willing buyer and an independent, willing seller, each having
reasonable knowledge of all relevant facts and neither being under any
compulsion to act (considering, where applicable, the relative rights of all
outstanding classes or series of capital stock but not discounting the value of
such securities for illiquidity or because they represent a minority ownership
position in the Corporation), which amount shall be determined by the Board of
Directors of the Corporation in its reasonable discretion and in good faith.
3.8. Preemptive Rights.
(a) Except for the issuance of the Corporation's capital stock or
other securities (i) pursuant to a Qualifying IPO, (ii) comprising additional
stock or option issuances to Employees of the Corporation pursuant to stock
option plans existing on the date hereof including the number of shares issuable
thereunder as of the date hereof (or amendments to such plans or new plans if
agreed to by the Stockholders) or (iii) in connection with acquisitions of
businesses by the Corporation approved by the Stockholders, if the Corporation
at any time after the date hereof authorizes the issuance or sale of any capital
stock of the Corporation or any securities of the Corporation containing options
or rights to acquire any shares of capital stock (other than as a dividend on
the outstanding capital stock), the Corporation shall first offer to sell to the
Stockholders on a pro rata basis, all of such capital stock or other securities
(the "Offered Shares").
(b) In order to exercise its purchase rights under this Section 3.8,
each Stockholder must within twenty (20) business days after receipt of written
notice from the Corporation describing in reasonable detail the capital stock or
securities being offered, the purchase price thereof and the payment terms,
deliver a written notice to the Corporation describing its election hereunder.
Such election shall indicate the number of Offered Shares that the Stockholder
in its sole discretion elects to purchase, which may be all or any portion of
the Offered Shares. The Corporation shall give the Stockholders no less than
fifteen (15) business days notice of the closing of the sale and purchase of
such shares.
(c) Upon the expiration of the 20-day period described above, the
Corporation shall be entitled to sell such capital stock or securities which the
Stockholder has not elected to purchase during the ninety (90) days following
such expiration on terms and conditions, including price, no more favorable to
the purchasers thereof than those offered to the Stockholders. Any capital stock
or securities offered or sold by the Corporation to any person after such 90-day
period must be re-offered to the Stockholders pursuant to the terms of this
Section 3.8.
ARTICLE 4. Other Agreements
IAMP (El Sitio) Investments Ltd.., Washburn and the Corporation
agree to use reasonable efforts to exploit jointly strategic business
opportunities in the future, including, but not limited to: (i) the Ibero Group
advertising on the Internet site of the Corporation and the Corporation
advertising on media networks of the Ibero Group and its Affiliates (including
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agreements whereby the Corporation will utilize media networks of the Ibero
Group and its Affiliates as the preferred choice for its advertising
expenditures); (ii) the Corporation and the Ibero Group developing Internet
sites for Ibero Group's media networks as a preferred provider; (iii) the
Corporation and the Ibero Group sharing production and advertising sales assets;
and (iv) the Corporation and the Ibero Group sharing offices and other
administrative overhead; provided, however, that such opportunities are mutually
beneficial for both Ibero Group and the Corporation. The Ibero Group and the
Corporation agree that these strategic business opportunities are intended to be
a part of a long-term strategic initiative.
ARTICLE 5. Miscellaneous
5.1. Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communication required or permitted to be given by any
provision of this Agreement shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by telecopier with
acknowledgment of receipt sent by telecopier or delivered in person, as the case
may be, to such party at the address or telecopier number, as the case may be,
set forth on the signature pages hereto. All such notices, requests, consents
and other communications shall be deemed to have been received: (a) in the case
of personal delivery, on the date of receipt; or (b) in the case of telecopying,
on the date of acknowledgment thereof.
5.2. Amendment and Waiver. No change or modification of, or waiver
of compliance with, this Agreement shall be valid unless the same shall be in
writing and signed by each of the Stockholders party hereto which holds an
Interest of one percent (1%) or more.
5.3. Termination. This Agreement may be terminated at any time by an
instrument in writing signed by all of the Stockholders party hereto. This
Agreement shall terminate automatically as to any Stockholder which transfers
all of its El Sitio Stock, or upon the occurrence of a Qualifying IPO (as
defined in the Memorandum). Unless sooner terminated, this Agreement shall
terminate ten (10) years from the date hereof, unless, at any time within one
(1) year prior to such date, all of the parties extend its duration for as many
additional periods, each not to exceed ten (10) years, as they may desire.
5.4. No Waiver. No failure or delay on the part of the Stockholders
or any of them in exercising any right, between the Corporation and the
Stockholders or any of them shall operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the simultaneous or later exercise of any other right, power or privilege. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies which the Stockholders or any of them would otherwise
have. No notice to or demand on the Corporation in any case shall entitle the
Corporation to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Stockholders or any of
them to take any other or further action in any circumstances without notice or
demand.
5.5. Specific Performance. Each party to this Agreement acknowledges
that the other parties will suffer irreparable injury in the event of any breach
of any provision of this Agreement and that therefore the remedy at law for any
breach or threatened breach of any such provision of this Agreement will be
inadequate. Accordingly, upon a breach or threatened breach of any such
provision of this Agreement by any party hereto, the other parties shall, in
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addition and without prejudice to any of the rights and remedies they may have,
be entitled as a matter of right, without proof of actual damages, to seek
specific performance of such provisions of this Agreement and to such other
injunctive or equitable relief to enforce, or prevent any violations (whether
anticipatory, continuing or future) of, such provisions of this Agreement.
5.6. Counterparts and Headings. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument. All headings
and any cover page or table of contents are inserted for convenience or
reference only and shall not affect its meaning or interpretation.
5.7. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice-versa. Dollars or $ means the currency of the United States or
its foreign currency equivalent at the time the determination is made.
5.8. Expenses. Each of the parties to this Agreement shall bear its
own expenses, including, without limitation, the fees and disbursements of its
respective counsel, in connection with the negotiation and execution of this
Agreement and the consummation of the transactions contemplated hereby.
5.9. Governing Law. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the British Virgin
Islands, without regard to its conflict of law rules.
5.10. Dispute Resolution.
(a) Any and all disputes between or among the parties arising in
connection with or relating in any way to the validity, construction, meaning,
enforceability or performance of this Agreement shall be settled by binding
arbitration in accordance with the rules of arbitration then in effect (the "ICC
Rules") of the International Chamber of Commerce (the "ICC"). Any party or
parties electing to refer a matter to arbitration pursuant hereto (the
"Petitioner") shall promptly deliver written notice (the "Arbitration Notice")
to the other parties that it wishes to commence an arbitration proceeding under
this Section 5.10. The Arbitration Notice shall set forth the matter being
referred to arbitration and the name of the individual selected by the
Petitioner as one of the arbitrators.
(b) There shall be three (3) arbitrators, and each party to the
arbitration shall select one (1) arbitrator. Within twenty (20) days of receipt
of the Arbitration Notice, the other party to such arbitration (the
"Respondent") shall appoint an arbitrator (who shall have appropriate
qualifications in relation to the matter in dispute) and notify the Petitioner
of such appointment and submit its counter statement, if any, of the matter
being referred to arbitration. If the Respondent fails to appoint an arbitrator
within such twenty (20) day period, the Petitioner shall request the ICC
President to appoint a second arbitrator who shall have appropriate
qualifications in relation to the matter in dispute. Within twenty (20) days
after appointment of the second arbitrator, the two arbitrators shall appoint
the third arbitrator. If the two arbitrators
16
<PAGE>
fail to appoint the third arbitrator within such twenty (20) day period, either
party to the arbitration may request that the ICC President appoint the third
arbitrator, who shall have appropriate qualifications in relation to the matter
in dispute. All three (3) arbitrators shall be bilingual (Spanish/English). In
the event that there are more than two (2) parties to such arbitration, all
three (3) arbitrators shall be appointed by the ICC President.
(c) The arbitration proceedings shall be conducted in the English
and Spanish languages in London, England, in accordance with the ICC Rules, and
all documents in connection with any such proceedings shall be submitted in the
English or Spanish languages or with a complete and accurate English or Spanish
(as applicable) language translation. In any arbitration, the decision of the
arbitrators shall be final and binding on the parties to the arbitration and
judgment on the decision may be entered in and enforced in any court of
competent jurisdiction in accordance with the New York Convention on the
Recognition and Enforcement of Arbitral Awards. The substantially prevailing
party in such arbitration, in addition to all other relief provided, shall be
entitled to an award of all its reasonable costs and expenses including attorney
fees and expenses and deposits and payments to the ICC.
(d) Each party hereto hereby agrees that each of the parties hereto
shall have the right to seek appropriate emergency or equitable relief to
preserve the arbitral matter or to otherwise protect its rights pending
resolution of the arbitral matter, whether in New York, New York, Argentina or
in any other jurisdiction.
5.11. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of each of the Stockholders and their respective
executors, administrators and personal representatives and heirs and their
successors and assigns. The rights and obligations of any Stockholder hereunder
shall inure to the benefit of and be binding upon any transferee of such
Stockholder, if (i) such transferee agrees in writing to be bound by the
provisions of this Agreement and (ii) the Interest of such transferee would,
immediately upon becoming a party to this Agreement, equal or exceed five
percent (5%).
5.12. Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, invalid or unenforceable, the remaining provisions hereof shall
nevertheless continue in full force and effect as though the illegal, invalid or
unenforceable provisions were not a part hereof, and the parties shall exert
their best efforts to amend this Agreement to include a provision which is
legal, valid and enforceable and which carries out the original intent of the
parties.
5.13. Complete Agreement. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous arrangements or understandings, whether
written or oral, between or among any of the parties hereto, with respect to the
subject matter hereof, other than the Registration Rights Agreement and the
Syndication Agreement among the Initial Stockholders, dated as of June 10, 1999.
5.14. Further Assurances. Each of the parties to this Agreement
agrees to execute such other documents and take such other action as may be
reasonably necessary to implement and carry out the intent of this agreement.
17
<PAGE>
5.15. Conflict with Memorandum. In the event that any of the terms
or provisions contained herein conflict with any of the provisions contained in
the Memorandum, the provisions of this Agreement shall govern to the extent that
they are consistent with applicable British Virgin Islands law, as in effect
from time to time.
5.16. Confidentiality. Each Stockholder covenants and agrees to
treat any non-public information provided to it by the Corporation concerning
the business and finances of the Corporation ("Corporate Information") as
confidential and agrees further that it will not use, exploit, reproduce,
disclose or provide Corporate Information to any third party (other than any
agents of the Stockholder who are bound by substantially similar obligations of
confidentiality) on its own behalf or otherwise, except with the consent of the
Corporation or as required by law, legal process or any federal or state
regulatory body having jurisdiction over such Stockholder. The provisions of
this Section 5.16 shall not apply to any information which:
(a) was within the public domain prior to the time of disclosure of
Corporate Information to the Stockholder or which comes into the public domain
other than as a result of a breach by the Stockholder of this Section 5.16;
(b) was in the possession of the Stockholder (or any of its
officers, directors, employees, agents, principals, or Affiliates) before the
Stockholder received the Corporate Information;
(c) was rightfully acquired by the Stockholder from a third party
without, to the knowledge of the Stockholder, any restriction or any obligation
of confidentiality; or
(d) was independently developed by the Stockholder without any use
or reference to the Corporate Information.
The provisions of this Section 5.16 shall survive the termination of
this Agreement, either in whole or as to any Stockholder, for a period of two
(2) years.
5.17. Failure to Execute. Failure of any party to execute this
Agreement renders this Agreement void as to the non-executing party, but such
Agreement shall be valid and binding as to all other parties that execute such
Agreement.
[The rest of this page has been intentionally left blank]
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the day and year first above written.
EL SITIO INTERNATIONAL CORPORATION
By: /s/ Roberto Cibrian-Campoy
----------------------------------------------
Title: Chief Executive Officer
Notice Address:
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attention: Roberto Cibrian-Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue, 31st Floor
New York, New York 10022
Attention: Neil A. Torpey
Telephone: (212) 318-6034
Telecopier: (212) 318-4090
<PAGE>
IAMP (EL SITIO) INVESTMENTS LTD.
By: /s/ Jose Santos
----------------------------------------------
Title: FOR WESTLAW LIMITED - Director
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attention: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
<PAGE>
WASHBURN ENTERPRISES INC.
By: /s/ Amaya Ariztoy
----------------------------------------------
Title: Authorized Signatory
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
<PAGE>
CHESTNUT HILL (EL SITIO), LLC
By: /s/ Michael Greeley
----------------------------------------------
Title: SVP
Notice Address:
c/o GCC Investments, Inc.
1300 Boylston Street
Chestnut Hill, MA 02647
Attn: Michael A. Greeley
Telephone: (617) 975-3222
Telecopier: (617) 975-3201
with a copy to:
Phillip J. Szabla
Vice President and General Counsel
GC Companies, Inc.
1300 Boylston Street
Chestnut Hill, MA 02467
Telephone: (617) 264-8098
Telecopier: (617) 264-8206
<PAGE>
ROBERTO VIVO-CHANETON
By: /s/ Roberto Vivo-Chaneton
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
GUILLERMO J. LIBERMAN
By: /s/ Guillermo J. Liberman
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
TOWER PLUS INTERNATIONAL CORP.
By: /s/ Nicolas Juan
----------------------------------------------
Title: PRESIDENT
Notice Address:
<PAGE>
ROBERTO CIBRIAN-CAMPOY
By: /s/ Roberto Cibrian-Campoy
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
HECTOR R. BANDONI
By: /s/ Hector R. Bandoni
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
SERGIO S. MONTI
By: /s/ Sergio S. Monti
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
HECTOR A. SIERRA
By: /s/ Hector A. Sierra
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
ALBERTO E. TAPIA
By: /s/ Alberto E. Tapia
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
DAMIAN SAID
By: /s/ Damian Said
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
COMPANIA DE INVERSIONES MONTEVIDEO BVI
By: /s/ Marial Ramos
----------------------------------------------
Title: Marial Ramos
Notice Address:
Plaza Indepencia 831/508
--------------------------------------
11100 Montevideo Uruguay
--------------------------------------
(05982) 901-44-29
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE>
HENRY B. WILSON TRUST
By: /s/ Henry B. Wilson
----------------------------------------------
Title:
Notice Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE>
VAMAGRA S.A.
By: /s/ Emilio Alfredo Gravier
----------------------------------------------
Title: Emilio Alfredo Gravier - apodarado
Notice Address:
c/o Piedras 172 4th Floor
--------------------------------------
1070 Buenos Aires Argentina
--------------------------------------
Attn: Emilio Alfredo Gravier
--------------------------------------
Telephone: (54) 11 4342-6909
--------------------------------------
--------------------------------------
<PAGE>
JULIEN SEVAUX
By: /s/ Julien Sevaux
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
ELINSTAR INTERNATIONAL CORPORATION
By: /s/ Carlos Korn
----------------------------------------------
Title:
Notice Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
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<PAGE>
RENEE SAENZ ARMAS
By: /s/ Renee Saenz Armas
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
GILLES DARD
By: /s/ Gilles Dard
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
SUMMIT INVESTMENT MANAGEMENT LTD.
By: /s/ Horacio Milberg
----------------------------------------------
Title:
Notice Address:
c/o Av. Belgrano 845 (4th)
--------------------------------------
1092 Buenos Aires
--------------------------------------
Attn: Horacio Milberg
--------------------------------------
Tel: (5411) 4343-6700
--------------------------------------
Fax: (5411) 4343-2355
--------------------------------------
<PAGE>
GUSTAVO BLUFSTEIN
By: /s/ Gustavo Blufstein
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
HELIANE STEDEN
By: /s/ Heliane Steden
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
JORGE AMY
By: /s/ Jorge Amy
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
ROBERTO J. GARAT
By: /s/ Roberto J. Garat
----------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
SLI.COM INC.
By: /s/ Guillermo Liberman
----------------------------------------------
Title: President
Notice Address:
Boucherd 547 Piso 14
--------------------------------------
Buenos Aires Argentina
--------------------------------------
Attn: Guillermo Liberman
--------------------------------------
Telephone: 5411 4316 9952
--------------------------------------
Telecopier: 5411 4313
--------------------------------------
<PAGE>
DUNAS OVERSEAS LTD.
By: /s/ Nicolas Juan
----------------------------------------------
Name: Nicolas Juan
Title: PRESIDENT
c/o Estudio Guyer & Reules
--------------------------------------
Plaza Independenia 811, P.B.
--------------------------------------
11100 Montevideo
--------------------------------------
Uruguay
--------------------------------------
Tel. (05982) 902 1515
--------------------------------------
<PAGE>
DANIEL ROTSZTAIN
By: /s/ Daniel Rotsztain
----------------------------------------------
Title: SVP
Notice Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE>
ALFREDO JIMENEZ DE ARECHAGA
By: /s/ Alfredo Jimenez De Arechaga
----------------------------------------------
Title:
Notice Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE>
RAFAEL BUSTAMENTE
By: /s/ Rafael Bustamente
----------------------------------------------
Title:
Notice Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE>
QUANTUM DOLPHIN PLC
By: /s/ Marcelo Mindlin
----------------------------------------------
Title: DIRECTOR
Notice Address:
BOLIVAR 108 1ST FLOOR
--------------------------------------
(1066) BUENOS AIRES
--------------------------------------
ARGENTINA
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE>
Exhibit 10.14
================================================================================
REGISTRATION RIGHTS AGREEMENT
by and among
EL SITIO INTERNATIONAL CORPORATION
and
THE HOLDERS OF ITS CLASS A CONVERTIBLE PREFERRED STOCK
July 2, 1999
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT, dated as of July 2, 1999, is entered into by and
among El Sitio International Corporation, a British Virgin Islands corporation
(the "Corporation"), and the holders of the Corporation's Class A Convertible
Preferred Stock, par value $1.00 per share, listed on Schedule A hereof
(collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, on the date hereof (the "Closing"), the Stockholders are
purchasing the Corporation's Class A Convertible Preferred Stock, par value
$1.00 per share (the "Preferred Stock");
WHEREAS, concurrently herewith, the Stockholders have executed a
stockholders agreement relating to board representation, transfers and other
matters in relation to their holding of the Preferred Stock (the "Stockholders
Agreement");
WHEREAS, in order to induce the Stockholders to make the purchases
described above, and in connection with such purchases to protect the rights of
all of the Stockholders, the Stockholders and the Corporation wish to establish
certain agreements relating to the grant by the Corporation to the Stockholders
of registration and other related rights.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE 1. Certain Definitions.
For the purposes of this Agreement, the following terms shall have
the respective meanings set forth below:
"Affiliate" means, with respect to any person, (i) any other person
of which securities or other ownership interests representing more than fifty
percent (50%) of the voting interests are, at the time such determination is
being made, owned, Controlled or held, directly or indirectly, by such person,
or (ii) any other person which, at the time such determination is being made, is
Controlling, Controlled by or under common Control with, such person. As used
herein, "Control," whether used as a noun or verb, refers to the possession,
directly or indirectly, of the power to direct, or cause the direction of, the
management or policies of a person, whether through the ownership of voting
securities or otherwise.
"Agreement" means this Agreement, as from time to time assigned,
supplemented, amended or modified in accordance with the terms hereof.
"Board" means the Board of Directors of the Corporation.
"Commission" means the United States Securities and Exchange
Commission.
<PAGE>
"Dollars" or "$" means the currency of the United States or its
foreign currency equivalent at the time the determination is made.
"Initial Stockholders" means collectively Roberto Vivo-Chaneton,
Guillermo J. Liberman, Tower Plus International Corp., Roberto Cibrian-Campoy,
Hector A Sierra, Hector R. Bandoni, Sergio S. Monti, Damian Said, and Alberto E.
Tapia.
"Restricted Shares" means any shares of Stock which have not been
registered under the Securities Act and which are owned by any Stockholder.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"Stock" means shares of the Corporation's ordinary shares, par value
$1.00 per share.
"Stockholder" means any person who is a party to this Agreement
(other than the Corporation) and any permitted transferee of such person who
agrees to be bound by the terms hereof.
ARTICLE 2. Registration Rights
2.1 Demand Registration.
(a) Upon notice to the Corporation from Stockholder(s) holding in
the aggregate $15.0 million or more of the Restricted Shares (or Preferred
Shares which are convertible into Restricted Shares), such Stockholders (the
"Requesting Stockholders") shall have the right to request in writing a
registration of such shares of Stock that are (or which would be upon
conversion) Restricted Shares. Such request (a "Demand Request") by the
Requesting Stockholders shall (i) specify the number of Restricted Shares which
each Requesting Stockholder intends to sell or dispose of, and (ii) state the
intended method or methods by which the Requesting Stockholder intends to sell
or dispose of such Restricted Shares. Upon receipt of a Demand Request pursuant
to this Section 2.1, the Corporation shall (as requested) (i) cause to be filed,
within the later of (x) ninety (90) days of the date of delivery to the
Corporation of the Demand Request, or (y) one hundred eighty (180) days after
the effectiveness of the most recently filed registration statement by the
Corporation, a registration statement covering such Restricted Shares which the
Corporation has been so requested to register, providing for the registration
under the Securities Act of such Restricted Shares to the extent necessary to
permit the disposition of such Restricted Shares so to be registered in
accordance with the intended method of distribution specified in such Demand
Request, provided, that the Corporation may delay making such filing or taking
such action by not more than one hundred twenty (120) days if the Corporation,
prior to the time it would otherwise have been required to file such
registration statement or take such action, determines in good faith that the
filing of such registration statement or the taking of such action would require
the disclosure of material, non-public information that, in the reasonable
judgment of the Corporation, would be detrimental to the Corporation if so
disclosed (and a delay would be likely to reduce the detrimental effect of such
disclosure or obviate the need for such disclosure to be made, or would
otherwise adversely affect a financing, acquisition, disposition, merger or
other material transaction), (ii) shall use its
2
<PAGE>
best efforts to have such registration statement declared effective by the
Commission as soon as practicable thereafter, and (iii) refrain from filing any
other registration statements with respect to any other securities of the
Corporation until such date which is one hundred eighty (180) days following
effectiveness of the registration statement filed in response to the Demand
Request. Subject to any existing written agreement between the Corporation and
Bear, Stearns & Co. Inc., the underwriter shall be selected by the Requesting
Stockholders and shall be reasonably acceptable to the Corporation for any
registration pursuant to this Section 2.1.
(b) In the event that the Corporation is required to file a
registration statement covering any Restricted Shares of any Requesting
Stockholder(s) pursuant to Section 2.1(a) above, the Corporation shall be
permitted to include newly-issued securities ("Piggyback Securities") in such
registration. Notwithstanding the foregoing, if the managing underwriter of such
proposed registration determines and advises in writing that the inclusion of
all Piggyback Securities proposed to be included in the underwritten public
offering would interfere with the successful marketing of the Requesting
Stockholders' Restricted Shares, then the Corporation shall not be permitted to
include any Piggyback Securities in excess of the amount, if any, of Piggyback
Securities which the managing underwriter of such underwritten offering shall
reasonably and in good faith agree in writing to include in such offering in
excess of any amount to be registered for the Requesting Stockholder(s). The
Piggyback Securities that are excluded from the underwritten public offering
pursuant to the preceding sentence shall be withheld from the market by the
Corporation for a period, not to exceed 180 days from the closing of such
underwritten public offering, that the managing underwriter determines is
necessary in order to effect such underwritten public offering.
(c) The Corporation shall not be required to comply with more
than four (4) Demand Requests, at least one (1) of which shall be reserved
for IAMP (El Sitio) Investments Ltd. (and its affiliates) and at least one
(1) of which shall be reserved for the Initial Stockholders.
2.2 Piggyback Registration.
(a) Each time that the Corporation proposes for any reason to
register any of its Stock under the Securities Act (a "Proposed Registration"),
other than pursuant to a registration statement on Form F-4 or Form F-8 or
similar or successor forms, the Corporation shall promptly give written notice
of such Proposed Registration to the holders of the Restricted Shares (which
notice shall be given not less than thirty (30) days prior to the expected
effective date of the Corporation's registration statement) and shall offer such
holders the right to request inclusion of any of such holder's Restricted Shares
in the Proposed Registration. No registration pursuant to this Section 2.2 shall
relieve the Corporation of its obligation to register Restricted Shares pursuant
to Section 2.1.
(b) Each Stockholder shall have twenty (20) days from the receipt of
such notice to deliver to the Corporation a written request specifying the
number of Restricted Shares such Stockholder intends to sell and such
Stockholder's intended method of disposition. Any Stockholder shall have the
right to withdraw such Stockholder's request for inclusion of such Stockholder's
Restricted Shares in any registration statement pursuant to this Section 2.2 by
giving written notice to the Corporation of such withdrawal. Subject to Section
2.3 below, the Corporation shall include in such registration statement all such
Restricted Shares so requested to
3
<PAGE>
be included therein; provided, however, that the Corporation may at any time
withdraw or cease proceeding with any such Proposed Registration if it shall at
the same time withdraw or cease proceeding with the registration of all other
equity securities originally proposed to be registered.
(c) In the event that the Proposed Registration by the Corporation
is, in whole or in part, an underwritten public offering of securities of the
Corporation, any request under Section 2.2(b) hereof must specify that the
Restricted Shares be included in the underwriting on the same terms and
conditions as the shares of Stock, if any, otherwise being sold through
underwriters under such registration.
2.3 Priority on Registrations.
(a) If the managing underwriter advises the Corporation that the
inclusion of such Restricted Shares would cause a Material Adverse Effect, the
Corporation will be obligated to include in such registration statement, as to
each Stockholder, only a portion of the Restricted Shares such Stockholder has
requested be registered equal to the ratio which such Stockholder's requested
Restricted Shares bears to the total number of Restricted Shares requested to be
included in such registration statement by all Stockholders who have requested
that their Restricted Shares be included in such registration statement, in the
case of Stockholders exercising rights under Section 2.2 hereof. It is
acknowledged by the Stockholders, that pursuant to the foregoing provision, the
securities to be included in such registration shall be allocated (x) if such
registration has been initiated by the Corporation for securities to be offered
by the Corporation, first to the Corporation, second to Stockholders exercising
their piggyback right and third to all others requesting securities to be
included therein and (y) if such registration has been initiated by Requesting
Stockholders requesting a Demand Registration, first to such Requesting
Stockholders, second to the Corporation if it exercises its piggyback right and
third to all others requesting securities to be included therein. If as a result
of the provisions of this Section 2.3(b) any Stockholder shall not be entitled
to include all of its Restricted Shares in a registration that such Stockholder
has requested to be so included, such Stockholder may withdraw such
Stockholder's request to include Restricted Shares in such registration
statement. The Restricted Shares that are excluded from the underwritten public
offering pursuant to the preceding sentence shall be withheld from the market by
the Stockholders for a period, not to exceed 180 days from the closing of such
underwritten public offering, that the managing underwriter determines as
necessary in order to effect such underwritten public offering.
(b) No Stockholder may participate in any registration statement
hereunder unless such Stockholder completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements, and other documents
reasonably required under the terms of such underwriting arrangements, including
an opinion of its counsel; provided, however, that no such Stockholder shall be
required to make any representations or warranties in connection with any such
registration other than representations and warranties as to (i) such
Stockholder's ownership of its Restricted Shares to be sold or transferred free
and clear of all liens, claims, and encumbrances, (ii) such Stockholder's power
and authority to effect such transfer, and (iii) such matters pertaining to
compliance with securities laws as may be reasonably requested.
2.4 Registration Procedures. Whenever any Stockholder has requested
that any Restricted Shares be registered pursuant to the provisions of this
Article 2, the Corporation
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will use its commercially reasonable efforts to effect the registration and the
sale of such Restricted Shares in accordance with the intended method of
disposition thereof as set forth in the written request, and pursuant thereto
the Corporation shall:
(a) prepare and file with the Commission registration statement(s)
with respect to such securities on the appropriate forms, and use its best
efforts to cause such registration statement(s) to become and remain effective
in accordance with Section 2.4(b) hereof and in accordance with all laws, rules
and regulations applicable thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement(s) and the prospectus(es) used in
connection therewith as may be necessary to keep such registration statement(s)
effective until the earlier of (i) the sale of all Restricted Shares covered
thereby or (ii) the date required therefor by the underwriters in the
underwriting agreement, and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all Restricted Shares covered
by such registration statement(s);
(c) furnish to each Stockholder participating in such registration
pursuant to Section 2.1 or Section 2.2 (each, a "Participating Stockholder")
such number of copies of any summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as the Stockholder may reasonably request in order
to facilitate the public sale or other disposition of such Restricted Shares;
(d) use its best efforts to register or qualify the Restricted
Shares covered by such registration statement(s) under the securities or blue
sky laws of such jurisdictions as the Participating Stockholder shall reasonably
request and do any and all other acts or things which may be necessary or
advisable to enable the Participating Stockholders to consummate the public sale
or other disposition in such jurisdictions of such Restricted Shares; provided,
however, that the Corporation shall not be required to consent to general
service of process for all purposes in any jurisdiction where it is not then
subject to process, qualify to do business as a foreign corporation where it
would not be otherwise required to qualify or submit to liability for state or
local taxes where it is not otherwise liable for such taxes;
(e) at any time when a prospectus relating thereto covered by such
registration statement(s) is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 2.4(b) hereof, promptly
notify each Stockholder and each underwriter and (if requested by any such
Stockholder) confirm such notice in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed and, with
respect to a registration statement or any post-effective amendment, when the
same has become effective, (ii) of the issuance by any state securities or other
regulatory authority of any order suspending the qualification or exemption from
qualification of any of the Restricted Shares under state securities or blue sky
laws or the initiation of any proceedings for that purpose, and (iii) of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing and, at the request of any Participating
Stockholder, prepare, file and furnish to such Participating Stockholder a
reasonable number of
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copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such shares, such
prospectus shall not include an 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 in the light of the circumstances then
existing;
(f) if the Corporation has delivered preliminary or final
prospectuses to any Participating Stockholder and after having done so the
prospectus is amended to comply with the requirements of the Securities Act, the
Corporation shall promptly notify such Participating Stockholder and, if
requested, the Participating Stockholder shall immediately cease making offers
of Restricted Shares and return all prospectuses to the Corporation. The
Corporation shall promptly provide the Participating Stockholder with revised
prospectuses and, following receipt of the revised prospectuses, the
Participating Stockholder shall be free to resume making offers of the
Restricted Shares;
(g) furnish, at the request of the Participating Stockholder on the
date such Restricted Shares are delivered to the underwriters for sale in
connection with a registration pursuant to this Article 2, if such Restricted
Shares are being sold through underwriters, or, if such Restricted Shares are
not being sold through underwriters, on the date that the registration statement
with respect to such Restricted Shares becomes effective, (i) an opinion, dated
such date, of the counsel representing the Corporation for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Participating Stockholders and (ii) a letter dated such date, from the
independent certified public accountants of the Corporation, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and the Participating Stockholders;
(h) if any proposed registration effected pursuant to Section 2.1 or
Section 2.2 involves an underwritten public offering, (i) subject to Section
2.1, select a reputable managing underwriter to underwrite such public offering,
(ii) cause all Restricted Shares to be listed for trading on the principal
national securities exchange (including, without limitation, the NASDAQ National
Market System) (as defined in the Securities and Exchange Act of 1934, as
amended) where the Corporation's Stock is listed for trading, and (iii) enter
into (x) an underwriting agreement with the underwriter providing for such
representations, warranties, covenants, conditions and indemnities as may be
requested by the underwriter and (y) a deposit agreement with a depositary, if
applicable, providing for such representations, warranties, covenants,
conditions and indemnities as may be requested by the depositary;
(i) before filing a registration statement or amendment thereto,
furnish to each Participating Stockholder and its counsel and other
representatives and the underwriters, if any, copies of each such registration
statement or amendment proposed to be filed, which documents shall be made
available on a timely basis for review and comment by the Participating
Stockholders, the underwriters (if any) and their respective representatives;
(j) make generally available to the Corporation's security holders
an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act, as promptly as
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practicable, but in any event no later than forty-five (45) days after the end
of the 12-month period beginning with the first day of the Corporation's first
fiscal quarter commencing after the effective date of a registration statement,
which earnings statement shall cover said 12-month period, and which requirement
will be deemed to be satisfied if the Corporation timely files complete and
accurate information on Forms 20-F and 6-K under the Exchange Act and otherwise
complies with Rule 158 under the Securities Act;
(k) if requested by the managing underwriter or any Participating
Stockholder, promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or any Participating
Stockholder reasonably requests to be included therein, including, without
limitation, with respect to the Restricted Shares being sold by such
Participating Stockholder, the purchase price being paid therefor by the
underwriters and with respect to any other terms of the underwritten offering of
the Restricted Shares to be sold in such offering, and promptly make all
required filings of such prospectus supplement or post-effective amendment;
(l) as promptly as practicable after filing with the SEC of any
document which is incorporated by reference into a registration statement (in
the form in which it was incorporated), deliver a copy of each such document to
each Participating Stockholder;
(m) cooperate with the Participating Stockholders and the managing
underwriter to facilitate the timely preparation and delivery of certificates
(which shall not bear any restrictive legends unless required under applicable
law) representing securities sold under any registration statement (if any), and
enable such securities to be in such denominations and registered in such names
as the managing underwriter or such sellers may request and keep available and
make available to the Corporation's transfer agent prior to the effectiveness of
such registration statement a supply of such certificates;
(n) promptly make available for inspection by any Participating
Stockholder, any underwriter participating in any disposition pursuant to any
registration statement, and any attorney, accountant or other agent or
representative retained by any such Participating Stockholder or underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Corporation (collectively, the
"Records"), as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Corporation's officers, directors
and employees to supply all information requested by any such Inspector in
connection with such registration statement; provided, that, unless the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in the registration statement or the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction,
the Corporation shall not be required to provide any information under this
subparagraph (n) if (A) the Corporation believes, after consultation with
counsel for the Corporation, that to do so would cause the Corporation to
forfeit an attorney-client privilege that was applicable to such information or
(B) if either (i) the Corporation has requested and been granted from the SEC
confidential treatment of such information contained in any filing with the SEC
of documents provided supplementally or otherwise or (ii) the Corporation
reasonably determines in good faith that such Records are confidential and so
notifies the Inspectors in writing unless prior to furnishing any such
information with respect to (A) or (B) such Participating Stockholder requesting
such information agrees to enter into a
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confidentiality agreement in customary form and subject to customary exceptions;
and provided, further, that each Participating Stockholder agrees that it will,
upon learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Corporation and allow the Corporation at its
expense, to undertake appropriate action and to prevent disclosure of the
Records deemed confidential;
(o) provide a CUSIP number for the Restricted Shares included in any
registration statement not later than the effective date of such registration
statement;
(p) cooperate with each Participating Stockholder and each
underwriter participating in the disposition of such Restricted Shares and their
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. ("NASD");
(q) during the period when the prospectus is required to be
delivered under the Securities Act, promptly file all documents required to be
filed with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act;
(r) notify each Participating Stockholder promptly of any request by
the SEC for the amending or supplementing of such registration statement or
prospectus or for additional information;
(s) prepare and file with the SEC promptly any amendments or
supplements to such registration statement or prospectus which, in the opinion
of counsel for the Corporation or the managing underwriter, is required in
connection with the distribution of the Restricted Shares;
(t) advise each Participating Stockholder, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order by
the SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for such purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued;
and
(u) if the Participating Stockholders so request, to request
acceleration of effectiveness of the registration statement from the Commission,
provided at the time of such request the Corporation does not, in good faith,
believe it is necessary to amend further the registration statement in order to
comply with the provisions of this Section 2.4. If the Corporation wishes to
further amend the registration statement prior to requesting acceleration, it
shall have five (5) business days to so amend prior to requesting acceleration.
2.5 Suspension of Dispositions. Each Participating Stockholder
agrees that upon receipt of any notice (a "Suspension Notice") from the
Corporation of the happening of any event of the kind described in Section
2.4(e)(iii), such Participating Stockholder will forthwith discontinue
disposition of Restricted Shares until such Participating Stockholder's receipt
of the copies of the supplemented or amended prospectus, or until it is advised
in writing (the "Advice") by the Corporation that the use of the prospectus may
be resumed, and has received copies of any additional or supplemental filings
which are incorporated by reference in the prospectus, and, if so directed by
the Corporation, such Participating Stockholder will deliver to
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the Corporation all copies, other than permanent file copies then in such
Participating Stockholder's possession, of the prospectus covering such
Restricted Shares current at the time of receipt of such notice. In the event
the Corporation shall give any such notice, the time period regarding the
effectiveness of registration statements set forth in Section 2.4(b) hereof
shall be extended by the number of days during the period from and including the
date of the giving of the Suspension Notice to and including the date when each
seller of Restricted Shares covered by such registration statement shall have
received the copies of the supplemented or amended prospectus or the Advice. The
Corporation shall use its commercially reasonable efforts and take such actions
as are reasonably necessary to render the Advice as promptly as practicable.
2.6 Cooperation upon a Registration. The Stockholders and the
Corporation agree that, in connection with any exercise of registration rights
pursuant to this Article 2, the Stockholders will authorize, and will authorize
and direct the Board to take, such actions as are necessary and appropriate to
effectuate such registration. In addition, each Participating Stockholder agrees
to cooperate fully with the Corporation and the underwriters of any underwritten
public offering in the preparation of all documentation necessary or desirable
to effectuate any registration of any Restricted Shares under the Securities Act
pursuant to this Article 2, or registration or qualification of any Restricted
Shares pursuant to Section 2.4(d) hereof. In addition, the Corporation agrees to
cooperate fully with the Participating Stockholders in connection with any such
registration or qualification.
2.7 Limitations. Notwithstanding anything in this Agreement to the
contrary, if requested in writing by the managing underwriter, if any, of any
underwritten public offering of the Corporation's capital stock pursuant to this
Article 2, each Stockholder agrees not to offer, sell, contract to sell or
otherwise dispose of any shares of capital stock of the Corporation except as
part of such underwritten public offering within thirty (30) days before or one
hundred and eighty (180) days after the effective date of the registration
statement filed with respect to said offering, unless expressly authorized to do
so by the managing underwriter.
2.8 Expenses. The Corporation shall pay all expenses incurred by the
Corporation in complying with Sections 2.1, 2.2 and 2.4 hereof, including,
without limitation, all registration and filing fees (including all expenses
incident to filing with the NASD), fees and expenses of complying with the
securities or blue sky laws of all such jurisdictions in which the Restricted
Shares are proposed to be offered and sold (including reasonable fees and
disbursements of counsel in connection with blue sky qualification of Restricted
Shares), rating agency fees, printing expenses, messenger and delivery expenses,
the Corporation's internal expenses (including without limitation all salaries
and expenses of its officers and employees performing legal or accounting
duties), fees and expenses incurred in connection with any listing of the
Restricted Shares, fees and expenses of counsel for the Corporation and its
independent certified public accountants (including the expenses of any special
audit or cold comfort letters required by or incident to such performance),
securities act liability insurance (if the Corporation elects to obtain such
insurance) and fees and disbursements of underwriters (to the extent the
Corporation is liable therefor under the terms of any underwriting agreement),
whether or not any registration statement becomes effective; provided, however,
that all underwriting discounts and selling commissions applicable to the
Restricted Shares covered by registrations effected pursuant to Section 2.1 or
Section 2.2 hereof shall be borne by the Participating Stockholders, in
proportion to the number of Restricted Shares sold by each such Participating
Stockholder, and
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except as expressly provided in this Section 2.8, in no event shall the
Corporation pay any fees or expenses attributable to any counsel, accountants or
other persons retained or employed by the Participating Stockholders. Further to
the foregoing, the Corporation shall pay all reasonable and customary expenses
incurred by any Participating Stockholder, including, without limitation, all
reasonable expenses and fees of one (1) firm of counsel for all Participating
Stockholders (which shall be selected by a majority (based on the number of
Restricted Securities to be sold) of the Participating Stockholders), plus, to
the extent reasonably necessary, one (1) firm of local counsel for all of the
Participating Stockholders in each state or country where reasonably necessary
(the "Expenses").
2.9 Indemnification.
(a) In the event of any registration of any Restricted Shares under
the Securities Act pursuant to this Article 2 or registration or qualification
of any Restricted Shares pursuant to Section 2.4(d) hereof, the Corporation
shall indemnify and hold harmless each Participating Stockholder, each
underwriter of such shares, if any, each broker or any other person acting on
behalf of the Participating Stockholders, each director, officer, employee and
partner of any of the foregoing and each other person, if any, who controls any
of the foregoing persons, within the meaning of the Securities Act (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities or
expenses, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of, are related
to, result from or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any registration statement under which
such Restricted Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any document incident to registration or qualification of any
Restricted Shares pursuant to Section 2.4(d) hereof, or arise out of, are
related to, result from or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or, with respect to any prospectus,
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or any violation by the Corporation of the
state securities or blue sky laws applicable to the Corporation and relating to
action or inaction required of the Corporation in connection with such
registration or qualification under such state securities or blue sky laws and
the Corporation shall reimburse on demand each Indemnified Person for any legal
or any other costs and expenses reasonably incurred by any of them in connection
with investigating, preparing for, defending or settling any such loss, claim,
damage, liability or action by any governmental agency or body; provided,
however, that the Corporation shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, preliminary or final
prospectus or amendment or supplement thereto or any document incident to
registration or qualification of any Restricted Shares pursuant to Section
2.4(d) hereof, in reliance upon and in conformity with written information
furnished to the Corporation by any Participating Stockholder, underwriter,
broker, other person or controlling person specifically for use in the
preparation thereof or arises out of or is based upon the Indemnified Person's
failure to deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Corporation has furnished such
Indemnified Person with a sufficient number of copies of the same; provided
further, that the
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Corporation shall not be liable for any settlement made without its prior
written consent, such consent not to be unreasonably withheld.
(b) Before Restricted Shares shall be included in any registration
pursuant to this Article 2, each Participating Stockholder will furnish to the
Corporation in writing such information and affidavits as the Corporation
reasonably requests for use in connection with any registration statement and
prospectus, and each such Participating Stockholder and any underwriter acting
on its behalf shall have agreed to indemnify and hold harmless (in the same
manner and to the same extent as set forth in paragraph (a) above) the
Corporation, each director of the Corporation, each officer of the Corporation
who signs such registration statement, every other Participating Stockholder and
any person who controls the Corporation within the meaning of the Securities
Act, with respect to any untrue statement or omission from such registration
statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, if such untrue statement or omission was
made in reliance upon and in conformity with written information furnished to
the Corporation by the Participating Stockholder or such underwriter for use in
the preparation of such registration statement, preliminary prospectus, final
prospectus or amendment or supplement; provided, however, that the maximum
amount of liability in respect of such indemnification shall be limited to an
amount equal to the net proceeds actually received by such Participating
Stockholder from the sale of Restricted Shares effected pursuant to such
registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in Section 2.9(a) or
(b) hereof, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 2.9, give prompt written
notice to the latter of the commencement of such action (provided that the
failure to give such notice shall not limit the rights of such indemnified party
unless and to the extent such failure is prejudicial to its ability to defend
such action). In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and, after notice to such indemnified party from the
indemnifying party of its election to assume the defense thereof; provided,
however, that, if any indemnified party shall have reasonably concluded that
there may be one or more legal defenses available to such indemnified party
which are different from, in conflict with or additional to those available to
the indemnifying party, or that such claim or litigation involves or could
reasonably be expected to have an effect upon matters beyond the scope of the
indemnity agreement provided in this Section 2.9, or if the indemnifying party
fails to take diligent action to defend such claim within twenty (20) days
following notice thereof from the indemnified party, the indemnifying party
shall not have the right to assume the defense of such action on behalf of such
indemnified party, or that such claim or litigation involves or could have an
effect upon matters beyond the scope of the indemnity agreement provided in this
Section 2.9, or if the indemnifying party fails to take diligent action to
defend such claim within twenty (20) days following notice thereof from the
indemnified party, and such indemnifying party shall reimburse such indemnified
party and any person controlling such indemnified party for the fees and
expenses of counsel retained by the indemnified party which are reasonably
related to the matters covered by the indemnity agreement provided in this
Section 2.9. If the indemnifying party does assume its own defense, from such
time the indemnified party shall bear the expenses of its own separate counsel.
If such
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defense is not assumed by the indemnifying party as permitted hereunder, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its written consent, which consent shall not be
unreasonably withheld. If such defense is assumed by the indemnifying party
pursuant to the provisions hereof, such indemnifying party shall not make any
settlement of the applicable claim indemnified against hereunder without the
written consent of the indemnified party or parties, which consent shall not be
unreasonably withheld. An indemnifying party that is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party and any other such indemnified party with respect to such
claim, unless in the reasonable judgment of any indemnified party, a conflict of
interest may exist between such indemnified party with respect to such claim, in
which event the indemnifying party shall be obligated to pay the reasonable fees
and disbursements of such additional counsel or counsels.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which an Indemnified Person
makes a claim for indemnification pursuant to this Section 2.9, but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced
notwithstanding the fact that this Section 2.9 provides for indemnification in
such case, then the Corporation and the Participating Stockholder will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject as is appropriate to reflect, as between the indemnifying party,
on the one hand, and the indemnified party on the other hand, the relative fault
of the indemnifying party, on the one hand, and the indemnified party, on the
other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, it being understood that the
parties acknowledge that the overriding equitable consideration to be given
effect in connection with this provision is the ability of one party or the
other to correct the statement or omission which resulted in such losses,
claims, damages or liabilities, and that it would not be just and equitable if
contribution pursuant hereto were to be determined by pro rata allocation or by
any other method of allocation which does not take into consideration the
foregoing equitable considerations. Notwithstanding the foregoing, (i) the
Participating Stockholder will not be required to contribute any amount in
excess of the proceeds to it of all Restricted Shares sold by it pursuant to
such registration statement, (ii) no underwriter shall be required to contribute
any amount in excess of the proceeds to it from the offering pursuant to such
registration statement, and (iii) no person or entity guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Securities Act,
shall be entitled to contribution from any person or entity who is not guilty of
such fraudulent misrepresentation. If indemnification is available under this
Section 2.9, the indemnifying parties shall indemnify each indemnified party to
the full extent provided in Section 2.9(a) and 2.9(b) without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 2.9(d).
(e) Notwithstanding any of the foregoing, if in connection with an
underwritten public offering of any Restricted Shares, the Corporation, the
Participating Stockholder and the underwriters enter into an underwriting or
purchase agreement relating to such offering which contains provisions covering
indemnification among the parties, the
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indemnification provided thereunder shall be in addition to (and not in lieu of)
the indemnification provided to the Stockholders hereunder.
(f) The indemnification and contribution required by this Section
2.9 shall be made by periodic payment of the amount thereof during the course of
the investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred; provided, that if a court of competent
jurisdiction finally determines that any Indemnified Person which has received
payments hereunder does not have an indemnification right under Section 2.9 for
any reason, then such Indemnified Person shall within five (5) days of such
final determination, refund all amounts received hereunder to the Corporation.
(g) The indemnification and contribution provided for hereunder will
remain in full force and effect regardless of any investigation made by or on
behalf of any Indemnified Person and will survive the transfer of securities.
ARTICLE 3. Miscellaneous
3.1 Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communication required or permitted to be given by any
provision of this Agreement shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by registered mail or
telecopied with acknowledgment of receipt sent by telecopier, registered mail or
delivered in person, as the case may be, to such party at the address or
telecopier number, as the case may be, set forth on the signature pages hereto
or to such other address or telecopier number, as the case may be, as such party
may from time to time designate in writing to the other parties. All such
notices, requests, consents and other communications shall be deemed to have
been received: (a) in the case of personal delivery or registered mail, on the
date of receipt; or (b) in the case of telecopying, on the date of
acknowledgment thereof.
3.2 Amendment and Waiver. No change or modification of, or waiver of
compliance with, this Agreement shall be valid unless the same shall be in
writing and signed by all of the parties hereto.
3.3 Termination. This Agreement may be terminated at any time by an
instrument in writing signed by all of the parties hereto. This Agreement shall
terminate automatically as to any Stockholder which transfers all of its
Restricted Shares. Unless sooner terminated, this Agreement shall terminate
eight (8) years from the date hereof, unless, at any time within one (1) year
prior to such date, all of the parties extend its duration for as many
additional periods, each not to exceed eight (8) years, as they may desire.
3.4 No Waiver. No failure or delay on the part of the Stockholders
or any of them in exercising any right, between the Corporation and the
Stockholders or any of them shall operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the simultaneous or later exercise of any other right, power or privilege. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies which the Stockholders or any of them would otherwise
have. No notice to or demand on the Corporation in any case shall entitle the
Corporation to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of
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the Stockholders or any of them to take any other or further action in any
circumstances without notice or demand.
3.5 Specific Performance. Each party to this Agreement acknowledges
that the other parties will suffer irreparable injury in the event of any breach
of any provision of this Agreement and that therefore the remedy at law for any
breach or threatened breach of any such provision of this Agreement will be
inadequate. Accordingly, upon a breach or threatened breach of any such
provision of this Agreement by any party hereto, the other parties shall, in
addition and without prejudice to any of the rights and remedies they may have,
be entitled as a matter of right, without proof of actual damages, to seek
specific performance of such provisions of this Agreement and to such other
injunctive or equitable relief to enforce, or prevent any violations (whether
anticipatory, continuing or future) of, such provisions of this Agreement.
3.6 Counterparts and Headings. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument. All headings and
any cover page or table of contents are inserted for convenience or reference
only and shall not affect its meaning or interpretation.
3.7 Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice-versa.
3.8 Expenses. Except as provided in Section 2.8 hereto, each of the
parties to this Agreement shall bear its own expenses, including, without
limitation, the fees and disbursements of its respective counsel, in connection
with the negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby.
3.9 Governing Law. This Agreement will be governed by, and construed
and enforced in accordance with, the laws of the State of New York, U.S.A.,
without regard to its conflict of law rules.
3.10 Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
Borough of Manhattan, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action or proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section 3.1
hereof.
14
<PAGE>
3.11 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the Corporation and its successors, and each
of the Stockholders and their respective executors, administrators and personal
representatives and heirs and their successors and assigns.
3.12 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
invalid or unenforceable, the remaining provisions hereof shall nevertheless
continue in full force and effect as though the illegal, invalid or
unenforceable provisions were not a part hereof, and the parties shall exert
their best efforts to amend this Agreement to include a provision which is
legal, valid and enforceable and which carries out the original intent of the
parties.
3.13 Complete Agreement. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous arrangements or understandings, whether
written or oral, between or among any of the parties hereto, with respect to the
subject matter hereof.
3.14 Further Assurances. Each of the parties to this Agreement
agrees to execute such other documents and take such other action as may be
reasonably necessary to implement and carry out the intent of this agreement.
3.15 Confidentiality. Each Stockholder covenants and agrees to treat
any non-public information provided to it by the Corporation concerning the
business and finances of the Corporation ("Corporate Information") as
confidential and agrees further that it will not use, exploit, reproduce,
disclose or provide Corporate Information to any third party (other than any
agents of the Stockholder who are bound by substantially similar obligations of
confidentiality) on its own behalf or otherwise, except with the consent of the
Corporation or as required by law, legal process or any federal or state
regulatory body having jurisdiction over such Stockholder. The provisions of
this Section 3.15 shall not apply to any information which:
(a) was within the public domain prior to the time of disclosure of
Corporate Information to the Stockholder or which comes into the public domain
other than as a result of a breach by the Stockholder of this Section 3.15;
(b) was in the possession of the Stockholder (or any of its
officers, directors, employees, agents, principals, or affiliates) before the
Stockholder received the Corporate Information;
(c) was rightfully acquired by the Stockholder from a third party
without, to the knowledge of the Stockholder, any restriction or any obligation
of confidentiality; or
(d) was independently developed by the Stockholder without any use
or reference to the Corporate Information.
The provisions of this Section 3.15 shall survive the termination of
this Agreement, either in whole or as to any Stockholder, for a period of two
(2) years.
15
<PAGE>
3.16. Failure to Execute. Failure of any party to execute this Agreement renders
this Agreement void as to the non-executing party, but such Agreement shall be
valid and binding as to all other parties that execute such Agreement.
[The rest of this page has been intentionally left blank]
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the day and year first above written.
EL SITIO INTERNATIONAL CORPORATION
By: /s/ Roberto Cibrian-Campoy
------------------------------------------
Title:
Notice Address:
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier:(54 11) 4343-9122, ext. 104
with a copy to:
Paul, Hastings, Janofsky & Walker, LLP
399 Park Avenue, 31st Floor
New York, New York 10022
Attn: Neil A. Torpey
Telephone: (212) 318-6034
Telecopier: (212) 318-4090
<PAGE>
IAMP (EL SITIO) INVESTMENTS LTD.
By: /s/ Jose Santos
------------------------------------------
Title: FOR WESTLAW LIMITED -- Director
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
<PAGE>
WASHBURN ENTERPRISES INC.
By: /s/ Amaya Ariztoy
------------------------------------------
Title: Authorized Signatory
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
<PAGE>
CHESTNUT HILL (EL SITIO), LLC
By: /s/ Michael Greely
------------------------------------------
Title: SVP
Notice Address:
c/o GCC Investments, Inc.
1300 Boylston Street
Chestnut Hill, MA 02467
Attn: Michael A. Greeley
Telephone: (617) 975-3222
Telecopier: (617) 975-3201
with a copy to:
Phillip J. Szabla
Vice President and General Counsel
GC Companies, Inc.
1300 Boylston Street
Chestnut Hill, MA 02467
Telephone: (617) 264-8098
Telecopier: (617) 264-8206
<PAGE>
ROBERTO VIVO-CHANETON
By: /s/ Roberto Vivo-Chaneton
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
GUILLERMO J. LIBERMAN
By: /s/ Guillermo J. Liberman
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
TOWER PLUS INTERNATIONAL CORP.
By: /s/ Nicolas Juan Alonso
------------------------------------------
Title: PRESIDENT
Notice Address:
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
<PAGE>
ROBERTO CIBRIAN-CAMPOY
By: /s/ Roberto Cibrian-Campoy
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
HECTOR R. BANDONI
By: /s/ Hector R. Bandoni
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
SERGIO S. MONTI
By: /s/ Sergio S. Monti
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
HECTOR A. SIERRA
By: /s/ Hector A. Sierra
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
ALBERTO E. TAPIA
By: /s/ Alberto E. Tapia
------------------------------------------
Notice Address: Niceto Vega 5203 7th Floor
Capital, Bs.As. Argentina
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
DAMIAN SAID
By: /s/ Damian Said
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
COMPANIA DE INVERSIONES MONTEVIDEO BVI
By: /s/ Marial Ramos
------------------------------------------
Title: Marial Ramos
Notice Address:
Plaza Indepencia 831/508
------------------------------------------
MONTEVIDEO, URUGUAY
------------------------------------------
TELEPHONE (05982) 901-44-29
------------------------------------------
------------------------------------------
------------------------------------------
<PAGE>
HENRY B. WILSON TRUST
By: /s/ Henry B. Wilson
------------------------------------------
Title:
Notice Address:
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
<PAGE>
VAMAGRA S.A.
By: /s/ Emilio Alfredo Gravier
------------------------------------------
Title: Emilio Alfredo Gravier -- apoderado
Notice Address:
c/o Piedras 172 4th floor
------------------------------------------
1070 Buenos Aires, Argentina
------------------------------------------
Attn: Emilio Alfredo Gravier
------------------------------------------
Telephone: (54) 11 4342-4342-6909
------------------------------------------
------------------------------------------
<PAGE>
JULIEN SEVAUX
By: /s/ Julien Sevaux
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
ELINSTAR INTERNATIONAL CORPORATION
By: /s/ Carlos Korn
------------------------------------------
Title:
Notice Address:
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
<PAGE>
RENEE SAENZ ARMAS
By: /s/ Renee Saenz Armas
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
GILLES DARD
By: /s/ Gilles Dard
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
SUMMIT INVESTMENT MANAGEMENT LTD.
By: /s/ Horacio Milberg
------------------------------------------
Title: Horatio Milberg
Notice Address:
c/o Av. Belgrano 845 (4th)
----------------------------------
1092 Buenos Aires, Argentina
----------------------------------
Attn: Horacio Milberg
----------------------------------
Tel: (54 11) 4343-6700
----------------------------------
Fax: (54 11) 4343-2355
---------------------------------
<PAGE>
GUSTAVO BLUFSTEIN
By: /s/ Gustavo Blufstein
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
HELIANE STEDEN
By: /s/ Heliane Steden
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
JORGE AMY
By: /s/ Jorge Amy
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
ROBERTO J. GARAT
By: /s/ Roberto J. Garat
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
SLI.COM INC.
By: /s/ Guillermo Liberman
------------------------------------------
Name: Guillermo Liberman
Title: President
<PAGE>
DANIEL ROTSZTAIN
By: /s/ Daniel Rotsztain
------------------------------------------
Title:
Notice Address:
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
<PAGE>
DUNAS OVERSEAS LTD
By: /s/ Nicolas Juan
------------------------------------------
Name: NICOLAS JUAN
Title: PRESIDENT
c/o Estudio Guyer Y Regules
------------------------------------------
Plaza Independencia 811, P.B.
------------------------------------------
11100 Montevideo
------------------------------------------
Uruguay
------------------------------------------
Tel: (05982) 902 1515
------------------------------------------
<PAGE>
ALFREDO JIMENEZ DE ARECHAGA
By: /s/ Alfredo Jimenez De Arechaga
------------------------------------------
Title:
Notice Address:
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
<PAGE>
RAFAEL BUSTAMENTE
By: /s/ Rafael Bustamente
------------------------------------------
Title:
Notice Address:
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
<PAGE>
QUANTUM DOLPHIN PLC
By: /s/ Marcelo Mindlin
------------------------------------------
Title: DIRECTOR
Notice Address:
BOLIVAR 108 1st FLOOR
--------------------------------------
(1066) BUENOS AIRES
--------------------------------------
ARGENTINA
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE>
Exhibit 10.15
MANDIC INTERNET LTDA.
QUOTAS PURCHASE AGREEMENT
Dated as of October 6, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 - SALE OF INTERESTS..................................................3
1.1 - SALE OF INTERESTS..................................................3
1.2 - ASSUMPTION OF LIABILITIES..........................................3
1.3 - CLOSING DATE.......................................................3
1.4 - FILING.............................................................3
ARTICLE 2 - PURCHASE PRICE.....................................................4
2.1 - PAYMENT OF PURCHASE PRICE..........................................4
2.2 - TIMING OF PAYMENT..................................................4
2.3 - RELEASE............................................................4
ARTICLE 3 - PURCHASER'S REPRESENTATIONS AND WARRANTIES.........................4
3.1 - PURCHASER'S REPRESENTATIONS AND WARRANTIES.........................4
3.1.1 - ORGANIZATION, CORPORATE POWER AND AUTHORIZATION..................5
3.1.2 - NO VIOLATION.....................................................5
ARTICLE 4 - SELLER'S REPRESENTATIONS AND WARRANTIES............................6
4.1 - SELLER'S REPRESENTATIONS AND WARRANTIES............................6
4.1.1- ORGANIZATION, CORPORATE POWER AND AUTHORIZATION...................6
4.1.2 - NO VIOLATION.....................................................7
4.1.3 - MANDIC INTERNET CORPORATE CAPITAL................................8
4.1.4 - FINANCIAL STATEMENTS.............................................8
4.1.5 - TAXES...........................................................10
4.1.6 - LITIGATION......................................................11
4.1.7 - INSURANCE.....................................................12
4.1.8 - CONTRACTS AND COMMITMENTS.......................................12
4.1.9 - COMPLIANCE WITH LAWS............................................13
4.1.10 - LABOR RELATIONS..............................................13
4.1.11 - COMPETITION, CONSUMER AND TRADE REGULATION LAW.................15
4.1.12 - SUBSCRIBERS....................................................15
-i-
<PAGE>
Page
----
ARTICLE 5 -- CONDITIONS TO CLOSING............................................16
5.1 - CONDITIONS OF OBLIGATIONS OF THE PURCHASER........................16
5.1.1 - REPRESENTATIONS AND WARRANTIES..................................16
5.1.2 - COMPLIANCE WITH AGREEMENT.......................................16
5.1.3 - APPROVALS.......................................................16
5.1.4 - NO INJUNCTION...................................................16
5.1.5 - NO MATERIAL ADVERSE CHANGE......................................17
5.1.6 - CERTIFICATE OF OFFICER..........................................17
5.1.7 - OPINIONS OF THE COMPANY'S COUNSEL...............................17
5.1.8 - MEMORANDUM......................................................17
5.1.9 - SUPPORTING DOCUMENTS............................................17
5.1.10 -OTHER DOCUMENTS.................................................18
5.2. - CONDITIONS OF OBLIGATIONS OF THE SELLER................................18
5.2.1 - REPRESENTATIONS AND WARRANTIES........................................18
5.2.2 - COMPLIANCE WITH AGREEMENT.............................................18
5.2.3 - APPROVALS.............................................................18
5.2.4 - NO INJUNCTION.........................................................18
5.2.5 - CERTIFICATE OF OFFICER................................................19
5.2.6 - SUPPORTING DOCUMENTS..................................................19
ARTICLE 6 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................19
ARTICLE 7 - INDEMNIFICATION...................................................19
7.1 - SELLER INDEMNIFICATION............................................19
7.2 - PURCHASER INDEMNIFICATION.........................................20
7.3 - INDEMNIFICATION PROCEDURE.........................................21
7.4 - SURVIAL OF INDEMNIFICATION OBLIGATIONS............................22
ARTICLE 8 - CONFIDENTIALITY...................................................22
ARTICLE 9 - NOTICES...........................................................23
-ii-
<PAGE>
Page
----
ARTICLE 10 - GENERAL PROVISIONS...............................................24
10.1 - OTHER AGREEMENTS.................................................24
10.2 - SUCCESSORS AND ASSIGNS...........................................24
10.3 - JURISDICTION.....................................................25
10.4 - GOVERNING LAW....................................................24
10.5 - COUNTERPARTS.....................................................25
10.6 - ADDITIONAL DELIVERIES............................................25
10.7 - NO THIRD-PARTY BENEFICIARIES.....................................25
10.8 - ENTIRE AGREEMENT.................................................26
10.9 - HEADINGS.........................................................26
10.10 - SEVERABILITY....................................................26
10.11 - TRANSLATION.....................................................26
Exhibits
Exhibit A: Share Purchase Agreement
Exhibit B: Telecommunications Services Agreement
Exhibit C: Assumed Contracts
Exhibit D: Mandic Internet Balance Sheet
Exhibit E: Private Instrument of Amendment of the Articles of
Association
Exhibit F: Release
Exhibit G: Purchaser Disclosure Schedules
Exhibit H: Seller Disclosure Schedules
Exhibit I: Employment Agreements
Exhibit J: Insurance Policies
Exhibit K: Material Waiver or Forbearance
Exhibit L: Opinion of Company's Counsel
-iii-
<PAGE>
QUOTAS PURCHASE AGREEMENT
QUOTAS PURCHASE AGREEMENT, dated as of this 6th day of October, 1999 (together
with the schedules and exhibits hereto, collectively, this "Agreement") is by
and between IMPSAT Comunicacoes Ltda., a Brazilian limited liability company
(the "Seller"), and O Site Entretenimentos Ltda., a Brazilian limited liability
company (the "Purchaser").
W I T N E S S E T H
WHEREAS, the Seller is controlled by IMPSAT Corporation, a corporation
duly organized and existing under the Laws of the State of Delaware, United
States of America ("IMPSAT");
WHEREAS, the Purchaser is controlled by El Sitio, Inc., a company duly
organized and existing under the Laws of the British Virgin Islands ("El
Sitio");
WHEREAS, IMPSAT and El Sitio have entered into a Framework Agreement dated
August 4, 1999 (the "Framework Agreement") in which the parties agreed on the
basic terms and conditions of a series of related agreements to be entered into
in connection with the sale of IMPSAT's retail Internet access business to El
Sitio;
WHEREAS, IMPSAT and El Sitio have entered into a Share Purchase Agreement
dated the date hereof (the "Share Purchase Agreement") substantially in the form
attached as Exhibit A, whereby IMPSAT shall purchase 1,756,677 shares of Class A
Preferred Shares ("Preferred Shares") of El Sitio for US$12,300,000 on the date
hereof and whereby IMPSAT has committed to purchase an additional 1,313,938
Preferred Shares for US$9,200,000;
WHEREAS, in conjunction with this Agreement, and in accordance with the
Framework Agreement dated August 4, 1999, by and between IMPSAT and El Sitio,
Seller and Purchaser shall concurrently herewith enter into a Telecommunications
Services Agreement substantially in the form attached hereto as Exhibit B,
whereby the Seller will provide and the Purchaser will purchase
telecommunications services related to the Purchaser's Internet access
requirements for the Acquired Business (as defined herein) of the Seller;
<PAGE>
2
WHEREAS, IMPSAT had direct or indirect stock participation in the
following companies: (i) Jungfrau Participacoes Ltda., a limited liability
company duly organized and existing under the laws of the Federative Republic of
Brazil ("Jungfrau"); (ii) Sfspv Empreendimentos e Participacoes Ltda., a limited
liability company duly organized and existing under the laws of the Federative
Republic of Brazil; (iii) Mandic.Com Ltda., a limited liability company duly
organized and existing under the laws of the Federative Republic of Brazil
("Mandic.Com"); and (iv) Mandic Internet Ltda., a Brazilian limited liability
company ("Mandic Internet");
WHEREAS, IMPSAT has completed a corporate restructuring in the group
of companies that it holds in Brazil, specifically; (i) the closing of Jungfrau
and Sfspv joint stock capital; (ii) the change of Jungfrau, Sfspv and Mandic.Com
corporate type; (iii) spin-off of Mandic.Com, with conversion of part of its
assets into Mandic Internet; and (iv) merger of Jungfrau, Sfspv and Mandic.Com
into the Seller (the "Restructuring");
WHEREAS, IMPSAT, under the Restructuring described above has transferred
to Mandic Internet all of its rights and interests in, including the
exploitation of, the retail "Dial Up" access business in Brazil, including the
contracts (the "Assumed Contracts") set forth on Exhibit C, as well as tangible
and intangible assets listed in the Appraisal Report and Balance Sheet as of
August 31, 1999 (the "Mandic Internet Balance Sheet"), attached hereto as
Exhibit D (collectively, the "Acquired Business");
WHEREAS, the Restructuring having been completed, the Seller wishes to
sell all Quotas representing 99.9% of the total corporate capital of Mandic
Internet (the "Interests") to the Purchaser, with all rights and obligations
they represent;
WHEREAS, the Purchaser wishes to acquire from the Seller the Interests;
WHEREAS, the Interests of Mandic Internet are and will remain paid-in,
free and clear of any commitments, agreements, rights, demands, encumbrances,
pledge, doubts, debts or liens of any kind, not having any judicial claims,
administrative procedure and/or debt which may affect the free transfer of the
Interests from the Seller to the Purchaser;
<PAGE>
3
NOW, THEREFORE, in consideration of the promises and mutual covenants and
agreements hereinafter contained, the receipt and sufficiency of which is hereby
mutually acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1 - SALE OF INTERESTS
1.1 - Sale of Interests.
Subject to the terms and conditions of this Agreement, the Seller agrees
to sell to the Purchaser, and the Purchaser shall purchase from the Seller, the
Interests on the date hereof.
1.2 - Assumption of Liabilities.
Purchaser shall not assume any liabilities of Seller or the Acquired
Business of any nature whatsoever arising prior to the date hereof except those
reflected in the Mandic Internet Balance Sheet and by the Assumed Contracts.
1.3 - Closing Date.
The transfer of the Interests (the "Closing") shall take place on the date
hereof and upon execution of the Private Instrument of Amendment of the Articles
of Association in the form attached as Exhibit E. The date on which the Closing
is held is referred to in this Agreement as the "Closing Date".
1.4 - Filing.
The Seller undertakes to file the Private Instrument of Amendment of the
Articles of Association within 30 days of the Closing Date.
<PAGE>
4
ARTICLE 2 - PURCHASE PRICE
2.1 - Payment of Purchase Price.
In consideration of the purchase of the Interests, the Purchaser shall pay
to the Seller on the date hereof, by wire transfer of immediately available
funds to Seller's Account No. 33.847.3000-1, Beneficiary: Impsat Comunicacoes
Ltda. at the Banco Sudameris, Agencia 0726 - Paulista, the total and agreed
price of R$24,066,180 (the "Purchase Price").
2.2 - Timing of Payment.
The Purchase Price will be paid by the Purchaser to the Seller
concomitantly with the execution of the Private Instrument of Amendment to the
Articles of Association of Mandic Internet, reflecting the transfer of the
Interests.
2.3 - Release.
The Seller will give to the Purchaser upon the payment of the Purchase
Price, the most full, irreducible, general, irrevocable and irreversible release
in relation to the Purchase Price, waiving all further claims anyway or in any
pretext, in the form attached as Exhibit F.
ARTICLE 3 - PURCHASER'S REPRESENTATIONS AND WARRANTIES
3.1 - Purchaser's Representations and Warranties.
The Purchaser hereby represents and warrants to the Seller that, except as
set forth in the disclosure schedules of Purchaser attached hereto as Exhibit G
(the "Purchaser Disclosure Schedules"):
3.1.1 - Organization, Corporate Power and Authorization.
The Purchaser is a corporation duly organized, validly existing and
in good standing under applicable law. The Purchaser has full corporate power
and authority to enter into this Agreement, to perform its obligations under
this
<PAGE>
5
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transaction contemplated by it have been duly and validly authorized by all the
necessary corporate or other actions on the part of Purchaser. This Agreement
has been duly executed by and on behalf of Purchaser and is a valid and binding
obligation of the Purchaser and is enforceable in accordance with its terms
except to the extent that the enforceability may be limited by applicable
bankruptcy, insolvency, concordata, moratorium and other laws relating to or
affecting creditor's rights generally or in equitable principles.
3.1.2 - No Violation.
(a) The execution and delivery of this Agreement by the Purchaser,
the performance of its obligations hereunder and the consummation of the
transactions contemplated hereby do not and will not violate, contravene,
breach or result in any default under any indenture, mortgage, lease,
agreement or other instrument or any statute, regulation, ordinance,
judgment, decree or law to which the Purchaser is party or is subject or
bound to and will not, with or without the given of notice or the passage
of time, conflict with or result in any of the terms or conditions of, or
constitute a default under, the Articles of Association or other governing
documents of the Purchaser.
(b) Except as provided in this Agreement, there are no consents,
approvals, authorizations or orders, governmental or otherwise, necessary
for the execution, delivery and performance of this Agreement by the
Purchaser and the transactions contemplated hereby or to ensure the
legality, validity, enforceability or admissibility in the Federative
Republic of Brazil.
ARTICLE 4 - SELLER'S REPRESENTATIONS AND WARRANTIES
4.1 - Seller's Representations and Warranties.
The Seller hereby represents and warrants to the Purchaser, except as set
forth in the disclosure schedules of Seller attached hereto as Exhibit H (the
"Seller Disclosure Schedules"):
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6
4.1.1- Organization, Corporate Power and Authorization.
(a) The Seller is a corporation duly organized, validly existing and
in good standing under applicable law. The Seller has full corporate power
and authority to enter into this Agreement, to perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transaction contemplated by it have been duly and
validly authorized by all the necessary corporate or other actions on the
part of the Seller. This Agreement has been duly executed by and on behalf
of the Seller and is a valid and binding obligation of the Seller and is
enforceable in accordance with its terms except to the extent that the
enforceability may be limited by applicable bankruptcy, insolvency,
concordata, moratorium and other laws relating to or affecting creditor's
rights generally or in equitable principles.
(b) Mandic Internet has been duly incorporated and is validly
existing and in good standing and has all requisite corporate and other
power and authority to carry on its business as currently conducted and to
own, lease, use and operate its assets at the places currently located and
in the manner currently used and operated; and is duly qualified to carry
out business and is in good standing, in each jurisdiction in which the
assets owned, leased, used or operated by it or the nature of the business
conducted by it require it to be so qualified. The assets owned by and the
Quotas of Mandic Internet are not subject to any liens.
(c) True and complete copies of the Articles of Association and
other organizational documents of Mandic Internet, as amended to and
including the date hereof, have been delivered to the Purchaser.
(d) There is no agreement, warrant or option existing pursuant to
which Mandic Internet is or may be required to provide participation in
its capital.
4.1.2 - No Violation.
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7
(a) The execution and delivery of this Agreement by the Seller, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby do not and will not violate, contravene,
breach or result in any default under any indenture, mortgage, lease,
agreement or other instrument, or any statute, regulation, ordinance,
judgment, decree or law to which the Seller is party or is subject or
bound to and will not, with or without the giving of notice or the passage
of time, conflict with or result in any breach of any of the terms or
conditions of, or constitute a default under, the Articles of Association
or other governing documents of the Seller.
(b) Mandic Internet is not a party to, or bound by or subject to any
indenture, mortgage, lease, agreement, instrument, charter or Articles of
Association provision, or subject to any statute, regulation, judgment or
decree which as a result of the execution of this Agreement, would result
in the creation or imposition of any encumbrance or lien, or give to
others, any interest or rights (including, without limitations rights to
termination or cancellation) in, or with respect to the Interests or give
rise to any right of termination, cancellation or acceleration of any
right or obligation or any benefit to which Mandic Internet or to a loss
of any benefit to which Mandic Internet is entitled.
(c) Except as provided in this Agreement, there are no filings,
registrations, consents, approvals, authorizations or orders, governmental
or otherwise, necessary for the execution, delivery and performance of
this Agreement by the Seller and the transactions contemplated hereby or
to ensure the legality, validity, enforceability or admissibility in the
Federative Republic of Brazil of this Agreement.
4.1.3 - Mandic Internet Corporate Capital.
(a) As of the date hereof, the corporate capital of Mandic Internet
is of R$108,775.00 divided into 108,775 Quotas with par value of R$1.00
each, all of which are authorized, outstanding and are validly existing.
(b) The Seller is the sole owner of all Interests having good and
valid title thereof. The Interests are duly and validly authorized and
<PAGE>
8
outstanding, fully paid and non-assessable, free and clear of any lien,
encumbrance, pledge or claim whatsoever.
(c) Since the other Quota holder (representing .01% of the capital)
of Mandic Internet has agreed separately to transfer its interests to
Purchaser, the transfer of the Interests is not subject to any pre-emptive
right or rights or first refusal or other rights of a similar nature in
favor of any quotaholder of Mandic Internet under its Articles of
Association or pursuant to any agreement or instrument to which Mandic
Internet or the Seller is a party.
4.1.4 - Financial Statements.
(a) The Mandic Internet Balance Sheet attached hereto as Exhibit D:
(i) is in accordance with the books and the records of Mandic Internet and
has been prepared in accordance with Brazilian generally accepted
accounting principles (the Brazilian GAAP) and (ii) presents fairly, in
all material respects, the consolidated financial position and the results
of operations, changes in quotaholders equity and cash flows of Mandic
Internet as of the dates and for the periods indicated, in accordance with
Brazilian GAAP applied on a basis consistent with prior periods.
(b) Since the date of the Mandic Internet Balance Sheet, there has
not been:
(i) any material adverse change, financial or otherwise, in
the business prospects, operations, assets, liabilities
(actual or contingent), earnings or other condition of
Mandic Internet; or
(ii) any change in the authorized or actual capitalization of
Mandic Internet.
(c) Except as reflected in the Mandic Internet Balance Sheet, Mandic
Internet has not:
(i) incurred or assumed any material liabilities,
obligations or indebtedness (whether direct or
indirect), actual or contingent, other than current
liabilities, obligations or
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9
indebtedness for operating expenses incurred in the
ordinary course of business consistent with good
practice;
(ii) entered into, or committed to enter into, any material
transaction, contract or agreement, whether written or
oral other than in the ordinary course of business
consistent with good practice;
(iii) acquired, subjected to any lien or disposed of or
committed to acquire, subject to any lien or dispose of
any material assets other than in the ordinary course of
business consistent with good practice; or
(iv) canceled or waived any debt, claim or other right.
(d) With respect to any assets belonging to Mandic Internet there is
no contravention of any statute, ordinance, rule or regulation of any duly
constituted authority having jurisdiction, arising from the tenancy,
occupancy or use thereof or the location, size, configuration, state of
repair, design or construction of or defects in the said assets, or on
account of the materials of which it is built or the quantity,
concentration or type of emission, deposit, issuance, or discharge from
any part of the said assets or otherwise in connection of the same. There
is no order or judgment by any authority having jurisdiction requiring any
work or expenditure of money in respect of such assets, nor is there any
pending or threatened expropriation procedure affecting the same. The
assets are usable and in sound condition, operation and repair, subject to
reasonable wear and tear and obsolescence.
(e) Mandic Internet has acquired, and currently holds all permits,
licenses, consents, concessions, authorizations, approvals, privileged
waivers, exemptions, orders, certificates, rulings, agreements and other
concessions granted by or entered into with any governmental or regulatory
authority required in connection with its assets and business, and all of
the foregoing are in good standing and are being complied with in all
material respects.
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10
(f) The bookkeeping and accounting records of Mandic Internet are
complete and accurate in all material respects, have been maintained on a
consistent basis and fairly reflect the financial transactions of Mandic
Internet.
(g) As of the date hereof, Mandic Internet has no liability or
obligation of any nature whatsoever (whether absolute, accrued,
contingent, asserted, unasserted or other), and there has not been any
aspect of the prior or current conduct of the business or affairs of
Mandic Internet which could form the basis for any claims by any third
party which, if asserted, could result in any such liability or
obligation, which is not fully reflected or reserved against on the
Financial Statements of Mandic Internet as at August 31, 1999.
4.1.5 - Taxes.
Mandic Internet has duly complied with all the administrative
proceeding before tax authorities. All the information and documents
conveyed by Mandic Internet to the tax authorities are true, correct and
complete and present fairly and accurately the information required to be
shown therein. Mandic Internet has paid all taxes payable by it to all
taxing authorities. There are no pending or threatened claims, liens,
investigation for tax deficiencies, penalties or interest asserted Mandic
Internet by any taxing authority. There are no agreements or waivers
extending the time for the assessment of any tax or tax deficiency against
Mandic Internet. The accrual for taxes reflected in the Financial
Statements is, in the aggregate, adequate to cover any and all national or
foreign tax liabilities (whether or not disputed) of Mandic Internet for
the period covered by such Financial Statements, and for all tax
liabilities arising out of transactions entered into or states of fact
existing prior thereto.
4.1.6 - Litigation.
(a) Mandic Internet has not received any notification that:
(i) any process utilized, any product produced or any
service provided by it or the conduct of its business
<PAGE>
11
infringes any patent, trade mark, trade name, trade
secret, know-how or technology owned or used by another
or is the subject of any pending or threatened
proceedings or outstanding court order;
(ii) there is any investigation by any administrative
authority or judicial body that would adversely affect
its business or any product, apparatus, method or design
of Mandic Internet.
(b) Mandic Internet has not been informed or received any
notification of any action, proceeding, demand, claim or investigation
pending or threatened by or before any court or administrative agency in
which an adverse determination might adversely and materially affect
Mandic Internet or a material portion of any of licenses or assets or
rights or that questions the validity of this Agreement or seeks to
restrain or enjoin the consummation of the transactions contemplated by
this Agreement. Neither Mandic Internet nor any of its assets are party to
any agreement or subject to any corporate restriction or any judgment,
order, writ, injunction, decree, rule or regulation that materially and
adversely affect the conduct of its business and operations. Mandic
Internet has not received any notification of any judgment, order or
decree enforceable against or in respect of Mandic Internet, or its
business which involves or may involve, or restricts or may restrict, or
requires or may require, the expenditure of money.
<PAGE>
12
4.1.7 - Insurance.
Mandic Internet has obtained all insurance policies that relate in
any way to the ownership, use or operation of its assets. Such policies
are each outstanding and in full force and effect and are valid and
enforceable in accordance with their terms, have been entered into, to
knowledge of Mandic Internet, with financially sound and reputable
insurance companies and insure all material assets of Mandic Internet
against loss and damage to the extent and in the manner reasonably
customary and prudent for companies engaged in similar businesses or
required by any of the licenses. All premiums with respect such insurance
policies required to be paid thereunder have been paid and no notice of
cancellation or termination has been received with respect to any such
policy.
4.1.8 - Contracts and Commitments
(a) The Assumed Contracts constitute all of the material contracts,
arrangements and understandings, written or oral, express or implied, to
which Mandic Internet is a party, or to or by which it or its assets are,
or may be subject, bound or affected. All such Assumed Contracts having
been transferred to Mandic Internet by Mandic.Com pursuant to the
Restructuring, and all such Assumed Contracts are in good standing, valid
and effective, current in payments, with no breach, violation, default,
notice or claim of breach by any party thereto, except for such breaches,
violations, defaults, notices of claims of breach that, individually and
in the aggregate, would not be material to Mandic Internet, and no event
has occurred which with notice or lapse of time, or both, constitute a
breach, violation or default by any party thereto. Contracts relating to
employment or consulting are listed in Exhibit I hereto and policies
relating to insurance are listed in Exhibit J hereto.
(b) The Seller has delivered to the Purchaser true and complete
copies of all written contracts and true and complete memoranda describing
the terms of all oral contracts listed in Exhibit C hereto, together with
a complete and correct copy or description, as the case may be, of all
amendments thereto. All material liabilities and obligations under such
contracts can be ascertained from such copies or memoranda. Each contract
is valid, in full force and effect, binding and enforceable by
<PAGE>
13
Mandic Internet thereto in accordance with its respective terms. Mandic
Internet has complied in all material respects with the terms of all
contracts, including, but not limited to, all such terms requiring the
filing of statements (financial or otherwise) and the payment of any
amounts and are not in default under any contract, except for defaults
that, individually and in the aggregate, would not be material to Mandic
Internet. Except as set forth on Exhibit K hereto, Mandic Internet has not
granted or been granted any material waiver or forbearance with respect to
any of the contracts. To the knowledge of the Seller or Mandic Internet,
no other contracting party is in material default under any of the
contracts.
(c) There is no agreement, option or other right or privilege
outstanding in favor of any person for the purchase from Mandic Internet
of its business or any of its assets, other than sales in the ordinary
course of business.
(d) There is no agreement signed by Mandic Internet or its
interestholders which may affect its activities, restraining or imposing
conditions to the development of its business.
4.1.9 - Compliance with Laws.
Mandic Internet has complied in all material respects with all
statutes, ordinances, codes, laws, rules, regulations or orders in respect
of the conduct of its business and ownership, possession, maintenance and
operation of its properties.
4.1.10 - Labor Relations.
(a) The Seller has delivered to the Purchaser a complete list of
employees of Mandic Internet as well as each such employee's date of hire,
current compensation, including salary, bonuses, commissions and other
benefits of any kind and participation in each of any benefit plan. A
true, correct and complete copy of the employee work book (Livro de
Registro de Empregados) has been delivered to the Purchaser as well as a
true, correct and complete copy of each written employment contract and a
description of each oral employment agreement.
<PAGE>
14
(b) Mandic Internet is in compliance with each of its obligations
under all statutes, rules, regulations, executive orders, judgements,
orders, decrees and agreements governing its employment practices and the
employment relationships with its employees.
(c) Mandic Internet has been complying with the provisions of the
collective bargaining relationship applicable to Mandic Internet's
employees. No employees of Mandic Internet have made a demand for
recognition of a labor organization or group or filed a petition with
Mandic Internet demanding such representation, nor does Mandic Internet
and/or the Seller has knowledge of any employee attempting to organize a
labor organization or group; and there is no labor strike pending or
threatened and no labor dispute(s) exists between Mandic Internet and any
labor organization or employee of Mandic Internet.
(d) There is no material: (i) pending or threatened, administrative
or judicial, unfair labor practice charges and/or discrimination charges,
and/or pending or threatened employment related litigation including
judicial, administrative and/or employment grievance proceedings and/or
arbitrations, related to any employee of Mandic Internet or any third
party; (ii) claims, pending or threatened, by any governmental agency,
labor organization, past or present employee or consultant alleging Mandic
Internet has violated any applicable statute, law (administrative and
judicial), executive order, rule, regulation, judgement, order, decree or
agreement, regarding Mandic Internet's employment practices; (iii) pending
or threatened unfair employment practice charges, judicial or
administrative proceedings and/or employment grievance and/or arbitrations
against Mandic Internet regarding its employment practices; and (iv)
present or former employee(s) of Mandic Internet who have any claims
against the Mandic Internet (whether under federal, provincial, state,
local or foreign law) under any employment agreement(s), or otherwise, on
account of or for (A) overtime pay, other than overtime pay for the
current payroll period, (B) wages or salary (excluding amounts accruing
under the Plans) for any period other than the current payroll period, (C)
vacation or time off (or pay in lieu thereof), other than that earned in
regard to the current fiscal or calendar year, or
<PAGE>
15
(D) any violation of any law, statute, rule or regulation relating to
minimum wages or maximum hours of work.
(e) The employment by Mandic Internet of any person (whether or not
there is a written employment agreement) may be terminated for any reason
whatsoever not inconsistent with current law, without penalty or liability
of any kind other than accrued vacation pay and all legal severance
obligations.
(f) Mandic Internet has never had any pension, profit sharing or
similar benefit plans.
4.1.11 - Competition, Consumer and Trade Regulation Law
(a) Mandic Internet is not a party to or is concerned in any
agreement or arrangement or is conducting or has conducted itself (whether
by omission or otherwise) in a manner which:
(i) infringes any anti-trust and consumer or similar
legislation in Brazil; and
(ii) is registrable, unenforceable or void or renders that
Mandic Internet liable to civil, criminal or
administrative proceedings by virtue of any anti-trust,
consumer or similar legislation.
(b) Mandic Internet has given an undertaking to, or is subject to
any order of or investigation by, or has received any request for
information from, any court or governmental regulatory authority,
including but not limited to any national competition authority under any
anti-trust, consumer or similar legislation.
4.1.12 - Subscribers
As of the date of the Mandic Internet Balance Sheet,
Mandic Internet had agreements with the number of paying subscribers for
receipt of dial-up access services identified in the audit report of
Deloitte & Touche attached as Exhibit D.
<PAGE>
16
ARTICLE 5 -- CONDITIONS TO CLOSING
5.1 - Conditions of Obligations of the Purchaser.
The obligation of the Purchaser to purchase and pay for the Quotas which
it has agreed to purchase on the date hereof is subject to the fulfillment in
all material respects prior to the date hereof of the following conditions, any
of which may be waived in whole or in part by the Purchaser:
5.1.1 - Representations and Warranties.
The representations and warranties of the Seller under this
Agreement shall be true and correct in all material respects on the date
hereof.
5.1.2 - Compliance with Agreement.
The Seller shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by
the Seller on or before the Closing Date.
5.1.3 - Approvals.
The Seller shall have obtained any and all consents, waivers,
approvals or authorizations, with or by any governmental body or any other
person required for the valid execution of this Agreement and the
transactions contemplated hereby.
5.1.4 - No Injunction.
No governmental body or any other person shall have issued an order
which shall then be in effect restraining or prohibiting the completion of
the transactions contemplated hereby, nor shall any such order be
threatened or pending.
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17
5.1.5 - No Material Adverse Change.
Since July 31, 1999, there shall not have been a Material Adverse
Change. "Material Adverse Change" means any event, circumstance,
condition, fact, effect or other matter which has had or could reasonably
be expected to have a material adverse effect (i) on the business, assets,
liabilities, prospects, properties, results of operations or condition
(financial or otherwise) of the Acquired Business or (ii) on the ability
of the Seller and such subsidiaries to perform on a timely basis any
material obligation under this Agreement or to consummate the transactions
contemplated hereby.
5.1.6 - Certificate of Officer.
The Seller shall have delivered to the Purchaser a certificate dated
the Closing Date, executed by its Chief Executive Officer, certifying the
satisfaction of the conditions specified in paragraphs 5.1.1, 5.1.2,
5.1.3, 5.1.4 and 5.1.5
5.1.7 - Opinions of the Company's Counsel.
The Purchaser shall have received from Pinheiro Neto Advogados,
counsel for the Seller, an opinion dated the date of the Closing, in the
form attached as Exhibit L.
5.1.8 - Memorandum.
The Articles of Association shall be in full force as of the date
hereof under the laws of the Brazil and shall not have been amended or
modified, and a certified copy of the and Articles of Association shall
have been delivered to counsel for the Purchaser.
5.1.9 - Supporting Documents.
The Purchaser shall have received the Seller Disclosure Schedules.
<PAGE>
18
5.1.10 - Other Documents.
The parties have executed the Share Purchase Agreement, and the
Telecommunications Services Agreement, and any document contemplated by
the foregoing agreements.
5.2 - Conditions of Obligations of the Seller.
The obligation of the Seller hereinunder is subject to the
fulfillment in all material respects prior to the date hereof of the following
conditions, any of which may be waived in whole or in part by the Seller:
5.2.1 - Representations and Warranties.
The representations and warranties of the Purchaser under this
Agreement shall be true and correct in all material respects on the date
hereof.
5.2.2 - Compliance with Agreement.
The Purchaser shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with
by the Purchaser on or before the Closing Date.
5.2.3 - Approvals.
The Purchaser shall have obtained any and all consents, waivers,
approvals or authorizations, with or by any governmental body or any other
person required for the valid execution of this Agreement and the
transactions contemplated hereby.
5.2.4 - No Injunction.
No governmental body or any other person shall have issued an order
which shall then be in effect restraining or prohibiting the completion of
the transactions contemplated hereby, nor shall any such order be
threatened or pending.
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19
5.2.5 - Certificate of Officer.
The Purchaser shall have delivered to the Seller a certificate dated
the Closing Date, certifying the satisfaction of the conditions specified
in paragraphs 5.2.1, 5.2.2, 5.2.3 and 5.2.4.
5.2.6 - Supporting Documents.
The Seller shall have received the Purchaser Disclosure Schedules.
ARTICLE 6 - Survival of Representations and Warranties
The representations and warranties made by the Seller shall survive the
execution and delivery of this Agreement and the completion of the transactions
contemplated herein.
ARTICLE 7 - INDEMNIFICATION
7.1 - Seller Indemnification.
The Seller, shall indemnify and hold harmless the Purchaser and/or
each of its directors, officers, agents, employees, advisers and representatives
from and against any losses, expenses, claims damages or liabilities of whatever
nature, joint or several, including without limitation reasonable costs of
investigation and reasonable legal fees and expenses of legal counsel to which
the Purchaser and/or each of its directors, officers, agents, employees,
advisers and representatives may become subject, which arise out of or are based
upon:
(a) any representation or warranty of the Seller made herein not
having been materially true, complete and accurate when made;
(b) any covenant made herein by the Seller not having been complied
with;
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20
(c) any liability for taxes including related liabilities,
penalties, fines, additions and interest in respect of any taxable period
ending on or prior to this date;
(d) any liability for labor claims filed after this date but related
to the working period prior to the date of signature of this Agreement, by
ex-employees of Mandic.Com or by the employees that were transferred from
Mandic.Com to Mandic Internet, as a result of the spin-off of Mandic.Com;
(e) any liability or obligation of Mandic.Com or any other affiliate
of IMPSAT, which was not transferred to Mandic Internet in view of the
spin-off of Mandic.Com;
(f) any liability or obligation arising out of the tangible and
intangible assets transferred to Mandic Internet, as a result of the
spin-off of Mandic.Com;
(g) any liability or obligation attributed by Mandic Internet's
clients, for services rendered before the signature of this Agreement;
(h) any liability or obligation attributed to the relevant parties
of the Contracts signed by and transferred to Mandic Internet, related to
the period prior to this Agreement; and
(i) Any liability or obligation arising from non-compliance of the
obligations assumed by Mandic.Com under Section 4.1.8 of this Agreement.
Seller's obligations to indemnify for Purchaser's losses under this
agreement shall accrue only if the aggregate amount of such losses exceeds one
percent of the Purchase Price, and then Seller shall be liable for all such
losses, including such initial one percent amount.
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21
7.2 - Purchaser Indemnification.
The Purchaser shall indemnify and hold harmless the Seller and each of its
directors, officers, agents, employees, advisers and representatives from and
against any losses, expenses, claims, damages or liabilities, joint or several,
including without limitation reasonable costs of investigation and reasonable
legal fees and expenses of legal counsel to which the Seller and/or each of its
directors, officers, agents, employees, advisers and representatives may become
subject, which arise out of or are based upon:
(a) any representation or warranty of the Purchaser made herein not having
been materially true, complete and accurate when made, or
(b) any covenant made herein by the Purchaser not having been complied
with.
Purchaser's obligations to indemnify for Seller's losses under this
Agreement shall accrue only if the aggregate amount of such losses exceeds one
percent of the Purchase Price, and then Purchaser shall be liable for all such
losses, including such initial one percent amount.
7.3 - Indemnification Procedure.
In the case of any claim asserted by a third party against a party
entitled to indemnification under this Agreement (the "Indemnified Party"),
notice shall be given by the Indemnified Party to the indemnifying party (the
"Indemnitor") promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and the Indemnified Party shall
permit the Indemnitor (at Indemnitor's expense) to assume the defense of any
claim or any litigation resulting therefrom, provided that (i) the counsel for
the Indemnitor who shall conduct the defense of such claim or litigation shall
be reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party
may participate in such defense at such Indemnified Party's expense, and (iii)
the omission by any Indemnified Party to give notice as provided herein shall
not relieve the Indemnitor of its indemnification obligation under this
Agreement except to the extent that such omission results in a failure of actual
notice to the Indemnitor and the Indemnitor is materially damaged as a result of
such failure to give notice. Except with the prior written consent of the
Indemnified Party, the Indemnitor, in the defense of any such claim or
litigation, shall not consent to
<PAGE>
22
entry of any judgment or order, interim or otherwise, or enter into any
settlement that provides for injunctive or other nonmonetary relief affecting
the Indemnified Party or that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to such Indemnified Party of a release
from all liability with respect to such claim or litigation. In the event that
the Indemnified Party shall in good faith determine that the conduct of the
defense of any claim subject to indemnification hereunder or any proposed
settlement of any such claim by the Indemnitor might be expected to affect
adversely the Indemnified Party's tax liability or the ability of the
Indemnified Party or any of its subsidiaries to conduct its business, or that
the Indemnified Party may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the Indemnitor in respect of such claim or any litigation relating
thereto, the Indemnified Party shall have the right at all times to take over
and assume control over the defense, settlement, negotiations or litigation
relating to any such claim at the sole cost of the Indemnitor, provided that if
the Indemnified Party does so take over and assume control, the Indemnified
Party shall not settle such claim or litigation without the written consent of
the Indemnitor, such consent not to be unreasonably withheld. In the event that
the Indemnitor does not accept the defense of any matter as above provided, the
Indemnified Party shall have the full right to defend against any such claim or
demand and shall be entitled to settle or agree to pay in full such claim or
demand. Notwithstanding the foregoing, the Indemnitor shall still provide
indemnification to the Indemnified Party. In any event, the Indemnitor and the
Indemnified Party shall cooperate in the defense of any claim or litigation
subject to this Section 7.3 and the records of each shall be available to the
other with respect to such defense.
7.4 - Survival of Indemnification Obligations.
The obligations of the parties under this Article shall survive the
execution and delivery of this Agreement for a period of not less than five (5)
years.
ARTICLE 8 - CONFIDENTIALITY
No party, without the consent of the other party, disclose to any third
party the existence of this Agreement, its contents or any other confidential
information to which it had knowledge as a result of this Agreement, except as
and strictly to the extent by any law, rule or regulation or judicial process.
<PAGE>
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ARTICLE 9 - NOTICES
All notices and other communications provided for hereunder shall be in
writing (including telecopier, telegraphic, telex and e-mail communications) and
mailed, telecopied, telegraphed telexed or delivered.
If to the Purchaser:
Rua Sancao Alves dos Santos, 20, 1(degree) andar, conjunto 12
Brooklin, Sao Paulo, SP
CEP:
Telefax: 55 11 5505 7665
Attn.: Marcos Souza Aranha
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, NY 10022
Telefax: 212-319-4090
Attn.: Neil A. Torpey
Mark G. Pedretti
And to:
Amaro, Stuber e Advogados
Avenida Paulista 1499
18th & 19th Floor
01311-928, Sao Paulo, Brazil
Telefax: 55-11-283-0483
Attn.: Walter Douglas Stuber
If to the Seller:
Av. Eng. Luis Carlos Berrini, 550, 10(degree) andar (parte) e 11(degree) andar
Brooklin Novo, Sao Paulo, SP
CEP:
<PAGE>
24
Tel.: 55 11 5506 7515
Fax: 55 11 5506 8399
Attn.: Daniel Vicente Hourquescos
Carlos Daniel Ligotti
with a copy to:
Pinheiro Neto - Advogados
Rua Boa Vista, 254
9th Floor
01014-907, Sao Paulo, Brazil
Telefax: 55-11-237-8600
Attn: Fernando R. de Almeida Prado
All notices are effective upon receipt or upon refusal if properly
delivered.
ARTICLE 10 - GENERAL PROVISIONS
10.1 - Other Agreements.
The Seller and the Purchaser agree to execute and deliver such other
documents or agreements as may be necessary or desirable for the implementation
of this Agreement and the consummation of the transactions contemplated hereby.
10.2 - Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement shall
not be assignable or otherwise transferable by any party hereto without the
prior written consent of the other parties hereto, and any purported assignment
or other transfer without such consent shall be void and unenforceable;
provided, that the Purchaser may assign this Agreement to any affiliate of such
Purchaser, but any such assignment shall not relieve the Purchaser of its
obligations hereunder.
<PAGE>
25
10.3 - Jurisdiction.
The parties hereto hereby irrevocably submit to the exclusive jurisdiction
of the courts of the City of Sao Paulo, State of Sao Paulo, Brazil, as the
competent courts to decide any questions or dispute which might arise under this
Agreement or of any of the transactions contemplated hereby.
10.4 - Governing Law.
The construction and performance of this Agreement shall be governed by
the laws of the Federative Republic of Brazil.
10.5 - Counterparts.
This Agreement may be executed in one or more counterparts, each of which
will be deemed an original and all of which together will constitute one and the
same instrument.
10.6 - Additional Deliveries.
The Seller shall at any time and from time to time within one year after
the Closing execute and deliver to the Purchaser such additional instruments,
documents, conveyances or assurances and take such other actions as shall be
necessary, or otherwise be reasonably requested by the Purchaser, to confirm and
assure the rights and obligations provided for in this Agreement and render
effective the consummation of the transactions contemplated hereby, or otherwise
to carry out the intent and purposes of this Agreement.
10.7 - No Third-Party Beneficiaries.
Nothing in this Agreement shall confer any rights upon any individual,
corporation or other entity or organization other than the parties hereto and
their respective heirs, successors and permitted assigns.
10.8 - Entire Agreement.
This Agreement and the Exhibits and Annexes hereto embody the entire
agreement and understanding of the parties hereto and supersede any and all
<PAGE>
26
prior agreements, arrangements and understandings relating to the matters
provided for herein. No amendment, waiver of compliance with any provision or
condition hereof or consent pursuant to this Agreement shall be effective unless
evidenced by an instrument in writing signed by the party against whom
enforcement of any amendment, waiver or consent is sought.
10.9 - Headings.
The headings set forth in this Agreement are for convenience only and will
not control or affect the meaning or construction of the provisions of this
Agreement.
10.10 - Severability.
If any provision, including any phrase, sentence, clause, section or
subsection, of this Agreement is invalid, inoperative or unenforceable for any
reason, such circumstances shall not have the effect of rendering such provision
in question invalid, inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision herein contained invalid,
inoperative, or unenforceable to any extent whatsoever.
10.11 - Translation.
This Agreement shall only be executed in the English version, but a
Portuguese translation in a form satisfactory to Seller and Purchaser shall be
prepared immediately after its signature.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties sign and execute this instrument in equal
form and content 2 (two) copies, for one effect, together with two witnesses in
all present.
Sao Paulo, October 6, 1999
IMPSAT COMUNICACOES LTDA.
/s/ Daniel Vincente Hourquescos
----------------------------------------
Name: DANIEL VINCENTE HOURQUESCOS
Title: DIRECTOR
/s/ Carlos Daniel Ligotti
----------------------------------------
Name: CARLOS DANIEL LIGOTTI
Title: DIRECTOR
O SITE ENTRETENIMENTOS LTDA.
/s/ Marcos Souza Aranha
----------------------------------------
Name: MARCOS SOUZA ARANHA
Title: DIRETOR-PRESIDENTE
Witnesses:
/s/ Cristina Xavier Da Rocha Loures /s/ Ana Claudia Donata De Oliveira
- ------------------------------------- ---------------------------------------
Name: Cristina Xavier Da Rocha Loures Name: Ana Claudia Donata De Oliveira
ID Card: 5 676 931-5 SSP/PR ID Card: 13613.493-2
<PAGE>
EXHIBIT A
FORM OF SHARE PURCHASE AGREEMENT
<PAGE>
EXHIBIT B
FORM OF TELECOMMUNICATIONS
SERVICES AGREEMENT
<PAGE>
EXHIBIT C
ASSUMED CONTRACTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
LIST OF MATERIAL CONTRACTS TRANSFERRED BY MANDIC.COM TO MANDIC INTERNET
- ------------------------------------------------------------------------------------------
==========================================================================================
PARTY OBJECT MONTHLY PAYMENT TERM
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AECESP - Detran (Transit Access service to R$ 2,80 per From 99.10.20 to
Department) Detran's data base access 00.10.19
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
AGENCIA ESTADO LTDA. Supply of informative R$2,000.00 Indetermined
articles for Mandic
Internet's home page
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
AMEX - AMERICAN EXPRESS American Express 4% on the Indetermined
Credit Card System received gross
value
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
ARGEL AR CONDICIONADO LTDA. Technical assistance R$200.00 Indetermined
for conditioning air
equipment
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
ASSOCIACAO COML DE SAO PAULO Supply of information R$ 0,64 per Indetermined
about credit on consult
checks received by
Mandic Internet
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
ASC ASSESSORIA Rendering of R$234.00 Indetermined
technical and
updating services
AT-DC
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
ATS ASSESSORIA E SISTEMAS Maintenance service R$500.00 Indetermined
S/C LTDA. of SICA (modulos
fopag), accountancy
and reicevables system
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
AUTOFAX Com. LTDA. Identification of CPF According to the Indetermined
(Individual's Tax number of consults
Roll Number)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
DHL WORLD WIDL EXPRESS Rendering of courier According to the No written
services weight and agreement
delivery's
location
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
DATAMINIG CONSULTORIA E Development of R$2,000.00 Indetermined
DESENV. EM INFORMATICA LTDA. software for customer
assistance services
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
DENISON BRASIL PUBLICIDADE Advertising, 15% on the Indetermined
LTDA publicity and direct production costs
marketing services
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
DELOITTE TOUCHE Auditing and tax R$2,000.00 99.12.22
TOHMATSU-AUDITORES INDEP. advisory services
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
DELRONIO IND. E COM LTDA . Leasing of photocopy R$238.00 24 months
equipment Sharp,
mod:SF-2114.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
EDITORA REVISTA DOS Access service to According to the Indetermined
TRIBUNAIS LTDA. jurisprudence data number of
base consults
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
AURORA SOFTWARE LTDA. License of the Remuneration in From 98.10.14 to
software "O Elefante" cash is not 00.10.14
involved
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
FIRMAMENTO ASSES. E Marketing and R$7,000.00 Indetermined
COMUNICACAO S/C LTDA communication services
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
GOLDEN TAXI TRANS. LTDA. Transport services According to the Indetermined
distance
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
HIPERCARD Credit Card System 5% on the
(administration of received gross
credit cards in the value
Northeast of Brazil)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
MACHIONI, VELOSO, BRAGA E Rendering of legal R$1,100.00 Indetermined
AMATO ADVS. services
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
LIST OF MATERIAL CONTRACTS TRANSFERRED BY MANDIC.COM TO MANDIC INTERNET
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAQUINAS DE CAFE EXPRESSO Leasing of a coffee R$200.00 Indetermined
LTDA. machine
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
MIDIA VOX LTDA. License of the In Recife R$1,60 Indetermined
software "Linha per Subscriber.
Livre" In other cities
R$2,00 per
Subscriber
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
MILTON PUBLICIDADE Production of According to the No written
publicity material service rendered agreement
and its distribution.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
MYREEL PRODUCAO DE IMAGENS Monthly supply of R$535.00 Indetermined
E COM. LTDA. articles for
"Developers Magazine"
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
NAWI SEGURANCA OCUPACIONAL Consultation service 2 and 1/2 minimum Indetermined
S/C LTDA in Labor Security salaries
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
OFICINA PAULISTA DE CLIPPING Clipping of artices R$300.00 From 99.05.15 to
and news published 00.05.14
about Mandic Internet
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
OPUS SOFTWARE E REPR. LTDA Development of Hourly rate based Indetermined
software for a new on the
data base of Mandic professional
Internet involved
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
PROCARTA SERVICOS LTDA. Printing service of R$. 120.00 per Indetermined
dockets one thousand
documents.
Minimum value of
R$ 200,00
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
RADIO EXCELSIOR LTDA. Propaganda/Publicity R$6.000,00 Indetermined
(Radio Globo) (depending on the
case)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
REDECARD S/A. Mastercard Credit 3% on the Indetermined
Card System received gross
value
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SCAM-Servicos de Association for the (i) 50% of the Indetermined
Comunicacao da Amazonia development of Mandic net income
Ltda. Internet's activities generated by the
in the North area of Subscriber; (ii)
Brazil 50% of the net
income resulting
from roaming
services; (iii)
R$ 0,50 per
active Subscriber.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SOFTWARE EXPRESS INF. S/C License of the R$600.00 Indetermined
LTDA. software "Sitef" for
the electronic
transfer of funds
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SUBSCRIBER AGREEMENTS Electronic agreements Varies Month to Month
with subscribers for
receipt of dial-up
access services
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SUL AMERICA SEGUROS Health Insurance Per employee - Indetermined
(i) Basic Plan:
R$ 60,04; (ii)
Especial Plan 1;
R$84,38; (iii)
Executive Plan:
180,75
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SUNSHINE EVENTOS LTDA Promotion of Internet Comission of R$ From 99.05.13 to
access kit of Mandic 4,95 per 00.05.12
Internet Subscriber and a
monthly comission
on the amount
received from
Mandic Internet.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
TELEFUTURA TELEMARKETING Receptive R$83,200.00 Indetermined
S/C LTDA. telemarketing services
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
TESLA TECNOLOGIA LTDA. Creation and R$12,700.00 Indetermined
maintenance of Mandic
Internet's web site
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
THANK YOU EXPRESS TRANS. Rendering of local R$8.90 /Hora Indetermined
LTDA. courier services
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
LIST OF MATERIAL CONTRACTS TRANSFERRED BY MANDIC.COM TO MANDIC INTERNET
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TREND MICRO DO BRASIL LTDA. License of the 50% of the amount Indetermined
software PC-cillin 98 received from
(anti-virus software) Subscribers
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
UNIBANCO UNIAO DOS BANCOS Programmed debt in 31% of the bank Indetermined
BRASILEIROS S/A. Subscribers' bank fee applicable to
accounts the service
rendered to
Mandic Internet
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
VARIG S.A-VIACAO AEREA Association for the US$. 0,02/mile Indetermined
RIO-GRANDENSE development of Mandic
Internet's promotions
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
VIDEO LUPA COM. E SERV. Intermediary services Comission From 99.05.13 a
LTDA - ME for Sunshine Eventos equivalent to one 00.05.12
Ltda. and Mandic month fee paid by
Internet the Subscriber
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
VISANET VISA Credit card 3% of the sales's Indetermined
System amount
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
XEROX DO BRASIL LTDA. Leasing of equipment R$567.64 Indetermined
mod. Landscape
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
XEROX DO BRASIL LTDA. Leasing of printer R$209.38 Indetermined
equipment
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
COMPUSHOW COMERCIO E (i) Local assistance (i) fixed part: From 99.06.14 to
SERVICOS LTDA. to the Subscribers of R$ 200,00; (ii) 00.06.14
Mandic Internet; (ii) variable part:
administration of the according to the
local branch. numbers of new
Subscribers.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
ATS ASSESSORIA E SISTEMAS (i) Local assistance (i) fixed part: From 99.06.20 to
S/C LTDA. to the Subscribers of R$ 200,00; (ii) 00.06.20
Mandic Internet; (ii) variable part:
administration of the according to the
local branch. numbers of new
Subscribers.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
CLINICA DE COMPUTADORES (i) Local assistance (i) fixed part: From 99.06.01 to
LTDA. to the Subscribers of R$ 200,00; (ii) 00.06.01
Mandic Internet; (ii) variable part:
administration of the according to the
local branch. numbers of new
Subscribers.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
ASTON - AUTOMACAO (i) Local assistance (i) fixed part: From 99.07.01 to
TELECOMUNICACOES LTDA. to the Subscribers of R$ 200,00; (ii) 00.07.01
Mandic Internet; (ii) variable part:
administration of the according to the
local branch. numbers of new
Subscribers.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Local companies of Salvador (i) Local assistance (i) fixed part: From 99.07.01 to
(BA), Fortaleza (CE), to the Subscribers of R$ 200,00; (ii) 00.07.01
Florianopolis (SC), Mandic Internet; (ii) variable part:
Curitiba (PR), Campinas administration of the according to the
(SP), Porto Alegre (RS), local branch. numbers of new
and Belo Horizonte (MG). Subscribers.
(No-Written Agreements)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
CARVALHO E PEREIRA E Rendering of judicial (i) fixed part: Indetermined
ADVOGADOS ASSOCIADOS services related to a R$ 20.000,00
law suit in order to (already paid by
discuss the payment Mandic.Com); and
of Service Tax on (ii) success fee:
Internet access 3% on the amount
services provided by recovered.
Mandic Internet to
Subscribers
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
PORTES ADMINISTRACAO E Leasing of suites 91, Approximately R$ From 98.08.01 to
AGROPECUARIA LTDA. 92, 101 and 122 of 2.800,00 per 00.07.31
the building located suite
at Avenida Pedroso de
Moraes, 433 (Mandic
Internet's head
office.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
MICROSOFT CORPORATION Internet Sign-Up (i) less than Indetermined
wizard referral and 1,499 new
Microsoft Internet Subscribers: US$
Explorer License and 40 per
Distribution Agreement Subscriber; (ii)
from 1,500 to
2,499
Subscribers: US$
35 per
Subscriber; (iii)
US$ from 2,500 to
4,999: US$ 30 per
Subscriber; and
(iv) more than
5,000
Subscribers: US$
25 per Subscriber
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIST OF MATERIAL CONTRACTS TRANSFERRED BY MANDIC.COM TO MANDIC INTERNET
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
*Purshaser and Seller have been discussing the division of the agreement with
the lessor. Until new agreements are not entered by each party,
- ------------------------------------------------------------------------------
Seller and Purchaser will pay all the amounts due to the lessor
proportionally to the number of suites occupied by each party.
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT D
MANDIC INTERNET BALANCE SHEET
MANDIC.COM LTDA.
MANDIC.COM LTDA.'S NET WORTH ELEMENTS ON JULY 31, 1999 TO BE MERGED IN
TWO EXISTING COMPANIES (Mandic Internet Ltda., and Impsat
Comunicacoes Ltda.) (in reais - R$)
DESTINATION OF MERGED EQUITY
- ----------------------------------------------------------------------------
Mandic Com. Ltda.
-----------------
ASSETS R$
Comunicacoes
------------
Internet Ltda. Ltda.
-------------- -----
- ----------------------------------------------------------------------------
CURRENT ASSETS
Cash 109,384 - 109,384
Marketable Securities 368,580 - 368,580
Accounts receivable 707,170 - 707,170
Prepaid taxes 362,462 - 362,462
Other 20,287 650 20,287
TOTAL CURRENT __________ __________
ASSETS 1,531,883 650 1,531,883
- ----------------------------------------------------------------------------
LONG-TERM ASSETS
Loans among
affiliated companies 1,000,000 - 1,000,000
Interest on loan 119,234 - 119,234
among affiliated
companies
Loans receivable 150,263 - 150,263
TOTAL LONG-TERM ___________ _____________ ___________
ASSETS: 1,269,497 - 1,269,497
- ----------------------------------------------------------------------------
PERMANENT ASSETS
- ----------------------------------------------------------------------------
Property, plant
and equipment, net
TOTAL PERMANENT 2,191,866 208,632 1,983,234
ASSETS: ____________ _____________ _____________
2,191,866 208,632 1,983,234
- ----------------------------------------------------------------------------
TOTAL ASSETS 4,993,246 209,282 4,783,964
- ----------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------
CURRENT
LIABILITIES
- ----------------------------------------------------------------------------
Notes Payable 621,810 - 621,810
Social Contribution
Payable 69,438 - 69,438
Tax Payable 129,812 - 129,812
Accounts Payable 16,283 - 16,283
- ----------------------------------------------------------------------------
<PAGE>
Provisions 327,173 100,607 327,173
Other current
liabilities 4,123 - 4,123
_____________ ____________ _____________
TOTAL CURRENT
LIABILITES: 1,168,639 100,607 1,168,639
- ----------------------------------------------------------------------------
LONG TERM
LIABILITIES
- ----------------------------------------------------------------------------
Long-Term Debts -Loan-
Interco 111,165 - 111,165
-------------- -------------- --------------
TOTAL LONG TERM
LIABILITIES 111,165 111,165
- ----------------------------------------------------------------------------
TOTAL 1,279,804 100,607 1,179,197
- ----------------------------------------------------------------------------
NET WORTH TO BE
MERGED 3,713,441 108,675 3,604,767
- ----------------------------------------------------------------------------
TOTAL LIABILITIES 4,993,246 209,282 4,783,964
- ----------------------------------------------------------------------------
<PAGE>
EXHIBIT E
FORM OF PRIVATE INSTRUMENT OF
AMENDMENT OF THE ARTICLES OF ASSOCATION
MANDIC INTERNET LTDA.
CNPJ No. 02.889.879/0001-08
N.I.R.E. No. 35.215.461.133
Amendment to the Articles of Association
By this private instrument, the undersigned: (a) IMPSAT COMUNICACOES LTDA., a
Brazilian limited liability company, with principal offices at Av. Eng. Luis
Carlos Berrini, 550, 10 andar (parte) e 11(degree) andar, in the City of Sao
Paulo, State of Sao Paulo, enrolled under the CNPJ under No. 72.843.212/0001-41,
with its Articles of Association duly registered with the Commercial Registry of
the State of Sao Paulo under No. 35.211.851.263, on 23.9.1993, herein
represented, in the form of its articles of association, by its officers Mr.
Daniel Vicente Hourquescos, Argentinean, married, engineer, with offices at Av.
Eng. Luis Carlos Berrini, 550, 10(degree) andar (parte) e 11(degree) andar,
bearer of Identity Card RNE No. V.211.219-V SE/DPMAF/DPF and enrolled with the
CPF/MF under No. 215.467.738-00 and Mr. Carlos Daniel Ligotti, Argentinean,
single, business administrator, with offices at Av. Eng. Luis Carlos Berrini,
550, 10(degree) andar (parte) e 11(degree) andar, bearer of Identity Card RNE
No. V 186216 E SE/DPMA/DPF and enrolled with the CPF/MF under No.
007.867.254-60; and (b) DANIEL VICENTE HOURQUESCOS, qualified above;
quotaholders representing the entire corporate capital of MANDIC INTERNET LTDA.,
a limited liability company with headquarters in the City of Sao Paulo, State of
Sao Paulo, at Av. Eng. Luis Carlos Berrini, 550, 11(degree) andar, Brooklin
Novo, with its Articles of Association duly registered with the Commercial
Registry of the State of Sao Paulo under No. 35.215.461.133, on January 8, 1999,
have agreed to amend said Articles of Association, as follows:
1. - IMPSAT COMUNICACOES LTDA., which owns 108,774 (one hundred
and eight thousand, seven hundred and seventy four) quotas, hereby withdraws
from the Company, and assigns and transfers, as in fact it has assigned and
transferred, the totality of its 108,774 (one hundred and eight thousand,
seven hundred and seventy four) quotas, with all they represent, free and
clear of any encumbrances or liens, to O SITE ENTRETENIMENTOS LTDA., a
Brazilian limited liability company, with principal offices at Rua Sancao
Alves dos Santos, 20, 1(degree) andar, conjunto 12, Brooklin, in the City of
Sao Paulo, State of Sao Paulo, enrolled <PAGE>
under the CNPJ N(0) 01.561.351/0001-34.
2. - DANIEL VICENTE HOURQUESCOS, who owns 1 (one) quota, hereby
withdraws from the Company, and assigns and transfers, as in fact he has
assigned and transferred, the totality of his 1 quota, with all it represent,
free and clear of any encumbrances or liens to MARCOS SOUZA ARANHA.
3. - The Company, the assignors and the assignees hereby give each
other full, general, irrevocable and irreversible release as regards the quotas
assigned and transferred hereunder, waiving all further claims against each
other at any time, in any way and under any pretext.
4. - After the aforementioned assignment, the corporate capital of
R$ 108,775.00 (one hundred and eight thousand, seven hundred and seventy seven
reais), divided into 108,775 (one hundred and eight thousand, seven hundred and
seventy five) quotas, with a par value of R$ 1,00 (one real) each, is
distributed among the quotaholders as follows:
(a) O SITE ENTRETENIMENTOS LTDA. owns 108,774 (one
hundred and eight thousand, seven hundred and seventy four) quotas, in the total
amount of R$ 108,774.00 (one hundred and eight thousand, seven hundred and
seventy four reais); and
(b) MARCOS SOUZA ARANHA owns 1 (one) quota, in the total
amount of R$ 1.00 (one real).
5. - In view of the above resolutions, the quotaholders resolve not
only to amend clauses V of the articles of association but also to reword and
consolidate all of its articles and dispositions, which shall henceforth become
effective in full with the following new wording:
"ARTICLES OF ASSOCIATION
OF
MANDIC INTERNET LTDA.
(...)"
Sao Paulo, October ___, 1999
IMPSAT COMUNICACOES LTDA.
<PAGE>
----------------------------------------
Name:
Title:
----------------------------------------
Name:
Title:
DANIEL VICENTE HORQUESCOS
------------------------------------
O SITE ENTRETENIMENTOS LTDA.
------------------------------------
Name:
Title:
Witnesses:
1. - ________________________________ 2. - ___________________________________
Name: Name:
ID: ID:
<PAGE>
EXHIBIT F
FORM OF RELEASE
IMPSAT COMUNICACOES LTDA., a Brazilian limited liability company, with principal
offices at Av. Eng. Luis Carlos Berrini, 550, 10 andar (parte) e 11(degree)
andar, in the City of Sao Paulo, State of Sao Paulo, enrolled with the CNPJ
under No. 72.843.212/0001-41, herein represented, in the form of its articles of
association, by its officers Mr. Daniel Vicente Hourquescos and Mr. Carlos
Daniel Ligotti, hereby declares that it has received from O SITE ENTRETENIMENTOS
LTDA., a Brazilian limited liability company, with principal offices at Rua
Sancao Alves dos Santos, 20, 1(degree) andar, conjunto 12, in the City of Sao
Paulo, State of Sao Paulo, the amount of R$_______________(_______________reais)
corresponding to the payment of the Purchase Price pursuant to the Quota
Purchase Agreement entered into and between the parties on October ___, 1999.
Sao Paulo, October __, 1999
IMPSAT COMUNICACOES LTDA.
---------------------------------------
Name: Daniel Vicente Hourquescos
Title: Director
---------------------------------------
Name: Carlos Daniel Ligotti
Title: Director
<PAGE>
EXHIBIT G
PURCHASER DISCLOSURE SCHEDULES
None.
<PAGE>
EXHIBIT H
SELLER DISCLOSURE SCHEDULES
None.
<PAGE>
EXHIBIT I
EMPLOYMENT AGREEMENTS
None.
<PAGE>
EXHIBIT J
INSURANCE POLICIES
Hannover International Insurance Company Policy No. 01.01.001.002544.
<PAGE>
EXHIBIT K
MATERIAL WAIVER OR FORBEARANCE
None.
<PAGE>
EXHIBIT L
FORM OF OPINION OF COMPANY'S COUNSEL
Gentlemen:
This opinion is furnished to you pursuant to Article 5.1.7 of the
Quota Purchase Agreement dated as of October __, 1999 (the "Agreement") between
Impsat Comunicacoes Ltda. (the "Seller") and O Site Entretenimentos Ltda. (the
"Purchaser"). Terms defined in the Agreement are used herein as therein defined.
We have acted as counsel for the Seller in connection with the
preparation, execution and delivery of the Agreement.
In that connection we have examined:
(1) the Agreement; and
(2) the corporate documents of the Seller.
Based upon the foregoing, we, having regard for legal considerations
we deem relevant, are of the opinion that:
(a) The Seller and Mandic Internet Ltda. ("Mandic Internet") are
limited liability companies (sociedades por quotas de responsabilidde limiitada)
validly existing and in good standing under the laws of the Federative Republic
of Brazil.
(b) The Agreement is a legal, valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms, except to
the extent that the enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, moratorium, concordata, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally.
(c) Except as set forth in the Exhibits to the Agreement, there are
(i) to our knowledge, no material pending or threatened action, suit, claim,
litigation or governmental proceedings or investigations involving the Company
of any nature, in law or equity; (ii) to our knowledge, no outstanding warrants,
options, agreements, convertible securities or other commitments or instruments
pursuant to which the Seller is or may become obligated to sell or repurchase
the Quotas of Mandic Internet; (iii) no preemptive, contractual or similar
rights to purchase or otherwise acquire, except pursuant to the Agreement; (iv)
no restrictions on the transfer of the Quotas
<PAGE>
imposed by any Brazilian statute the Quotas, or to our knowledge, any agreement
to which the Seller is a party or any order of any court or any government
agency to which the Seller is subject; and (v) to our knowledge, no agreements,
written or oral, between the Seller and any quotaholder relating to the
acquisition, disposition or voting of the Quotas.
(d) The execution, delivery and performance by the Seller of the
Agreement, and the compliance with the provisions thereof by the Seller, do not:
(i) Violate any provision of Brazilian law, or to our knowledge
any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body
applicable to the Seller or its properties or assets; or
(ii) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice or
lapse of time, or both) a default (or give rise to any right
of termination, cancellation or acceleration) or result in the
creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Seller under any
agreement, document, instrument, contract, note indenture,
mortgage or lease to which the Seller is known by us to be a
party or under which the Seller or any of its assets is known
by us to be bound or affected.
(e) No authorization, consent, approval or other order of, or
declaration to or filing with, any governmental agency or body, and to our
knowledge, no consent, waiver, or authorization under any agreement, instrument,
contract, note, indenture, mortgage or lease to which the Seller or is known by
us to be a party or under which the Seller or Mandic Internet or any of their
assets is known by us to be bound or affected, is required for: (i) the valid
authorization, execution, delivery and performance by the Seller of the
Agreement, or (ii) the valid authorization, sale and delivery of the Quotas to
the Purchaser, except for the authorization given under the Quotaholders Meeting
of the Seller held on September 27, 1999.
(f) The Seller has the necessary corporate power and authority to
own its properties and conduct its businesses as presently conducted, to enter
into the Agreement, and consummate the transactions contemplated thereby.
(g) All action required by the Company in order to authorize the
execution, delivery and performance of the Agreement and the consummation of the
transactions contemplated thereby by the Seller has been duly and validly taken.
<PAGE>
(h) The execution and delivery of the Agreement does not violate the
Articles of Association of the Seller.
(i) The quotas to be delivered and transferred under the Agreement
have been duly and validly authorized and, when paid for and issued in
accordance with the Agreement, will be fully paid and non-assessable, free and
clear of any lien, encumbrance, pledge or claim whatsoever.
(j) The corporate capital of Mandic Internet is of R$108,775 (one
hundred and eight thousand, seven hundred and seventy five reais) divided into
108,775 (one hundred and eight thousand, seven hundred and seventy five) quotas.
Very truly yours,
----------------------------------------
<PAGE>
Exhibit 10.16
INTERNET SERVICE AGREEMENT
By the present instrument IMPSAT COMUNICACOES LTDA., registered at the CNPJ/MF
under No. 72.843.212/0001-41, with registered office at Avenida Engenheiro Luis
Carlos Berrini 550, 10(degree) e 11(degree) andares, CEP 04571-000, Sao Paulo -
SP, hereby legally represented and hereinafter simply referred to as IMPSAT, and
MANDIC INTERNET LTDA. , registered in the CNPJ/MF under No. 02.889.879/0001-08,
with registered office at Avenida Pedroso de Moraes, 433, 13(degree) floor, CEP
05419-OOO, Sao Paulo - SP, hereby legally represented and
hereinafter simply referred to as MANDIC, and both jointly hereinafter simply
referred to as THE PARTIES, and,
WHEREAS:
MANDIC is a company dedicated to marketing advertisement, providing on-line
content and services via Internet, such as chat rooms, news, games, electronic
mail, among other services;
IMPSAT is a company providing network connectivity services, among which
Internet access service to corporate and final users, via dial-up telephone
access, among others means;
MANDIC is willing to offer to its customers Internet access service and IMPSAT
is capable of providing equipment and infrastructure required for such purposes;
THE PARTIES hereto have entered the present Internet Service Agreement to be
governed by the following clauses and conditions:
1. OBJECT
The present Agreement will set the conditions on which IMPSAT will provide
to MANDIC the POP (Point of Presence) outsourcing services for
dial-up telephone access to the Internet, i.e., installation, management,
and infrastructure and equipment maintenance services required for MANDIC
to offer to its own customers the value-added services commonly called
"Internet," hereinafter simply referred to as the "Service".
1.1 The Service will be provided on a 24-hour, 365-day-a-year basis,
using equipment owned by IMPSAT, hereinafter simply referred to as
the "Equipment," as well as Internet and telephone network
connectivity infrastructure, as specified in Annex B.
1.2 The Equipment will be installed in the POP facilities of IMPSAT,
hereinafter simply referred to as "Service Access Points," within
the estimated time frame and in conformity with technical
specifications detailed in Annexes A and B, respectively.
1.3 MANDIC accepts that, according to the regulation in force, "It is
expressly forbidden to use the service provided for live voice
transmission (telephony). Any violation of the present disposition
will result in termination by MANDIC's default with notice
issued to ANATEL."
<PAGE>
1.4 The documents described below are an integral part of this
Agreement, including the Annexes hereof: Annex A: "Existing Service
Access Points;" Annex B: "Technical and Service Specifications;"
Annex C: "Prices and Payment Conditions;" Annex D: "Maintenance
Service;" Annex E: "Installation/Service Activation Minute Form."
2. TERM OF THE AGREEMENT
2.1 The present Agreement will be effective as of the date of its
execution.
2.2 The term of the present Agreement will be thirty-six (36) months as
of the date of its execution, when the Services to be provided to
MANDIC customers shall be available.
2.3 The term of this Agreement will be automatically extended by equal
and successive periods of thirty-six (36) months, except upon notice
in contrary by the party deciding not to extend it to the other, in
sixty (60) days prior to the day this Agreement or its extensions
expire.
3. SERVICE AVAILABILITY
3.1 IMPSAT's existing Service Access Points, currently available for
immediate use by MANDIC, are described in Annex A.
3.2 For new Service Access Points and for expansion of the existing
Service Access Points, IMPSAT will provide and install the necessary
Equipment for the Service. The criteria and specifications in this
case are described in Annex B.
3.3 The Service will be considered technically operational when it
becomes possible to send IP control packages (PING command) between
a computer with dial-up access connected to the equipment at the
Service Access Points and any Name Server published by INTERNIC
(Root DNS).
3.4 The procedure for considering the Service operational at Service
Access Points, after commissioning tests are performed, will be
described in section 3.3, with minutes drawn to formalize such
events and signed by both PARTIES according to the minute form
presented in Annex E.
3.5 No individual not authorized by IMPSAT will be allowed to repair or,
in any way, change the Equipment or modify its installation. MANDIC
will be responsible for any damage or loss to the Equipment
resulting from its fault or deceit.
4. COVERAGE
4.1 The area covered by the Services will comprise, initially, the
locations defined in Annex A, consisting of 19 cities and a total of
3,815 dial-up access ports.
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4.2 Without any prejudice to this initial coverage, THE PARTIES may
include, in the Agreement hereof, upon mutual consent, successively,
cities and areas in which IMPSAT already provides dial-up Internet
services.
4.3 IMPSAT will communicate to MANDIC the incorporation of new locations
for supply of the Service. At its own discretion, IMPSAT will decide
on the provision of services in each location.
5. IMPSAT'S LIABILITIES AND LIMITS OF RESPONSIBILITY
5.1 By the present Agreement, IMPSAT will provide to MANDIC
installation, management, and equipment and infrastructure services
required for exclusive dial-up access to the Internet, according to
conditions described in Annex B hereof, thus becoming responsible
for the operation and maintenance of the Service.
5.2 In case of Service unavailability or failure, IMPSAT's
responsibilities will be limited to providing maintenance service
described in Annex D hereof. In case of Service unavailability or
failure, IMPSAT will use its best efforts to reinstate the Service
as promptly as possible. MANDIC will be entitled to discounts from
Service payments to IMPSAT proportionally to the extent and to the
time of unavailability of the Service , according to the provisions
of Annex D.
5.3 IMPSAT's responsibilities before MANDIC will be limited to the
damages that IMPSAT may cause as a result of the installation,
management, and equipment and infrastructure services object of this
Agreement. Therefore, under no other conditions IMPSAT will be
responsible for other damages that MANDIC and/or third parties
may suffer, including loss of profits, loss of cash resources and/or
stored properties.
5.4 IMPSAT is liable for providing MANDIC with the Service specified in
the Agreement hereof, but in no case it will assure the possibility
of use or access availability to different services existing in the
Internet, to which the responsibility will be entirely of the
providers of each one of such services. IMPSAT will not assume any
responsibility for the contents, origin, or use of the
communications, of any type, received or transmitted via Internet.
5.5 Additionally, and since most of the services and systems comprising
the Internet are under the responsibility of third parties, IMPSAT
will not be responsible for transmission speed variations that may
occur when accessing different servers comprising the web.
6. CUSTOMER'S LIABILITIES
6.1 Without prejudice to other liabilities set forth in the present
Agreement, MANDIC will be liable for the following:
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a) Using the Service and the Equipment in conformity with what is
established herein. MANDIC will use the Service to provide
services to its customers via dial-up telephone access.
b) Should IMPSAT provide IP addresses necessary for operation of
MANDIC's internal network, the latter must inform IMPSAT what
use has been made of them, every time IMPSAT may so request.
c) MANDIC will exempt IMPSAT from any violation to intellectual
property laws, defamation, calumny, and/or any other acts or
omissions of MANDIC, or of any of its customers, which may
cause any damages to third parties, through the use of the
Service, resulting in liabilities imposed to IMPSAT by any
competent court seeking for compensation to such third
parties.
d) MANDIC will provide its customers with an adequate computing
structure for use of the Service and for its adequate
operation, including a personal computer, telephone line, and
modem. The customer will be solely responsible for the
maintenance of such computing structure essential for access
to the Service.
e) MANDIC will comply with all of the laws and regulations
applicable to the services under its responsibility, and for
obtaining all of the related permits and authorities.
7. INVOICING
7.1 During the term of this Agreement, and of its extensions, IMPSAT
will invoice MANDIC according to prices and payment conditions
set forth in Annex C hereof.
7.2 MANDIC will be the sole responsible for invoicing its customers for
the amounts corresponding to the services contracted by them.
8. APPLICABLE TAXES
8.1 According to the regulation in force, IMPSAT will invoice MANDIC for
applicable taxes on the agreed prices and sales. It will also
invoice the amount resulting from the application of any new tax
which may be incurred to this Agreement, as well as any existing tax
increase providing the same effect.
9. RELATION BETWEEN THE PARTIES
9.1 MANDIC is an independent contracting party and not a representative
or agent of IMPSAT for any purposes. MANDIC's liabilities set forth
herein will be met by the individuals having exclusive dependency
relation with MANDIC. There is no dependency relation and/or
subordination between MANDIC's and IMPSAT's personnel. As a
result, MANDIC will be the sole and exclusive responsible for
compliance with the legal and fiscal liabilities, including those
related to labor and social security, as well as any other
responsibilities in relation to its personnel during
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the entire term of this Agreement. At any moment IMPSAT is allowed
to require from MANDIC a proof of effective compliance with its
liabilities in view of this liability condition.
9.2 MANDIC will be the sole and exclusive responsible before IMPSAT, its
customers, and/or third parties, for the acts and omissions of its
personnel, or personnel of its subcontractors, in this case derived
from the execution of the present Agreement, and it shall be liable
before IMPSAT for any infringement and/or violation to any rules or
legal dispositions to which they may incur. MANDIC is hereafter
committed to immediately reimburse IMPSAT for any sum of money that
the latter may be required to pay to a third party as a result of
any of MANDIC's liabilities under this Agreement.
10. GENERAL
10.1 The entire responsibility related to the services provided by MANDIC
to its customers will be of its own liability. MANDIC will also be
the sole responsible before its customers in relation to providing
its services. MANDIC is forbidden to make any statement and/or
grant warranties in relation to the services on behalf of IMPSAT.
10.2 THE PARTIES hereby state, in compliance with their contractual
liabilities, that they will have access to confidential information
from the other party, such as, but not limiting to working methods,
marketing plans, prices, list of customers, costs, etc. THE PARTIES
are committed to maintain this information, or any other to which
access is provided, under strict confidentiality and using the
information solely for the purposes of compliance with this
Agreement. The confidentiality commitment will be maintained for a
period of two year after the termination of this Agreement, no
matter what may have caused the termination.
10.3 IMPSAT agrees to respect and recognize MANDIC's customers as
belonging to the latter, thus avoiding any type of business contact
with them, except in case of written indication or authority for
such.
10.4 MANDIC must not assign rights and liabilities resulting hereof,
without prior written consent from IMPSAT.
10.5 MANDIC will give preference to IMPSAT in contracting the services
object hereof, according to the following procedures:
a) MANDIC will notify IMPSAT about services to be contracted,
specifying the terms and conditions required to prepare an
offer (proposal). IMPSAT will submit to MANDIC the offer
within 10 days as of the reception of such notice.
b) Should MANDIC receive an offer from a third party more
favorable than that of IMPSAT, MANDIC will immediately notify
IMPSAT of the terms and conditions contained in such offer.
IMPSAT will have the right to match the offer and MANDIC will
then contract the services from IMPSAT.
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10.6 Price adjustment, according to market conditions, may be effected
after the twelve first months of this Agreement. After twelve
months, and should MANDIC receive an offer from a third party with
more favorable conditions than IMPSAT's, MANDIC will immediately
notify IMPSAT about the terms and conditions contained in such
offer. IMPSAT will have the right to match this offer and MANDIC
will then contract or continue to contract the services from IMPSAT.
Should IMPSAT fail to match or exceed the offer, MANDIC will have
the right to terminate this Agreement without any penalties.
10.7 In order to maintain the economic-financial balance of the
Agreement, MANDIC expressly agrees, hereafter, to revise the prices
for the Service to be paid to IMPSAT by the customer, should there
occur any significant change in the current economic situation of
the country, or in case of any economic measure that may devaluate
or outdate the agreed prices.
10.8 THE PARTIES shall not assign, transfer or subcontract this Agreement
or the Services, without the express written authorization of the
other parties.
11. SUSPENSION
11.1 Without any prejudice to any of its other rights, IMPSAT will have
the right to automatically suspend the Service should MANDIC fail to
meet any of its liabilities before the present Agreement, upon at
least 10 days prior written notice requesting the performance of
such obligation.
11.2 Without any prejudice to any of its other rights, MANDIC will have
the right to suspend the payment of any amount, under the present
Agreement, in face of any contractual default by IMPSAT, upon at
least 10 days prior written notice requesting the performance of
such obligation.
12. ACTS OF GOD OR FORCE MAJEURE
12.1 Any default or delay in its responsibilities regarding equipment
installation, beginning or continuation of services provided by
IMPSAT will not generate any liabilities against IMPSAT if such
default or delay should result from acts of God or force majeure,
being these understood as acts or facts of the government, natural
phenomena, or any other circumstances outside IMPSAT's control,
including, but not limiting to adverse conditions, whether
meteorological or astronomical, communication provider going out of
service for whatever reason, either partially or totally,
temporarily or definitely, earthquakes, epidemics, civil riots,
fires, strikes, war, acts or omissions of the satellite owner.
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13. TERMINATION
13.1 After 12 months of effect, MANDIC may terminate the present
Agreement, without a reason, upon at least 60 days prior written
notice to IMPSAT, and upon previous payment to IMPSAT of an amount
in cash corresponding to 12% of the remaining sum (provisioned) up
to end of the Agreement.
13.2 Additionally, both IMPSAT and MANDIC will have the right to
terminate this Agreement, after a notice is given to the other party
requiring the compliance of the obligations within 20 days
(except in the case of a termination pursuant to Section 13.2 (b)
and (c), which shall require no prior notice), if any of the
following causes should occur:
a) A default by the other party of any contractual obligation.
b) A default by the other party of any legal and regulating
dispositions, current or future, governing the use of the
Service or which are directly or indirectly binding, and whose
omission or encroachment may generate consequences of any
nature to the complying party or to the object hereof.
c) If the other party applies for its own failure, or if this
process is requested by third parties, or if a preventive
arrangement with creditors is submitted.
d) Execution of clause 10.6.
14. INDEMNIFICATION
14.1 If any of the parties to this Agreement fails to comply with an
obligation or not fulfill it in the appropriate manner and within
the established time frame provided in this Agreement, it shall
answer for such losses and damages and will indemnify and hold
harmless the other party for such losses and damages in accordance
with the provisions of Article 1056 of the Brazilian Civil Code as
well as with other provisions of such Code in connection with civil
and contractual liability.
15. FORUM AND OTHER DISPOSITIONS
15.1 No behavior, habit, or usage shall modify the terms and liabilities
agreed in the present Agreement.
15.2 Any modification to this Agreement must be formulated upon written
consent and executed by both parties.
15.3 This Agreement constitutes the complete and exclusive expression of
the rights and liabilities of the parties, making null every
communication, proposals, verbal or written offers which may have
been made between the parties relative to the object of the
Agreement before its execution.
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15.4 For all effects of this Agreement, THE PARTIES constitute the
addresses contained in the heading hereof as valid for all notices
that may result.
15.5 Renouncing all others, not matter how privileged they may be, the
parties hereto elect the Forum of the City of Sao Paulo, State of
Sao Paulo, for resolution of any doubts or disputes resulting from
this Agreement.
15.6 The Parties hereto have executed this Agreement, in Portuguese and
English versions. For the resolution of any disputes between the
parties, the Portuguese will prevail.
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IN WITNESS WHEREOF, the parties hereto have set their hands and seal to this
Agreement, in two copies of equal content, in the presence of the witnesses
below.
Sao Paulo, October 6, 1999
/s/ Carlos Daniel Ligotti /s/ Marcos Souza Aranha
- --------------------------- -------------------------------
IMPSAT COMUNICACOES LTDA. MANDIC INTERNET LTDA.
WITNESSES:
/s/ Cristina Xavier da Rocha Loures
- ------------------------------------
Christina Xavier da Rocha Loures
5 676 931-5 SSP/PR
CPF 872-248-609-72
/s/ Ana Claudia Donata de Oliveira
- ------------------------
Ana Claudia Donata de Oliveira
R.G. 13 613 498-2
CP.F. 171 253 708-37
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Exhibit 10.17
===============================================================================
EL SITIO, INC.
SHARE PURCHASE AGREEMENT
October 6, 1999
===============================================================================
<PAGE>
SHARE PURCHASE AGREEMENT, dated as of this 6th day of October, 1999
(this "Agreement"), between EL SITIO, INC., an international business company
organized and existing under the laws of the British Virgin Islands (the
"Company"), and IMPSAT Corporation, a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company desires to issue to the Purchaser, and the
Purchaser desires to purchase from the Company, the Preferred Shares (as such
term is defined below) as set forth below; and
WHEREAS, certain terms used in this Agreement are defined in Section
9.1 hereof;
NOW, THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter contained, the receipt and sufficiency of
which is hereby mutually acknowledged, the parties hereto hereby agree as
follows:
1. Sale and Purchase of Securities.
1.1 Sale and Purchase of Preferred Shares. Subject to the terms and
conditions of this Agreement, the Company shall issue, sell and deliver to the
Purchaser, and the Purchaser shall purchase from the Company, an aggregate of
3,070,615 shares of Class A Preferred Stock of the Company (the "Preferred
Shares").
1.2 Timing of Preferred Shares Issuance. On the respective Closing
Dates (as defined in Section 3.1 herein) for the Internet Agreements (as defined
herein), for IMPSAT S.A. (Argentina) ("IMPSAT Argentina"), IMPSAT Comunicacoes
Ltda. ("IMPSAT Brazil") and IMPSAT S.A. (Colombia) ("IMPSAT Colombia," and
collectively with IMPSAT Argentina and IMPSAT Brazil, the "Sellers"), the
Company shall issue 885,480, 1,756,677 and 428,458 shares of Preferred Shares,
respectively.
2. Purchase Price.
2.1 Amount of Purchase Price. The aggregate purchase price of the
Preferred Shares to be purchased is US$21,500,000 (the "Purchase Price"). On the
respective Closing Dates for IMPSAT Argentina, IMPSAT Brazil and IMPSAT
Colombia, the Purchaser shall pay to the Company the amount of US$6,200,000,
US$12,300,000 and US$3,000,000, respectively.
3. Closing.
3.1 Closing Date. Each of the closings of the sale and purchase of
the Preferred Shares (the "Closings") shall take place at such time, dates or
places as the parties shall mutually agree; provided that all conditions to the
Closing set forth in this Agreement have been satisfied or waived by such date.
The date on which any of the Closings is held is referred to in this Agreement
as the "Closing Date" with respect to each of the Closings. At the First Closing
(as
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defined herein), the parties shall execute and deliver the documents
referred to in Section 8 hereof.
3.2 Closing of the Internet Agreements. In conjunction with the
execution and delivery of this Agreement, the Company or any Subsidiary (as
defined herein) of the Company designated by the Company (collectively with the
Company, the "Buyer") shall enter into (i) a purchase agreement with IMPSAT
Brazil or its affiliate pursuant to which IMPSAT Brazil or its affiliate shall
transfer, sell and assign all of its ownership rights in all of the outstanding
quotas of Mandic Internet Ltda. and (ii) a telecommunications service agreement
pursuant to which IMPSAT Brazil or its affiliate shall provide to the Buyer
telecommunications services related to the Buyer's Internet access requirements.
The Company shall also enter into purchase agreements and telecommunications
services agreements with IMPSAT Argentina and IMPSAT Colombia or their
affiliates, pursuant to which IMPSAT Argentina and IMPSAT Colombia or their
affiliates shall transfer, sell and assign to the Buyer the retail internet
access customer contracts and its assets directly and exclusively related to
IMPSAT's retail internet access business and provide telecommunication services
in Argentina or Colombia, as the case may be. The purchase agreements and
telecommunications services agreements for IMPSAT Argentina, IMPSAT Brazil and
IMPSAT Colombia are herein collectively referred to as the "Internet
Agreements". Each of the Closings with respect to IMPSAT Argentina, IMPSAT
Brazil and IMPSAT Columbia shall occur simultaneously with the signing of the
Internet Agreements for each of those countries.
4. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser that:
4.1 Organization and Good Standing; Capitalization.
(a) The Company is duly organized and validly existing under the
laws of the British Virgin Islands and has the corporate power and authority to
own, lease and operate its properties and assets and to carry on its business as
now conducted and as it is proposed to be conducted, except where the lack
thereof would not have a Material Adverse Effect (as defined in Section 9). The
Company is duly qualified or authorized to do business as a foreign corporation
under the laws of each jurisdiction in which the conduct of its business or the
ownership of its properties or assets requires such qualification or
authorization except where the lack thereof would not have a Material Adverse
Effect.
(b) The authorized and issued capital of the Company immediately
prior to and immediately after the Closing and the legal and beneficial
ownership thereof is as set forth on Schedule 4.1(b). All the outstanding shares
of capital stock of the Company have been duly authorized, and are validly
issued, fully paid and non-assessable. Except as disclosed on Schedule 4.1(b),
(i) there is no option, warrant, call, right, commitment or other agreement of
any character to which the Company is a party, (ii) there are no securities of
the Company outstanding which upon conversion or exchange would require, and
(iii) there are no stock appreciation rights, or other similar rights based on
securities of the Company which, in the case of clause (i), (ii) or (iii), would
require the issuance, sale or transfer of any additional shares of capital stock
or other equity securities of the Company or other securities convertible into,
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exchangeable for or evidencing the right to subscribe for or purchase shares of
capital stock or other equity securities of the Company. Except as disclosed on
Schedule 4.1(b) and other than this Agreement, the Company is not a party to,
nor is it aware of, any voting trust or other voting agreement with respect to
any of the securities of the Company or to any agreement relating to the
issuance, sale, redemption, transfer or other disposition of the capital stock
of the Company.
4.2 Authorization of Agreement; Enforceability. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and each other agreement, document, instrument and certificate to be executed by
the Company in connection with the consummation of the transactions contemplated
by this Agreement (the "Transaction Documents"), and to perform fully its
obligations hereunder and thereunder. The execution, delivery and performance by
the Company of this Agreement and the Transaction Documents have been duly
authorized by all necessary corporate action on the part of the Company and its
members. This Agreement and each of the Transaction Documents have been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery thereof by the Purchaser, this Agreement
and each of the Transaction Documents constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
4.3 Subsidiaries, Joint Ventures, Partnerships, Etc.
(a) Schedule 4.3(a) hereof sets forth a true, complete and correct
list of each company or other entity in which the Company holds an interest of
greater than fifty percent (50%) (each such corporation or other entity is
referred to herein as a "Subsidiary" and, collectively, the "Subsidiaries") as
well as each entity in which the Company holds a minority interest. Each
Subsidiary is duly organized and validly existing in good standing (if
applicable) under the laws of the jurisdiction of its incorporation with
corporate power and corporate authority under such laws to own, lease and
operate its properties and conduct its business except, in each case, where the
lack thereof would not have a Material Adverse Effect; and each Subsidiary is
duly qualified to transact business as a foreign corporation and is in good
standing (if applicable) in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so qualify or
be in good standing would not result in a Material Adverse Change. All of the
issued and outstanding shares of capital stock of each Subsidiary which are
owned by the Company have been duly authorized and validly issued, and are fully
paid and non-assessable. The Company, directly or indirectly, owns the
percentage of capital indicated in Schedule 4.3(a) next to each such Subsidiary,
free and clear of any Liens, except as set forth in Schedule 4.3(a).
(b) The Company is not a party to any joint venture, partnership or
similar arrangement in which the Company or any of its Subsidiaries
participates.
4.4 Consents of Third Parties. None of the execution and delivery by
the Company of this Agreement and the Transaction Documents, the consummation of
the
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transactions contemplated hereby or thereby, or compliance by the Company
with any of the provisions hereof or thereof will (a) conflict with, or result
in the breach of, any provision of the Memorandum of Association or Articles of
Association or by-laws of the Company, (b) conflict with, violate, result in the
breach or termination of, or constitute a default or give rise to any right of
termination or acceleration or right to increase the obligations or otherwise
modify the terms thereof under any Permit or Order to which the Company is a
party or any Contract to which the Company or any of its Subsidiaries is bound
or by which the Company or any of its properties or assets is bound, (c)
constitute a violation of any Law applicable to the Company or (d) result in the
creation of any Lien upon the properties or assets of the Company. Except as set
forth on Schedule 4.4 and other than those which have been obtained or made, no
consent, waiver, approval, Order, Permit or authorization of, or declaration or
filing with, or notification to, any Person or Governmental Body is required on
the part of the Company in connection with the execution and delivery of this
Agreement or the Transaction Documents, or the compliance by the Company with
any of the provisions hereof or thereof.
4.5 Authorization of Preferred Shares.
(a) On the Closing Date, the issuance, sale, and delivery of the
Preferred Shares to be purchased pursuant to Section 1.1 will have been duly
authorized by all requisite action of the Company, and, when issued, sold, and
delivered in accordance with this Agreement, the Preferred Shares will be
validly issued and outstanding, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof, and not subject to preemptive or
any other similar rights of the members of the Company or others.
(b) On the Closing Date, the issuance and delivery of the Common
Stock to be delivered upon conversion of the Preferred Shares in accordance with
the terms of the Preferred Shares will have been duly authorized by all
requisite action of the Company and, when issued and delivered in accordance
with the terms of the Preferred Shares, the Common Stock will be validly issued
and outstanding, fully paid and non-assessable, with no personal liability
attaching to the ownership thereof, and not subject to preemptive or any other
similar rights of the members of the Company or others.
4.6 Financial Statements. Attached hereto as Schedule 4.6 are (a)
copies of the audited balance sheet of the Company and its Subsidiaries, on a
consolidated basis as of December 31, 1998, the income statement of the Company
and its Subsidiaries, on a consolidated basis for the fiscal year ended December
31, 1998, and the cash flow statement of the Company and its Subsidiaries, on a
consolidated basis for the fiscal year ended December 31, 1998 (the "Audited
Financial Statements") and (b) copies of the unaudited balance sheet of the
Company and its Subsidiaries, on a consolidated basis as of June 30, 1999, the
statement of income and retained earnings of the Company and its Subsidiaries,
on a consolidated basis for the six-month period ended June 30, 1999, and the
cash flow statement of the Company and its Subsidiaries, on a consolidated basis
for the six-month period ended June 30, 1999 (the "Unaudited Financial
Statements", and together with the Audited Financial Statements, the "Financial
Statements"). Each of the Financial Statements was prepared in good faith, is
complete and correct in all material respects, has been prepared in accordance
with GAAP and in conformity with the practices consistently applied by the
Company and its Subsidiaries and
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presents fairly the financial position, results of operations and cash flows of
the Company and its Subsidiaries as of the dates and for the periods indicated.
4.7 No Undisclosed Liabilities. Except as set forth on Schedule 4.7,
neither the Company nor any of its Subsidiaries has any liabilities (whether
accrued, absolute, contingent or otherwise, and whether due or to become due or
asserted or unasserted), except (a) obligations under Contracts described in
Schedule 4.15 or under Contracts that are not required to be disclosed thereon
as a result of dollar thresholds therein, (b) liabilities provided for in the
Financial Statements (other than liabilities which, in accordance with GAAP,
need not be disclosed), (c) liabilities (other than accounts payable) incurred
since the Audited Financial Statements, in the ordinary course of business
consistent with past practice, the sum of which is, in the aggregate, no greater
than $50,000, and (d) accounts payable in excess of those shown on the Financial
Statements, incurred in the ordinary course of business consistent with past
practice, the sum of which is, in the aggregate, not greater than $50,000.
4.8 Absence of Certain Developments. Except as set forth on Schedule
4.8 and since the date of the Audited Financial Statements:
(a) there has not been any Material Adverse Change nor has any event
occurred which could result in any Material Adverse Change;
(b) there has not been any declaration, setting a record date,
setting aside or authorizing the payment of, any dividend or other distribution
in respect of any shares of capital stock of the Company or any of its
Subsidiaries or any repurchase, redemption or other acquisition by the Company
or any of its Subsidiaries, of any of the outstanding shares of capital stock or
other securities of, or other ownership interest in, the Company or any of its
Subsidiaries;
(c) there has not been any transfer, issue, sale or other
disposition by the Company of any shares of capital stock or other securities of
the Company or any of its Subsidiaries or any grant of options, warrants, calls
or other rights to purchase or otherwise acquire shares of such capital stock or
such other securities;
(d) neither the Company nor any of its Subsidiaries has (i) awarded
or paid any bonuses to Employees or Representatives of the Company, (ii) entered
into any employment, deferred compensation, severance or similar agreements (nor
amended any such agreement), (iii) agreed to increase the compensation payable
or to become payable by the Company or any of its Subsidiaries to any of the
Company's Employees or Representatives, or (iv) agreed to increase the coverage
or benefits available under any severance pay, deferred compensation, bonus or
other incentive compensation, pension or other employee benefit plan, payment or
arrangement made to, for or with such Employees or Representatives, other than
in the ordinary course of business consistent with past practice which increases
in the aggregate do not exceed $50,000 in annual cost to the Company or any of
its Subsidiaries and consistent with the operating expense budget of the Company
or any of its Subsidiaries, and other than as may have been required by law or
insurers;
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(e) neither the Company nor any of its Subsidiaries has made any
loans, advances (other than advances to officers and employees of the Company or
its Subsidiaries which advances are made in the ordinary course of business and
do not exceed per individual the reasonable anticipated expenses for legitimate
business purposes), or capital contributions to, or investments in, any Person
or paid any fees or expenses to any Affiliate of the Company other than a
Subsidiary;
(f) neither the Company nor any of its Subsidiaries has transferred
or granted any rights under any Contracts, leases, licenses, agreements or
intangible property (as set forth in Section 4.12 hereof) used by the Company in
its business which could result in a Material Adverse Change;
(g) there has not been any damage, destruction or loss, whether or
not covered by insurance, with respect to the property or assets of the Company
or any of its Subsidiaries having a replacement cost of more than $10,000 for
any single loss or $50,000 for all such losses;
(h) neither the Company nor any of its Subsidiaries has mortgaged,
pledged or subjected to any Lien any of its assets, or acquired any assets for a
purchase price in excess of $50,000 in the aggregate or sold, assigned,
transferred, conveyed, leased or otherwise disposed of any assets of the Company
or any of its Subsidiaries for a sale price in excess of $50,000 in the
aggregate except for assets acquired or sold, assigned, transferred, conveyed,
leased or otherwise disposed of in the ordinary course of business;
(i) neither the Company nor any of its Subsidiaries has canceled or
compromised any debt or claim or amended, canceled, terminated, relinquished,
waived or released any Contract or right except in the ordinary course of
business consistent with past practice and which, individually or in the
aggregate, would not be material to the Company or any of its Subsidiaries;
(j) neither the Company nor any of its Subsidiaries has made any
binding commitment to make any capital expenditures or capital additions or
betterments in excess of $25,000 individually or $75,000 in the aggregate;
(k) neither the Company nor any of its Subsidiaries has incurred any
debts, obligations or liabilities, whether due or to become due, except current
liabilities incurred in the ordinary course of business, none of which current
liabilities (individually or in the aggregate) could result in a Material
Adverse Change;
(l) neither the Company nor any of its Subsidiaries has entered into
any transaction other than in the ordinary course of business except for (in the
case of the Company) this Agreement;
(m) neither the Company nor any of its Subsidiaries has encountered
any labor difficulties or labor union organizing activities;
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(n) neither the Company nor any of its Subsidiaries has made any
change in the accounting principles, methods or practices followed by it or
depreciation or amortization policies or rates theretofore adopted;
(o) neither the Company nor any of its Subsidiaries has disclosed to
any Person any material trade secrets except for disclosures made to Persons
subject to valid and enforceable confidentiality agreements;
(p) except in the ordinary course of business, neither the Company
nor any of its Subsidiaries has suffered or experienced any change in the
relationship or course of dealings between the Company and/or any of its
Subsidiaries and any of their suppliers or customers which supply goods or
services to the Company or any of its Subsidiaries or purchase goods or services
from the Company and or any of its Subsidiaries, which has had or is likely to
have a Material Adverse Effect; and
(q) neither the Company nor any of its Subsidiaries has made any
payment to, or received any payment from, or made or received any investment in,
or entered into any transaction or series of related transactions (including
without limitation, the purchase, sale, exchange or lease of assets, property or
services, or the making of a loan or guarantee) with any Affiliate in each case,
in excess of $50,000 or its equivalent (other than any transactions between or
among the Company and any of its Subsidiaries) (each, an "Affiliate
Transaction").
4.9 Taxes. The Company and each of its Subsidiaries has filed all
Tax returns (including statements of estimated Taxes owed) and reports required
to be filed within the applicable periods (subject to extensions) for such
filings and has paid all Taxes required to be paid, and has established adequate
reserves (net of estimated Tax payments already made) for the payment of all
Taxes payable in respect of the period subsequent to the last periods covered by
such returns. Such Tax returns and reports are true and correct in all material
respects. No deficiencies for any Tax are currently assessed against the Company
or any Subsidiary, and, no Tax returns of the Company or any Subsidiary have
ever been audited, and, to the knowledge of the Company, there is no such audit
pending or contemplated. Neither the Company nor any of its Subsidiaries has
received any notice of any audit of any of the Tax returns by any British Virgin
Islands or foreign taxing authority (including, without limitation, the
Argentine Direccion General Impositiva ("DGI") and Direccion General de Rentas).
There is no Tax lien, whether imposed by any federal, state or local taxing
authority, outstanding against the assets, properties or business of the Company
or any of its Subsidiaries other than Liens for Taxes which are not yet due.
Neither the Company nor any of its Subsidiaries has executed any waiver of the
statute of limitations on the assessment or collection of any Tax or
governmental charge. The Company and its Subsidiaries have properly charged,
collected and paid all applicable stamp, sales, use and other similar Taxes on
or before the Closing Date.
4.10 Real Property.
(a) Neither the Company nor any of its Subsidiaries owns any real
property.
(b) Schedule 4.10(b) sets forth a complete list of all real property
and interests in real property leased by the Company or any of its Subsidiaries
(each, a "Real Property Lease",
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and collectively, the "Real Property Leases") as lessee or lessor. The Company
or the applicable Subsidiary has good, legal and marketable title to the
leasehold estates in all Real Property Leases in each case free and clear of all
Liens. Neither the Company nor any Subsidiary has any reason to believe that
such title would not be insurable subject to customary exceptions.
(c) Each of the Real Property Leases is valid and enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity), and there is no default under any Real Property Lease by the Company or
the applicable Subsidiary or, to the knowledge of the Company, by any other
party thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder. The Company has
delivered or otherwise made available to the Purchaser true, correct and
complete copies of the Real Property Leases, together with all amendments,
modifications, supplements or side letters affecting the obligations of any
party thereunder.
(d) No previous or current party to any Real Property Lease has
given notice of or made a claim with respect to any breach or default
thereunder. With respect to those Real Property Leases that were assigned or
subleased to the Company or a Subsidiary by a third party, all necessary
consents to such assignments or subleases have been obtained.
4.11 Tangible Personal Property; Assets. Each of the Company and its
Subsidiaries has good, legal and marketable title to or valid leasehold
interests in, all of its personal property and assets. The personal property
owned by the Company or its Subsidiaries are held in each case free and clear of
all Liens, other than Permitted Liens. With respect to the personal property and
assets that the Company or any Subsidiary leases, the lessee thereunder is in
compliance with such leases except for such noncompliance as would not have a
Material Adverse Effect and the lessee holds a valid leasehold interest free and
clear of any Liens, other than Permitted Liens. All material items of personal
property and assets owned or leased by the Company and its Subsidiaries are in
good operating condition, normal wear and tear excepted.
4.12 Intangible Property. Each of the Company and its Subsidiaries
owns or possesses adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names, copyrights, manufacturing processes, software,
formulae, trade secrets and know how (collectively, "Intellectual Property")
necessary to the conduct of its business as conducted; if any such Intellectual
Property necessary to the conduct of the business as proposed to be conducted is
not owned or licensed to the Company or to any of its Subsidiaries, such
Intellectual Property is readily available to the Company on commercially
reasonable terms, and no claim is pending or, to the knowledge of the Company,
threatened to the effect that the operations of the Company or any Subsidiary
infringe upon or conflict with the asserted rights of any other Person under any
Intellectual Property, and the Company does not know of any basis for any such
claim (whether or not pending or threatened). No claim is pending or, to the
knowledge of the Company, threatened to the effect that any such Intellectual
Property owned or licensed by the Company or any Subsidiary, or which the
Company or a Subsidiary otherwise has the right to use, is invalid or
unenforceable by the Company or the applicable Subsidiary, and the Company does
not know of any basis for any such claim (whether or not pending or threatened).
Neither the Company
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nor any Subsidiary has granted or assigned to any other Person any right to
provide the services or proposed services of the Company and its Subsidiaries.
4.13 Technology. Except as set forth in Schedule 4.13, the products,
processes, proprietary technology and other proprietary know-how owned or used
by the Company and its Subsidiaries were completely developed by the Company's
full-time employees only; the concepts, inventions and original works of
authorship owned or used by the Company or its Subsidiaries were developed or
conceived by employees within the scope of their employment by the Company (or
the applicable Subsidiary) and are connected with the Company's and its
Subsidiaries' underlying products, processes and proprietary technology. Except
as set forth in Schedule 4.13, no independent contractors or consultants were
used or employed by the Company or a Subsidiary in the development of the
products, processes, proprietary technology and other proprietary know-how owned
or used by the Company and its Subsidiaries.
4.14 Real Property Holding Corporation. The Company is not a "United
States real property holding corporation" within the meaning of Section
847(c)(2) of the Code.
4.15 Material Contracts.
(a) Except as set forth on Schedule 4.15, neither the Company, any
Subsidiary nor any of their respective properties or assets is a party to or
bound by any (i) Contract not made in the ordinary course of business, or
involving a commitment or payment by the Company or any Subsidiary in excess of
$50,000 or, in the Company's belief, otherwise material to the business of the
Company or any Subsidiary, (ii) Contract among members or granting a right of
first refusal or for a partnership or a joint venture or for the acquisition,
sale or lease of any assets or capital stock of the Company or any other Person
or involving a sharing of profits, (iii) mortgage, pledge, conditional sales
contract, security agreement, factoring agreement or other similar Contract with
respect to any real or tangible personal property of the Company or any
Subsidiary, (iv) loan agreement, credit agreement, promissory note, guarantee,
subordination agreement, letter of credit or any other similar type of Contract,
(v) Contract with any Governmental Body outside the ordinary course of business,
(vi) Contract with respect to the discharge, storage or removal of hazardous
materials or (vii) binding commitment or agreement to enter into any of the
foregoing. The Company has delivered or otherwise made available to the
Purchaser true, correct and complete copies of the Contracts listed on Schedule
4.15, together with all amendments, modifications, supplements or side letters
affecting the obligations of any party thereunder.
(b) (i) Each of the Contracts listed on Schedule 4.15 is valid and
enforceable against the Company or its Subsidiaries in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and there is no
default under any Contract listed on Schedule 4.15 by the Company or any of its
Subsidiaries which is likely to have a Material Adverse Effect or, to the
knowledge of the Company, by any other party thereto, and no event has occurred
that with the lapse of time or the giving of notice or both would constitute a
default by the Company thereunder which is likely to have a Material Adverse
Effect.
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(ii) No previous or current party to any Contract has given
written notice to the Company or any Subsidiary of or made a claim with respect
to any breach or default thereunder and the Company has no knowledge of any
notice of or claim with respect to any such breach or default.
(c) With respect to the Contracts listed on Schedule 4.15 that were
assigned to the Company or any Subsidiary by a third party, all necessary
consents to such assignment have been obtained.
4.16 Employee Benefits. Except as set forth on Schedule 4.16,
neither the Company nor any Subsidiary has in effect any employment agreements,
consulting agreements, deferred compensation, pension or retirement agreements
or arrangements, bonus, incentive or profit-sharing plans or arrangements, or
labor or collective bargaining agreements, written or oral. The Company and its
Subsidiaries are in compliance in all material respects with all applicable Laws
relating to labor, employment, fair employment practices, terms and conditions
of employment, and wages and hours.
4.17 Employees.
(a) To the knowledge of the Company, no key executive Employee and
no group of Employees or independent contractors of the Company or any
Subsidiary has any plans to terminate his, her or its employment or relationship
as an Employee or independent contractor with the Company or such Subsidiary.
(b) Schedule 4.17 sets forth a true and complete list of the name
and amount of annual compensation of (i) each Employee of the Company or any
Subsidiary whose current annual compensation is $50,000 or more, together with
such person's job title and amounts and forms of compensation and fringe and
severance benefits and (ii) each consultant, contractor or subcontractor
equivalent of the Company and its Subsidiaries whose annual compensation by the
Company or its Subsidiary is $50,000 or more.
(c) To the best of the Company's knowledge after reasonable inquiry,
no key executive Employee or any other Employee of the Company or any Subsidiary
is a party to or is otherwise bound by any agreement or arrangement (including,
without limitation, confidentiality agreements, non-competition agreements,
licenses, covenants, or commitments of any nature), or subject to any judgment,
decree, or Order of any court or Governmental Body, (i) that would conflict with
such Employee's obligation diligently to promote and further the interest of the
Company or such Subsidiary or (ii) that would conflict in any material respect
with the Company's (or the applicable Subsidiary's) business as now conducted or
as proposed to be conducted.
4.18 Litigation. There are no Legal Proceedings pending or, to the
knowledge of the Company, threatened that question the validity of this
Agreement or any of the Transaction Documents or any action taken or to be taken
by the Company in connection with the consummation of the transactions
contemplated hereby or thereby. Except as set forth on Schedule 4.18, there are
no Legal Proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company, any of its Subsidiaries or any of their
respective
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properties or assets, and there is no reasonable basis for any such
Legal Proceeding. There is no outstanding or, to the knowledge of the Company,
threatened Order of any Governmental Body against, in respect of or naming the
Company or any of its Subsidiaries or in respect of any of their respective
properties or assets or against the Company or its Subsidiaries.
4.19 Compliance with Laws; Permits.
(a) The Company and each Subsidiary is and at all times has been in
compliance in all material respects with all material Laws and material Orders
promulgated by any Governmental Body applicable to the Company or such
Subsidiary, or to the conduct of the business or operations of the Company or
such Subsidiary, or the use of any of their respective properties (including any
leased properties) and assets. Neither the Company nor any Subsidiary has
received any notices of violation or alleged violation of any such Law or Order
by any Governmental Body.
(b) The Company and each Subsidiary has all Permits necessary for
the conduct of its business where the failure to have such Permits could have a
Material Adverse Effect. The Company and each Subsidiary has complied in all
material respects with all conditions of such Permits applicable to it; no
default or violation, or event that with the lapse of time or giving of notice
or both would become a default or violation which could have a Material Adverse
Effect, has occurred in the due observance of any such Permit; all such Permits
are in full force and effect without further consent or approval of any Person;
and neither the Company nor any Subsidiary has received any notice from any
source to the effect that there is lacking any such material Permit required in
connection with the current operations of the Company or such Subsidiary.
4.20 Environmental and Safety Laws. Neither the Company nor any
Subsidiary is in violation of any applicable Laws relating to the environment or
occupational health where the failure to so comply could have a Material Adverse
Effect and safety and no material expenditures are or will be required in order
to comply with any such existing Laws.
4.21 Investment Company Act. The Company is not, nor is it directly
or indirectly controlled by or acting on behalf of any Person that is, an
investment company within the meaning of the Investment Company Act of 1940, as
amended.
4.22 Affiliate Transactions. Schedule 4.22 sets forth each Affiliate
Transaction of the Company and its Subsidiaries, including the parties, material
terms (including amounts due from the Company (or a Subsidiary) or owed to the
Company (or a Subsidiary)), restrictions and obligations of the Company and its
Subsidiaries in connection with each such Affiliate Transaction. Each such
Affiliate Transaction is on an arm's-length basis and on terms no less favorable
to the Company or a Subsidiary than could be obtained from non-related parties.
The Company has delivered or otherwise made available to the Purchaser true,
correct and complete copies of all written Contracts relating to such Affiliate
Transactions, together with all amendments, modifications, supplements or side
letters affecting the obligations of any party thereunder.
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4.23 Disclosure; Survival. There is no fact which has not been
disclosed to the Purchaser of which the Company has knowledge and which has had
or could reasonably be anticipated to result in a Material Adverse Change. All
representations and warranties set forth in this Agreement or in any writing or
certificate delivered in connection with this Agreement shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby for a period of sixty (60) days after delivery
of audited financial statements for 1999 (the "Survival Period") and shall not
be affected by any examination made for or on behalf of the Purchaser, the
knowledge of the Purchaser, or the acceptance by the Purchaser of any
certificate or opinion.
4.24 Insurance. There is in full force and effect one or more
policies of insurance issued by insurers of recognized responsibility, insuring
the Company, its Subsidiaries and their respective properties, business and
projects against such losses and risks, and in such amounts, as are customary in
the case of corporations of established reputation engaged in the same or
similar business and similarly situated. Neither the Company nor any Subsidiary
has been refused any insurance coverage sought or applied for, and the Company
has no reason to believe that the Company and its Subsidiaries will be unable to
renew its existing insurance coverage as and when the same shall expire upon
terms at least as favorable as those presently in effect, other than possible
increases in premiums that do not result from any act or omission of the Company
or the applicable Subsidiary. Schedule 4.24 sets forth a list of each insurance
policy (specifying the insurer, the amount of coverage, the type of insurance,
the policy number, the expiration date, the annual premium (current and for each
of the last three (3) years) and any pending claims thereunder) maintained by
the Company and its Subsidiaries relating to its properties, assets, business or
personnel, and each inspection report or recommendation, if any, during the last
three (3) years as to the conditions of the properties and assets owned, leased,
occupied or operated by it or the conduct of its business. Except as disclosed
on Schedule 4.24, neither the Company nor any Subsidiary is in default in any
material respect with respect to any provision contained in any insurance policy
maintained by the Company or any of its Subsidiaries, and neither the Company
nor any Subsidiary has failed to give any notice or present any presently
existing claims under any insurance policy in due and timely fashion.
4.25 Customers and Suppliers. Schedule 4.25 sets forth a list of the
ten (10) largest customers and the ten (10) largest suppliers of the Company and
its Subsidiaries and the dollar amount of purchases or sales which each such
customer or supplier represents. There exists no actual or, to the knowledge of
the Company, threatened termination or cancellation of the business conducted by
the Company or any Subsidiary with any customer, supplier or group of customers
or group of suppliers set forth on Schedule 4.25.
4.26 Year 2000. Each item of hardware, software, information
technology, embedded, or processor based system and/or any combination thereof,
used, developed, manufactured, distributed, licensed, transferred or delivered,
by the Company or any of its Subsidiaries (collectively, the "System"), shall be
able to correctly function, operate, process data or perform date related
calculations, including, but not limited to, calculating, comparing and
sequencing, from, into and between the years 1999 and 2000, accurately process,
provide and/or receive date data, including leap year calculations, into and
between the years 1999, 2000 and beyond, shall otherwise function as per the
specifications thereof before, during and following January 1, 2000. Neither
performance nor functionality of the System shall be
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affected by dates prior to, during and after January 1, 2000. A System
containing or calling on a calendar function including, without limitation, any
function indexed to the CPU clock, and any function providing specific dates or
days, or calculating spans of dates or days shall record, store, process,
provide and, where appropriate, insert, true and accurate dates and calculations
for dates and spans, before, during and following January 1, 2000. The System
shall have no lesser functionality or operability with respect to records
containing dates, before, during or after January 1, 2000 than heretofore with
respect to dates prior to January 1, 2000. The System shall be fully
interoperable and interface with any and all other systems, software and/or
hardware used by the Company, its Subsidiaries and their respective customers
before, during or after January 1, 2000, and/or otherwise exchange data,
including date related data therewith.
4.27 Financial Advisors. No agent, broker, investment banker,
finder, financial advisor or other Person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee from the Company,
directly or indirectly, in connection with the transactions contemplated by this
Agreement or any Transaction Document and no Person is entitled to any fee or
commission or like payment from the Company in respect thereof based in any way
on agreements, arrangements or understandings made by or on behalf of the
Company.
4.28 Condition of Properties. All facilities, machinery, equipment,
fixtures, vehicles and other properties owned, leased or used by the Company and
its Subsidiaries are in good operating condition and repair, are reasonably fit
and usable for the purposes for which they are being used, are adequate and
sufficient for the Company and its Subsidiaries' respective businesses and
conform in all material respects with all applicable Laws.
4.29 Illegal or Unauthorized Payments; Political Contributions. The
operations and practices of the Company and its Subsidiaries have been conducted
at all times during the past five (5) years in compliance with the provisions of
the United States Foreign Corrupt Practices Act of 1977, as amended.
4.30 Pending Changes. To the actual knowledge of the Company, there
is no pending or threatened change in any Law which materially affects or could
materially affect the Company or the business, assets, liabilities, prospects,
properties, results of operations or condition (financial or otherwise) of the
Company or its Subsidiaries.
4.31 Securities Laws. The Company has complied with all applicable
U.S. federal and state securities laws in connection with the offer, issuance
and sale of the Preferred Shares. Prior to the Closing, neither the Company nor
anyone acting on its behalf has sold, offered to sell or solicited offers to buy
the Preferred Shares or similar securities to, or solicit offers with respect
thereto from, or entered into any preliminary conversations or negotiations
relating thereto with, any Person, so as to bring the issuance and sale of the
Preferred Shares under the registration provisions of the Securities Act, and
applicable state securities laws. Neither the Company nor any Person acting on
its behalf has offered the Preferred Shares to any Person by means of general or
public solicitation or general or public advertising, such as by newspaper or
magazine advertisements, by broadcast media, or at any seminar or meeting whose
attendees were solicited by such means.
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4.32 Backlog. Schedule 4.32 sets forth a list of Revenue and
Customer "Backlog" by customer as of July 31, 1999. Such list has been
accurately compiled, is true, correct and complete insofar as it purports to
reflect revenues actually generated, and represents the best good faith forecast
of the Company insofar as it purports to forecast revenues for periods after the
date hereof.
4.33 Accounts Receivable. The accounts receivable of the Company and
its Subsidiaries were created in the ordinary course of business and, to the
Company's knowledge, are fully collectible, without offset or other deduction,
subject to appropriate reserves in accordance with GAAP applied on a consistent
basis. Schedule 4.33 sets forth a good faith estimate of the accounts receivable
of the Company and its Subsidiaries as of July 31, 1999.
4.34 Registration Rights. Except for the rights granted under the
Transaction Documents, no Person has demand or other rights to cause the Company
to file any registration statement under the Securities Act relating to any
securities of the Company or any right to participate in any such registration
statement.
4.35 Books and Records. The books of account, ledgers, order books,
records and documents of the Company and its Subsidiaries accurately and
completely reflect all material information relating to the business of the
Company or the applicable Subsidiary, the location and collection of its assets,
and the nature of all transactions giving rise to the obligations or accounts
receivable of the Company or the applicable Subsidiary.
4.36 PFIC. The Company is not a "passive foreign investment company"
within the meaning of Section 1297 of the Code.
5. Representations and Warranties of the Purchaser.
The Purchaser hereby represents and warrants to the Company that:
5.1 Capacity; Authorization. The Purchaser has all legal capacity to
enter into this Agreement and to carry out its obligations hereunder. Assuming
due execution and delivery by the Company of this Agreement, this Agreement will
constitute a legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
5.2 Investment Purposes. (a) The Purchaser is acquiring the
Preferred Shares it has agreed to purchase for investment purposes only, for its
own account, and not as nominee or agent for any other Person, and not with a
view to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act, (b) it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, (c) the Company has made available to it the
opportunity to ask questions and to receive answers, and to obtain information
necessary to evaluate the merits and risks of this investment, (d) the Purchaser
understands, acknowledges and agrees that the Preferred Shares have not been
registered under (and that the Company has no present intention to register the
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Preferred Shares under) the U.S. Securities Act or applicable state securities
laws, and may not be sold or otherwise transferred by the Purchaser to a United
States person unless the Preferred Shares have been registered under the U.S.
Securities Act and applicable U.S. state securities laws or are sold or
transferred in a transaction exempt therefrom, and (e) no broker has acted on
behalf of the Purchaser in connection with this Agreement, and there are no
brokerage commissions, finders' fees or similar fees or commissions payable in
connection therewith based on any agreement, arrangement or understanding with
the Purchaser or any action taken by the Purchaser.
5.3 Payment of Purchase Price. The Purchaser has available resources
in order to pay to the Company the purchase price for the Preferred Shares in
accordance with the terms and conditions of this Agreement.
6. Further Agreements of the Parties.
6.1 Reserved Shares. For so long as the Preferred Shares are
convertible, the Company shall reserve that number of shares of Common Stock
issuable upon conversion of the Preferred Shares, which shares shall not be
subject to any preemptive or other similar rights.
6.2 Use of Proceeds. The Company shall use the proceeds from the
sale of the Preferred Shares under this Agreement for the following purposes:
advertising, brand positioning and development, production of proprietary and
third party content, product and technology development, expansion of local
sales operations, general corporate purposes and such other purposes as are
discussed in the Private Placement Memorandum.
6.3 Access to Information. The Purchaser and its Representatives
shall be entitled, upon reasonable notice, and at their own expense, to make
such investigation of the properties, business and operations of the Company and
such examination of the books, records and financial condition of the Company as
they reasonably request and to make extracts and copies of such books and
records. Any such investigation and examination shall be conducted during
regular business hours and under reasonable circumstances without material
interference with the Company's normal business operations, and the Company and
its Representatives shall cooperate fully therein. No investigation by the
Purchaser or its Representatives prior to or after the date of this Agreement
shall diminish or obviate any of the representations, warranties, covenants or
agreements of the Company contained in this Agreement or the Transaction
Documents. In order that the Purchaser may have full opportunity to make such
physical, business, accounting and legal review, examination of the affairs of
the Company and investigation as may be reasonably requested, the Company shall
cause its Representatives to cooperate fully with the Representatives of the
Purchaser in connection with such review and examination.
6.4 Confidentiality. Except as may be required by applicable law or
as otherwise agreed among the parties hereto, neither the Company, the Purchaser
nor any of their respective Affiliates shall at any time divulge, disclose,
disseminate, announce or release any information to any Person concerning this
Agreement, the Transaction Documents, the transactions contemplated hereby or
thereby, any trade secrets or other confidential information
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of the Company or the Purchaser, without first obtaining the prior written
consent of the other party hereto; provided, however, that the parties shall be
entitled to disclose information with respect to the Purchaser's investment in
the Company on any reports the Purchaser files with the U.S. Securities and
Exchange Commission or otherwise furnishes to its security holders or as
otherwise required by Law.
6.5 Other Actions. The Company and the Purchaser agree to execute
and deliver such other documents and take such other actions as the other
parties may reasonably request for the purpose of carrying out the intent of
this Agreement and the Transaction Documents.
6.6 Year 2000 Covenant. The Company undertakes to promptly inform
the Purchaser of any material deficiency or expected cost in complying with the
"Year 2000" problem.
6.7. Indemnity.
(a) The Company agrees to indemnify, defend and hold harmless the
Purchaser (and its partners (and each officer and director thereof), directors,
officers, members, Employees, Affiliates, agents and permitted assigns) from and
against any and all losses, claims, liabilities, damages, deficiencies, costs or
expenses (including interest, penalties, and reasonable attorneys' fees,
disbursements and related charges) (collectively, "Losses") based upon, arising
out of or otherwise in respect of any inaccuracy in or breach of any
representations, warranties, covenants or agreements of the Company contained in
this Agreement or the Transaction Documents; provided, however, that the
Purchaser shall have no right to indemnification hereunder unless and until its
Losses, when aggregated with any and all other Losses which the Purchaser may
have against the Company, exceed $250,000. The provisions of this Section 6.7(a)
shall survive the termination of this Agreement for a period equal to the
Survival Period.
(b) The Purchaser agrees, severally and not jointly, to indemnify,
defend and hold harmless the Company (and its directors, officers, members,
Employees, Affiliates, agents and permitted assigns) from and against any and
all Losses based upon, arising out of or otherwise in respect of any inaccuracy
in or breach by it of any representations, warranties, covenants or agreements
of the Purchaser (and no other) contained in this Agreement.
6.8 Other Affirmative Covenants of the Company. Without limiting any
other covenants and provisions hereof, the Company covenants and agrees that
until the consummation of a Qualifying IPO, it will perform and observe the
following covenants and provisions, and will cause each Subsidiary, if and when
such Subsidiary exists, to perform and observe such of the following covenants
and provisions as are applicable to such Subsidiary:
(a) The Company shall pay and discharge, and cause each Subsidiary
to pay and discharge, all Taxes, assessments and governmental charges or levies
imposed upon it or upon its income, profits or business, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a Lien or charge upon any
properties of the Company or any Subsidiary, provided that neither the Company
nor any Subsidiary shall be required to pay any such Tax, assessment, charge,
levy or
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claim which is being contested in good faith and by appropriate proceedings if
the Company or any Subsidiary shall have set aside on its books sufficient
reserves, if any, with respect thereto. The Company shall pay and cause each
Subsidiary to pay, when due, or in conformity with customary trade terms, all
lease obligations, all trade debt, and all other indebtedness incident to the
operations of the Company or its Subsidiaries, except such as are being
contested in good faith and by proper proceedings if the Company or Subsidiary
concerned shall have set aside on its books sufficient reserves, if any, with
respect thereto.
(b) The Company shall maintain insurance with a reputable insurance
company or association in such amount and covering such risks as is customary
coverage covering its properties and businesses customarily carried by companies
engaged in similar businesses and owning similar properties in the same general
areas in which the Company or any Subsidiary operates for the type and scope of
its properties and businesses and the Company shall maintain, and cause each
Subsidiary to maintain, such insurance. The Company will not cause or permit any
assignment of the proceeds of the life insurance policies specified in the first
sentence of this paragraph and will not borrow against such policies. The
Company will add the Purchaser as a notice party to such policies and will
request that the issuer(s) of such policies provide such designee with at least
ten (10) days' notice before either such policy is terminated (for failure to
pay premiums or otherwise) or assigned, or before any change is made in the
designation of a beneficiary thereof.
(c) The Company shall preserve and maintain (except where
noncompliance will not result in a Material Adverse Effect) and, unless the
Company deems it not to be in its best interests, cause each Subsidiary to
preserve and maintain, its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
or lease of its properties. The Company shall use commercially reasonable best
efforts to secure, preserve and maintain (except where noncompliance will not
result in a Material Adverse Effect) and cause each Subsidiary to use
commercially reasonable best efforts to secure, preserve and maintain (except
where noncompliance will not result in a Material Adverse Effect), all licenses
and other rights to use patents, processes, licenses, Permits, trademarks, trade
names, inventions, intellectual property rights or copyrights owned or possessed
by it and deemed by the Company to be material to the conduct of its business or
the business of any Subsidiary.
(d) The Company shall comply (except where noncompliance will not
result in a Material Adverse Effect), and cause each Subsidiary to comply, with
the requirements of all applicable Laws and Orders of any Governmental Body,
where noncompliance would have a Material Adverse Effect.
(e) The Company shall keep, and cause each Subsidiary to keep,
adequate records and books of account in which complete entries will be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and any Subsidiary, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, returns of merchandise,
obsolescence, amortization, Taxes, bad debts and other purposes in connection
with its business shall be made.
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(f) The Company shall use commercially reasonable best efforts to
maintain and preserve, and cause each Subsidiary to use commercially reasonable
best efforts to maintain and preserve, all of its properties and assets,
necessary for the proper conduct of its business, in good repair, working order
and condition, ordinary wear and tear excepted, including, without limitation,
the maintenance and preservation of any material patents, licenses, Permits or
agreements being used by the Company in its business as now operated and as now
proposed to be operated.
(g) The Company shall promptly, fully and in detail, inform the
Board of Directors of any substantive discussions, offers or contracts relating
to possible financings of any nature for the Company, whether initiated by the
Company or any other Person, except for (i) arrangements with trade creditors,
and (ii) utilization by the Company or any Subsidiary of commercial lending
arrangements with financial institutions.
(h) The Company shall at all times maintain provisions in its
Memorandum of Association and Articles of Association indemnifying all directors
against liability to the maximum extent permitted under the laws of the British
Virgin Islands.
(i) On or before December 31 in each calendar year (beginning
December 1, 1999), the Company shall pay to the Purchaser a monitoring fee equal
to $100,000 per annum in arrears (pro rated for any partial year). The board of
directors of the Company shall have the right to review the compensation paid
hereunder beginning at any time after December 31, 2001, and may (in its sole
discretion) reduce, eliminate, maintain or increase all such fees.
7. Other Obligations of the Parties.
7.1 Certain Notifications. At all times prior to the Closing, each
party hereto shall as promptly as reasonably practicable notify the other party
in writing of the occurrence of any event of which it obtains knowledge which
will result, or in the opinion of such party has a reasonable prospect of
resulting, in the failure to satisfy the conditions specified in Section 8
hereof.
7.2 Public Announcements. The parties hereto agree to consult
promptly with each other prior to issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
7.3 Furnishing Information. Each of the parties hereto will, as soon
as practicable after reasonable request therefor, furnish all the information
concerning it required for inclusion in any statement or application made by any
of them to any governmental or regulatory body in connection with the
transactions contemplated by this Agreement.
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8. Conditions to Closing.
8.1 Conditions of Obligations of the Purchaser. The obligation of
the Purchaser to purchase and pay for the Preferred Shares which it has agreed
to purchase on the Closing Date is subject to the fulfillment in all material
respects prior to or on the date of the first Closing contemplated by this
Agreement (the "First Closing") of the following conditions, any of which may be
waived in whole or in part by the Purchaser:
(a) Representations and Warranties. The representations and
warranties of the Company under this Agreement shall be deemed to have been made
again on the date of the First Closing (other than those representations and
warranties made expressly as of a date prior to the First Closing) and shall
then be true and correct.
(b) Compliance with Agreement. The Company shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by the Company on or before the First Closing.
(c) Approvals. The Company shall have obtained any and all consents,
waivers, approvals or authorizations, with or by any Governmental Body or any
other Person required for the valid execution of this Agreement and the
transactions contemplated hereby.
(d) No Injunction. No Governmental Body or any other Person shall
have issued an Order which shall then be in effect restraining or prohibiting
the completion of the transactions contemplated hereby, nor shall any such Order
be threatened or pending.
(e) No Material Adverse Change. Since December 31, 1998, there shall
not have been a Material Adverse Change.
(f) Certificate of Officer. At any Closing hereunder subsequent to
the First Closing, the Company will deliver a certificate dated as of such
subsequent Closing Date, executed by its Chief Executive Officer, certifying the
satisfaction of the conditions specified in paragraphs (a), (b), (c), (d), (e)
and (h) of this Section 8.1 as of such subsequent Closing Date.
(g) Opinions of the Company's Counsel. The Purchaser shall have
received from Paul, Hastings, Janofsky & Walker, LLP, U.S. counsel for the
Company, and from Conyers Dill & Pearman, British Virgin Islands counsel for the
Company, favorable opinions dated the date of the First Closing, in form and
substance satisfactory to the Purchaser and their counsel.
(h) Memorandum. The Memorandum of Association and Articles of
Association shall be in full force and effect as of the date of the First
Closing under the laws of the British Virgin Islands and shall not have been
amended or modified, and a certified copy of the Memorandum of Association and
Articles of Association shall have been delivered to counsel for the Purchaser.
(i) Registration Rights Agreement and Stockholders Agreement. The
Purchaser shall have received from each of the parties thereto executed versions
of the amendment to the Stockholders Agreement and the amendment to the
Registration Rights Agreement on the date of the First Closing, in the form
attached hereto as Exhibits A and B.
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(j) Supporting Documents. The Purchaser shall have received the
following:
(i) Copies of resolutions of the Board of the Company,
certified by the Secretary of the Company, authorizing and approving the
execution, delivery and performance of this Agreement and the Transaction
Documents and the issuance of the Preferred Shares, the forms of stock
certificates, and all other documents and instruments to be delivered pursuant
hereto and thereto;
(ii) A copy of the consent executed by holders of a majority
of the shares of Preferred Shares issued and outstanding as of the date hereof
consenting to the issuance of preferred shares pursuant to this Agreement; and
(iii) A certificate of incumbency executed by the Secretary of
the Company certifying the names, titles and signatures of the officers
authorized to execute the documents referred to in subparagraph (i) above and
further certifying that the Memorandum of Association and Articles of
Association of the Company delivered to the Purchaser at the time of the
execution of this Agreement have been validly adopted and have not been amended
or modified.
(k) Updating of Information. The Company shall have promptly
delivered to the Purchaser any information concerning events subsequent to the
date of this Agreement which is necessary to supplement the information
contained in or made a part of the representations and warranties contained
herein, including the schedules provided in connection with this Agreement, or
delivered by the Company pursuant to any of the covenants contained herein, in
order that the information contained herein or so delivered be complete and
accurate in all material respects as of the date of the First Closing.
Notwithstanding the preceding sentence, for purposes of determining the parties'
rights and obligations under this Agreement, the schedules delivered by the
Company shall be deemed to include only that information contained therein on
the date of this Agreement.
8.2 Conditions of Company's Obligations. The Company's obligation to
issue and sell the Preferred Shares to the Purchaser on each of the Closing
Dates is subject to the fulfillment prior to or on each Closing Date of the
following conditions, any of which may be waived in whole or in part by the
Company, provided that at any Closing hereunder subsequent to the First Closing,
the Purchaser will deliver a certificate dated as of such subsequent Closing
Date, executed by its Chief Executive Officer, certifying the satisfaction of
the conditions specified in paragraphs (a), (b), (c), (d) and (e) of this
Section 8.2 as of such subsequent Closing Date:
(a) Representations and Warranties. The representations and
warranties of the Purchaser under this Agreement shall be deemed to have been
made again on each Closing Date and shall then be true and correct in all
material respects.
(b) Compliance with Agreement. The Purchaser shall have performed
and complied with all agreements and conditions required by this Agreement to be
performed or complied with by the Purchaser on or before the First Closing.
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(c) Approvals. The Purchaser shall have obtained any and all
consents, waivers, approvals or authorizations, with or by any Governmental Body
or any other Person required for the valid execution of this Agreement and the
transactions contemplated hereby.
(d) Payment of Purchase Price. The Purchaser shall have delivered
its Purchase Price specified in Section 2.1 hereof.
(e) No Injunction. No Governmental Body or any other Person shall
have issued an Order which shall then be in effect restraining or prohibiting
the completion of the transactions contemplated hereby, nor shall any such Order
be threatened or pending.
8.3 Closing of the Internet Agreements. With respect to each
Closing, the parties or their respective affiliates shall have executed the
Internet Agreement for such Closing.
9. Miscellaneous.
9.1 Certain Definitions.
"Affiliate" of any Person means any Person that directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including with its correlative
meanings, "controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through ownership
of securities or partnership or other ownership interests, by contract or
otherwise). For the purposes of Section 8.2(d), the Purchaser shall not be
deemed to be an Affiliate of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Common Stock" means the ordinary shares, par value $1.00 per share,
of the Company.
"Contract" means any contract, agreement, indenture, note, bond,
loan, instrument, lease, conditional sales contract, mortgage, license,
franchise, insurance policy, commitment or other arrangement or agreement,
whether written or oral.
"Dollars" or "$" means the currency of the United States or its
foreign currency equivalent at the time the determination is made.
"Employee" means any current employee, office consultant,
independent contractor, agent, officer or director of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
"GAAP" means generally accepted accounting principles, as in effect
in the United States.
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"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).
"Law" means any federal, state, local or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement or
guideline.
"Legal Proceeding" means any judicial, administrative or arbitral
actions, suits, proceedings (public or private), claims or governmental
proceedings.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or similar laws) of any jurisdiction and including any lien or
charge arising by statute or other law.
"Material Adverse Change" means any material adverse change in the
business, assets, liabilities, prospects, properties, results of operations or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole.
"Material Adverse Effect" means any event, circumstance, condition,
fact, effect, or other matter which has had or could reasonably be expected to
have a material adverse effect (i) on the business, assets, liabilities,
prospects, properties, results of operations or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole or (ii) on the
ability of the Company and such subsidiaries to perform on a timely basis any
material obligation under this Agreement or to consummate the transactions
contemplated hereby.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"Permits" means any approvals, authorizations, consents, licenses,
permits or certificates by or of any Governmental Body.
"Permitted Liens" shall mean (a) Liens for ad valorem real or
personal property taxes or assessments not at the time due and (b) Liens in
respect of pledges or deposits under workers' compensation laws or similar
legislation, carriers', warehousemen's, mechanics', laborers', and materialmen's
and similar liens, if the obligations secured by such Liens are not then
delinquent.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
"Qualifying IPO" means an underwritten initial public offering of
shares of common stock of the Company pursuant to an effective registration
statement under the Securities Act of 1933, as then in effect (or any comparable
statement under any similar federal statute then in force or effect) in which
the cumulative gross proceeds to the Company are equal to or greater than $35.0
million and the price per share paid in the public offering is greater than
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3.0 times the then applicable Conversion Price (as defined in the Memorandum of
Association and Articles of Association of the Company).
"Register" means to register under the Securities Act and applicable
state securities laws for the purpose of effecting a public sale of securities.
"Representatives" of a Person means its officers, Employees, agents,
legal advisors and accountants.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same shall be in effect at the time.
"Taxes" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value-added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
9.2 Expenses.
(a) At the Closing, the Company shall reimburse the Purchaser for
the reasonable out-of-pocket fees and expenses incurred by the Purchaser in
connection with the transactions contemplated hereby. The Company agrees that
such fees and expenses incurred through the Closing Date may be deducted by the
Purchaser from the Purchase Price payable at the Closing.
(b) The Company shall pay its own other out-of-pocket expenses and
all stamp and other Taxes which may be payable in respect of the execution and
delivery of this Agreement, the Transaction Documents, or the issuance, delivery
or acquisition of the Preferred Shares.
(c) The Company further agrees to reimburse the Purchaser on demand
for the Purchaser's reasonable out-of-pocket fees and expenses incurred in
connection with any amendment to or waiver or enforcement of this Agreement.
9.3 Specific Performance. Each of the parties hereto acknowledges
and agrees that the breach of this Agreement would cause irreparable damage to
the other parties hereto and that the other parties hereto will not have an
adequate remedy at law. Therefore, the obligations of each of the parties hereto
under this Agreement shall be enforceable by a decree of specific performance
issued by any court of competent jurisdiction, and appropriate injunctive relief
may be applied for and granted in connection therewith. Such remedies shall,
however, be cumulative and not exclusive and shall be in addition to any other
remedies which any party may have under this Agreement or otherwise.
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9.4 Further Assurances. The Company and the Purchaser agree to
execute and deliver such other documents or agreements as may be necessary or
desirable for the implementation of this Agreement and the consummation of the
transactions contemplated hereby.
9.5 Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
Borough of Manhattan, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action or proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section 9.10
hereof.
9.6 Entire Agreement; Amendments and Waivers. This Agreement
(including the schedules and exhibits hereto) represents the entire
understanding and agreement among the parties hereto with respect to the subject
matter hereof and can be amended, supplemented or changed, and any provision
hereof can be waived, only by written instrument making specific reference to
this Agreement signed by the parties hereto. No action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranty, covenant or agreement
contained herein. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach. No
failure on the part of any party to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
9.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
the principles of conflict of laws thereunder which would specify the
application of the law of another jurisdiction.
9.8 Headings; Interpretive Matters. The section headings of this
Agreement are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement. No provision of this Agreement
will be interpreted in favor of, or against, any of the parties hereto by reason
of the extent to which any such party or its counsel
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participated in the drafting thereof or by reason of the extent to which any
such provision is inconsistent with any prior draft hereof or thereof.
9.9 Confidentiality. Each party hereto covenants and agrees to treat
any non-public information provided to it by the Company concerning the business
and finances of the Company ("Corporate Information") as confidential and agrees
further that it will not use, exploit, reproduce, disclose or provide Corporate
Information to any third party (other than any agents of the parties who are
bound by substantially similar obligations of confidentiality) on its own behalf
or otherwise, except with the consent of the Company or as required by law,
legal process or any federal or state regulatory body having jurisdiction over
such party. The provisions of this Section 9.9 shall not apply to any
information which:
(a) was within the public domain prior to the time of disclosure of
Corporate Information to the receiving party or which comes into the public
domain other than as a result of a breach by the party of this Section 9.9;
(b) was in the possession of the receiving party or any of its
officers, directors, employees, agents, principals, or Affiliates) before the
receiving party received the Corporate Information;
(c) was rightfully acquired by the receiving party from a third
party without, to the knowledge of the receiving party, any restriction or any
obligation of confidentiality; or
(d) was independently developed by the receiving party without any
use or reference to the Corporate Information.
The provisions of this Section 9.9 shall survive the termination of
this Agreement, either in whole or as to any party, for a period of two (2)
years.
9.10 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally, telecopied or mailed by certified mail, return receipt requested, to
the parties at the address or telecopier number indicated in the signature pages
hereof.
All notices are effective upon receipt or upon refusal if properly
delivered.
9.11 Severability. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in effect.
9.12 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third-party beneficiary rights in any Person not a party to this Agreement
except as provided below. No assignment of this Agreement or of any rights or
obligations hereunder may be made by the Company or the Purchaser (by operation
of law or otherwise) without the prior written consent of the other parties
hereto and any attempted assignment without the required consents shall be void;
provided, however, that the Purchaser may assign this Agreement and any or all
rights and obligations hereunder, in whole or in part, to any Affiliate of the
Purchaser, but any such
25
<PAGE>
assignment shall not relieve the Purchaser of its obligations hereunder. In
addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of the Purchaser as a
purchaser or holder of Preferred Shares (or any securities pursuant to which
such Preferred Shares may be converted or exercised into) are also for the
benefit of and enforceable by, any subsequent holder of such Preferred Shares
who acquires the lesser of (i) $5,000,000 in original purchase price value of
the Preferred Shares other than pursuant to open-market purchases or (ii) fifty
percent (50%) of the number of Preferred Shares purchased by the Purchaser
pursuant hereto. Upon any permitted assignment, the references in this Agreement
to the Purchaser shall also apply to any such assignee unless the context
otherwise requires.
9.13 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
[The rest of this page has been intentionally left blank]
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first written above.
EL SITIO, INC.
By: /s/ Marcos Souza Aranha
---------------------------------------
Title:
Notice address: Rua Florida 1821
1st Floor
Brooklin, Sao Paulo
Brazil 04565-001
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attention: Roberto Cibrian-Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue, 31st Floor
New York, New York 10022
Attention: Neil A. Torpey
Telephone: (212) 318-6034
Telecopier: (212) 318-4090
27
<PAGE>
IMPSAT CORPORATION
By: /s/ Marcos Souza Aranha
---------------------------------------
Title:
Notice address: Rua Florida 1821
1st Floor
Brooklin, Sao Paulo
Brazil 04565-001
ImpSat Corporation
Alferez Pareja 256
1107 Buenos Aires, Argentina
Attention: Hector Alonso
Telephone:
Telecopier: 541 11-328-0140
with a copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004-1202
Attn: Neil M. Goodman
Telephone: 202-942-5191
Telecopier: 202-942-5999
28
<PAGE>
Exhibit 10.18
AMENDMENT NO. 1 TO
REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 dated as of October 6, 1999 (this
"Amendment") to the Registration Rights Agreement, dated as of July 2, 1999
(the "Agreement"), by and among El Sitio, Inc., a British Virgin Islands
corporation (the "Corporation"), and the parties listed on Schedule A
thereof, is entered into and shall be effective as of the date hereof.
WHEREAS, Roberto Vivo-Chaneton desires to transfer 2,303,505
shares of Common Stock, $1.00 par value per share ("Common Stock") of the
Corporation to Militello Limited;
WHEREAS, Guillermo J. Liberman desires to transfer 1,572,320
shares of Common Stock of El Sitio to SLI.COM, Inc. ("SLI");
WHEREAS, Daniel Rotsztain desires to transfer 7,141 shares of
Preferred Stock, $1.00 par value per share ("Preferred Stock") to Futurit
S.A.;
WHEREAS, pursuant to the Share Purchase Agreement, dated as of
October __, 1999 between IMPSAT Corporation, a Delaware corporation
("IMPSAT") and the Corporation, IMPSAT may acquire up to 3,070,615 shares
of Preferred Stock;
WHEREAS, pursuant to the Subscription Agreement, dated as of
August 31, 1999 between the Corporation and TV Azteca, S.A. de C.V.
("TVA"), TVA has acquired 355,478 shares of Preferred Stock;
WHEREAS, the parties hereto desire to enter into this Amendment to
provide for the addition of Futurit S.A., Militello Limited and TVA as
parties to the Agreement in accordance with Section 3.2 of the Agreement;
WHEREAS, effective as of the date of the First Closing (as defined
in the Share Purchase Agreement), the parties hereto desire to provide for
the addition of IMPSAT as a party to the Agreement in accordance with
Section 3.2 of the Agreement; and
WHEREAS, capitalized terms used herein without definition shall
have the same meanings as set forth in the Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. The definition of "Stockholders" shall be deemed to include
each of Militello Limited, Futurit S.A., Dunas Overseas Ltd., SLI and TVA.
2. Militello Limited, Futurit S.A., Dunas Overseas Ltd., SLI and
TVA agree to be bound by the terms and conditions of the Agreement as if
made a Stockholder therein.
3. Effective as of the date of First Closing, the definition of
"Stockholder" shall be deemed to include IMPSAT.
4. Effective as of the date of First Closing, IMPSAT agrees to be
bound by the terms and conditions of the Agreement as if made a Stockholder
therein.
5. Effective as of the date of the First Closing, Section 2.1(c)
of the Agreement is hereby amended and restated in its entirety to read as
follows:
"The Corporation shall not be required to comply with more than four (4)
Demand Requests, at least one (1) of which shall be reserved for IAMP (El
Sitio) Investments Ltd. (and its affiliates), at least one (1) of which
shall be reserved for the IMPSAT Corporation and at least one (1) of which
shall be reserved for the Initial Stockholders."
6. This Amendment may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument. This Amendment shall be
governed by and construed in accordance with the terms, conditions and
provisions of the Agreement.
7. Except as specifically amended or waived by this Amendment, all
of the terms, covenants and conditions of the Agreement shall remain
unchanged and in full force and effect.
[The rest of this page has been intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement as of the day and year first above written.
EL SITIO, INC.
By: /s/ Roberto Cibrian-Campoy
--------------------------------------------
Title:
Notice Address:
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
with a copy to:
Paul, Hastings, Janofsky & Walker, LLP
399 Park Avenue, 31st Floor
New York, New York 10022
Attn: Neil A. Torpey
Telephone: (212) 318-6034
Telecopier: (212) 318-4090
<PAGE>
T.V. AZTECA, S.A. DE C.V.
By: /s/ Adrian Steckel
--------------------------------------------
Title: CFO
Notice Address:
TV Azteca, S.A. de C.V.
Perifrico Sur, No. 4121
Col. Fuentes de Pedregal
14141 Mexico, D.F.
Attn: Adrian Steckel
Telephone: 011-525420-1302
Telecopier: 011-525420-1409
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Leslie N. Silverman
Telephone: (212) 225-2584
Telecopier: (212) 225-3999
<PAGE>
MILITELLO LIMITED
By: /s/ Roberto Vivo-Chaneton
--------------------------------------------
Title:
Notice Address:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
<PAGE>
FUTURIT S.A.
By: /s/ Felipe Ostrolencki
--------------------------------------------
Title: Attorney-in-fact
Notice Address:
----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
<PAGE>
IAMP (EL SITIO) INVESTMENTS LTD.
By: /s/ Benjamin Moody
--------------------------------------------
Title: FOR WESTLAW LIMITED
Director.
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
<PAGE>
WASHBURN ENTERPRISES INC.
By: /s/ Amaya Ariztoy
--------------------------------------------
Title: Attorney-in-fact
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
<PAGE>
CHESTNUT HILL (EL SITIO), LLC
By: /s/ Michael Greely
--------------------------------------------
Title: SVP
Notice Address:
c/o GCC Investments, Inc.
1300 Boylston Street
Chestnut Hill, MA 02647
Attn: Michael A. Greeley
Telephone: (617) 975-3222
Telecopier: (617) 975-3201
with a copy to:
Phillip J. Szabla
Vice President and General Counsel
GC Companies, Inc.
1300 Boylston Street
Chestnut Hill, MA 02467
Telephone: (617) 264-8098
Telecopier: (617) 264-8206
<PAGE>
TOWER PLUS INTERNATIONAL CORP.
By: /s/ Nicolas Juan
----------------------------------------
Title:
Notice Address:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
with a copy to:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
<PAGE>
ROBERTO CIBRIAN-CAMPOY
By: /s/ Roberto Cibrian-Campoy
--------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
HECTOR SIERRA
By: /s/ Hector Sierra
--------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
By: /s/ Hector R. Bandoni
--------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
By: /s/ Sergio Monti
--------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
QUANTUM DOLPHIN PLC
By: /s/ Marcelo Mindlin
----------------------------------------
Title:
Notice Address:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
<PAGE>
SLI.COM INC.
By: /s/ Guillermo Liberman
----------------------------------------
Title:
Notice Address:
Bouchard 547 Piso 14
Buenos Aires Argentina
Attn: Guillermo Liberman
Telephone: (54 11) 4316-9952
Telecopier: (54 11) 4313
<PAGE>
DUNAS OVERSEAS LTD.
By: /s/ Nicolas Juan
----------------------------------------
Title:
Notice Address:
--------------------------
--------------------------
--------------------------
--------------------------
--------------------------
--------------------------
<PAGE>
DAMIAN SAID
By: /s/ Damian Said
----------------------------------------
Title:
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
ALBERTO E. TAPIA
By: /s/ Alberto E. Tapia
----------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
JULIEN SEVAUX
By: /s/ Julien Sevaux
----------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
GILES DARD
By: /s/ Giles Dard
----------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
RENEE SAENZ ARMAS
By: /s/ Renee Saenz
----------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
GUSTAVO BLUFSTEIN
By: /s/ Gustavo Blufstein
----------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
HELAINE STEDEN
By: /s/ Helaine Steden
----------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
JORGE AMY
By: /s/ Jorge Amy
----------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
ROBERTO J. GARAT
By: /s/ Roberto J. Garat
----------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
<PAGE>
COMPANIA DE INVERSIONES MONTEVIDEO BVI
By: /s/ Marial Ramos
----------------------------------------
Title:
Notice Address:
Plaza Independencia 831/508
Montevideo - Uruguay
Tel - (059829 901-44-2)
-----------------------------
-----------------------------
-----------------------------
<PAGE>
HENRY B. WILSON TRUST
By: /s/ Henry Wilson
----------------------------------------
Title:
Notice Address:
101 Wilshire Blvd
Suite 600
Santa Monica, CA 90401
---------------------------------
---------------------------------
---------------------------------
<PAGE>
SUMMIT INVESTMENT MANAGEMENT LTD.
By: /s/ Horacio Milberg
----------------------------------------
Title: Director
Notice Address:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
<PAGE>
ELINSTAR INTERNATIONAL CORPORATION
By: /s/ Carlos Korn
----------------------------------------
Title:
Notice Address:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
<PAGE>
DANIEL ROTSZTAIN
By: /s/ Daniel Rotsztain
----------------------------------------
Title:
Notice Address:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
<PAGE>
ALFREDO JIMENEZ DE ARECHEGA
By: /s/ Alfredo Jimenez de Arechega
----------------------------------------
Title:
Notice Address:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
<PAGE>
Effective as of the date of First Closing:
IMPSAT CORPORATION
By: /s/ Guillermo Pardo
----------------------------------------
Title: Guillermo Pardo - Proxy
Notice Address:
ImpSat Corporation
Alferez Pareja 256
1107 Buenos Aires, Argentina
Attn: Hector Alonso
Telephone:
Telecopier: (541) 11-328-0140
with a copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004-1202
Attn: Neil M. Goodman
Telephone: (202) 942-5191
Telecopier: (201) 942-5999
<PAGE>
VAMAGRA S.A.
By: /s/ Emilio Gravier
----------------------------------------
Title:
Notice Address:
Piedras 172 4th Floor
---------------------------------
1070 Buenos Aires
---------------------------------
Argentina
---------------------------------
---------------------------------
---------------------------------
---------------------------------
<PAGE>
GUILLERMO LIBERMAN
By: /s/ Guillermo Liberman
----------------------------------------
Title:
Notice Address:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
<PAGE>
Exhibit 10.19
WAIVER AND AMENDMENT NO. 1 TO
STOCKHOLDERS AGREEMENT
THIS WAIVER AND AMENDMENT NO. 1 dated October 6, 1999 (this
"Amendment") to the Stockholders Agreement dated as of July 2, 1999 (the
"Agreement"), by and among IAMP (El Sitio) Investments Ltd., a British
Virgin Islands corporation ("IAMP"), Washburn Enterprises Inc., a British
Virgin Island corporation ("Washburn"), Chestnut Hill (El Sitio), LLC, a
Delaware limited liability company ("Chestnut"), the Initial Stockholders
(as defined therein) and El Sitio, Inc., a British Virgin Islands
corporation ("El Sitio"), is entered into and shall be effective as of the
date hereof by and among IAMP, Washburn, Chestnut, the Initial
Stockholders, Militello Limited, Futurit S.A., SLI.COM, Inc. ("SLI"), Dunas
Overseas Ltd. ("Dunas") and El Sitio, and effective as of the date of the
First Closing (as defined herein) with respect to IMPSAT Corporation
("IMPSAT").
WHEREAS, IAMP, Washburn, Chestnut, the Initial Stockholders, SLI,
Dunas and El Sitio previously entered into the Agreement;
WHEREAS, Roberto Vivo-Chaneton desires to transfer 2,303,505
shares of Common Stock, $1.00 par value per share ("Common Stock") of El
Sitio to Militello Limited;
WHEREAS, Guillermo J. Liberman desires to transfer 1,572,320
shares of Common Stock of El Sitio to SLI;
WHEREAS, Daniel Rotsztain desires to transfer 7,141 shares of
Class A Convertible Preferred Stock, $1.00 par value per share ("Preferred
Stock") to Futurit S.A.;
WHEREAS, Quantum Dolphin PLC has granted a purchase option to
Roberto Cibri-Campoy to purchase 57,128 shares of its Preferred
Stock;
WHEREAS, pursuant to the Share Purchase Agreement dated as ,
1999 (the "Share Purchase Agreement") between IMPSAT and El Sitio, IMPSAT
may acquire up to 3,070,615 shares of Class A Preferred Stock of El Sitio;
WHEREAS, the parties hereto desire to enter into this Amendment to
provide for the addition of each of Futurit S.A. and Militello Limited as
parties to the Agreement in accordance with Section 5.11 of the Agreement;
the addition of IMPSAT, effective as of the date of the First Closing (as
defined in the Share Purchase Agreement) as a party to
<PAGE>
the Agreement in accordance with Sections 5.2 and 5.11 of the Agreement;
and the waiver and amendment of certain provisions of the Agreement in
accordance with Section 5.2 of the Agreement as set forth below;
WHEREAS, capitalized terms used herein without definition shall
have the same meanings as set forth in the Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. The definition of "Stockholders" shall be deemed to include
each of Futurit S.A., Militello Limited, Dunas and SLI.
2. Effective as of the date of the First Closing, the definition
of "Stockholders" shall be deemed to include IMPSAT.
3. Exhibit 1(c) of the Agreement is hereby amended (a) to delete
Roberto Vivo- Chaneton therefrom and substitute Militello Limited therefor,
(b) to delete Guillermo J. Liberman and (c) to include Futurit S.A.
Effective as of the date of the First Closing, Exhibit 1(c) shall be
amended to include IMPSAT.
4. The parties hereto hereby waive the application of Section 3.3
of the Agreement and agree to decline any right they may have to purchase
shares pursuant to Article 40 of El Sitio's Articles of Association for the
transfers by the transferring stockholders set forth on Schedule A of the
number of shares of Covered Stock to the transferees set forth on Schedule
A opposite each such selling stockholders name, all as more fully described
in the recitals hereto.
5. Futurit S.A., Militello Limited, Dunas and SLI agree to be
bound by the terms and conditions of the Agreement as if named a
Stockholder therein.
6. Effective as of the date of the First Closing, IMPSAT agrees to
be bound by the terms and conditions of the Agreement as if named a
Stockholder therein.
7. Effective as of the date of the First Closing, Section 2.1 of
the Agreement is hereby amended and restated in its entirety to read as
follows:
"2.1 BOARD OF DIRECTORS. It is agreed that there shall be up
to nine (9) members and nine (9) alternate members of the Board, all to be
elected at the same time and serving for a term of one fiscal year, and the
Memorandum shall so provide. Each director shall be entitled to vote on all
matters presented to the Board, except as expressly provided herein."
2
<PAGE>
8. Effective as of the date of the First Closing, Section 2.2(a)
of the Agreement is hereby amended and restated in its entirety to read as
follows:
"(a) The Initial Stockholders shall have the right in any
election of directors to the Board to select four (4) directors. Each
Stockholder agrees that the holders of Class A Preferred shall have the
right to nominate five (5) directors (each a "Class A Preferred Director")
to the Board. The Ibero Group shall have the right to nominate two (2)
Class A Preferred Directors for so long as the Ibero Group shall own ten
percent (10%) or more of its current holdings of El Sitio Stock on an
as-converted basis or one (1) for so long as the Ibero Group shall own one
percent (1%) or more of El Sitio Stock on an as-converted basis. If the
Ibero Group owns less than one percent (1%) of El Sitio Stock on an
as-converted basis, the Ibero Group shall have the right to appoint an
observer to the Board, who shall be entitled to participate in the meetings
of the Board, but shall not have any vote. Chestnut shall have the right to
nominate one (1) Class A Preferred Director to the Board for so long as
Chestnut shall own (i) two and one-half percent (2.5%) or more of its
current holdings of El Sitio Stock on an as-converted basis or (ii) one
percent (1%) or more of El Sitio Stock on an as-converted basis. If
Chestnut owns less than one percent (1%) of El Sitio Stock on an
as-converted basis, Chestnut shall have the right to appoint an observer to
the Board, who shall be entitled to participate in the meetings of the
Board, but shall not have any vote. IMPSAT shall have the right to nominate
one (1) Class A Preferred Director to the Board for so long as IMPSAT shall
own (i) two and one-half percent (2.5%) of its current holdings of El Sitio
Stock on an as-converted basis or (ii) one percent (1%) or more of El Sitio
Stock on an as-converted basis. If IMPSAT owns less than one percent (1%)
of El Sitio Stock on an as-converted basis, IMPSAT shall have the right to
appoint an observer to the Board who shall be entitled to participate in
the meetings of the Board, but shall not have any vote. One (1) Class A
Preferred Director will be nominated by the unanimous vote of all of the
directors of El Sitio and shall be independent to any other holder of
common stock or Class A Convertible Preferred Stock."
9. Effective as of the date of the First Closing, Section 2.3(a) of
the Agreement is hereby amended and restated in its entirety to read as
follows:
"(a) Except as provided in Section 2.3(b) below or in the
Memorandum or under applicable law, all actions of the Board shall require
the affirmative vote of five (5) directors. Unless prohibited by law, the
directors shall be permitted to vote on any matter brought before the
Board. The Stockholders and the Corporation agree to take any action
necessary or desirable to effect the foregoing."
10. Effective as of the date of the First Closing, Section 2.3(b) of
the Agreement is hereby amended and restated in its entirety to read as
follows:
3
<PAGE>
"(b) The Stockholders agree that the matters set forth below
will require the affirmative vote of three of the five Class A
Preferred Directors:
(i) any guarantees, loans or contractual obligations
to make loans, in either case made by the Corporation or any Subsidiary
to third parties, in an amount which, jointly or severally, exceeds
$50,000;
(ii) execution by the Corporation or any Subsidiary
of contracts with suppliers or service companies in any amount which
requires annual or single payments which exceed $75,000 above and
beyond any budgeted item in the long term and annual business plans;
(iii) approval of the Corporation's long term
business plan and any material modifications thereto;
(iv) approval of the Corporation's Annual Budget
and any material modifications thereto;
(v) incurrence of debt by the Corporation or any
Subsidiary in amounts not contemplated by the Corporation's long term
business plan and annual business plan;
(vi) granting of Liens (other than purchase money
security interests) on assets (including stock of any Subsidiary) of
the Corporation or any Subsidiary not contemplated by the Corporation's
long term business plan and annual business plan;
(vii) any disposition outside the ordinary course of
business of assets (including stock of any Subsidiary) of the
Corporation or any Subsidiary having a value of more than $100,000
which constitute less than all or substantially all of the assets of
the Corporation;
(viii) any transactions between the Corporation or
any of its Subsidiaries, on the one hand, and any Stockholder or any of
its Affiliates, on the other hand;
(ix) reductions in capital for any reason;
(x) public listing of securities of the Corporation
on a securities exchange (except in connection with the exercise of
demand registration rights pursuant to the Registration Rights
Agreement), other than in connection with a public offering which (x)
raises at least $35.0 million net proceeds for the Corporation, (y) is
made at a price per share at least equal to 3.0 times the conversion
price on the Class A Preferred,
4
<PAGE>
and (z) the shares offered in which are listed on the NASDAQ National
Market System, or any other U.S. national securities exchange.
(xi) issuance of equity securities or securities
convertible into or exchangeable for equity securities of the
Corporation; and
(xii) distribution of dividends by the Corporation.
11. This Amendment may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument. This Amendment shall be
governed by and construed in accordance with the laws of the British Virgin
Islands, without regard to its conflict of law rules.
12. Except as specifically amended or waived by this Amendment,
all of the terms, covenants and conditions of the Agreement shall remain
unchanged and in full force and effect.
[The rest of this page has been intentionally left blank]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement as of the day and year first above written.
EL SITIO, INC.
By: /s/ Guillermo Pardo
----------------------------------
Title: Guillermo Pardo Proxy
Notice Address:
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
with a copy to:
Paul, Hastings, Janofsky & Walker, LLP
399 Park Avenue, 31st Floor
New York, New York 10022
Attn: Neil A. Torpey
Telephone: (212) 318-6034
Telecopier: (212) 318-4090
6
<PAGE>
MILITELLO LIMITED
By: /s/ Roberto Vivo-Chaneton
-------------------------------
Title:
Notice Address:
--------------------------
--------------------------
--------------------------
--------------------------
--------------------------
--------------------------
with a copy to:
--------------------------
--------------------------
--------------------------
--------------------------
--------------------------
--------------------------
7
<PAGE>
FUTURIT S.A.
By: /s/ Felix Ostrolencki
--------------------------------
Title: Attorney-in-fact
Notice Address:
c/o Posadas 1429, Piso 10A
1011 Buenos Aires, Argentina
Attn: Felipe Ostrolencki
Telephone: (54 11) 4447-0312
Telecopier: (54 11) 4749-3315
--------------------------------
--------------------------------
with a copy to:
--------------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
8
<PAGE>
IAMP (EL SITIO) INVESTMENTS LTD.
By: /s/ Benjamin Moody
-----------------------------------
Title: FOR WESTLAW LIMITED
Director
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telecopier: (212) 872-1002
9
<PAGE>
WASHBURN ENTERPRISES INC.
By: /s/ Amaya Anztoy
----------------------------------
Title: Attorney-in-fact
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
10
<PAGE>
CHESTNUT HILL (EL SITIO), LLC
By: /s/ Michael Greeley
-----------------------------------------
Title: SVP
Notice Address:
c/o GCC Investments, Inc.
1300 Boylston Street
Chestnut Hill, MA 02647
Attn: Michael A. Greeley
Telephone: (617) 975-3222
Telecopier: (617) 975-3201
with a copy to:
Phillip J. Szabla
Vice President and General Counsel
GC Companies, Inc.
1300 Boylston Street
Chestnut Hill, MA 02467
Telephone: (617) 264-8098
Telecopier: (617) 264-8206
11
<PAGE>
ROBERTO VIVO-CHANETON
By: /s/ Roberto Vivo-Chaneton
----------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
12
<PAGE>
GUILLERMO J. LIBERMAN
By: /s/ Guillermo J. Liberman
--------------------------------
Notice Address:
Bouchard 547 Piso
Buenos Aires, Argentina
Attn: Mario Janovich
Telephone: (54 11) 4316-9952
Telecopier: (54 11) 4313
13
<PAGE>
TOWER PLUS INTERNATIONAL CORP.
By: /s/ Nicolas Juan
-----------------------------------
Title:
Notice Address:
c/o Nicholas Juan Alonso
Plaza Independencia 811 PB
11100 Montevideo Uruguay
Telephone: (58 92) 902-1515
Telecopier: (58 92) 902-5454
with a copy to:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
----------------------------------
----------------------------------
14
<PAGE>
ROBERTO CIBRIAN-CAMPOY
By: /s/ Roberto Cibrian-Campoy
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
15
<PAGE>
HECTOR A. SIERRA
By: /s/ Hector A. Sierra
--------------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
16
<PAGE>
HECTOR R. BANDONI
By: /s/ Hector R. Bandoni
------------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
17
<PAGE>
SERGIO S. MONTI
By: /s/ Sergio S. Monti
------------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
18
<PAGE>
QUANTUM DOLPHIN PLC
By: /s/ Marcelo Mindlir
----------------------------------------
Title:
Notice Address:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
19
<PAGE>
SLI.COM INC.
By: /s/ Guillermo Liberman
----------------------------------------
Title:
Notice Address:
Bouchard 547 Piso 14
Buenos Aires Argentina
Attn: Guillermo Liberman
Telephone: (54 11) 4316-9952
Telecopier: (54 11) 4313
20
<PAGE>
DUNAS OVERSEAS LTD.
By: /s/ Nicolas Juan
-------------------------------------
Title:
Notice Address:
c/o Nicholas Juan Alonso
Plaza Independencia 811 PB
11100 Montevideo Uruguay
Telephone: (58 92) 902-1515
Telecopier: (58 92) 902-5454
21
<PAGE>
Effective as of the date of First Closing:
IMPSAT CORPORATION
By: /s/ Guillermo Pardo
------------------------------------
Title: Guillermo Pardo Proxy
Notice Address:
ImpSat Corporation
Alferez Pareja 256
1107 Buenos Aires, Argentina
Attn: Hector Alonso
Telephone:
Telecopier: (541) 11-328-0140
with a copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004-1202
Attn: Neil M. Goodman
Telephone: (202) 942-5191
Telecopier: (201) 942-5999
22
<PAGE>
SCHEDULE A
WAIVED TRANSFERS
<TABLE>
<CAPTION>
NO. OF SHARES OF COVERED STOCK TO
TRANSFERRING STOCKHOLDER BE TRANSFERRED TRANSFEREE
<S> <C> <C>
Daniel Rotsztain 7,141 shares of Preferred Stock Futurit S.A.
Guillermo J. Liberman 1,572,320 of Common Stock SLI.COM Inc.
Roberto Vivo-Chaneton 2,303,505 of Common Stock Militello Limited
Quantum Dolphin PLC Up to 57,128 share of Preferred Stock Roberto-Cibrian-Campoy
</TABLE>
A-1
<PAGE>
EXHIBIT 10.20
EXECUTION
COPY
ASSIGNMENT AGREEMENT
IMPSAT S.A., a company duly created under the laws of the Republic of Argentina,
domiciled at 256 Alferez Pareja., city of Buenos Aires, (hereinafter called the
"Assignor"), herein duly represented by Mr. Marcello Girotti, in his capacity as
Vice President of Assignor, pursuant to the documents enclosed as ANNEX A that
is part hereof, party of the one part; and EL SITIO ARGENTINA S.A., a company
duly created under the laws of the Republic of Argentina, domiciled at 845
Belgrano Ave. 4th floor "A", (hereinafter called the "Assignee"), herein duly
represented by Daniel Rotsztain and __________, in their capacity as
attorney-in-fact of Assignee, pursuant to the documents enclosed hereto as ANNEX
B that is a part hereof, party of the second part (the Assignor and the Assignee
are hereinafter jointly called the "Parties"), enter into this Assignment
Agreement (hereinafter the "Agreement") pursuant to the following terms and
conditions.
W I T N E S S E T H
WHEREAS, the Assignor is controlled by IMPSAT Corporation, a corporation duly
organized and existing under the laws of the State of Delaware, United States of
America ("IMPSAT");
WHEREAS, the Assignee is controlled by El Sitio, Inc., a company duly organized
and existing under the laws of the British Virgin Islands ("El Sitio");
WHEREAS, IMPSAT and El Sitio have entered into a Framework Agreement dated
August 4, 1999 (the "Framework Agreement") in which the parties agreed on the
basic terms and conditions of a series of related agreements to be entered into
in connection with the sale of IMPSAT's retail Internet access businesses in
Argentina, Brazil and Colombia to El Sitio;
WHEREAS, the Assignor renders telecommunications services, and has agreed to
assign to the Assignee its contracts (written and oral) (the "Assigned
Contracts" or "Acquired Business") relating to the clients listed on ANNEX C (of
which Annex shall designate the clients subject to contracts that are oral
contracts) who receive Internet access service from the Assignor (the
"Service"); and the Assignee has agreed to pay to the Assignor the Purchase
Price for the Acquired Business, pursuant to the terms and conditions detailed
herein;
<PAGE>
WHEREAS, simultaneously with the execution of this Agreement, the Assignor and
the Assignee are entering into a Services Agreement in the form attached hereto
as ANNEX D (hereinafter called the "Services Agreement") pursuant to which the
Assignor shall render to the Assignee the services that are necessary for the
latter to render the Service to its present and future clients, including
clients listed on ANNEX C (the "Assigned Clients");
WHEREAS, simultaneously with the execution of this Agreement, the Assignor and
the Assignee are entering into a Reseller and Management Agreement in the form
attached hereto as ANNEX E (as herein defined);
WHEREAS, the Assignee will not assume any liabilities or obligations of any
nature whatsoever of Assignor of the Acquired Business arising prior to the date
hereof other than those specified on ANNEX F (each an "Assumed Liability");
NOW, THEREFORE, in consideration of the promises and mutual covenants and
agreements hereinafter contained, the receipt and sufficiency of which is hereby
mutually acknowledged, the Parties hereto agree as follows:
1. DEFINITIONS
Under this Agreement, the following terms shall have the following meaning:
"Annual Effective Rate" means a due rate annually calculated on the
corresponding capital, based on a calendar year of 360 days, based on 12 months
of 30 days each, taking into account the days effectively elapsed, including the
first day and excluding the last day of the corresponding period.
"Assigned Contracts" shall include those contracts between the Assignor and the
clients as set forth on ANNEX C.
"Closing Date" shall mean November 4, 1999.
"Purchase Price" shall have the meaning set forth in Section 2.2.
2. ASSIGNMENT; PAYMENT DATES
2.1 ASSIGNMENT AND PAYMENT OF THE INITIAL PURCHASE PRICE.
(a) Pursuant to this Agreement, and according to the other terms and
conditions established herein, on the Closing Date (i) the Assignor shall assign
to the Assignee the Assigned Contracts, and the Assignee shall acquire from the
Assignor the Assigned Contracts and (ii) the Assignee will pay the Assignor the
Initial Purchase Price (as defined below) in accordance with the terms and
conditions set forth in Section 2.2(a) below.
-2-
<PAGE>
(b) The Assignor hereby grants to the Assignee the non-exclusive
right, fully paid, to use the domain name "impsat1.com.ar" in order to allow the
Assignee to continue rendering services exclusively to the Assigned Clients (the
"Dominion"), for a nine month period from the Closing Date. Before the
expiration of said term, the Assignee shall cease to use and cause the Assigned
Clients to cease in the use of the Dominion. Notwithstanding the aforesaid, the
Assignor shall be solely responsible for the lawful administration of the
Dominion during the nine month period referred above.
2.2 PRICE OF THE ASSIGNMENT. PAYMENT DATES. In consideration for the
assignment of the Assigned Contracts, the Assignee shall pay the Assignor the
Purchase Price. The Purchase Price equals Six Million Two Hundred Thousand U.S.
Dollars (US$6,200,000). Assignee will also be responsible for paying a value
added tax calculated at 21% ("VAT") on the purchase price in the amount of One
Million Three Hundred and Two Thousand U.S. Dollars (US$1,302,000).
The Purchase Price shall be paid by the Assignee to the Assignor as follows:
(a) 85% of the Purchase Price, i.e. Five Million Two Hundred Seventy
Thousand US Dollars (US $5,270,000) (the "Initial Purchase Price") plus
corresponding VAT equal to One Million One Hundred and Six Thousand Seven
Hundred US Dollars (US$ 1,106,700), shall be paid on the Closing Date by the
Assignee to the Assignor through a wire transfer to account number 3601-8798 at
Citibank N.A. (Beneficiary: IMPSAT S.A.) (ABA #021000089) or as otherwise agreed
to by the Parties.
(b) the balance of the Purchase Price, i.e. Nine Hundred Thirty
Thousand U.S. Dollars (US$ 930,000) plus the corresponding VAT equal to One
Hundred Ninety Five Thousand Three Hundred U.S. Dollars (US$195,300) shall be
paid by Assignee to Assignor, beginning on December 5, 1999, in 24 equal
consecutive monthly installments plus an annual 12% interest on the balance,
jointly payable with each installment through a deposit in the account to be
specified by the Assignor to the Assignee (hereinafter called the "Balance").
The Balance, or any portion thereof, outstanding at any time may be prepaid by
the Assignee in full at any time without penalty.
(c) For each day that payment of the Balance is in arrears pursuant to
Section 2.2, the Assignee shall pay to the Assignor interest on loan arrears on
the amount owed at an Annual Effective Rate of 15%.
2.3 PAYMENT IN US DOLLARS; WAIVER OF THE DOCTRINE OF UNFORESEEABILITY.
(a) PAYMENT IN US DOLLARS. All the payments shall be made in
unrestricted US Dollars (hereinafter called "Dollars"), free of discounts due to
transfer costs or any other banking expense. If it is legally impossible to buy
Dollars in the Republic of Argentina, the Assignee shall be able to pay with
Dollars bought abroad or with Pesos, or the current Argentine legal currency.
(hereinafter called "Argentine Currency"). The Assignor shall have the exclusive
right to elect one of the following payment options:
-3-
<PAGE>
(i) exchange rate (bid) of Dollars with Argentine Currency,
pursuant to the quotation of Citibank N.A. at 1:00 p.m. on the payment date,
plus commissions, expenses and taxes on said exchange operation; or
(ii) the actual amount of Argentine Currency necessary to buy, in
Buenos Aires or Montevideo Republic of Uruguay, at the Assignor's option, the
amount of Foreign Bonds of the Republic of Argentina that sold for Dollars in
New York or Montevideo, at the Assignor's exclusive option, plus any commission,
expense and tax on said operation- is necessary to buy, at 1:00 p.m. of the
effective payment date, the amount owed in Dollars. If this cannot be applied,
the exchange rate to buy Dollars with Argentine Currency in New York or
Montevideo, pursuant to the quotation of Citibank N.A., at 1:00 p.m. on the
effective payment date, will be applied.
(b) WAIVER OF THE DOCTRINE OF UNFORESEEABILITY. The Parties expressly
agree that the amounts payable pursuant to this Agreement may significantly vary
due to inflationary or hyperinflationary peaks, or due to an increase of taxes
and/or the variation of interest and/or exchange rates, for any reason. These
unforeseeable and important events that may affect the Parties, are a risk for
this Agreement that the Parties accept and, consequently, wholly assume.
Consequently, none of the Parties hereof shall claim either unforeseeability or
contractual adjustments with regard to the agreed amount or currency, nor as a
consequence of the application of economic emergency systems that may affect
what the Parties hereof have freely agreed to pursuant to this Agreement.
2.4 DELIVERIES. At or before the Closing, the Parties have delivered all
documents required to be delivered by them pursuant to this Agreement or any
other document signed in connection with this Agreement.
2.5 FRAMEWORK AGREEMENT. The Assignor and the Assignee hereby waive their
rights to an adjustment in the Purchase Price on a per subscriber basis as
contemplated by the Framework Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE ASSIGNOR
The Assignor represents and warranties to the Assignee the following:
3.1 CREATION. The Assignor is a duly created company, validly existing,
duly registered, and in good standing pursuant to the laws of the Republic of
Argentina.
3.2 POWER. The Assignor has full corporate authority and capacity to grant
and enter into this Agreement and perform its obligations hereunder and
consummate the transactions contemplated hereby pursuant to the terms and
conditions established herein. The Board of Directors of the Assignor approved
this Assignment, pursuant to the terms and conditions hereof, as established in
the copies certified by a notary public of the pertinent board minutes attached
hereto as ANNEX G.
-4-
<PAGE>
3.3 NON-BREACH.The execution of this Agreement, the performance of the
operations stipulated herein, or the fulfillment by the Assignor of any of the
provisions hereof do not or shall not conflict with, or result in the breach of,
any organizational document of the Assignor including its Bylaws, copies of
which are included as ANNEX A.
3.4 BINDING OBLIGATION. This Agreement constitutes a binding, valid and
legal obligation of the Assignor and is enforceable against it pursuant to its
terms except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium and other laws relating to or affecting
creditor's rights generally or by equitable principles.
3.5 TITLE. Except as set forth in the Assigned Contracts, the Assigned
Contracts are free and clear of all pledges, security interests, liens,
encumbrances and claims of any kind, and the Assignee will acquire the Assigned
Contracts free and clear of all pledges, security interests, liens,
encumbrances, or claims, except as created by Assignee.
3.6 CONTRACTS. ANNEX H contains the material terms of the form of written
contract used by the Assignor with the Assigned Clients; provided, however, that
some Assigned Clients have oral contracts and some written contracts have been
orally amended. None of the oral contracts are on terms that are materially
different than those found in the written contracts, and none of the oral
amendments materially change the economic terms of any of the written contracts
except as set forth on ANNEX C. Except in such cases as would not in the
aggregate have a material adverse effect on the Acquired Business (a) the
Assigned Contracts are valid, binding and enforceable in accordance with their
terms, (b) the Assignor has performed, and is now performing, the obligations
of, and are not in default (and would not by the lapse of time or the giving of
notice be in default) under any of the Assigned Contracts, (c) no parties have
notified the Assignor in writing of any claim, dispute or controversy or
withheld payments from the Assignor with respect to any of the Assigned
Contracts, (d) no other party to an Assigned Contract is in default or has
breached any term or provision of such Assigned Contract that has not previously
been cured, (e) the Assignor has not received notice or warning of alleged
nonperformance, delay in delivery or other noncompliance with respect to any of
the Assigned Contracts, and (f) the Assignor has not received any notice that
any Assigned Client intends to totally or partially terminate any of the
Assigned Contracts. For purposes of this Section 3.6, a "material adverse effect
on the Acquired Business" means an effect which would result in a diminution in
the revenues of the Acquired Business of more than five percent (5%), as
compared to the revenues as of July 31, 1999.
3.7 NO OTHER PURCHASERS. There is no agreement, option or other right or
privilege outstanding in favor of any person for the purchase from Assignor of
the Acquired Business or any aspect of the Acquired Business.
3.8 COMPLIANCE. With respect to the Acquired Business, the Assignor has
complied in all material respects with all statutes, ordinances, codes, laws,
rules, regulations or orders during all times prior to the Closing Date.
3.9 CLIENTS. As of July 31, 1999, the Assignor had agreements with the
number of
-5-
<PAGE>
paying clients for receipt of dial-up access services identified in the Deloitte
& Touche report attached hereto as ANNEX I.
3.10 NO CONSENTS. Except to the extent that licenses and any other permits
required for the Assignee to provide the telecommunications value added
services, commonly called Internet, have not been received from the SECRETARIA
DE COMUNICACIONES of the Republic of Argentina, there are no governmental
filings, registrations, consents, approvals, authorizations or orders necessary
for the execution, delivery and performance of this Agreement by the Assignor
and the transactions contemplated hereby or to ensure the legality, validity,
enforceability or admissibility in the Republic of Argentina of this Agreement.
3.11 NO PENDING ACTIONS, PROCEEDINGS OR INVESTIGATIONS. There are no
pending, or to the best of Assignor's knowledge, threatened, judicial or
administrative actions, proceedings or investigations which question the
validity of this Agreement or question the action to be taken by Assignor in
connection with this Agreement. There is no material legal action pending or
threatened with respect to any of the Assigned Contracts.
3.12 NO BROKERS. The Assignor has not retained any broker, finder or agent
or agreed to pay any brokerage or similar fee with respect to the transactions
contemplated hereby.
3.13 NO MATERIAL ADVERSE CHANGE. To Assignor's knowledge, there has been no
material adverse change to the Acquired Business, results of operations,
financial conditions or prospects of the Acquired Business as a whole since July
31, 1999. As used in this Agreement, the phrase "material adverse change to the
Acquired Business", excludes any change or event which generally affects the
Internet industry.
3.14 NO CHANGE IN ANY LAW. To the knowledge of the Assignor, there is no
pending or threatened change in any law which materially affects or could
materially affect the Acquired Business.
3.15 NO MISLEADING STATEMENTS. The annexes and the representations and
warranties of this Agreement made pursuant to this Section 3, are and shall at
the Closing Date be true, correct and complete in all material aspects, and this
Agreement, its annexes and representations and warranties of this Agreement, do
not contain and shall not contain any statement whatsoever that may be
incorrect, incomplete, false or misleading as regards the facts or acts
established in said representations and warranties.
4. REPRESENTATIONS AND WARRANTIES OF THE ASSIGNEE
The Assignee hereby represents and warranties to the Assignor the following:
4.1 CREATION. The Assignee is a duly created company, validly existing and
duly registered pursuant to the laws of the Republic of Argentina.
-6-
<PAGE>
4.2 POWER. The Assignee has full corporate authority and capacity to enter
into this Agreement and perform its obligations hereunder, consummate the
transactions contemplated hereby, pursuant to the terms and conditions
established herein and shall take all the corporate measures required to
authorize the execution, delivery and performance of this Agreement and the
fulfillment of the operations stipulated therein; and this Agreement constitutes
a legal, valid and binding obligation of the Assignee, enforceable against it
pursuant to its terms except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, moratorium and other laws relating to or
affecting creditor's rights generally or by equitable principles. The Board of
Directors of the Assignee has approved the acquisition of the Acquired Business,
pursuant to the terms and conditions hereof, according to the copies certified
by notary public of the pertinent Board minutes attached hereto as ANNEX K.
4.3 NON-BREACH. Except to the extent that licenses and any other permits
required for the Assignee to provide the telecommunications value added
services, commonly called Internet, have not been received from the
SECRETARIA DE COMUNICACIONES of the Republic of Argentina, the execution of
this Agreement, the performance of the operations stipulated herein, or the
fulfillment by the Assignee of any of the provisions hereof: (i) do not breach
or shall not breach, or shall not be in conflict with or result in the breach of
any law, executive order, regulation, ordinance or any other provision or shall
constitute a breach (or a fact that, through notice or the lapse of time, or
both, may constitute a breach) of any term or provision of, or shall become a
breach under, any agreement of which the Assignee may be a party or to which its
business, property or assets may be subject; (ii) are not or shall not be in
conflict with, or shall result in the breach of the Bylaws of the Assignee,
copies of which are included as ANNEX B.
4.4 NO MISLEADING STATEMENTS. The representations and warranties of this
Agreement made pursuant to this Section 4, are and shall at the Closing Date be
true, correct and complete in all their aspects, and do not contain and shall
not contain any statement whatsoever that may be incorrect, incomplete, false or
misleading as regards the facts or acts established in said representations and
warranties.
5. INVOICING, ASSIGNMENT OF RIGHTS, DISTRIBUTION OF SUBSCRIPTIONS
5.1 INVOICING. Subject to the terms and conditions of the Reseller and
Management Agreement, the invoicing with respect to the Acquired Business and
the collection of any and all fees shall be made by the Assignee as of the
Closing Date.
5.2 ASSIGNMENT OF AUTOMATIC DEBITS. Within forty-five (45) days after the
Closing Date, the Assignor shall deliver to the Assignee a notice addressed to
the Banks and/or credit card companies included in ANNEX L, requesting that the
automatic debits with respect to the Acquired Business corresponding to the
rendering of the Service, be done immediately in favor of the Assignee instead
of the Assignor, and will take such further actions as Assignee
-7-
<PAGE>
may reasonably request in respect of the foregoing.
5.3 PRO-RATED FEES. Because the Closing Date does not coincide with the
last day of the month, the Parties agree to distribute fees collected with
respect to the Assigned Contracts for the month of the Closing Date as follows:
(i) the Assignor shall receive pro-rated fees based on the period as from the
first day of the month up to and including the Closing Date; and (ii) the
Assignee shall receive pro-rated fees based on the period from after the Closing
Date until the last day of the month.
(a) As regards those clients to whom the Service is invoiced in
advance, the Assignor shall receive in trust for and deliver to the
Assignee the amounts corresponding to the Service provided after the
Closing Date as long as it has effectively received them from the Clients
and within ten working days as from the receipt of such amounts.
(b) As to the Clients to whom the Service is invoiced on a monthly
basis, the Assignee shall receive in trust for and deliver to the Assignor
the amounts corresponding to the Service provided before or on the Closing
Date as long as it has effectively received them from the Clients and
within ten working days as from the reception of the amounts.
5.4 CALCULATION OF PROPORTIONAL FEE. The calculation of the proportional
fee shall be obtained by dividing the fee period described in Section 5.3
corresponding to such Assigned Contracts by thirty-one.
5.5 LIABILITY OF THE ASSIGNOR.
(a) The Assignor shall have no responsibility in the event that any
Assigned Client at any time on or after the Closing Date terminates its Assigned
Contract or its commercial relationship with the Assignee for any reason
whatsoever, and the Assignee shall have no claims against the Assignor in
respect to any such termination.
(b) The Assignor makes no warranty or guarantee nor does the Assignor
assume any liability whatsoever for the financial or economic condition of any
Assigned Client or for the payment of any amounts owing in respect of any of the
Assigned Contracts from and after the Closing Date.
6. CONDITIONS TO CLOSING
6.1 CONDITIONS OF OBLIGATIONS OF THE ASSIGNEE. The obligation of the
Assignee to purchase and pay for the Assigned Contracts is subject to the
fulfillment in all material respects prior to the date hereof of the following
conditions, any of which may be waived in whole or in part by the Assignee:
(a) The representations and warranties of the Assignor under this
Agreement
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<PAGE>
shall be true and correct in all material respects on the Closing Date without
regard to any materiality qualifier set forth in any representation and warranty
contained herein.
(b) The Assignor shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with by
the Assignor on or before the Closing Date.
(c) The Parties shall have entered into a Reseller and Management
Agreement in the form attached hereto as ANNEX E.
(d) No governmental body or any other person shall have issued an
order which shall then be in effect restraining or prohibiting the completion of
the transactions contemplated hereby, nor shall any such order be threatened or
pending.
(e) Since July 31, 1999 until the Closing Date, there shall not have
been a material adverse change to the Acquired Business. "Material adverse
change to the Acquired Business" means any event, circumstance, condition, fact,
effect or other matter which has had or could reasonably be expected to have a
material adverse effect (i) on the assets, liabilities, prospects, results of
operations or condition (financial or otherwise) of the Acquired Business or
(ii) on the ability of the Assignor to perform on a timely basis any material
obligation under this Agreement or to consummate the transactions contemplated
hereby.
(f) The Assignor shall have delivered to the Assignee a certificate
dated the Closing Date, executed by its Chief Executive Officer, certifying the
satisfaction of the conditions specified in paragraphs 6.1(a), (b), (c), (d) and
(e).
(g) The Assignee shall have received from Nicholson & Cano, counsel
for the Assignor, an opinion dated the Closing Date, in the form attached as
ANNEX J.
(h) The parties shall have executed the Services Agreement and the
Reseller and Management Agreement and any document contemplated by the foregoing
agreements.
(i) The parent of Assignor shall have entered into the Guaranty in the
form attached hereto as ANNEX N.
6.2 CONDITIONS OF OBLIGATIONS OF THE ASSIGNOR. The obligation of the
Assignor hereinunder is subject to the fulfillment in all material respects
prior to the date hereof of the following conditions, any of which may be waived
in whole or in part by the Assignor:
(a) The representations and warranties of the Assignee under this
Agreement shall be true and correct in all material respects on the Closing
Date.
(b) The Assignee shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with by
the Assignee on or before the Closing Date.
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(c) The Assignee shall have obtained any and all consents, waivers,
approvals or authorizations, with or by any governmental body or any other
person required for the valid execution of this Agreement and the transactions
contemplated hereby. Notwithstanding the foregoing, the Assignor expressly
acknowledges that the Assignee has not yet obtained the licenses and/or other
permits required to provide telecommunications value added services in
Argentina, and the fact that such licenses or consents have not yet obtained
shall not be deemed as a failure of any condition contained herein.
(d) No governmental body or any other person shall have issued an
order which shall then be in effect restraining or prohibiting the completion of
the transactions contemplated hereby, nor shall any such order be threatened or
pending.
(e) The parent of Assignee shall have entered into the Guaranty in the
form attached hereto as ANNEX N.
(f) The parties shall have executed the Services Agreement and the
Reseller and Management Agreement and any document contemplated by the foregoing
agreements.
7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties made by the Assignor shall survive the
execution and delivery of this Agreement and the completion of the transactions
contemplated herein.
8. INDEMNIFICATION
8.1 INDEMNIFICATION BY ASSIGNOR. The Assignor shall indemnify and hold
harmless the Assignee and/or each of its directors, officers, agents, employees,
advisers and representatives from and against any losses, expenses, claims,
damages or liabilities of whatever nature, joint or several, including without
limitation reasonable costs of investigation and reasonable legal fees and
expenses of legal counsel to which the Assignee and/or each of its directors,
officers, agents, employees, advisers and representatives may become subject,
which arise out of or are based upon:
(a) any representation or warranty of the Assignor made herein not
having been materially true, complete and accurate when made;
(b) any covenant made herein by the Assignor not having been complied
with;
(c) any liability with respect to the Acquired Business for taxes
including related liabilities, penalties, fines, additions and interest in
respect of any taxable period ending on or prior to the Closing Date; or
(d) any liability or obligation that is not an Assumed Liability or
that is attributed to the Acquired Business related to the period prior to the
Closing Date.
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The Assignor's obligations to indemnify for the Assignee's losses under this
agreement shall accrue only if the aggregate amount of such losses exceeds one
percent of the Purchase Price (or $62,000), and the Assignor shall be liable for
all such losses, including such initial one percent amount; provided, however,
that the maximum liability of the Assignor under this Section 8.1 shall not
exceed the Purchase Price.
8.2 INDEMNIFICATION BY ASSIGNEE. The Assignee shall indemnify and hold
harmless the Assignor and each of its directors, officers, agents, employees,
advisers and representatives from and against any losses, expenses, claims,
damages or liabilities, joint or several, including without limitation
reasonable costs of investigation and reasonable legal fees and expenses of
legal counsel to which the Assignor and/or each of its directors, officers,
employees, advisers and representatives may become subject, which arise out of,
or are based upon:
(a) any representation or warranty of the Assignee made herein not
having been materially true, complete and accurate when made;
(b) any covenant made herein by the Assignee not having been complied
with;
(c) any liability with respect to the Acquired Business for taxes
including related liabilities, penalties, fines, additions and interest in
respect of any taxable period ending after the Closing Date; or
(d) any Assumed Liability and any liability or obligation attributed
to the Acquired Business related to the period after the Closing Date.
The Assignee's obligations to indemnify the Assignor for losses under this
Agreement shall accrue only if the aggregate amount of such losses exceeds one
percent of the Purchase Price (or $62,000), and in such event Assignee shall be
liable for all such losses, including such initial one percent amount; provided,
however, that the maximum liability of the Assignee under this Section 8.2 shall
not exceed the Purchase Price. The one percent threshold shall not apply to any
default of the Assignee under Section 2.2(b) of this Agreement, and Assignee
shall be liable for all losses as a result of a default under Section 2.2.
8.3 INDEMNIFICATION PROCEDURE
(a) In the case of any claim asserted by a third party against a party
entitled to indemnification under this Agreement (the "Indemnified Party"),
notice shall be given by the Indemnified Party to the indemnifying party (the
"Indemnitor") promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and the Indemnified Party shall
permit the Indemnitor (at Indemnitor's expense) to assume the defense of any
claim or any litigation resulting therefrom, provided that (i) the counsel for
the Indemnitor who shall conduct the defense of such claim or litigation shall
be reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party
may participate in such defense at such Indemnified Party's expense, and (iii)
the omission by any Indemnified Party to give notice as provided herein shall
not relieve the Indemnitor of its
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indemnification obligation under this Agreement except to the extent that such
omission results in a failure of actual notice to the Indemnitor and the
Indemnitor is materially damaged as a result of such failure to give notice.
Except with the prior written consent of the Indemnified Party, the Indemnitor,
in the defense of any such claim or litigation, shall not consent to entry of
any judgment or order, interim or otherwise, or enter into any settlement that
provides for injunctive or other nonmonetary relief affecting the Indemnified
Party or that does not include as an unconditional term thereof the giving by
each claimant or plaintiff to such Indemnified Party of a release from all
liability with respect to such claim or litigation. In the event that the
Indemnified Party shall in good faith determine that the conduct of the defense
of any claim subject to indemnification hereunder or any proposed settlement of
any such claim by the Indemnitor might be expected to affect adversely the
Indemnified Party's tax liability or the ability of the Indemnified Party or any
of its subsidiaries to conduct its business, or that the Indemnified Party may
have available to it one or more defenses or counterclaims that are inconsistent
with one or more of those that may be available to the Indemnitor in respect of
such claim or any litigation relating thereto, the Indemnified Party shall have
the right at all times to take over and assume control over the defense,
settlement, negotiations or litigation relating to any such claim at the sole
cost of the Indemnitor, provided that if the Indemnified Party does so take over
and assume control, the Indemnified Party shall not settle such claim or
litigation without the written consent of the Indemnitor, such consent not to be
unreasonably withheld. In the event that the Indemnitor does not accept the
defense of any matter as above provided, the Indemnified Party shall have the
full right to defend against any such claim or demand and shall be entitled to
settle or agree to pay in full such claim or demand. Notwithstanding the
foregoing, the Indemnitor shall still provide indemnification to the Indemnified
Party. In any event, the Indemnitor and the Indemnified Party shall cooperate in
the defense of any claim or litigation subject to this Section and the records
of each shall be available to the other with respect to such defense.
(b) The obligations of the parties under this Section shall survive
the execution and delivery of this Agreement for a period of two (2) years.
9. EXPENSES
9.1 ASSIGNOR'S EXPENSES. The Assignor shall pay all the costs and expenses
including, but not limited to, the fees and expenses of lawyers, accountants and
any other advisor hired by it and any other expenses incurred by the Assignor
related to this Agreement.
9.2 ASSIGNEE'S EXPENSES. The Assignee shall pay all the costs and expenses
including, but not limited to, the fees and expenses of lawyers, accountants and
any other advisor hired by it and any other expenses incurred by the Assignee
related to this Agreement.
10. MISCELLANEOUS
10.1 COMPLETE AGREEMENT. This Agreement and its annexes contains the
complete
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agreement between the Parties as regards the operations stipulated therein and
replaces all the negotiations, depositions, statements, commitments, offers and
agreements, written or oral, entered into between the Parties before the date
hereof. No waiver or modification or amendment of any provision of this
Agreement shall be in force, unless it is made in writing and is duly signed by
the Parties.
10.2 SPECIFIC PERFORMANCE. In the event either party fails to close the
transactions contemplated by this Agreement for any reason other than a material
breach of this Agreement by the other party, each party shall have the right,
among other remedies, to specifically enforce this Agreement. Such remedy,
however, shall not be exclusive and shall be in addition to any other remedies
which the other party may have under this Agreement or otherwise.
10.3 COPIES. This Agreement is signed in 4 copies of the same tenor in the
English language and 4 copies of the same tenor in the Spanish language, each of
which shall be considered an original and only valid if they have all the
signatures of the Assignor and the Assignee. In the event of a difference
between the English and Spanish versions, the Spanish version shall prevail.
10.4 APPLICABLE LAW AND JURISDICTION. The validity, duration and
construction of this Agreement shall be exclusively ruled by the laws of the
Republic of Argentina. The Parties agree that in the event that any dispute,
controversy or difference arises as a consequence of this Agreement and is not
resolved within ten days after such dispute, controversy or difference is
brought to the attention of both parties, the Parties agree to submit the
decision to arbitration as set forth below:
(a) Any dispute, controversy or claim resulting from or related to any
of the provisions of this Agreement, or its interpretation, execution,
compliance, violation, termination or validity, including without limitation
whatsoever, this present section, shall be solely and definitively resolved
through arbitration. The Parties shall unify all the pending disputes, if any,
in one single arbitration procedure.
(b) All matters submitted to arbitration shall be resolved by a sole
arbitrator jointly appointed by both Parties. The arbitrator shall proceed in
accordance with the rules of the Arbitration Court of the Stock Exchange of the
City of Buenos Aires, which both Parties acknowledge and accept. In case the
Parties fail to agree on the designation of the arbitrator, they shall submit
the controversy to the Arbitration Court of the Stock Exchange of the City of
Buenos Aires, which shall resolve the controversy in accordance with its rules
of arbitration.
(c) The arbitrator's decision shall be deemed final and binding upon
the Parties, and the execution of the arbitration award may be brought to any
competent court of law. The Parties expressly waive their rights to file
judicial claims or defenses against the result of the arbitration procedure.
(d) The losing party in the arbitration shall pay for all its
expenses, and for the
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expenses of the other party, even when the latter has not so requested.
10.5 NOTICES. All notices, petitions, demands for performance and other
communications pursuant to this Agreement shall be in writing and in the
following due way:
<TABLE>
<S> <C>
To the Assignor: To the Assignee:
IMPSAT S.A. EL SITIO ARGENTINA S.A.
Alferez Pareja 256 Belgrano Avenue 845, 4th Floor
Buenos Aires, Argentina 1092 Buenos Aires, Argentina
Attn: Hector Alonso Attn: Roberto Cibrian-Campoy
With copy to: With copy to:
Arnold & Porter Paul, Hastings, Janofsky & Walker LLP
555 12th Street, N.W. 399 Park Avenue
Washington, D.C. 20004-1202 New York, NY 10022
Attn: Neil M. Goodman Attn: Neil A. Torpey
Mark G. Pedretti
And to: And to:
Nicholson & Cano Estudio Marval, O'Farrell & Mairal
San Martin 140, 14th Floor Av. Leandro N. Alem 928, 7th Floor
1004 Buenos Aires, Argentina 1001 Buenos Aires, Argentina
Attn: Mariana Rawson Paz, Esq. Attn: Alberto J. Rivera
</TABLE>
10.6 ADDRESSES. The addresses of the Parties set forth in Section 10.5 are
the ones that the Parties establish for the purposes of this Agreement. Any of
the Parties hereto may change its address to any other within the Federal
Capital City with previous notice to the other Party specifying the new address,
but said change shall not be considered until the notice of change is actually
received by the other Party.
10.7 FURTHER ASSURANCES. The Assignee agree to execute and deliver such
other documents or agreements and to take action as may be necessary or
desirable for the implementation of this Agreement and the consummation of the
transactions contemplated hereby.
10.8 SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in effect.
10.9 COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.10 CONFIDENTIALITY. No party, without the consent of the other party,
shall disclose to any third party the existence of this Agreement, its contents
or any other confidential
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information to which it had knowledge as a result of this Agreement, except as
strictly to the extent required by any law, rule or regulation or judicial
process.
10.11 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the Parties and their respective successors and assigns.
This Agreement shall not be assignable or otherwise transferable by any party
hereto without the prior written consent of the other parties hereto, and any
purported assignment or other transfer without such consent shall be void and
unenforceable; provided, that the Assignee may assign this Agreement to any
affiliate of such Assignee, but any such assignment shall not relieve the
Assignee of its obligations hereunder.
10.12 HEADINGS. The headings of the Terms included in this Agreement are
for the Parties' reference and shall not affect the meaning or interpretation of
this Agreement. The use of the singular or masculine shall include the plural
and feminine and the use of the plural and feminine shall include the singular
and masculine, when necessary due to the context.
10.13 TRANSLATION. This Agreement shall only be executed in the English
version, but a Spanish translation in a form satisfactory to Assignor and
Assignee shall be prepared immediately after its signature.
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IN AGREEMENT THEREOF, the parties sign this Assignment Agreement in the City of
Buenos Aires, on the 5th day of November, 1999.
IMPSAT S.A
- -----------------------
Name:
Title:
EL SITIO ARGENTINA S.A.
- -----------------------
Name:
Title:
EL SITIO ARGENTINA S.A.
- -----------------------
Name:
Title:
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<PAGE>
ANNEX A ASSIGNOR'S LEGAL STATUS. ASSIGNOR'S BYLAWS
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<PAGE>
ANNEX B ASSIGNEE'S LEGAL STATUS. ASSIGNEE'S BYLAWS
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<PAGE>
ANNEX C LIST OF CLIENTS AND SUBSCRIPTION OF EACH CLIENT
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ANNEX D FORM OF SERVICES AGREEMENT
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ANNEX E FORM OF RESELLER AND MANAGEMENT AGREEMENT
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ANNEX F ASSUMED LIABILITIES
NONE
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ANNEX G CERTIFIED COPY OF THE MINUTES OF THE BOARD OF DIRECTORS
OF THE ASSIGNOR THAT APPROVED THIS AGREEMENT
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ANNEX H FORM OF WRITTEN CONTRACT
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ANNEX I DELOITTE & TOUCHE AUDIT REPORT
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ANNEX J OPINION OF COUNSEL
FORM OF OPINION OF COMPANY'S COUNSEL
Gentlemen:
This opinion is furnished to you pursuant to Section 6.1(g) of the
Assignment Agreement dated as of , 1999 (the "Agreement") between Impsat S.A.
(the "Assignor") and El Sitio Argentina S.A. (the "Assignee"). Terms defined in
the Agreement are used herein as therein defined.
We have acted as counsel for the Assignor in connection with the
preparation, execution and delivery of the Agreement.
In that connection we have examined:
(1) the Agreement; and
(2) the corporate documents of the Assignor.
Based upon the foregoing, we, having regard for legal considerations we
deem relevant, are of the opinion that:
(a) The Assignor is a company validly existing and in good standing
under the laws of the Republic of Argentina.
(b) The Agreement is a legal, valid and binding obligation of the
Assignor, enforceable against the Assignor in accordance with its terms, except
to the extent that the enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, moratorium, CONCORDATA, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally.
(c) Except as set forth in the Annexes to the Agreement or otherwise
specified in the Agreement, there are (i) to our knowledge, no material pending
or threatened action, suit, claim, litigation or governmental proceedings or
investigations involving the Acquired Business off any nature, in law or equity;
(ii) no preemptive, contractual or similar rights to purchase or otherwise
acquire the Acquired Business, except pursuant to the Agreement; and (iii) no
liens, pledges, security interest and encumbrances of the Acquired Business
imposed by any Argentine statute, or to our knowledge, any agreement to which
the Assignor is a party or any order of any court or any government agency to
which the Assignor is subject.
(d) The execution, delivery and performance by the Assignor of the
Agreement, and the compliance with the provisions thereof by the Assignor, do
not:
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(i) Violate to our knowledge any ruling, writ, injunction,
order, judgment or decree of any court, administrative
agency or other governmental body applicable to the Acquired
Business or its properties or assets; or
(ii) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice
or lapse of time, or both) a default (or give rise to any
right of termination, cancellation or acceleration) or
result in the creation of any lien, security interest,
charge or encumbrance upon the Acquired Business under any
agreement, document, instrument, contract, note indenture,
mortgage or lease to which the Assignor is known by us to be
a party or under which the Assignor or any of its assets is
known by us to be bound or affected, except for a default
under an Assigned Contract.
(e) Except for the approval required for the ISP License by
[_________], and with respect to (ii) of this paragraph 2(e) any approvals
required under an Assigned Contract, no authorization, consent, approval or
other order of, or declaration to or filing with, any governmental agency or
body, and to our knowledge, no consent, waiver, or authorization under any
agreement, instrument, contract, note, indenture, mortgage or lease to which the
Assignor is known by us to be a party or under which the Assignor or any of
their assets is known by us to be bound or affected, is required for: (i) the
valid authorization, execution, delivery and performance by the Assignor of the
Agreement, or (ii) the valid authorization, sale and delivery of the Acquired
Business, except for the authorization given under the _______ Meeting of the
Assignor held on _________, 1999.
(f) The Assignor has the necessary corporate power and authority to
own its properties and conduct its businesses as presently conducted, to enter
into the Agreement, and consummate the transactions contemplated thereby.
(g) All corporate action required by the Assignor in order to
authorize the execution, delivery and performance of the Agreement and the
consummation of the transactions contemplated thereby by the Assignor has been
duly and validly taken.
(h) The execution and delivery of the Agreement does not violate the
bylaws of the Assignor.
This opinion is given only as of the date hereof and is addressed only
to and is provided solely for the benefit of the addressees listed herein. It
may not be delivered to or relied upon by any other person without our express
consent, and is strictly limited to the matters stated herein and is not to be
used or extended by implication to any other matter.
This opinion is being rendered based on the legal provisions
applicable in Argentina as of the date hereof. We assume no obligation to
supplement this opinion if any applicable law changes after the date hereof or
if we become aware of any facts that might
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change the opinions expressed herein after the date hereof.
Very truly yours,
-----------------------------
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<PAGE>
ANNEX K CERTIFIED COPY OF THE MINUTES OF THE BOARD OF DIRECTORS
OF THE ASSIGNEE THAT APPROVED THE PURCHASE OF THE CLIENTS
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ANNEX L LIST OF BANKS AND CREDIT CARDS
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<PAGE>
ANNEX M GUARANTY OF ASSIGNOR'S PARENT
GUARANTY
FOR VALUE RECEIVED, and in consideration therefor, and as an inducement to
EL SITIO ARGENTINA S.A., a company duly created under the laws of the Republic
of Argentina ("El Sitio") to enter into that certain Assignment Agreement (the
"Agreement"), dated as of , 1999, by and between El Sitio and IMPSAT S.A., a
company duly created under the laws of the Republic of Argentina ("IMPSAT"), the
undersigned, being the parent of IMPSAT, being familiar with the Agreement,
unconditionally guarantees to El Sitio the full performance and observance of
all covenants, conditions, agreements and obligations of IMPSAT under the
Agreement without requiring any notice of non-payment or non-performance in
order to charge the undersigned therefor, which notice the undersigned hereby
expressly waives. El Sitio shall have the right to bring a cause of action
seeking indemnification under the Agreement directly against the undersigned
without being obligated to first bring a cause of action or exhaust its remedies
against IMPSAT. The undersigned expressly agrees that the validity of this
Guaranty and the obligations of the undersigned shall in no way affect or
otherwise impair the right of IMPSAT or the undersigned to contest any claim for
indemnification by El Sitio under the Agreement. The undersigned further
covenants and agrees that this Guaranty shall remain and continue in full force
and effect regardless of any modification or amendment of the Agreement except
to the extent the undersigned's obligations hereunder are specifically modified
or amended.
This Guaranty shall be governed by the laws of the State of Delaware,
United States of America.
IMPSAT CORPORATION
By: _____________________________
Name:
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ANNEX N GUARANTY OF ASSIGNEE'S PARENT
GUARANTY
FOR VALUE RECEIVED, and in consideration therefor, and as an inducement to
IMPSAT S.A., a company duly created under the laws of the Republic of Argentina
("IMSPAT"), to enter into that certain Assignment Agreement (the "Agreement"),
dated as of , 1999, by and between El Sitio Argentina S.A., a company duly
created under the laws of the Republic of Argentina ("El Sitio"), and IMPSAT,
the undersigned, being the parent of El Sitio, being familiar with the
Agreement, unconditionally guarantees to IMPSAT the full performance and
observance of all covenants, conditions, agreements and obligations of El Sitio
under the Agreement without requiring any notice of non-payment or
non-performance in order to charge the undersigned therefor, which notice the
undersigned hereby expressly waives. IMPSAT shall have the right to bring a
cause of action under the Agreement directly against the undersigned without
being obligated to first bring a cause of action or exhaust its remedies against
El Sitio. The undersigned expressly agrees that the validity of this Guaranty
and the obligations of the undersigned shall in no way affect or otherwise
impair the right of El Sitio or the undersigned to contest any claim by IMPSAT
under the Agreement. The undersigned further covenants and agrees that this
Guaranty shall remain and continue in full force and effect regardless of any
modification or amendment of the Agreement except to the extent the
undersigned's obligations hereunder are specifically modified or amended.
This Guaranty shall be governed by the laws of the State of Delaware,
United States of America.
EL SITIO, INC.
By: ______________________________
Name:
Title:
-32-
<PAGE>
ASSIGNMENT AGREEMENT
BY AND BETWEEN
EL SITIO ARGENTINA S.A.
AND
IMPSAT S.A.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS....................................................................................... 2
2. ASSIGNMENT; PAYMENT DATES......................................................................... 2
2.1 Assignment and Payment of the Initial Purchase Price..................................... 2
2.2 Price of the Assignment. Payment Dates................................................... 3
2.3 Payment In US Dollars; Waiver Of The Doctrine Of Unforeseeability........................ 3
2.4 Deliveries............................................................................... 4
2.5 Framework Agreement...................................................................... 4
3. REPRESENTATIONS AND WARRANTIES OF THE ASSIGNOR.................................................... 4
3.1 Creation................................................................................. 4
3.2 Power.................................................................................... 4
3.3 Non-Breach............................................................................... 4
3.4 Binding Obligation....................................................................... 5
3.5 Title.................................................................................... 5
3.6 Contracts................................................................................ 5
3.7 No Other Purchasers...................................................................... 5
3.8 Compliance............................................................................... 5
3.9 Clients.................................................................................. 5
3.10 No Consents.............................................................................. 5
3.11 No Pending Actions, Proceedings or Investigations........................................ 6
3.12 No Brokers............................................................................... 6
3.13 No Material Adverse Change............................................................... 6
3.14 No Change In Any Law..................................................................... 6
3.15 No Misleading Statements................................................................. 6
4. REPRESENTATIONS AND WARRANTIES OF THE ASSIGNEE.................................................... 6
4.1 Creation................................................................................. 6
4.2 Power.................................................................................... 6
4.3 Non-Breach............................................................................... 7
4.4 No Misleading Statements................................................................. 7
5. INVOICING, ASSIGNMENT OF RIGHTS, DISTRIBUTION OF SUBSCRIPTIONS.................................... 7
5.1 Invoicing................................................................................ 7
5.2 Assignment of Automatic Debits........................................................... 7
5.3 Pro-rated Fees........................................................................... 7
5.4 Calculation of Proportional Fee.......................................................... 8
</TABLE>
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<TABLE>
<S> <C> <C>
5.5 Liability of the Assignor................................................................ 8
6. CONDITIONS TO CLOSING............................................................................. 8
6.1 Conditions of Obligations of the Assignee................................................ 8
6.2 Conditions of Obligations of the Assignor................................................ 9
7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES....................................................... 10
8. INDEMNIFICATION.................................................................................. 10
8.1 Indemnification by Assignor............................................................. 10
8.2 Indemnification by Assignee............................................................. 11
8.3 Indemnification Procedure............................................................... 11
9. EXPENSES......................................................................................... 12
9.1 Assignor's Expenses..................................................................... 12
9.2 Assignee's Expenses..................................................................... 12
10. MISCELLANEOUS.................................................................................... 12
10.1 Complete Agreement...................................................................... 12
10.2 Specific Performance.................................................................... 12
10.3 Copies.................................................................................. 13
10.4 Applicable Law and Jurisdiction......................................................... 13
10.5 Notices................................................................................. 13
10.6 Addresses............................................................................... 14
10.7 Further Assurances...................................................................... 14
10.8 Severability............................................................................ 14
10.9 Counterparts............................................................................ 14
10.10 Confidentiality......................................................................... 14
10.11 Successors and Assigns.................................................................. 14
10.12 Headings................................................................................ 15
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
LIST OF ANNEXES
<S> <C>
Annex A Assignor's Legal Status. Assignor's Bylaws.
Annex B Assignee's Legal Status. Assignee's Bylaws.
Annex C List of Clients and subscription of each Client.
Annex D Form of Services Agreement.
Annex E Form of Reseller and Management Agreement
Annex F Assumed Liabilities.
Annex G Certified copy of the Minutes of the Board of
Directors of the Assignor that approved this
Agreement.
Annex H Form of Written Contract
Annex I Deloitte & Touche Audit Report
Annex J Opinion of Counsel
Annex K Certified copy of the Minutes of the Board of
Directors of the Assignee that approved the
purchase of the Clients.
Annex L List of Banks and Credit Cards.
Annex M Guaranty of Assignor's Parent
Annex N Guaranty of Assignee's Parent
</TABLE>
-36-
<PAGE>
EXHIBIT 10.21
EXECUTION
COPY
INTERNET SERVICE AGREEMENT
IMPSAT S.A., a company duly created under the laws of the Republic of Argentina
(hereinafter called "IMPSAT"), hereby represented by Mr. Marcello Girotti, in
his capacity as Vice President, and EL SITIO ARGENTINA S.A. a company duly
created under the laws of the Republic of Argentina, hereby represented by
Messrs. Daniel Rotsztain and _____ _____ in their capacity as attorneys-in-fact,
(hereinafter called "EL SITIO", and together with IMPSAT, the "Parties") enter
into this INTERNET SERVICE AGREEMENT, dated as of November 5, 1999 (hereinafter
called the "Agreement") pursuant to the following terms and conditions.
WHEREAS:
EL SITIO is a company dedicated to marketing advertisement, providing on-line
content and services via Internet, such as chat rooms, news, games, electronic
mail, among other services;
IMPSAT is a company providing network connectivity services, among which
Internet access service to corporate and final users, via dial-up telephone
access, among others means;
EL SITIO is willing to offer to its customers Internet access service and IMPSAT
is capable of providing equipment and infrastructure required for such purposes;
THE PARTIES hereto have entered the present Internet Service Agreement to be
governed by the following clauses and conditions:
1. OBJECT
The present Agreement will set the conditions on which IMPSAT will
provide to EL SITIO the POP (Point of Presence) outsourcing services for
dial-up telephone access to the Internet, i.e., installation, management,
and infrastructure and equipment maintenance services required for EL
SITIO to offer to its own customers as well as potential customers, the
telecommunications service, hereinafter the "SERVICE", and the
value-added services, ruled by the RESOLUCION NO. 1083/95, commonly
called "Internet".
1.1 The SERVICE will be provided on a 24-hour, 365-day-a-year basis,
using equipment owned by IMPSAT, hereinafter simply referred to as
the "EQUIPMENT," as well as Internet and telephone network
connectivity infrastructure, as specified in Annex B.
1.2 The EQUIPMENT will be installed in the POP facilities of IMPSAT,
hereinafter simply referred to as "SERVICE ACCESS POINTS," within
the estimated time frame and
<PAGE>
in conformity with technical specifications detailed in Annex A.
1.3 IMPSAT shall provide the Service in accordance with License No. __,
granted by the SECRETARIA DE COMUNICACIONES of the Republic of
Argentina, which allows IMPSAT to provide value-added services at
the national and international level. EL SITIO accepts that, in
accordance with RESOLUCION SC NO. 194/96, "IT IS EXPRESSLY
FORBIDDEN TO USE THE SERVICE PROVIDED FOR LIVE VOICE TRANSMISSION
(TELEPHONY). ANY VIOLATION OF THE PRESENT DISPOSITION WILL RESULT
IN TERMINATION BY EL SITIO'S DEFAULT WITH NOTICE ISSUED TO COMISION
NACIONAL DE COMUNICACIONES ."
1.4 The documents described below are an integral part of this
Agreement, including the Annexes hereof: Annex A: "Existing Service
Access Points;" Annex B: "Technical Specifications of the Service;"
Annex C: "Prices and Payment Conditions;" Annex D: "Maintenance
Service;" Annex E: "Installation/Service Activation Minute Form."
2. TERM OF THE AGREEMENT
2.1 The present Agreement will be effective as of the date of its
execution.
2.2 The term of the present Agreement will be THIRTY-SIX (36) MONTHS as
of the date of its execution, when the SERVICES to be provided to
EL SITIO'S customers shall be available.
2.3 This Agreement will be extended by equal and successive periods of
thirty-six (36) months, upon notice provided by each party to the
other party served at least sixty (60) days prior to the day this
Agreement or its extensions expire.
3. SERVICE AVAILABILITY
3.1 IMPSAT's existing SERVICE ACCESS POINTS, currently available for
immediate use by EL SITIO, are described in Annex A.
3.2 For NEW SERVICE ACCESS POINTS and for EXPANSION of the EXISTING
SERVICE ACCESS POINTS, IMPSAT will provide and install the
necessary EQUIPMENT for the SERVICE. The criteria and
specifications in this case are described in Annex B.
3.3 The SERVICE will be considered technically operational when it
becomes possible to send IP control packages (PING command) between
a computer with dial-up access connected to the equipment at the
SERVICE ACCESS POINTS and any Name Server published by ARIN (ROOT
DNS).
3.4 Upon installation of the Equipment and when the Service becomes
operational, both
<PAGE>
Parties shall formalize such events by drafting a minute in the
form presented in Annex E.
3.5 No individual not authorized by IMPSAT will be allowed to repair
or, in any way, change the EQUIPMENT or modify its installation. EL
SITIO will be responsible for any damage or loss to the EQUIPMENT
resulting from its fault or deceit.
4. COVERAGE
4.1 The area covered by the SERVICES will comprise, initially, the
locations defined in Annex A.
4.2 Without any prejudice to this initial coverage, THE PARTIES may
include, in the Agreement hereof, upon mutual consent,
successively, cities and areas in which IMPSAT already provides
dial-up Internet services.
4.3 IMPSAT will communicate to EL SITIO the incorporation of new
locations for supply of the SERVICE. At its own discretion, IMPSAT
will decide on the provision of services in each location.
4.4 In the event that IMPSAT is not capable of providing the Service in
a location required by EL SITIO, EL SITIO shall have the right to
enter into an agreement with another service provider.
5. IMPSAT'S LIABILITIES AND LIMITS OF RESPONSIBILITY
5.1 By the present Agreement, IMPSAT will provide to EL SITIO
installation, management, maintenance, equipment and infrastructure
services required for exclusive dial-up access to the Internet,
according to conditions described in Annex B hereof, thus becoming
responsible for the operation and maintenance of the SERVICE.
5.2 In case of SERVICE unavailability or failure, IMPSAT's
responsibilities will be limited to providing maintenance service
described in Annex D hereof, and to provide EL SITIO with a
24-hour, 365 days a year telephone service for the solution of
problems related to the interruption of the Service. In case of
SERVICE unavailability or failure, IMPSAT will use its best efforts
to reinstate the SERVICE as promptly as possible. EL SITIO will be
entitled to discounts from SERVICE payments to IMPSAT
proportionally to the extent and to the time of unavailability of
the SERVICE, according to the provisions of Annex D.
5.3 IMPSAT's responsibilities before EL SITIO will be limited to the
damages that IMPSAT may cause as a result of the installation,
management, maintenance, equipment and infrastructure services
object of this Agreement. Therefore, under no other conditions
IMPSAT will be responsible for other damages that EL SITIO and/or
<PAGE>
third parties may suffer, including loss of profits, loss of cash
resources and/or stored properties.
5.4 IMPSAT is liable for providing EL SITIO with the SERVICE specified
in the Agreement hereof, but in no case it will assure the
possibility of use or access availability to different services
existing in the Internet, to which the responsibility will be
entirely of the providers of each one of such services. IMPSAT will
not assume any responsibility for the contents, origin, or use of
the communications, of any type, received or transmitted via
Internet.
5.5 Additionally, and since most of the services and systems comprising
the Internet are under the responsibility of third parties, IMPSAT
will not be responsible for transmission speed variations that may
occur when accessing different servers comprising the web.
6. CUSTOMER'S LIABILITIES
6.1 Without prejudice to other liabilities set forth in the present
Agreement, EL SITIO will be liable for the following:
a) Using the SERVICE and the EQUIPMENT in conformity with what is
established herein. EL SITIO will use the SERVICE to provide
services to its customers via dial-up telephone access.
b) Should IMPSAT provide IP addresses necessary for operation of
EL SITIO's internal network, the latter must inform IMPSAT what
use has been made of them, every time IMPSAT may so request.
c) EL SITIO will exempt IMPSAT from any violation to intellectual
property laws, defamation, calumny, and/or any other acts or
omissions of EL SITIO, or of any of its customers, which may
cause any damages to third parties, through the use of the
SERVICE, resulting in liabilities imposed to IMPSAT by any
competent court seeking for compensation to such third parties.
d) EL SITIO will explain to its customers the adequate computing
structure for use of the SERVICE and for its adequate
operation, which involves a personal computer, telephone line
and modem. The customer will be solely responsible for the
maintenace of such computing structure essential for access to
the SERVICE.
e) EL SITIO will comply with all of the laws and regulations
applicable to the services under its responsibility, and for
obtaining all of the related permits and authorities.
<PAGE>
7. INVOICING
7.1 During the term of this Agreement, and of its extensions, IMPSAT
will invoice EL SITIO according to prices and payment conditions
set forth in Annex C hereof.
7.2 The rate for provision of the services by EL SITIO to its customers
will be solely determined by EL SITIO, which will also be solely
responsible for invoicing its customers for the amounts
corresponding to the services contracted by them, except as set
forth in the Reseller and Management Agreement entered into between
the Parties on the date hereof.
8. APPLICABLE TAXES
8.1 According to the regulation in force, IMPSAT will invoice EL SITIO
for applicable taxes on the agreed prices and sales. It will also
invoice the amount resulting from the application of any new tax
which may be incurred to this Agreement, as well as any existing
tax increase providing the same effect.
9. RELATION BETWEEN THE PARTIES
9.1 EL SITIO is an independent contracting party and shall not be
deemed a representative or agent of IMPSAT for any purposes.
Moreover, IMPSAT shall be deemed to be an independent contractor,
and not an agent, partner or joint venturer in connection with the
rendition of the Service hereunder. Furthermore, EL SITIO will be
solely and exclusively responsible for its legal and fiscal
obligations, including those related to labor and social security,
as well as any other responsibilities in relation to its personnel
during the entire term of this Agreement.
9.2 Each party will be solely and exclusively responsible before the
other party, their customers, and/or third parties, for the acts
and omissions of its personnel, or personnel of its subcontractors,
in this case derived from the execution of the present Agreement,
and each party shall be liable before the other party for any
infringement and/or violation of any rules or legal dispositions
that they are found guilty of. EL SITIO is hereafter committed to
immediately reimburse IMPSAT for any sum of money that the latter
may be required to pay to a third party as a result of any of EL
SITIO's liabilities under this Agreement.
10. GENERAL
<PAGE>
10.1 The entire responsibility related to the services provided by EL
SITIO to its customers will be of its own liability. EL SITIO will
also be the sole responsible before its customers in relation to
providing its services. EL SITIO is forbidden to make any statement
and/or grant warranties in relation to the services on behalf of
IMPSAT.
10.2 THE PARTIES hereby state, in compliance with their contractual
liabilities, that they will have access to confidential information
from the other party, such as, but not limiting to working methods,
marketing plans, prices, list of customers, costs, etc. THE PARTIES
are committed to maintain this information, or any other to which
access is provided, under strict confidentiality and using the
information solely for the purposes of compliance with this
Agreement. The confidentiality commitment will be maintained for a
period of two years after the termination of this Agreement, no
matter what may have caused the termination.
10.3 IMPSAT agrees to respect and recognize EL SITIO's customers as
belonging to the latter, thus avoiding any type of business contact
with them, except in case of written indication or authority for
such.
10.4 EL SITIO must not assign rights and liabilities resulting hereof,
without prior written consent from IMPSAT.
10.5 EL SITIO will give preference to IMPSAT in contracting the services
according to the following procedures:
a) EL SITIO will notify IMPSAT about services to be contracted,
specifying the terms and conditions required to prepare an
offer (proposal). IMPSAT will submit to EL SITIO the offer
within 10 days as of the reception of such notice.
b) Should EL SITIO receive an offer from a third party more
favorable than that of IMPSAT, EL SITIO will immediately notify
IMPSAT of the terms and conditions contained in such offer.
IMPSAT will have the right to match the offer and EL SITIO will
then contract the services from IMPSAT.
10.6 Price adjustment, according to market conditions, may be effected
after the twelve first months of this Agreement. After twelve
months, and should EL SITIO receive an offer from a third party
with more favorable conditions than IMPSAT's, EL SITIO will
immediately notify IMPSAT about the terms and conditions contained
in such offer. IMPSAT will have the right to match this offer and
EL SITIO will then contract or continue to contract the services
from IMPSAT. Should IMPSAT fail to match or exceed the offer, EL
SITIO will have the right to terminate this Agreement without any
penalties.
10.7 In order to maintain the economic-financial balance of the
Agreement, EL SITIO expressly agrees, hereafter, to revise the
prices for the SERVICE to be paid to IMPSAT by the customer, should
there occur any significant change in the current
<PAGE>
economic situation of the country, or in the case of any economic
measure that may significantly devaluate or outdate the agreed
prices.
10.8 THE PARTIES shall not assign, transfer or subcontract this
Agreement or the SERVICES, without the express written
authorization of the other parties.
11. SUSPENSION
11.1 Without any prejudice to any of its other rights, IMPSAT will have
the right to automatically suspend the SERVICE should EL SITIO fail
to meet any of its liabilities before the present Agreement, upon
at least 10 days prior written notice requesting the performance of
such obligation.
11.2 Without any prejudice to any of its other rights, EL SITIO will
have the right to suspend the payment of any amount, under the
present Agreement, in face of any contractual default by IMPSAT,
upon at least 10 days prior written notice requesting the
performance of such obligation.
12. ACTS OF GOD OR FORCE MAJEURE
12.1 Any default or delay in its responsibilities regarding equipment
installation, beginning or continuation of services provided by
IMPSAT will not generate any liabilities against IMPSAT if such
default or delay should result from acts of God or force majeure,
being these understood as acts or facts of the government, natural
phenomena, or any other circumstances outside IMPSAT's control,
including, but not limiting to adverse conditions, whether
meteorological or astronomical, communication provider going out of
service for whatever reason, either partially or totally,
temporarily or definitely, earthquakes, epidemics, civil riots,
fires, strikes, war, acts or omissions of the satellite owner.
13. TERMINATION
13.1 After 12 months of effect, EL SITIO may terminate the present
Agreement, without a reason, upon at least 60 days prior written
notice to IMPSAT, and upon previous payment to IMPSAT of an amount
in cash corresponding to 12% of the remaining sum (provisioned) up
to end of the Agreement, based on the last amount due.
13.2 Additionally, both IMPSAT and EL SITIO will have the right to
terminate this Agreement, upon 20 days prior notice to the other,
if any of the following causes should occur:
<PAGE>
a) A default by the other party of any contractual obligation.
b) A default by the other party of any legal and regulating
dispositions, current or future, governing the use of the
Service or which are directly or indirectly binding, and whose
omission or encroachment may generate consequences of any
nature to the complying party or to the object hereof.
c) If the other party applies for its own failure, or if this
process is requested by third parties, or if a preventive
arrangement with creditors is submitted.
14. INDEMNIFICATION
14.1 If any of the parties to this Agreement fails to comply with an
obligation or not fulfill it in the appropriate manner and within
the established time frame provided in this Agreement, it shall
answer for such losses and damages and will indemnify and hold
harmless the other party for such losses and damages in accordance
with the provisions of law.
15. FORUM AND OTHER DISPOSITIONS
15.1 No behavior, habit, or usage shall modify the terms and liabilities
agreed in the present Agreement.
15.2 Any modification to this Agreement must be formulated upon written
consent and executed by both parties.
15.3 This Agreement constitutes the complete and exclusive expression of
the rights and liabilities of the parties, making null every
communication, proposals, verbal or written offers which may have
been made between the parties relative to the object of the
Agreement before its execution.
15.4 The validity, duration and construction of this Agreement shall be
exclusively ruled by the laws of the Republic of Argentina. The
Parties agree that in the event that any dispute, controversy or
difference arises as a consequence of this Agreement and is not
resolved within ten days after such dispute, controversy or
difference is brought to the attention of both parties, the Parties
agree to submit the decision to arbitration as set forth below:
a) Any dispute, controversy or claim resulting from or related to
any of the provisions of this Agreement, or its interpretation,
execution, compliance, violation, termination or validity,
including without limitation whatsoever, this present section,
shall be solely and definitively resolved through arbitration.
The
<PAGE>
Parties shall unify all the pending disputes, if any, in one
single arbitration procedure.
b) All matters submitted to arbitration shall be resolved by a
sole arbitrator jointly appointed by both Parties. The
arbitrator shall proceed in accordance with the rules of the
Arbitration Court of the Stock Exchange of the City of Buenos
Aires, which both Parties acknowledge and accept. In case the
Parties fail to agree on the designation of the arbitrator,
they shall submit the controversy to the Arbitration Court of
the Stock Exchange of the City of Buenos Aires, which shall
resolve the controversy in accordance with its rules of
arbitration.
c) The arbitrator's decision shall be deemed final and binding
upon the Parties, and the execution of the arbitration award
may be brought to any competent court of law. The Parties
expressly waive their rights to file judicial claims or
defenses against the result of the arbitration procedure.
d) The losing party in the arbitration shall pay for all its
expenses, and for the expenses of the other party, even when
the latter has not so requested.
15.5 All notices, petitions, demands for performance and other
communications pursuant to this Agreement shall be in writing and
in the following way:
<TABLE>
<CAPTION>
To the Assignor: To the Assignee:
<S> <C>
IMPSAT S.A. EL SITIO ARGENTINA S.A.
Alferez Pareja 256 Belgrano Avenue 845, 4th Floor
Buenos Aires, Argentina 1092 Buenos Aires, Argentina
Attn: Hector Alonso Attn: Roberto Cibrian-Campoy
With copy to: With copy to:
Arnold & Porter Paul, Hastings, Janofsky & Walker LLP
555 12th Street, N.W. 399 Park Avenue
Washington, D.C. 20004-1202 New York, NY 10022
Attn: Neil M. Goodman Attn: Neil A. Torpey
Mark G. Pedretti
And to: And to:
Nicholson & Cano Estudio Marval, O'Farrell & Mairal
San Martin 140, 14th Floor Av. Leandro N. Alem 928, 7th Floor
1004 Buenos Aires, Argentina 1001 Buenos Aires, Argentina
Attn: Mariana Rawson Paz, Esq. Attn: Alberto J. Rivera
</TABLE>
15.6 This Agreement shall only be executed in the English version, but a
Spanish translation in a form satisfactory to the EL SITIO and
IMPSAT shall be prepared immediately after its signature.
<PAGE>
16. STAMP TAX
The stamp tax shall be borne by both Parties in equal halves in the event
it is payable.
<PAGE>
IN WITNESS WHEREOF, the parties sign this Agreement in the City of Buenos Aires,
on the 5th day of November, 1999.
IMPSAT S.A.
- ------------------------
Name:
Title:
EL SITIO ARGENTINA S.A.
- ------------------------
Name:
Title:
EL SITIO ARGENTINA S.A.
- ------------------------
Name:
Title:
<PAGE>
ANNEX A
EXISTING SERVICE ACCESS POINTS
The SERVICE for IMPSAT's four existing POPs, with the respective number of
dial-up ports, will be available immediately upon the execution of the
Agreement.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
IMPSAT'S NUMBER SCHEDULE FOR ACTIVATION ON AGREEMENT
LOCATIONS OF PORTS EXECUTION
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Buenos Aires 1,110 Immediate
- -------------------------------------------------------------------------------------------------------------------------
Cordoba 30 Immediate
- -------------------------------------------------------------------------------------------------------------------------
Rosario 30 Immediate
- -------------------------------------------------------------------------------------------------------------------------
Mar del Plata 30 Immediate
- -------------------------------------------------------------------------------------------------------------------------
TOTAL NO. OF PORTS AVAILABLE 1,200
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ANNEX B
TECHNICAL SPECIFICATIONS OF THE SERVICE
B.1 SERVICE DESCRIPTION
IMPSAT has infrastructure for service outsourcing and POP equipment for
Internet dial-up access provided with high speed links to domestic and
international backbones, using world-class equipment.
The SERVICE will consist of availability to Internet dial-up access by EL
SITIO's customers, at IMPSAT's points of presence (POPs), in order to
explore the services in those locations.
IMPSAT currently has 4 points of presence provided with dial-up access,
totaling 1,200 existing ports.
B.2 TECHNICAL FEATURES
The dial-up service has the following features:
- Modules of 30 telephone channels (ports) via E1 digital trunks when
available at the location. In some locations, only analog lines are
available; in others there are analog and digital lines.
- Initial capacity for each new POP: 30 ports (channels)
- Current capacity for each existing POP: see Annex A
- Incrementing modules: 30 ports (channels)
- Minimum 4.5 Kbps average connectivity to the backbone for each
telephone channel (port)
- Number of existing POPs = 4
- Number of existing dial-up ports = 1,200 (see Annex A)
B.3 SERVICE EXPANSION IN EXISTING POPS
In case of expansion of the number of ports in the existing IMPSAT's
POPs, the time for service availability is 30 to 60 days after a formal
request from EL SITIO to IMPSAT. This time frame depends on facilities
(telephone infrastructure) available at the site and provided by the
telephone company.
<PAGE>
Expansion modularity is 30 ports, i.e., E1 trunk modules having 30 telephone
channels.
<PAGE>
B.4 SERVICE EXPANSION IN NEW LOCATIONS (NEW POPs)
Should EL SITIO need to expand to new locations, or Points of Presence
(POPs), IMPSAT may provide the services depending on the technical
availability. Should IMPSAT not be capable of providing the services
according to conditions and average time established, EL SITIO may freely
contract the services from other providers.
The initial modularity will be 30 ports (or one E1 trunk) minimum, and
expansion in one E1 trunk module (30 ports).
The time for implementation will be 90 days average, to be confirmed,
after analysis of technical feasibility by IMPSAT.
B.5 NETWORK MANAGEMENT
IMPSAT will provide network management and use monitoring in order to
allow for proactive planning and to offer the best level of quality to
the user.
Network management reports will be issued on a monthly basis, both
regarding telephone trunk occupancy and Internet backbone occupancy. In
addition, quality levels established will also be reported.
B.6 TELEPHONE ACCESS
IMPSAT shall provide to EL SITIO with one or more telephone lines for the
telephone access to the pool of modems in each location.
B.7 CONTENT, E-MAIL, AND VALIDATION SERVERS
Content, e-mail, an user validation servers are not contemplated in the
POP service outsourcing.
B.8 SERVERS PROPERTY OF EL SITIO
The servers property of EL SITIO, such as content, e-mail, and user
validation, may be installed at IMPSAT's POP facilities, upon separate
contracting of another service called HOUSING.
In this case, EL SITIO will be responsible for management, installation,
operation, and maintenance of the servers, software, and applications.
B.9 CONTENT HOSTING
<PAGE>
The services for the use of IMPSAT's servers may be available upon
separate contracting through a service called HOSTING, which allows
placing EL SITIO's and/or its customer's contents without the need of
equipment purchasing by EL SITIO.
In this case, EL SITIO will be responsible for the software and
applications.
B.10 USER MANAGEMENT AND CONTROL
EL SITIO will be responsible for user management and control.
<PAGE>
ANNEX C
PRICES AND PAYMENT CONDITIONS
C.1 PRICES
The prices to be paid by EL SITIO to IMPSAT will be in function of the
number of ports made available.
The price is:
- $116.88 per month per port
that is,
- $140,256.00 per 1,200 ports
The prices do not include the Value Added Tax ("VAT"). Prices included in
this offer are expressed in Argentina Pesos which can be converted
directly into U.S. Dollars at an exchange rate of U.S. $1/$1, in
accordance with the provisions of Argentina Convertibility Law No. 23,982
and taking into consideration the legal force of such Law at the time of
this offer and its surveillance during the term of this Agreement. In the
event EL SITIO invoices its customers in U.S. Dollars, the prices indexed
in this offer will be expressed in U.S. Dollars.
C.2 PAYMENT CONDITIONS
An amount corresponding to one monthly payment for the contracted
configuration will be invoiced upon the execution of the Agreement, when
the SERVICE will already be available at the existing IMPSAT's POPs,
according to configurations detailed in Annexes A and B.
The first monthly payment will be invoiced 30 days after execution of the
Agreement, being due in 5 working days after reception of the invoice by
EL SITIO. Subsequent payments will be invoiced on a monthly basis, due in
five working days.
In case of service expansion, this rule also applies, i.e., upon
expansion request, a monthly sum will be invoiced relative to such
expansion, and the first payment after the actuation of the services.
Subsequent payments will be invoiced on a monthly basis, included in the
other invoices.
The payments to be made by EL SITIO to IMPSAT, for any concept as
established in this Agreement, must be made via bank deposit to a current
account to be indicated by IMPSAT, or by other means that IMPSAT may
indicate.
<PAGE>
In case of delinquency by EL SITIO in meeting any of its payment duties,
the amounts due will be added of a two percent (2%) fine applied as of
the next day following the due date of each payment, in addition to one
percent (1%) interest a month should the delay exceed thirty (30) days,
calculated as of the day immediately after the due date of the respective
payment, up to the date of the effective payment. Every payment made by
EL SITIO, which shall not cover the amount due integrally, the
corresponding fine, interests and currency update, will be considered
partial payment. IMPSAT has no obligation to receive partial payments,
but if it does the amounts received will be imputed first as interests,
and the due balance, if any, will continue to accumulate interests up to
its final cancellation. The reception by IMPSAT of any partial payment
will not imply in delinquency exemption, nor in novation of the
obligation of EL SITIO.
C.3 CONFIGURATION EXPANSION
The expansion of the configuration, both for new POPs and expansion of
the number of dial-up access ports, may be requested during the term of
the Agreement, with the requested expansion being valid for 12 months,
i.e., the requested expansions will be a commitment to a minimum term of
12 months. The price to be charged for new POPs and dial-up access ports
will be mutually agreed upon by both parties. Each request will result in
an amendment to the Agreement. For configuration reductions before the
end of the 12 month period, the same conditions set in section 13.1 will
apply.
EL SITIO will deliver to IMPSAT, on a quarterly basis, the estimates for
growth of the number of new ports required for its customers, in order to
facilitate the operation of the infrastructure necessary to provide the
SERVICE at the points of presence.
C.4 PRICE ADJUSTMENT
Depending on market conditions, specially in relation to prices practiced
for basic inputs of telephone channels and Internet backbone, the prices
may be revised, up or down, in 12-month periods.
<PAGE>
ANNEX D
MAINTENANCE SERVICES
D.1 IMPSAT will directly provide, or by means of an authorized contractor,
the maintenance services necessary for preserving the infrastructure and
the equipment in good operating conditions, being understood that it will
provide for every replacement of spare parts, repairs, and adjustments
necessary, as resulted of weather exposure, wear and tear from normal and
proper use, or of defects.
D.2 EL SITIO must inform IMPSAT of any fault immediately after being
detected, in addition to observing the procedures established to request
maintenance services. Such event will be communicated orally or by e-mail
notice.
D.3 As the same manner, IMPSAT shall communicate orally or by e-mail about
any fault or suspension of the SERVICES within 30 minutes counted from
its detection.
D.4 IMPSAT reserves the right to check and confirm that the maintenance
service requested is actually necessary.
D.5 Network preventive and general maintenance will be conducted during
low-demand hours, being service interruptions notified to EL SITIO at
least two (2) days before the service. Every unforeseen fault that may
occur to the network must be repaired by IMPSAT.
D.6 Maintenance service will be provided free of cost to EL SITIO.
D.7 Impossibility of Internet access
In case EL SITIO or the users of the SERVICES are not able to transmit or
receive information from the access ports to Internet, in view of a fault
of the SERVICES rendered by IMPSAT, IMPSAT will credit to EL SITIO the
proportional amount corresponding to the period that the Services were
not available, according to the Formula 1 below:
Such credit will be included in the subsequent invoice to be issued after
the event.
D.8 Discount Formula in view of unavailability of the SERVICES.
The interruption period subject to discounts, will be considered due only
after 30 minutes of continuous interruption, and each complete period of
30 minutes will be considered for
<PAGE>
discount purposes. This means that the discount will be due only for
interruptions which exceeds 30 minutes and for each break of 30 minutes.
The discount amount will be calculated based on the following manner
(Formula F.1), per each port affected by the interruption:
FORMULA F1:
D = P X H /T
Where:
D = amount of the discount per each port
P = monthly price per each port
H = number of 30 minutes breaks (completed) interruption
T = number of 30 minutes in each month = 30 X 24 X 2 = 1440
D.9 SLA - Service Level Agreement
The SLA - Service Level Agreement will be obtained based on the periods
of unavailability of the SERVICES, calculated in monthly, trimestrial,
semestral and annual periods.
In the calculation of the SERVICE's quality, the non-programmed
interruptions shall not exceed the following percentages, considering the
global number of ports:
In a month: 2.0%
In a trimester: 1.5%
In a semester: 1.3%
In a year: 1.0%
D.10 Audit and Report on Activities
For follow up and audit purposes, IMPSAT will provide to EL SITIO the
following reports on:
- Internet Backbone Performance
- Modems and telephone trunks (E1 or analogical) Performance
- Telephone Trunks Occupation
- System and/or Equipment Availability
<PAGE>
ANNEX E
INSTALLATION/SERVICE ACTIVATION MINUTE FORM
- -------------------------------------------------------------------------------
INTERNET TECHNICAL ACTIVATION
IMPSAT
Company:
Address:
Person Responsible:
Telephone:
- -------------------------------------------------------------------------------
Configuration: LOCATION: ______________
- -------------------------------------------------------------------------------
IMPSAT IP ROUTER: IP NETWORK:
KEY TRUNK IP LAN:
MASK: SUBNETWORK MASK:
IP DNS SERVER
- -------------------------------------------------------------------------------
The Internet technical activation will be considered completed once the
connectivity between the networks is verified upon the transmission of IP
control packages (PING) between the dial-up configured equipment and a name
server published by ARIN.
Buenos Aires, ____ / ____ / _____
By IMPSAT: By the EL SITIO:
NAME: ___________________ NAME: ______________________
POSITION: _______________ POSITION: __________________
WITNESSES:
NAME: ___________________
NAME: ___________________
<PAGE>
EXHIBIT 10.22
EXECUTION
COPY
RESELLER AND MANAGEMENT AGREEMENT
THIS RESELLER AND MANAGEMENT AGREEMENT (this "Agreement") is made as of
November 5, 1999, by and between IMPSAT S.A., a company duly created under the
laws of Argentina (the "Assignor"), and El Sitio Argentina S.A., a company duly
created under the laws of Argentina (the "Assignee").
WHEREAS, pursuant to that certain Assignment Agreement, dated as of the
date hereof (the "Assignment Agreement") between Assignor and Assignee, the
Assignor has agreed to assign the contracts (written and oral) for the provision
of Internet Dial Up access relating to the clients listed on ANNEX C of the
Assignment Agreement;
WHEREAS, the Assignee has informed the Assignor that it has not yet
obtained certain consents (the "Consents") required to transfer or to obtain the
license (the "ISP License") required to operate the Acquired Business;
WHEREAS, the Assignee has informed the Assignor that it does not yet have
the capacity and resources to provide certain services with respect to the
Acquired Business;
WHEREAS, the Assignment Agreement and the Purchase Price that the
Assignee shall pay to the Assignor is a condition for the execution of this
Agreement;
WHEREAS, the Assignor and the Assignee desire to enter into this
Agreement according to the terms as set forth below; and
WHEREAS, all capitalized terms used herein and not defined shall have the
meanings ascribed to such terms in the Assignment Agreement.
NOW, THEREFORE, for the consideration herein stipulated, the parties
hereby agree as follows:
1. MANAGEMENT OF THE ACQUIRED BUSINESS.
(a) From and after the Closing Date, the Assignee shall use its best
efforts in seeking the granting by the SECRETARIA DE COMUNICACIONES of the
Republic of Aregentina of the ISP License to Assignee.
(b) From the Closing Date, the Assignor will render the services set
forth on ANNEX A attached hereto (the "IMPSAT Services") to the Assignee and its
clients included in the Acquired Business and to any other client that Assignee
may incorporate in the future (hereafter referred jointly as the "Assignee
Clients"), until the date which is ninety (90) days after the Closing Date (the
"Services Termination Date"). In addition, the IMPSAT Services specified on
ANNEX B may be rendered for a period greater than ninety (90) days if the ISP
License is not
<PAGE>
received by the Services Termination Date. In such event, the IMPSAT Services
listed on ANNEX B shall be provided until the date such ISP License is received.
Except for the provision of the IMPSAT Services, the Assignor shall have no
other obligation to perform any services for the Assignee pursuant hereto.
(c) Until the date on which the ISP license is granted to the
Assignee, the parties agree that the Assignee will act as a reseller of the
Services pursuant to Section 5 of the General Licensing Rules approved by
Resolution 16,200 of the Secretary of Communications. During such period the
Assignor shall be responsible to the Assignee Clients for the quality,
reliability and availability of the ISP service and the Assignee will be
responsible for the commercial aspects of the relationship with the Assignee
Clients, including, but not limited to pre- and post-sale activities, customer
services, etc.; provided, however, that the Assignee shall indemnify and hold
harmless the Assignor for all Losses (as defined below) relating to or arising
out of the Acquired Business in accordance with Section 6 hereof
(d) Until the later of (i) the Services Termination Date and (ii) the
date on which the ISP license is granted to the Assignee, the parties agree that
the Assignee shall have the right to monitor the activities of the Assignor in
providing the IMPSAT Services, provided, however, that Assignee's monitoring of
operations shall not in any way interfere with the Assignor's day-to-day
operation thereof in accordance with this Agreement.
2. COMPENSATION. As a result of the Assignment Agreement and the Purchase
Price that the Assignee shall pay to Assignor for the Acquired Business, the
Parties mutually agree that as sole consideration for the provision of the
IMPSAT Services, the Assignor will be entitled to all Expenses (as defined
herein) incurred by the Assignor in connection with the provision of the IMPSAT
Services. The Assignor will not be entitled to receive any profit or revenue
arising from the rendering of any services provided by the Assignee to the
Assignee Clients or to any other customers of the Assignee. All amounts payable
to the Assignor pursuant to this Section 2(a) shall be invoiced, due and payable
in accordance with the terms of Clause C2 of Annex C to the Services Agreement
entered into between the Assignor and Assignee, dated as of the date hereof.
Expenses shall include all operating expenses incurred by Assignor, as
calculated in good faith, in conjunction with the provision of the IMPSAT
Services.
3. RISK OF LOSS. The risk of any loss or damage with respect to the
Acquired Business shall continue to be borne by the Assignee at all times from
the date hereof.
4. THE ASSIGNOR AS THE AGENT OF THE ASSIGNEE. The Assignor shall perform
the IMPSAT Services hereunder on behalf of the Assignee and shall act solely as
the agent of the Assignee. Neither party hereto shall have any right or
authority to bind the other or to incur or create any liability for or on behalf
of the other.
5. TERM OF AGREEMENT; EFFECT OF TERMINATION. This Agreement shall
continue in full force and effect until the later of (i) the Services
Termination Date and (ii) the date on which the ISP license is granted to the
Assignee. The Assignee shall pay to the Assignor within 10 days of termination
of this Agreement all outstanding amounts due under Section 2 for the period
prior to the termination of this Agreement.
<PAGE>
6. INDEMNIFICATION OF THE ASSIGNOR.
(a) The Assignee shall indemnify and hold harmless the Assignor and
its respective affiliates (individually, an "INDEMNITEE") from and against any
and all losses, claims, costs, damages, liabilities, expenses, judgments and
settlements, including, without limitation, any claims, damage or liabilities
(collectively, "Losses") as a result of the obligations of the Assignor as
contemplated by this agreement incurred by the Assignor in connection with the
performance by the Assignor of this Agreement, except in the event that any such
Losses related primarily to the gross negligence, fraud or willful misconduct of
the Assignor.
(b) Expenses incurred by an Indemnitee in defending any legal action
subject to Section 6(a) shall, from time to time, be advanced by the Assignee
prior to the final disposition of such legal action; provided that (i) such
legal action relates to the performance of duties or services by such Indemnitee
pursuant to this Agreement, and (ii) the Assignee has received an undertaking
given by or on behalf of the Indemnitee to repay such amount if it shall be
determined that such Indemnitee is not entitled to be indemnified as authorized
in this Section.
(c) The Indemnification provided in this Section 6 shall inure to the
benefit of the heirs, successors and administrators of the Indemnitee.
(d) The provisions of this Section 6 are for the benefit of the
Indemnitees and shall not be deemed to create any rights for the benefit of any
other persons.
(e) The indemnification obligations of the Assignee set forth in this
Section 6 shall terminate with respect to any claim for indemnification not made
within one (1) year of the date of this Agreement.
7. INDEMNIFICATION OF THE ASSIGNEE.
(a) The Assignor shall indemnify and hold harmless the Assignee and
its respective affiliates (individually, an "INDEMNITEE") from and against any
and all Losses incurred by the Assignee as a result of or arising out of the
Assignor's gross negligence, fraud or willful misconduct in connection with the
performance (or failure to perform) by the Assignor of this Agreement.
(b) Expenses incurred by the Assignee in defending any legal action
subject to this Section shall, from time to time, be advanced by the Assignor
prior to the final disposition of such legal action; provided that (i) such
legal action relates to the performance of duties or services by the Assignor
pursuant to this Agreement, and (ii) the Assignor has received an undertaking
given by or on behalf of the Assignee to repay such amount if it shall be
determined that the Assignee is not entitled to be indemnified as authorized in
this Section.
(c) The indemnification provided in this Section 7 shall inure to the
benefit of the Assignee's heirs, successors and administrators.
<PAGE>
(d) The provisions of this Section 7 are for the benefit of the
Assignee and its affiliates and shall not be deemed to create any rights for the
benefit of any other persons.
(e) The indemnification obligations of the Assignor set forth in this
Section 7 shall terminate with respect to any claim for indemnification not made
within one (1) year of the date of this Agreement.
8. NON-ASSIGNABILITY OF AGREEMENT. No assignment of this Agreement shall
be made by either party except to an affiliate thereof and with the prior
written consent of the other Party.
9. WAIVER. No waiver of any term, provision, or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed or construed as a further and continuing waiver of any such term,
provision or condition, but either party hereto may waive its rights in any
particular instance by a written instrument of waiver.
10. ENTIRE AGREEMENT. This Agreement represents the entire understanding
of the parties hereto with respect to the subject matter hereof, and may not be
modified or amended, except by a written instrument executed by each of the
parties hereto designating specifically the terms and provisions so modified and
amended.
11. CHOICE OF LAW. The internal laws of the Republic of Argentina shall
govern this Agreement and the construction of any of its terms.
12. SEVERABILITY. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid, illegal, or unenforceable, that
provision shall not affect any other provision of this Agreement, which shall
remain in full force and effect to the extent possible.
13. ATTORNEYS' FEES. In any suit, action or appeal to enforce or
interpret this Agreement, the prevailing party shall be entitled to recover its
costs incurred, including reasonable attorneys' fees, at trial or on appeal.
14. EFFECTIVENESS. At the time of the Service Termination Date,
notwithstanding anything herein to the contrary, this Agreement shall be
terminated, null and void and deemed to have never been in effect, except for
amounts due under Sections 2, 6 and 7.
15. TRANSLATION. This Agreement shall only be executed in the English
version, but a Spanish translation in a form satisfactory to Assignor and
Assignee shall be prepared immediately after its signature.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first set forth above.
EL SITIO ARGENTINA S.A. EL SITIO ARGENTINA S.A.
By:_____________________________ By:_______________________
Name: Name:
Title: Title:
IMPSAT S.A.
By:____________________________
Name:
Title:
<PAGE>
ANNEX A
Impsat will provide El Sitio the following IMPSAT Services.
1.- Billing
Printing and "paperwork"
Putting in envelopes
Distribution by mail
Notes to client to be included
Billing administration (Processing of the information, invoice issuance,
agreements with company that makes the envelopes and puts invoices in envelopes
and the Mail Company)
2.- Collection
Payment of commissions to credit cards
Idem to COBNET
Relationship with credit card companies (Mailings, rejections and analysis
thereof, etc.) Idem with COBNET Relationship with clients that pay cash (check
payment status, call if no payment, etc)
NOTE : El Sitio will provide the Call Center Services (through a Company called
Conect). Those services will be for business and technical issues. The operators
of the Call Center need to be able to enter the systems of A, B and M (New
clients, clients that canceled and modifications), Mandic and TeleSat.
3.- Impsat's support
To El Sitio's Customer Service
El Sitio clients referred from El Sitio's Customer Center
4.- Provision of following services:
Phone lines between Call Center (Connect) and IMPSAT S.A.
Internet access to Mandic from Call Center (Connect) (512 Kbps)
Mandic (Software & Hardware)
Telesat (Software & Hardware)
Radius
DNS's
Servers (Mail, Web)
5.- Other
Updating of database in the system of Mandic
Office space in Impsat for El Sitio employees working in the administration
group
<PAGE>
ANNEX B
Provision of following services:
Phone lines between Call Center (Connect) and IMPSAT S.A.
Internet access to Mandic from Call Center (Connect) (512 Kbps)
Mandic (Software & Hardware)
Telesat (Software & Hardware)
Radius
DNS's
Servers (Mail, Web)
<PAGE>
Exhibit 10.23
================================================================================
EL SITIO, INC.
SHARE PURCHASE AGREEMENT
November 9, 1999
================================================================================
<PAGE>
SHARE PURCHASE AGREEMENT, dated as of this 9th day of
November, 1999 (this "AGREEMENT"), among EL SITIO, INC., an international
business company organized and existing under the laws of the British Virgin
Islands (the "COMPANY"), and each of the persons or entities set forth on
EXHIBIT A (each, a "PURCHASER").
W I T N E S S E T H:
WHEREAS, the Company desires to issue to the Purchasers, and
the Purchasers desire to purchase from the Company, the Preferred Shares (as
such term is defined below) as set forth below; and
WHEREAS, certain terms used in this Agreement are defined in
Section 9.1 hereof;
NOW, THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter contained, the parties hereto hereby agree
as follows:
1. SALE AND PURCHASE OF SECURITIES.
1.1 SALE AND PURCHASE OF PREFERRED SHARES. Subject to the
terms and conditions of this Agreement, on the Closing Date (as defined in
Section 3.1 hereof), the Company shall issue, sell and deliver to each of the
Purchasers, and each of the Purchasers shall purchase from the Company for the
Purchase Price (as defined in Section 2.1 hereof) that number of Class B
Convertible Preferred Shares of the Company (the "PREFERRED SHARES"), set forth
opposite such Purchaser's name on EXHIBIT A.
2. PURCHASE PRICE.
2.1 AMOUNT OF PURCHASE PRICE. The purchase price of the
Preferred Shares to be purchased pursuant to Section 1.1 by each Purchaser shall
be as set forth opposite such Purchaser's name on EXHIBIT A (the "PURCHASE
PRICE"). The Purchase Price shall be payable as provided in Section 2.2 hereof.
2.2 PAYMENT OF THE PURCHASE PRICE. At the Closing (as
defined in Section 3.1 hereof), each Purchaser shall pay its Purchase Price in
United States dollars by wire transfer of immediately available funds or by such
other method as may be reasonably acceptable to the Company and such Purchaser,
to such account of the Company as shall have been designated in advance to the
Purchasers by the Company.
3. CLOSING.
3.1 CLOSING DATE. The closing of the sale and purchase of
the Preferred Shares (the "Closing") shall take place on November 11, 1999, or
at such other time, date or place as the parties hereto may mutually agree;
provided that all conditions to the Closing set forth in this Agreement have
been satisfied or waived by such date. The date on which the Closing is held is
referred to in this Agreement as the "Closing Date." At the Closing, the parties
shall execute and deliver the documents referred to in Section 8 hereof.
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchasers that:
4.1 ORGANIZATION AND GOOD STANDING; CAPITALIZATION.
(a) The Company is duly organized and validly existing under
the laws of the British Virgin Islands and has the corporate power and authority
to own, lease and operate its properties and assets and to carry on its business
as now conducted and as it is proposed to be conducted, except where the lack
thereof would not have a Material Adverse Effect (as defined in Section 9.1).
The Company is duly qualified or authorized to do business as a foreign
corporation under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties or assets requires such
qualification or authorization except where the lack thereof would not have a
Material Adverse Effect.
(b) The authorized and issued share capital of the Company
immediately prior to and immediately after the Closing and the legal and
beneficial ownership thereof is as set forth on SCHEDULE 4.1(B). All the
outstanding shares of the Company have been duly authorized, and are validly
issued, fully paid and non-assessable. Except as disclosed on SCHEDULE 4.1(B),
(i) there is no option, warrant, call, right, commitment or other agreement of
any character to which the Company is a party, (ii) there are no securities of
the Company outstanding which upon conversion or exchange would require, and
(iii) there are no share appreciation rights, or other similar rights based on
securities of the Company which, in the case of clause (i), (ii) or (iii), would
require the issuance, sale or transfer of any additional share capital or other
equity securities of the Company or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase share
capital or other equity securities of the Company. Except as disclosed on
SCHEDULE 4.1(B) and other than this Agreement, the Company is not a party to,
nor is it aware of, any voting trust or other voting agreement with respect to
any of the securities of the Company or to any agreement relating to the
issuance, sale, redemption, transfer or other disposition of the share capital
of the Company.
4.2 AUTHORIZATION OF AGREEMENT; ENFORCEABILITY. The Company
has all requisite corporate power and authority to execute and deliver this
Agreement and each other agreement, document, instrument and certificate to be
executed by the Company in connection with the consummation of the transactions
contemplated by this Agreement (the "TRANSACTION DOCUMENTS"), and to perform
fully its obligations hereunder and thereunder. The execution, delivery and
performance by the Company of this Agreement and the Transaction Documents have
been duly authorized by all necessary corporate action on the part of the
Company and its members. This Agreement and each of the Transaction Documents
have been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery thereof by the Purchasers, this
Agreement and each of the Transaction Documents constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
2
<PAGE>
4.3 SUBSIDIARIES, JOINT VENTURES, PARTNERSHIPS, ETC.
(a) SCHEDULE 4.3(A) hereof sets forth a true, complete
and correct list of each company or other entity in which the Company holds an
interest of greater than fifty percent (50%) (each such corporation or other
entity is referred to herein as a "SUBSIDIARY" and, collectively, the
"SUBSIDIARIES") as well as each entity in which the Company holds a minority
interest. Each Subsidiary is duly organized and validly existing in good
standing (if applicable) under the laws of the jurisdiction of its incorporation
with corporate power and corporate authority under such laws to own, lease and
operate its properties and conduct its business as currently conducted except,
in each case, where the lack thereof would not have a Material Adverse Effect;
and each Subsidiary is duly qualified to transact business as a foreign
corporation and is in good standing (if applicable) in each other jurisdiction
in which it owns or leases property of a nature, or transacts business of a
type, that would make such qualification necessary, except to the extent that
the failure to so qualify or be in good standing would not result in a Material
Adverse Change. All of the issued and outstanding share capital of each
Subsidiary which are owned by the Company has been duly authorized and validly
issued, and is fully paid and non-assessable. The Company, directly or
indirectly, owns the percentage of capital indicated in SCHEDULE 4.3(A) next to
each such Subsidiary, free and clear of any Liens, except as set forth in
SCHEDULE 4.3(A).
(b) The Company is not a party to any joint venture,
partnership or similar arrangement in which the Company or any of its
Subsidiaries participates. 4.4 CONSENTS OF THIRD PARTIES. None of the execution
and delivery by the Company of this Agreement and the Transaction Documents, the
consummation of the transactions contemplated hereby or thereby, or compliance
by the Company with any of the provisions hereof or thereof will (a) conflict
with, or result in the breach of, any provision of the Memorandum of Association
or Articles of Association of the Company, (b) conflict with, violate, result in
the breach or termination of, or constitute a default or give rise to any right
of termination or acceleration or right to increase the obligations or otherwise
modify the terms thereof under any Permit or Order to which the Company is a
party or any Contract to which the Company or any of its Subsidiaries is bound
or by which the Company or any of its properties or assets is bound, (c)
constitute a violation of any Law applicable to the Company or (d) result in the
creation of any Lien upon the properties or assets of the Company. Except as set
forth on SCHEDULE 4.4 and other than those which have been obtained or made, no
consent, waiver, approval, Order, Permit or authorization of, or declaration or
filing with, or notification to, any Person or Governmental Body is required on
the part of the Company in connection with the execution and delivery of this
Agreement or the Transaction Documents, or the compliance by the Company with
any of the provisions hereof or thereof.
4.5 AUTHORIZATION OF PREFERRED SHARES.
(a) On the Closing Date, the issuance, sale, and delivery of
the Preferred Shares to be purchased pursuant to Section 1.1 will have been duly
authorized by all requisite action of the Company, and, when issued, sold,
delivered and paid for in accordance with this Agreement, the Preferred Shares
will be validly issued and outstanding, fully paid and non-
3
<PAGE>
assessable, with no personal liability attaching to the ownership thereof, and
not subject to preemptive or any other similar rights of the members of the
Company or others.
(b) On the Closing Date, the issuance and delivery of the
Common Shares to be delivered upon conversion of the Preferred Shares in
accordance with the terms of the Preferred Shares will have been duly authorized
by all requisite action of the Company and, when issued and delivered in
accordance with the terms of the Preferred Shares, the Common Shares will be
validly issued and outstanding, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof, and not subject to preemptive or
any other similar rights of the members of the Company or others.
4.6 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 4.6
are (a) copies of the audited balance sheet of the Company and its Subsidiaries,
on a consolidated basis as of December 31, 1998, the income statement of the
Company and its Subsidiaries, on a consolidated basis for the fiscal year ended
December 31, 1998, and the cash flow statement of the Company and its
Subsidiaries, on a consolidated basis for the fiscal year ended December 31,
1998 (the "AUDITED FINANCIAL STATEMENTS") and (b) copies of the unaudited
balance sheet of the Company and its Subsidiaries, on a consolidated basis as of
June 30, 1999, the statement of income and retained earnings of the Company and
its Subsidiaries, on a consolidated basis for the six-month period ended June
30, 1999, and the cash flow statement of the Company and its Subsidiaries, on a
consolidated basis for the six-month period ended June 30, 1999 (the "UNAUDITED
FINANCIAL STATEMENTS", and together with the Audited Financial Statements, the
"FINANCIAL STATEMENTS"). Each of the Financial Statements was prepared in good
faith, is complete and correct in all material respects, has been prepared in
accordance with GAAP and in conformity with the practices consistently applied
by the Company and its Subsidiaries and presents fairly the financial position,
results of operations and cash flows of the Company and its Subsidiaries as of
the dates and for the periods indicated, subject, in the case of the Unaudited
Financial Statements, to the absence of footnotes and normal year-end
adjustments.
4.7 NO UNDISCLOSED LIABILITIES. Except as set forth on
SCHEDULE 4.7, neither the Company nor any of its Subsidiaries has any
liabilities (whether accrued, absolute, contingent or otherwise, and whether due
or to become due or asserted or unasserted), except (a) obligations under
Contracts described in SCHEDULE 4.15 or under Contracts that are not required to
be disclosed thereon as a result of dollar thresholds therein, (b) liabilities
provided for in the Financial Statements (other than liabilities which, in
accordance with GAAP, need not be disclosed), (c) liabilities (other than
accounts payable) incurred since the Audited Financial Statements, in the
ordinary course of business consistent with past practice, the sum of which is,
in the aggregate, no greater than $50,000, and (d) accounts payable in excess of
those shown on the Financial Statements, incurred in the ordinary course of
business consistent with past practice, the sum of which is, in the aggregate,
not greater than $50,000.
4.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on
SCHEDULE 4.8 and since the date of the Audited Financial Statements:
(a) there has not been any Material Adverse Change nor has
any event occurred which could result in any Material Adverse Change;
4
<PAGE>
(b) there has not been any declaration, setting a record
date, setting aside or authorizing the payment of, any dividend or other
distribution in respect of any share capital of the Company or any of its
Subsidiaries or any repurchase, redemption or other acquisition by the Company
or any of its Subsidiaries, of any of the outstanding share capital or other
securities of, or other ownership interest in, the Company or any of its
Subsidiaries;
(c) there has not been any transfer, issue, sale or other
disposition by the Company of any share capital or other securities of the
Company or any of its Subsidiaries or any grant of options, warrants, calls or
other rights to purchase or otherwise acquire shares of such capital stock or
such other securities;
(d) neither the Company nor any of its Subsidiaries has (i)
awarded or paid any bonuses to Employees or Representatives of the Company, (ii)
entered into any employment, deferred compensation, severance or similar
agreements (nor amended any such agreement), (iii) agreed to increase the
compensation payable or to become payable by the Company or any of its
Subsidiaries to any of the Company's Employees or Representatives, or (iv)
agreed to increase the coverage or benefits available under any severance pay,
deferred compensation, bonus or other incentive compensation, pension or other
employee benefit plan, payment or arrangement made to, for or with such
Employees or Representatives, other than in the ordinary course of business
consistent with past practice which increases in the aggregate do not exceed
$50,000 in annual cost to the Company or any of its Subsidiaries and consistent
with the operating expense budget of the Company or any of its Subsidiaries, and
other than as may have been required by law or insurers;
(e) neither the Company nor any of its Subsidiaries has made
any loans, advances (other than advances to officers and employees of the
Company or its Subsidiaries which advances are made in the ordinary course of
business and do not exceed per individual the reasonable anticipated expenses
for legitimate business purposes), or capital contributions to, or investments
in, any Person or paid any fees or expenses to any Affiliate of the Company
other than a Subsidiary;
(f) neither the Company nor any of its Subsidiaries has
transferred or granted any rights under any Contracts, leases, licenses,
agreements or intangible property (as set forth in Section 4.12 hereof) used by
the Company in its business which could result in a Material Adverse Change;
(g) there has not been any damage, destruction or loss,
whether or not covered by insurance, with respect to the property or assets of
the Company or any of its Subsidiaries having a replacement cost of more than
$10,000 for any single loss or $50,000 for all such losses;
(h) neither the Company nor any of its Subsidiaries has
mortgaged, pledged or subjected to any Lien any of its assets, or acquired any
assets for a purchase price in excess of $50,000 in the aggregate or sold,
assigned, transferred, conveyed, leased or otherwise disposed of any assets of
the Company or any of its Subsidiaries for a sale price in excess of $50,000 in
the aggregate except for assets acquired or sold, assigned, transferred,
conveyed, leased or otherwise disposed of in the ordinary course of business;
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(i) neither the Company nor any of its Subsidiaries has
canceled or compromised any debt or claim or amended, canceled, terminated,
relinquished, waived or released any Contract or right except in the ordinary
course of business consistent with past practice and which, individually or in
the aggregate, would not be material to the Company or any of its Subsidiaries;
(j) neither the Company nor any of its Subsidiaries has made
any binding commitment to make any capital expenditures or capital additions or
betterments in excess of $25,000 individually or $75,000 in the aggregate;
(k) neither the Company nor any of its Subsidiaries has
incurred any debts, obligations or liabilities, whether due or to become due,
except current liabilities incurred in the ordinary course of business, none of
which current liabilities (individually or in the aggregate) could result in a
Material Adverse Change;
(l) neither the Company nor any of its Subsidiaries has
entered into any transaction other than in the ordinary course of business
except for (in the case of the Company) this Agreement;
(m) neither the Company nor any of its Subsidiaries has
encountered any labor difficulties or labor union organizing activities;
(n) neither the Company nor any of its Subsidiaries has made
any change in the accounting principles, methods or practices followed by it or
depreciation or amortization policies or rates theretofore adopted;
(o) neither the Company nor any of its Subsidiaries has
disclosed to any Person any material trade secrets except for disclosures made
to Persons subject to valid and enforceable confidentiality agreements;
(p) except in the ordinary course of business, neither the
Company nor any of its Subsidiaries has suffered or experienced any change in
the relationship or course of dealings between the Company and/or any of its
Subsidiaries and any of their suppliers or customers which supply goods or
services to the Company or any of its Subsidiaries or purchase goods or services
from the Company and or any of its Subsidiaries, which has had or is likely to
have a Material Adverse Effect; and
(q) neither the Company nor any of its Subsidiaries has made
any payment to, or received any payment from, or made or received any investment
in, or entered into any transaction or series of related transactions (including
without limitation, the purchase, sale, exchange or lease of assets, property or
services, or the making of a loan or guarantee) with any Affiliate in each case,
in excess of $50,000 or its equivalent (other than any transactions between or
among the Company and any of its Subsidiaries) (each, an "AFFILIATE
Transaction").
4.9 TAXES. The Company and each of its Subsidiaries has
filed all Tax returns (including statements of estimated Taxes owed) and reports
required to be filed within the applicable periods (subject to extensions) for
such filings and has paid all Taxes required to be
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paid, and has established adequate reserves (net of estimated Tax payments
already made) for the payment of all Taxes payable in respect of the period
subsequent to the last periods covered by such returns. Such Tax returns and
reports are true and correct in all material respects. No deficiencies for any
Tax are currently assessed against the Company or any Subsidiary, and, no Tax
returns of the Company or any Subsidiary have ever been audited, and, to the
knowledge of the Company, there is no such audit pending or contemplated.
Neither the Company nor any of its Subsidiaries has received any notice of any
audit of any of the Tax returns by any British Virgin Islands or foreign taxing
authority (including, without limitation, the Argentine DIRECCION GENERAL
IMPOSITIVA ("DGI") and DIRECCION GENERAL DE RENTAS). There is no Tax Lien,
whether imposed by any federal, state or local taxing authority, outstanding
against the assets, properties or business of the Company or any of its
Subsidiaries other than Liens for Taxes which are not yet due. Neither the
Company nor any of its Subsidiaries has executed any waiver of the statute of
limitations on the assessment or collection of any Tax or governmental charge.
The Company and its Subsidiaries have properly charged, collected and paid all
applicable stamp, sales, use and other similar Taxes on or before the Closing
Date.
4.10 REAL PROPERTY. (a) Neither the Company nor any of its
Subsidiaries owns any real property.
(b) SCHEDULE 4.10(B) sets forth a complete list of all real
property and interests in real property leased by the Company or any of its
Subsidiaries (each, a "REAL PROPERTY LEASE", and collectively, the "REAL
PROPERTY LEASES") as lessee or lessor. The Company or the applicable Subsidiary
has good, legal and marketable title to the leasehold estates in all Real
Property Leases in each case free and clear of all Liens. Neither the Company
nor any Subsidiary has any reason to believe that such title would not be
insurable subject to customary exceptions.
(c) Each of the Real Property Leases is valid and
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and there is no default under any Real Property
Lease by the Company or the applicable Subsidiary or, to the knowledge of the
Company, by any other party thereto, and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a default
thereunder. The Company has delivered or otherwise made available to the
Purchasers true, correct and complete copies of the Real Property Leases,
together with all amendments, modifications, supplements or side letters
affecting the obligations of any party thereunder.
(d) No previous or current party to any Real Property Lease
has given notice of or made a claim with respect to any breach or default
thereunder. With respect to those Real Property Leases that were assigned or
subleased to the Company or a Subsidiary by a third party, all necessary
consents to such assignments or subleases have been obtained.
4.11 TANGIBLE PERSONAL PROPERTY; ASSETS. Each of the Company
and its Subsidiaries has good, legal and marketable title to or valid leasehold
interests in, all of its personal property and assets. The personal property
owned by the Company or its Subsidiaries are held in each case free and clear of
all Liens, other than Permitted Liens. With respect to the
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personal property and assets that the Company or any Subsidiary leases, the
lessee thereunder is in compliance with such leases except for such
noncompliance as would not have a Material Adverse Effect and the lessee holds a
valid leasehold interest free and clear of any Liens, other than Permitted
Liens. All material items of personal property and assets owned or leased by the
Company and its Subsidiaries are in good operating condition, normal wear and
tear excepted.
4.12 INTANGIBLE PROPERTY. Each of the Company and its
Subsidiaries owns or possesses adequate licenses or other rights to use all
patents, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names, copyrights, manufacturing processes,
software, formulae, trade secrets and know how (collectively, "INTELLECTUAL
PROPERTY") necessary to the conduct of its business as conducted; if any such
Intellectual Property necessary to the conduct of the business as proposed to be
conducted is not owned or licensed to the Company or to any of its Subsidiaries,
such Intellectual Property is readily available to the Company on commercially
reasonable terms, and no claim is pending or, to the knowledge of the Company,
threatened to the effect that the operations of the Company or any Subsidiary
infringe upon or conflict with the asserted rights of any other Person under any
Intellectual Property, and the Company does not know of any basis for any such
claim (whether or not pending or threatened). No claim is pending or, to the
knowledge of the Company, threatened to the effect that any such Intellectual
Property owned or licensed by the Company or any Subsidiary, or which the
Company or a Subsidiary otherwise has the right to use, is invalid or
unenforceable by the Company or the applicable Subsidiary, and the Company does
not know of any basis for any such claim (whether or not pending or threatened).
Neither the Company nor any Subsidiary has granted or assigned to any other
Person any right to provide the services or proposed services of the Company and
its Subsidiaries.
4.13 TECHNOLOGY. Except as set forth in SCHEDULE 4.13, the
products, processes, proprietary technology and other proprietary know-how owned
or used by the Company and its Subsidiaries were completely developed by the
Company's full-time employees only; the concepts, inventions and original works
of authorship owned or used by the Company or its Subsidiaries were developed or
conceived by employees within the scope of their employment by the Company (or
the applicable Subsidiary) and are connected with the Company's and its
Subsidiaries' underlying products, processes and proprietary technology. Except
as set forth in SCHEDULE 4.13, no independent contractors or consultants were
used or employed by the Company or a Subsidiary in the development of the
products, processes, proprietary technology and other proprietary know-how owned
or used by the Company and its Subsidiaries.
4.14 REAL PROPERTY HOLDING CORPORATION. The Company is not a
"United States real property holding corporation" within the meaning of Section
847(c)(2) of the Code.
4.15 MATERIAL CONTRACTS.
(a) Except as set forth on SCHEDULE 4.15, neither the
Company, any Subsidiary nor any of their respective properties or assets is a
party to or bound by any (i) Contract not made in the ordinary course of
business, or involving a commitment or payment by the Company or any Subsidiary
in excess of $50,000 or, in the Company's belief, otherwise material to the
business of the Company or any Subsidiary, (ii) Contract among members or
granting a right of first refusal or for a partnership or a joint venture or for
the acquisition, sale or lease of any assets
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or share capital of the Company or any other Person or involving a sharing of
profits, (iii) mortgage, pledge, conditional sales contract, security agreement,
factoring agreement or other similar Contract with respect to any real or
tangible personal property of the Company or any Subsidiary, (iv) loan
agreement, credit agreement, promissory note, guarantee, subordination
agreement, letter of credit or any other similar type of Contract, (v) Contract
with any Governmental Body outside the ordinary course of business, (vi)
Contract with respect to the discharge, storage or removal of hazardous
materials or (vii) binding commitment or agreement to enter into any of the
foregoing. The Company has delivered or otherwise made available to the
Purchasers true, correct and complete copies of the Contracts listed on SCHEDULE
4.15, together with all amendments, modifications, supplements or side letters
affecting the obligations of any party thereunder.
(b) (i) Each of the Contracts listed on SCHEDULE 4.15 is
valid and enforceable against the Company or its Subsidiaries in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity), and there
is no default under any Contract listed on SCHEDULE 4.15 by the Company or any
of its Subsidiaries or, to the knowledge of the Company, by any other party
thereto, which is likely to have a Material Adverse Effect, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default by the Company thereunder which is likely to have a
Material Adverse Effect. (ii) No previous or current party to any Contract has
given written notice to the Company or any Subsidiary of or made a claim with
respect to any breach or default thereunder and the Company has no knowledge of
any notice of or claim with respect to any such breach or default.
(c) With respect to the Contracts listed on SCHEDULE 4.15
that were assigned to the Company or any Subsidiary by a third party, all
necessary consents to such assignment have been obtained.
4.16 EMPLOYEE BENEFITS. Except as set forth on SCHEDULE 4.16,
neither the Company nor any Subsidiary has in effect any employment agreements,
consulting agreements, deferred compensation, pension or retirement agreements
or arrangements, bonus, incentive or profit-sharing plans or arrangements, or
labor or collective bargaining agreements, written or oral. The Company and its
Subsidiaries are in compliance in all material respects with all applicable Laws
relating to labor, employment, fair employment practices, terms and conditions
of employment, and wages and hours.
4.17 EMPLOYEES.
(a) To the knowledge of the Company, no key executive
Employee and no group of Employees or independent contractors of the Company or
any Subsidiary has any plans to terminate his, her or its employment or
relationship as an Employee or independent contractor with the Company or such
Subsidiary.
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(b) SCHEDULE 4.17 sets forth a true and complete list of the
name and amount of annual compensation of (i) each Employee of the Company or
any Subsidiary whose current annual compensation is $50,000 or more, together
with such person's job title and amounts and forms of compensation and fringe
and severance benefits and (ii) each consultant, contractor or subcontractor
equivalent of the Company and its Subsidiaries whose annual compensation by the
Company or its Subsidiary is $50,000 or more.
(c) To the best of the Company's knowledge after reasonable
inquiry, no key executive Employee or any other Employee of the Company or any
Subsidiary is a party to or is otherwise bound by any agreement or arrangement
(including, without limitation, confidentiality agreements, non-competition
agreements, licenses, covenants, or commitments of any nature), or subject to
any judgment, decree, or Order of any court or Governmental Body, (i) that would
conflict with such Employee's obligation diligently to promote and further the
interest of the Company or such Subsidiary or (ii) that would conflict in any
material respect with the Company's (or the applicable Subsidiary's) business as
now conducted or as proposed to be conducted. 4.18 LITIGATION. There are no
Legal Proceedings pending or, to the knowledge of the Company, threatened that
question the validity of this Agreement or any of the Transaction Documents or
any action taken or to be taken by the Company in connection with the
consummation of the transactions contemplated hereby or thereby. Except as set
forth on SCHEDULE 4.18, there are no Legal Proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company, any of
its Subsidiaries or any of their respective properties or assets, and there is
no reasonable basis for any such Legal Proceeding. There is no outstanding or,
to the knowledge of the Company, threatened Order of any Governmental Body
against, in respect of or naming the Company or any of its Subsidiaries or in
respect of any of their respective properties or assets or against the Company
or its Subsidiaries.
4.19 COMPLIANCE WITH LAWS; PERMITS.
(a) The Company and each Subsidiary is and at all times has
been in compliance in all material respects with all material Laws and material
Orders promulgated by any Governmental Body applicable to the Company or such
Subsidiary, or to the conduct of the business or operations of the Company or
such Subsidiary, or the use of any of their respective properties (including any
leased properties) and assets. Neither the Company nor any Subsidiary has
received any notices of violation or alleged violation of any such Law or Order
by any Governmental Body.
(b) The Company and each Subsidiary has all Permits
necessary for the conduct of its business where the failure to have such Permits
could have a Material Adverse Effect. The Company and each Subsidiary has
complied in all material respects with all conditions of such Permits applicable
to it; no default or violation, or event that with the lapse of time or giving
of notice or both would become a default or violation which could have a
Material Adverse Effect, has occurred in the due observance of any such Permit;
all such Permits are in full force and effect without further consent or
approval of any Person; and neither the Company nor any Subsidiary has received
any notice from any source to the effect that there is lacking any
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such material Permit required in connection with the current operations of the
Company or such Subsidiary.
4.20 ENVIRONMENTAL AND SAFETY LAWS. Neither the Company nor
any Subsidiary is in violation of any applicable Laws relating to the
environment or occupational health and safety where the failure to so comply
could have a Material Adverse Effect and no material expenditures are or will be
required in order to comply with any such existing Laws.
4.21 INVESTMENT COMPANY ACT. The Company is not, nor is it
directly or indirectly controlled by or acting on behalf of, any Person that is
an investment company within the meaning of the Investment Company Act of 1940,
as amended.
4.22 AFFILIATE TRANSACTIONS. SCHEDULE 4.22 sets forth each
Affiliate Transaction of the Company and its Subsidiaries, including the
parties, material terms (including amounts due from the Company (or a
Subsidiary) or owed to the Company (or a Subsidiary)), restrictions and
obligations of the Company and its Subsidiaries in connection with each such
Affiliate Transaction. Each such Affiliate Transaction is on an arm's-length
basis and on terms no less favorable to the Company or a Subsidiary than could
be obtained from non-related parties. The Company has delivered or otherwise
made available to the Purchasers true, correct and complete copies of all
written Contracts relating to such Affiliate Transactions, together with all
amendments, modifications, supplements or side letters affecting the obligations
of any party thereunder.
4.23 DISCLOSURE; SURVIVAL. There is no fact which has not
been disclosed to the Purchasers of which the Company has knowledge and which
has had or could reasonably be anticipated to result in a Material Adverse
Change. All representations and warranties set forth in this Agreement or in any
writing or certificate delivered in connection with this Agreement shall survive
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby for a period of sixty (60) days after delivery
of audited financial statements for 1999 (the "SURVIVAL PERIOD") and shall not
be affected by any examination made for or on behalf of the Purchasers, the
knowledge of the Purchasers, or the acceptance by the Purchasers of any
certificate or opinion.
4.24 INSURANCE. There is in full force and effect one or more
policies of insurance issued by insurers of recognized responsibility, insuring
the Company, its Subsidiaries and their respective properties, business and
projects against such losses and risks, and in such amounts, as are customary in
the case of corporations of established reputation engaged in the same or
similar business and similarly situated. Neither the Company nor any Subsidiary
has been refused any insurance coverage sought or applied for, and the Company
has no reason to believe that the Company and its Subsidiaries will be unable to
renew its existing insurance coverage as and when the same shall expire upon
terms at least as favorable as those presently in effect, other than possible
increases in premiums that do not result from any act or omission of the Company
or the applicable Subsidiary. SCHEDULE 4.24 sets forth a list of each insurance
policy (specifying the insurer, the amount of coverage, the type of insurance,
the policy number, the expiration date, the annual premium (current and for each
of the last three (3) years) and any pending claims thereunder) maintained by
the Company and its Subsidiaries relating to its properties, assets, business or
personnel, and each inspection report or recommendation, if any,
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during the last three (3) years as to the conditions of the properties and
assets owned, leased, occupied or operated by it or the conduct of its business.
Except as disclosed on SCHEDULE 4.24, neither the Company nor any Subsidiary is
in default in any material respect with respect to any provision contained in
any insurance policy maintained by the Company or any of its Subsidiaries, and
neither the Company nor any Subsidiary has failed to give any notice or present
any presently existing claims under any insurance policy in due and timely
fashion.
4.25 CUSTOMERS AND SUPPLIERS. SCHEDULE 4.25 sets forth a list
of the ten (10) largest customers and the ten (10) largest suppliers of the
Company and its Subsidiaries and the dollar amount of purchases or sales which
each such customer or supplier represents. There exists no actual or, to the
knowledge of the Company, threatened termination or cancellation of the business
conducted by the Company or any Subsidiary with any customer, supplier or group
of customers or group of suppliers set forth on SCHEDULE 4.25.
4.26 YEAR 2000. Each item of hardware, software, information
technology, embedded, or processor based system and/or any combination thereof,
used, developed, manufactured, distributed, licensed, transferred or delivered,
by the Company or any of its Subsidiaries (collectively, the "SYSTEM"), shall be
able to correctly function, operate, process data or perform date related
calculations, including, but not limited to, calculating, comparing and
sequencing, from, into and between the years 1999 and 2000, accurately process,
provide and/or receive date data, including leap year calculations, into and
between the years 1999, 2000 and beyond, shall otherwise function as per the
specifications thereof before, during and following January 1, 2000. Neither
performance nor functionality of the System shall be affected by dates prior to,
during and after January 1, 2000. A System containing or calling on a calendar
function including, without limitation, any function indexed to the CPU clock,
and any function providing specific dates or days, or calculating spans of dates
or days shall record, store, process, provide and, where appropriate, insert,
true and accurate dates and calculations for dates and spans, before, during and
following January 1, 2000. The System shall have no lesser functionality or
operability with respect to records containing dates, before, during or after
January 1, 2000 than heretofore with respect to dates prior to January 1, 2000.
The System shall be fully interoperable and interface with any and all other
systems, software and/or hardware used by the Company, its Subsidiaries and
their respective customers before, during or after January 1, 2000, and/or
otherwise exchange data, including date related data therewith.
4.27 FINANCIAL ADVISORS. Except as set forth in SCHEDULE
4.27, no agent, broker, investment banker, finder, financial advisor or other
Person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee from the Company, directly or indirectly, in
connection with the transactions contemplated by this Agreement or any
Transaction Document and no Person is entitled to any fee or commission or like
payment from the Company in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of the Company.
4.28 CONDITION OF PROPERTIES. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Company and its Subsidiaries are in good operating condition and repair, are
reasonably fit and usable for the purposes for which they are being used, are
adequate and sufficient for the Company and its Subsidiaries' respective
businesses and conform in all material respects with all applicable Laws.
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4.29 ILLEGAL OR UNAUTHORIZED PAYMENTS; POLITICAL
CONTRIBUTIONS. The operations and practices of the Company and its Subsidiaries
have been conducted at all times during the past five (5) years in compliance
with the provisions of the United States Foreign Corrupt Practices Act of 1977,
as amended.
4.30 PENDING CHANGES. To the actual knowledge of the Company,
there is no pending or threatened change in any Law which materially affects or
could materially affect the Company or the business, assets, liabilities,
prospects, properties, results of operations or condition (financial or
otherwise) of the Company or its Subsidiaries.
4.31 SECURITIES LAWS. The Company has complied with all
applicable U.S. federal and state securities laws in connection with the offer,
issuance and sale of the Preferred Shares. Prior to the Closing, neither the
Company nor anyone acting on its behalf has sold, offered to sell or solicited
offers to buy the Preferred Shares or similar securities to, or solicit offers
with respect thereto from, or entered into any preliminary conversations or
negotiations relating thereto with, any Person, so as to bring the issuance and
sale of the Preferred Shares under the registration provisions of the Securities
Act, and applicable state securities laws. Neither the Company nor any Person
acting on its behalf has offered the Preferred Shares to any Person by means of
general or public solicitation or general or public advertising, such as by
newspaper or magazine advertisements, by broadcast media, or at any seminar or
meeting whose attendees were solicited by such means.
4.32 BACKLOG. SCHEDULE 4.32 sets forth a list of Revenue and
Customer "Backlog" by customer as of July 31, 1999. Such list has been
accurately compiled, is true, correct and complete insofar as it purports to
reflect revenues actually generated, and represents the best good faith forecast
of the Company insofar as it purports to forecast revenues for periods after the
date hereof.
4.33 ACCOUNTS RECEIVABLE. The accounts receivable of the
Company and its Subsidiaries were created in the ordinary course of business
and, to the Company's knowledge, are fully collectible, without offset or other
deduction, subject to appropriate reserves in accordance with GAAP applied on a
consistent basis. SCHEDULE 4.33 sets forth a good faith estimate of the accounts
receivable of the Company and its Subsidiaries as of July 31, 1999.
4.34 REGISTRATION RIGHTS. Except for the rights granted under
the Transaction Documents, no Person has demand or other rights to cause the
Company to file any registration statement under the Securities Act relating to
any securities of the Company or any right to participate in any such
registration statement.
4.35 BOOKS AND RECORDS. The books of account, ledgers, order
books, records and documents of the Company and its Subsidiaries accurately and
completely reflect all material information relating to the business of the
Company or the applicable Subsidiary, the location and collection of its assets,
and the nature of all transactions giving rise to the obligations or accounts
receivable of the Company or the applicable Subsidiary.
4.36 PFIC. The Company is not a "passive foreign investment
company" within the meaning of Section 1297 of the Code.
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4.37 SIGNATURE PAGES. Notwithstanding anything in this
Article 4 to the contrary, the representations and warranties made as of the
date hereof (but not as of the Closing Date) in Sections 4.2 and 4.4 are subject
to the receipt by the Company of signature pages to the relevant consents and
authorizations referred to therein.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company that:
5.1 CAPACITY; AUTHORIZATION. Such Purchaser has all legal
capacity to enter into this Agreement and to carry out its obligations
hereunder. Assuming due execution and delivery by the Company of this Agreement,
this Agreement will constitute a legal, valid and binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
5.2 INVESTMENT PURPOSES. (a) Such Purchaser is acquiring the
Preferred Shares it has agreed to purchase for investment purposes only, for its
own account, and not as nominee or agent for any other Person, and not with a
view to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act, (b) it understands and acknowledges that the
Preferred Shares have not been registered under the Securities Act or any other
securities laws, (c) it is not an "affiliate" (as defined in Rule 144 under the
Securities Act) of the Company, (d) it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, (e) it is an "accredited investor" within the meaning
of Rule 501 of Regulation D under the Securities Act, (f) the Company has made
available to it the opportunity to ask questions and to receive answers, and to
obtain information necessary to evaluate the merits and risks of this
investment, (g) such Purchaser understands, acknowledges and agrees that the
Preferred Shares have not been registered under (and that the Company has no
present intention to register the Preferred Shares under) the Securities Act or
applicable state securities laws, and may not be sold or otherwise transferred
by the Purchasers to a United States person unless the Preferred Shares have
been registered under the Securities Act and applicable U.S. state securities
laws or are sold or transferred in a transaction exempt therefrom, and (h) no
broker has acted on behalf of such Purchaser in connection with this Agreement,
and there are no brokerage commissions, finders' fees or similar fees or
commissions payable in connection therewith based on any agreement, arrangement
or understanding with such Purchaser or any action taken by such Purchaser.
5.3 PAYMENT OF PURCHASE PRICE. Such Purchaser has available
resources in order to pay to the Company the purchase price for the Preferred
Shares in accordance with the terms and conditions of this Agreement.
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6. FURTHER AGREEMENTS OF THE PARTIES.
6.1 RESERVED SHARES. For so long as the Preferred Shares are
convertible, the Company shall reserve that number of Common Shares issuable
upon conversion of the Preferred Shares, which shares shall not be subject to
any preemptive or other similar rights.
6.2 USE OF PROCEEDS. The Company shall use the proceeds from
the sale of the Preferred Shares under this Agreement for the following
purposes: advertising, brand positioning and development, production of
proprietary and third-party content, product and technology development,
expansion of local sales operations, general corporate purposes and such other
purposes as are discussed in the Private Placement Memorandum.
6.3 ACCESS TO INFORMATION. The Purchasers and their
Representatives shall be entitled, upon reasonable notice, and at their own
expense, to make such investigation of the properties, business and operations
of the Company and such examination of the books, records and financial
condition of the Company as they reasonably request and to make extracts and
copies of such books and records. Any such investigation and examination shall
be conducted during regular business hours and under reasonable circumstances
without material interference with the Company's normal business operations, and
the Company and its Representatives shall cooperate fully therein. No
investigation by the Purchasers or their Representatives prior to or after the
date of this Agreement shall diminish or obviate any of the representations,
warranties, covenants or agreements of the Company contained in this Agreement
or the Transaction Documents. In order that the Purchasers may have full
opportunity to make such physical, business, accounting and legal review,
examination of the affairs of the Company and investigation as may be reasonably
requested, the Company shall cause its Representatives to cooperate fully with
the Representatives of the Purchasers in connection with such review and
examination.
6.4 CONFIDENTIALITY. Except as may be required by applicable
Law or as otherwise agreed among the parties hereto, neither the Company, the
Purchasers nor any of their respective Affiliates shall at any time divulge,
disclose, disseminate, announce or release any information to any Person
concerning this Agreement, the Transaction Documents, the transactions
contemplated hereby or thereby, any trade secrets or other confidential
information of the Company or the Purchasers, without first obtaining the prior
written consent of the other parties hereto; PROVIDED, HOWEVER, that the parties
shall be entitled to disclose information with respect to the Purchasers'
investment in the Company on any reports the Purchasers furnish to their
investors or as otherwise required by Law. The provisions of this Section 6.4
shall not apply to Intel Atlantic, Inc., whose obligations with respect to the
treatment of such information, including Corporate Information (as defined in
Section 9.9), are set forth in EXHIBIT F hereto.
6.5 OTHER ACTIONS. The Company and the Purchasers agree to
execute and deliver such other documents and take such other actions as the
other parties may reasonably request for the purpose of carrying out the intent
of this Agreement and the Transaction Documents.
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6.6 YEAR 2000 COVENANT. The Company undertakes to promptly
inform the Purchasers of any material deficiency or expected cost in complying
with the "Year 2000" problem.
6.7. INDEMNITY.
(a) The Company agrees to indemnify, defend and hold
harmless the Purchasers (and their partners (and each officer and director
thereof), directors, officers, members, stockholders, Employees, Affiliates,
agents and permitted assigns) from and against any and all losses, claims,
liabilities, damages, deficiencies, costs or expenses (including interest,
penalties, and reasonable attorneys' fees, disbursements and related charges)
(collectively, "LOSSES") based upon, arising out of or otherwise in respect of
any inaccuracy in or breach of any representations, warranties, covenants or
agreements of the Company contained in this Agreement or the Transaction
Documents; provided, however, that the Purchasers shall have no right to
indemnification hereunder unless and until its Losses, when aggregated with any
and all other Losses which the Purchasers may have against the Company, exceed
$250,000. The provisions of this Section 6.7(a) shall survive the termination of
this Agreement for a period equal to the Survival Period.
(b) Each Purchaser agrees, severally and not jointly, to
indemnify, defend and hold harmless the Company (and its directors, officers,
members, Employees, Affiliates, agents and permitted assigns) from and against
any and all Losses based upon, arising out of or otherwise in respect of any
inaccuracy in or breach by it of any representations, warranties, covenants or
agreements of such Purchaser (and no other) contained in this Agreement.
6.8 OTHER AFFIRMATIVE COVENANTS OF THE COMPANY. Without
limiting any other covenants and provisions hereof, the Company covenants and
agrees that until the consummation of a Qualifying IPO, it will perform and
observe the following covenants and provisions, and will cause each Subsidiary,
if and when such Subsidiary exists, to perform and observe such of the following
covenants and provisions as are applicable to such Subsidiary:
(a) The Company shall pay and discharge, and cause each
Subsidiary to pay and discharge, all Taxes, assessments and governmental charges
or levies imposed upon it or upon its income, profits or business, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
and all lawful claims which, if unpaid, might become a Lien or charge upon any
properties of the Company or any Subsidiary, PROVIDED that neither the Company
nor any Subsidiary shall be required to pay any such Tax, assessment, charge,
levy or claim which is being contested in good faith and by appropriate
proceedings if the Company or any Subsidiary shall have set aside on its books
sufficient reserves, if any, with respect thereto. The Company shall pay and
cause each Subsidiary to pay, when due, or in conformity with customary trade
terms, all lease obligations, all trade debt, and all other indebtedness
incident to the operations of the Company or its Subsidiaries, except such as
are being contested in good faith and by proper proceedings if the Company or
Subsidiary concerned shall have set aside on its books sufficient reserves, if
any, with respect thereto.
(b) The Company shall maintain insurance with a reputable
insurance company or association in such amount and covering such risks as is
customary coverage
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covering its properties and businesses customarily carried by companies engaged
in similar businesses and owning similar properties in the same general areas in
which the Company or any Subsidiary operates for the type and scope of its
properties and businesses and the Company shall maintain, and cause each
Subsidiary to maintain, such insurance. The Company will not cause or permit any
assignment of the proceeds of the life insurance policies specified in the first
sentence of this paragraph and will not borrow against such policies. The
Company will add the Purchasers as a notice party to such policies and will
request that the issuer(s) of such policies provide such designee with at least
ten (10) days' notice before either such policy is terminated (for failure to
pay premiums or otherwise) or assigned, or before any change is made in the
designation of a beneficiary thereof.
(c) The Company shall preserve and maintain (except where
noncompliance will not result in a Material Adverse Effect) and, unless the
Company deems it not to be in its best interests, cause each Subsidiary to
preserve and maintain, its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
or lease of its properties. The Company shall use commercially reasonable best
efforts to secure, preserve and maintain (except where noncompliance will not
result in a Material Adverse Effect) and cause each Subsidiary to use
commercially reasonable best efforts to secure, preserve and maintain (except
where noncompliance will not result in a Material Adverse Effect), all licenses
and other rights to use patents, processes, licenses, Permits, trademarks, trade
names, inventions, intellectual property rights or copyrights owned or possessed
by it and deemed by the Company to be material to the conduct of its business or
the business of any Subsidiary.
(d) The Company shall comply (except where noncompliance
will not result in a Material Adverse Effect), and cause each Subsidiary to
comply, with the requirements of all applicable Laws and Orders of any
Governmental Body, where noncompliance would have a Material Adverse Effect.
(e) The Company shall keep, and cause each Subsidiary to
keep, adequate records and books of account in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and any Subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, returns of merchandise,
obsolescence, amortization, Taxes, bad debts and other purposes in connection
with its business shall be made.
(f) The Company shall use commercially reasonable best
efforts to maintain and preserve, and cause each Subsidiary to use commercially
reasonable best efforts to maintain and preserve, all of its properties and
assets, necessary for the proper conduct of its business, in good repair,
working order and condition, ordinary wear and tear excepted, including, without
limitation, the maintenance and preservation of any material patents, licenses,
Permits or agreements being used by the Company in its business as now operated
and as now proposed to be operated.
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(g) The Company shall promptly, fully and in detail, inform
the Board of Directors of any substantive discussions, offers or contracts
relating to possible financings of any nature for the Company, whether initiated
by the Company or any other Person, except for (i) arrangements with trade
creditors, and (ii) utilization by the Company or any Subsidiary of commercial
lending arrangements with financial institutions.
(h) The Company shall at all times maintain provisions in
its Memorandum of Association and Articles of Association indemnifying all
directors against liability to the maximum extent permitted under the laws of
the British Virgin Islands.
6.9 ISSUANCE OF ADDITIONAL PREFERRED SHARES. Without the
consent of the Purchasers, the Company shall not issue any Preferred Shares
(other than the issuance and sale of Preferred Shares pursuant to this
Agreement) to any Person that is not named in the definition of "Strategic Sale"
contained in the Memorandum of Association.
6.10 WAIVER. Each Purchaser hereby irrevocably waives its
right to include any of its Preferred Shares in the Company's proposed
registration statement on Form F-1, which the Company expects to be declared on
or about November 30, 1999.
7. OTHER OBLIGATIONS OF THE PARTIES.
7.1 CERTAIN NOTIFICATIONS. At all times prior to the
Closing, each party hereto shall as promptly as reasonably practicable notify
the others in writing of the occurrence of any event of which it obtains
knowledge which will result, or in the opinion of such party has a reasonable
prospect of resulting, in the failure to satisfy the conditions specified in
Section 8 hereof.
7.2 PUBLIC ANNOUNCEMENTS. The parties hereto agree to
consult promptly with each other prior to issuing any press releases or
otherwise making public statements with respect to the transactions contemplated
hereby, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law.
7.3 FURNISHING INFORMATION. Each of the parties hereto will,
as soon as practicable after reasonable request therefor, furnish all the
information concerning it required for inclusion in any statement or application
made by any of them to any governmental or regulatory body in connection with
the transactions contemplated by this Agreement.
8. CONDITIONS TO CLOSING.
8.1 CONDITIONS OF OBLIGATIONS OF THE PURCHASERS. The
obligation of the Purchasers to purchase and pay for the Preferred Shares which
it has agreed to purchase on the Closing Date is subject to the fulfillment in
all material respects prior to or on the Closing Date of the following
conditions, any of which may be waived in whole or in part by the Purchasers:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company under this Agreement shall be deemed to have been made
again on the Closing Date
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(other than those representations and warranties made expressly as of a date
prior to the Closing Date) and shall then be true and correct.
(b) COMPLIANCE WITH AGREEMENT. The Company shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by the Company on or before the
Closing Date.
(c) APPROVALS. The Company shall have obtained any and all
consents, waivers, approvals or authorizations, with or by any Governmental Body
or any other Person required for the valid execution of this Agreement and the
transactions contemplated hereby.
(d) NO INJUNCTION. No Governmental Body or any other Person
shall have issued an Order which shall then be in effect restraining or
prohibiting the completion of the transactions contemplated hereby, nor shall
any such Order be threatened or pending.
(e) NO MATERIAL ADVERSE CHANGE. Since December 31, 1998,
there shall not have been a Material Adverse Change.
(f) CERTIFICATE OF OFFICER. The Company shall have delivered
to the Purchasers a certificate dated the Closing Date, executed by its Chief
Executive Officer, certifying the satisfaction of the conditions specified in
paragraphs (a), (b), (c), (d), (e) and (h) of this Section 8.1.
(g) OPINIONS OF THE COMPANY'S COUNSEL. The Purchasers shall
have received from Paul, Hastings, Janofsky & Walker, LLP, U.S. counsel for the
Company, and from Conyers, Dill & Pearmen, British Virgin Islands counsel for
the Company, favorable opinions dated the Closing Date, in form and substance
satisfactory to the Purchasers and their counsel.
(h) MEMORANDUM AND ARTICLES. The Amended and Restated
Memorandum of Association and the Amended and Restated Articles of Association
providing for the terms, preferences, designations and other rights of the
Preferred Shares set forth in Exhibit C hereto shall have been duly adopted and
executed and filed with the appropriate authorities in the British Virgin
Islands. The Amended and Restated Memorandum of Association and the Amended and
Restated Articles of Association shall be in full force and effect as of the
Closing under the laws of the British Virgin Islands and shall not have been
further amended or modified. The Company shall not have adopted or filed any
other document designating terms, relative rights or preferences of the
Preferred Shares. A certified copy of the Amended and Restated Memorandum of
Association and the Amended and Restated Articles of Association shall have been
delivered to counsel for the Purchasers.
(I) AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT AND
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT. The Purchasers shall have received
from each of the parties thereto (other than the Purchasers) executed versions
of the Amended and Restated Shareholders Agreement and the Amended and Restated
Registration Rights Agreement on the Closing Date, in the form attached hereto
as Exhibits D and E.
(J) SUPPORTING DOCUMENTS. The Purchasers shall have received
the following:
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(i) Copies of resolutions of the Board and the members of
the Company, certified by the Secretary of the Company, authorizing and
approving the amendments to the Amended and Restated Memorandum of Association
and the Amended and Restated Articles of Association set forth in Exhibit C and,
as to the Board, the execution, delivery and performance of this Agreement and
the Transaction Documents and the issuance of the Preferred Shares, the forms of
share certificates, and all other documents and instruments to be delivered
pursuant hereto and thereto;
(ii) A copy of the consent executed by holders of a majority
of the shares of the Class A Preferred Stock issued and outstanding as of the
date hereof consenting to the issuance of the Preferred Shares pursuant to this
Agreement; and
(iii) A certificate of incumbency executed by the Secretary of
the Company certifying the names, titles and signatures of the officers
authorized to execute the documents referred to in subparagraph (I) above and
further certifying that the Amended and Restated Memorandum of Association and
the Amended and Restated Articles of Association of the Company, as amended in
accordance with Exhibit C and delivered to the Purchasers at the time of the
execution of this Agreement have been validly adopted and have not been further
amended or modified.
(k) UPDATING OF INFORMATION. The Company shall have promptly
delivered to the Purchasers any information concerning events subsequent to the
date of this Agreement which is necessary to supplement the information
contained in or made a part of the representations and warranties contained
herein, including the schedules provided in connection with this Agreement, or
delivered by the Company pursuant to any of the covenants contained herein, in
order that the information contained herein or so delivered be complete and
accurate in all material respects as of the Closing Date. Notwithstanding the
preceding sentence, for purposes of determining the parties' rights and
obligations under this Agreement, the schedules delivered by the Company shall
be deemed to include only that information contained therein on the date of this
Agreement.
8.2 CONDITIONS OF COMPANY'S OBLIGATIONS. The Company's
obligation to issue and sell the Preferred Shares to the Purchases on the
Closing Date is subject to the fulfillment prior to or on the Closing Date of
the flowing conditions, any of which may be waived in whole or in part by the
Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchasers under this Agreement shall be deemed to have been
made again on the Closing Date and shall then be true and correct in all
material respects.
(b) COMPLIANCE WITH AGREEMENT. Each of the Purchasers shall
have performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by such Purchaser on or before the
Closing.
(c) APPROVALS. Each of the Purchasers shall have obtained
any and all consents, waivers, approvals, Permits or authorizations, with or by
any Governmental Body
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or any other Person required for the valid execution of this Agreement and the
transactions contemplated hereby.
(d) PAYMENT OF PURCHASE PRICE. Each Purchaser shall have
delivered its Purchase Price specified in Section 2.1 hereof.
(e) NO INJUNCTION. No Governmental Body or any other Person
shall have issued an Order which shall then be in effect restraining or
prohibiting the completion of the transactions contemplated hereby, nor shall
any such Order be threatened or pending.
9. MISCELLANEOUS.
9.1 CERTAIN DEFINITIONS.
"AFFILIATE" of any Person means any Person that directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "CONTROL" (including with its correlative
meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through ownership
of securities or partnership or other ownership interests, by contract or
otherwise).
"CODE" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"COMMON SHARES" means the ordinary shares, par value $0.01 per
share, of the Company.
"CONTRACT" means any contract, agreement, indenture, note,
bond, loan, instrument, lease, conditional sales contract, mortgage, license,
franchise, insurance policy, commitment or other arrangement or agreement,
whether written or oral.
"DOLLARS" or "$" means the currency of the United States or
its foreign currency equivalent at the time the determination is made.
"EMPLOYEE" means any current employee, office consultant,
independent contractor, agent, officer or director of the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
"GAAP" means generally accepted accounting principles, as in
effect in the United States.
"GOVERNMENTAL BODY" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).
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"LAW" means any federal, state, local or foreign law
(including common law), statute, code, ordinance, rule, regulation or other
requirement or guideline.
"LEGAL PROCEEDING" means any judicial, administrative or
arbitral actions, suits, proceedings (public or private), claims or governmental
proceedings.
"LIEN" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to give any financing statement under the
Uniform Commercial Code (or similar laws) of any jurisdiction and including any
lien or charge arising by statute or other law.
"MATERIAL ADVERSE CHANGE" means any material adverse change in
the business, assets, liabilities, prospects, properties, results of operations
or condition (financial or otherwise) of the Company and its Subsidiaries, taken
as a whole.
"MATERIAL ADVERSE EFFECT" means any event, circumstance,
condition, fact, effect, or other matter which has had or could reasonably be
expected to have a material adverse effect (i) on the business, assets,
liabilities, prospects, properties, results of operations or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole or
(ii) on the ability of the Company and such subsidiaries to perform on a timely
basis any material obligation under this Agreement or to consummate the
transactions contemplated hereby.
"ORDER" means any order, injunction, judgment, decree, ruling,
writ, assessment or arbitration award.
"PERMITS" means any approvals, authorizations, consents,
licenses, permits or certificates by or of any Governmental Body.
"PERMITTED LIENS" shall mean (a) Liens for ad valorem real or
personal property taxes or assessments not at the time due and (b) Liens in
respect of pledges or deposits under workers' compensation laws or similar
legislation, carriers', warehousemen's, mechanics', laborers', and materialmen's
and similar liens, if the obligations secured by such Liens are not then
delinquent.
"PERSON" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
"QUALIFYING IPO" means an underwritten initial public offering
of Common Shares of the Company pursuant to an effective registration statement
under the Securities Act, as then in effect (or any comparable statement under
any similar federal statute then in force or effect) in which the net proceeds
to the Company are equal to or greater than $35.0 million.
"REGISTER" means to register under the Securities Act and
applicable state securities laws for the purpose of effecting a public sale of
securities.
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"REPRESENTATIVES" of a Person means its officers, Employees,
agents, legal advisors and accountants.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder, all as the same shall be in effect at the
time.
"TAXES" means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, share capital, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value-added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
9.2 EXPENSES.
(a) At the Closing, the Company shall reimburse the
Purchasers for the reasonable out-of-pocket fees and expenses incurred by the
Purchasers in connection with the transactions contemplated hereby. The Company
agrees that such fees and expenses incurred through the Closing Date may be
deducted by the Purchasers from the Purchase Price payable at the Closing.
(b) The Company shall pay its own other out-of-pocket
expenses and all stamp and other Taxes which may be payable in respect of the
execution and delivery of this Agreement, the Transaction Documents, or the
issuance, delivery or acquisition of the Preferred Shares.
(c) The Company further agrees to reimburse the Purchasers
on demand for the Purchasers' reasonable out-of-pocket fees and expenses
incurred in connection with any amendment to or waiver or enforcement of this
Agreement.
9.3 SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that the breach of this Agreement would cause
irreparable damage to the other parties hereto and that the other parties hereto
will not have an adequate remedy at law. Therefore, the obligations of each of
the parties hereto under this Agreement shall be enforceable by a decree of
specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies shall, however, be cumulative and not exclusive and
shall be in addition to any other remedies which any party may have under this
Agreement or otherwise.
9.4 FURTHER ASSURANCES. The Company and the Purchasers agree
to execute and deliver such other documents or agreements as may be necessary or
desirable for the implementation of this Agreement and the consummation of the
transactions contemplated hereby.
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9.5 SUBMISSION TO JURISDICTION; CONSENT TO SERVICE OF
PROCESS.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
Borough of Manhattan, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action or proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any suit, action or proceeding by
the mailing of a copy thereof in accordance with the provisions of Section 8.10
hereof.
9.6 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement
(including the schedules and exhibits hereto) represents the entire
understanding and agreement among the parties hereto with respect to the subject
matter hereof and can be amended, supplemented or changed, and any provision
hereof can be waived, only by written instrument making specific reference to
this Agreement signed by the parties hereto. No action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranty, covenant or agreement
contained herein. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach. No
failure on the part of any party to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
9.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the principles of conflict of laws thereunder which would specify the
application of the law of another jurisdiction.
9.8 HEADINGS; INTERPRETIVE MATTERS. The section headings of
this Agreement are for reference purposes only and are to be given no effect in
the construction or interpretation of this Agreement. No provision of this
Agreement will be interpreted in favor of, or against, any of the parties hereto
by reason of the extent to which any such party or its counsel participated in
the drafting thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.
9.9 CONFIDENTIALITY. Each party hereto (other than Intel
Atlantic, Inc.) covenants and agrees to treat any non-public information
provided to it by the Company concerning the business and finances of the
Company ("Corporate Information") as confidential and agrees further that it
will not use, exploit, reproduce, disclose or provide Corporate
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Information to any third-party (other than any agents of the parties who are
bound by substantially similar obligations of confidentiality) on its own behalf
or otherwise, except with the consent of the Company or as required by law,
legal process or any federal or state regulatory body having jurisdiction over
such party. The provisions of this Section 9.9 shall not apply to any
information which:
(a) was within the public domain prior to the time of
disclosure of Corporate Information to the receiving party or which comes into
the public domain other than as a result of a breach by the party of this
Section 9.9;
(b) was in the possession of the receiving party or any of
its officers, directors, employees, agents, principals, or Affiliates) before
the receiving party received the Corporate Information;
(c) was rightfully acquired by the receiving party from a
third party without, to the knowledge of the receiving party, any restriction or
any obligation of confidentiality; or
(d) was independently developed by the receiving party
without any use or reference to the Corporate Information.
The provisions of this Section 9.9 shall survive the
termination of this Agreement, either in whole or as to any party, for a period
of two (2) years.
9.10 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally, telecopied or mailed by certified mail, return receipt requested, to
the parties at the address or telecopier number indicated in the signature pages
hereof.
All notices are effective upon receipt or upon refusal if
properly delivered.
9.11 SEVERABILITY. If any provision of this Agreement is
invalid or unenforceable, the balance of this Agreement shall remain in effect.
9.12 BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Nothing in this Agreement shall create or be
deemed to create any third-party beneficiary rights in any Person not a party to
this Agreement except as provided below. No assignment of this Agreement or of
any rights or obligations hereunder may be made by the Company or the Purchasers
(by operation of law or otherwise) without the prior written consent of the
other parties hereto and any attempted assignment without the required consents
shall be void; PROVIDED, HOWEVER, that any of the Purchasers may assign this
Agreement and any or all of its rights and obligations hereunder, in whole or in
part, to any of its Affiliates, but any such assignment shall not relieve such
Purchaser of its obligations hereunder. In addition, and whether or not any
express assignment has been made, the provisions of this Agreement which are for
the benefit of the Purchasers as purchasers or holders of Preferred Shares (or
any securities pursuant to which such Preferred Shares may be converted or
exercised into) are also for the benefit of and enforceable by, any subsequent
holder of such Preferred Shares who
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acquires the lesser of (i) $5,000,000 in original purchase price value of the
Preferred Shares other than pursuant to open-market purchases or (ii) fifty
percent (50%) of the number of Preferred Shares purchased by the Purchasers
pursuant hereto. Upon any permitted assignment, the references in this Agreement
to the Purchasers shall also apply to any such assignee unless the context
otherwise requires.
9.13 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
[The rest of this page has been intentionally left blank]
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or have
caused this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first written above.
EL SITIO, INC.
By:
-------------------------------------
Title:
Notice address:
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attention: Roberto Cibrian-Campoy
Telephone: (54 11) 4343-6700
Telecopier: (54 11) 4343-2355
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue, 31st Floor
New York, New York 10022
Attention: Neil A. Torpey
Telephone: (212) 318-6034
Telecopier: (212) 318-4090
[Signature Page to Share Purchase Agreement - El Sitio, Inc.]
<PAGE>
UTILITIVEST II, L.P.
By: Utilitivest II, L.L.C., its General Partner
By:
-------------------------------------
Name: Hurdle H. Lea III
Title: Vice President and Director of
Utilitivest II, L.L.C.
Notice address:
Globalvest Management Company
6000 Estate Charlotte Amalie
Suite 4
St. Thomas, VI 00802
Telephone - 340-775-8009
[email protected]
UTILITIVEST III, L.P.
By Utilitivest III, L.L.C., its General Partner
By:
-------------------------------------
Name: Hurdle H. Lea III
Title: Vice President and Director of
Utilitivest III, L.L.C.
Notice address:
Globalvest Management Company
6000 Estate Charlotte Amalie
Suite 4
St. Thomas, VI 00802
Telephone - 340-775-8009
[email protected]
[Signature Page to Share Purchase Agreement - El Sitio, Inc.]
<PAGE>
INTEL ATLANTIC, INC.
By:
-------------------------------------
Name:
Title:
Notice address:
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: M&A Portfolio Manager-M/S RN6-46
Fax Number: (408) 765-6038
With copies to:
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
Fax Number: (408) 765-1859
[Signature Page to Share Purchase Agreement - El Sitio, Inc.]
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Number of Class B Percentage of Class B
NAME PREFERRED SHARES PREFERRED SHARES PURCHASE PRICE
<S> <C> <C> <C>
Utilitivest II, L.P. 333,333 30% $3,000,000
Utilitivest III, L.P. 222,222 20% $2,000,000
Intel Atlantic, Inc. 555,556 50% $5,000,000
</TABLE>
<PAGE>
EXHIBIT F
November 9, 1999
Intel Atlantic, Inc.
2200 Mission College Blvd.
Santa Clara, CA 95052
In consideration of the purchase by Intel Atlantic, Inc. ("Intel") of
555,555.55 shares of Class B Preferred Stock of El Sitio, Inc. ("Company"),
pursuant to a Share Purchase Agreement dated November 9, 1999 (the "Purchase
Agreement"), Company and Intel agree to the terms and obligations of this letter
agreement ("Agreement").
1. CONFIDENTIALITY
(a) DISCLOSURE OF TERMS. The terms and conditions of this Agreement,
the Purchase Agreement, the Amended and Restated Shareholders Agreement, dated
November 9, 1999 and the Amended and Restated Registration Rights Agreement,
dated November 9, 1999 (collectively, the "Financing Terms"), including their
existence, shall be considered confidential information and shall not be
disclosed by the Company to any third party except in accordance with the
provisions set forth below.
(b) PRESS RELEASES, ETC. Within sixty (60) days after the closing of
the transactions contemplated by the Purchase Agreement, the Company may issue a
press release disclosing that the Investors, including Intel, have invested in
the Company; provided that the release does not disclose any of the Financing
Terms and the final form of the press release is approved in advance in writing
by Intel. Intel's name and the fact that Intel is an investor in the Company can
be included in a reusable press release boilerplate statement, so long as Intel
has given the Company its initial approval of such boilerplate statement and the
boilerplate statement is reproduced in exactly the form in which it was
approved. No other announcements regarding Intel in a press release, conference,
advertisement, announcement, professional or trade publication, mass marketing
materials or otherwise to the general public may be made without Intel's prior
written consent.
(c) PERMITTED DISCLOSURES. Notwithstanding the foregoing, (i) the
Company may disclose any of the Financing Terms to its current or bona fide
prospective investors, employees, investment bankers, lenders, accountants and
attorneys, in each case only where such persons or entities are under
appropriate nondisclosure obligations; (ii) the Company may disclose (other than
in a press release or other public announcement described in subsection (b))
solely the fact that Intel is an investor in the Company to any third parties
without the requirement for the consent of any other party or nondisclosure
obligations; and (iii) Intel may disclose its investment in the Company and the
Financing Terms to third parties or to the public at its sole discretion and, if
it does so, the Company shall have the right to disclose to third parties any
such information disclosed in a press release or other public announcement by
Intel.
[Signature Page to Share Purchase Agreement]
<PAGE>
(d) LEGALLY COMPELLED DISCLOSURE. In the event that any party is
requested or becomes legally compelled (including without limitation, pursuant
to securities laws and regulations) to disclose the existence of the agreements
referenced in paragraph (a) above or any of the Financing Terms hereof in
contravention of the provisions of this letter, the Company shall provide Intel
with prompt written notice of that fact so that the appropriate party may seek
(with the cooperation and reasonable efforts of the other) a protective order,
confidential treatment or other appropriate remedy. In such event, the Company
shall furnish only that portion of the information which is legally required and
shall exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded such information to the extent reasonably requested
by Intel.
(e) OTHER INFORMATION. The provisions of this Letter Agreement shall be
in addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by any of the parties hereto with respect to
the transactions contemplated hereby. Additional disclosures and exchange of
confidential information between the Company and Intel Corporation or Intel
Atlantic, Inc. shall be governed by the terms of the Corporate Non-Disclosure
Agreement No. 7626010, dated October 18, 1999, executed by the Company and Intel
Corporation, and any Confidential Information Transmittal Records (CITR)
provided in connection therewith.
(f) All notices required under this section shall be made pursuant to
Section 8.10 of the Purchase Agreement.
2. MISCELLANEOUS.
2.1 DEFINITIONS. All capitalized terms used but not otherwise defined
in this Agreement have the meaning defined for such terms in the Purchase
Agreement.
2.2 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
2.3 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
2.4 AMENDMENTS AND WAIVERS. This Agreement may not be amended or
modified without the written consent of Intel and the Company, nor shall any
waiver be effective against any party unless in a writing executed on behalf of
such party.
2.5 SEVERABILITY. If any provision of this Agreement shall be declared
void or unenforceable by any judicial or administrative authority, the validity
of any other provision and of the entire Agreement shall not be affected
thereby.
<PAGE>
The parties hereto have executed this Agreement on the day and year first
written above.
EL SITIO, INC. INTEL ATLANTIC, INC.
By: By:
------------------------ ------------------------
Name: Name:
------------------------ ------------------------
Title: Title:
------------------------ ------------------------
<PAGE>
Exhibit 10.24
================================================================================
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
by and among
EL SITIO, INC.,
THE HOLDERS OF ITS CLASS A CONVERTIBLE PREFERRED SHARES,
and
THE HOLDERS OF ITS CLASS B CONVERTIBLE PREFERRED SHARES
November 9, 1999
================================================================================
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated
as of November 9, 1999, is entered into by and among El Sitio, Inc., an
international business company organized under the laws of the British Virgin
Islands (the "Company"), the holders of the Company's Class A Convertible
Preferred Shares, par value $0.01 per share (the "Class A Preferred Shares"),
and the holders of the Company's Class B Convertible Preferred Shares, $0.01 par
value per share (the "Class B Preferred Shares" and, together with the Class A
Preferred Shares, the "Preferred Shares") (such holders, collectively, the
"Shareholders").
W I T N E S S E T H:
WHEREAS, certain holders of the Company's Class A Preferred
Shares (the "Class A Shareholders") and the Company entered into a Registration
Rights Agreement dated July 2, 1999, as amended by Amendment No. 1 to the
Registration Rights Agreement dated October 6, 1999 (the "Original Registration
Rights Agreement");
WHEREAS, on the date hereof (the "Closing"), the purchasers of
the Class B Preferred Shares (the "Class B Shareholders") are purchasing the
Class B Preferred Shares;
WHEREAS, concurrently herewith, the Shareholders have executed
an Amended and Restated Shareholders' Agreement relating to board
representation, transfers and other matters in relation to their holding of the
Preferred Shares (the "Shareholders' Agreement"); and
WHEREAS, in order to induce the Class B Shareholders to make
the purchases described above, and in connection with such purchases to protect
the rights of all of the Shareholders, the Shareholders and the Company wish to
establish certain agreements relating to the grant by the Company to the
Shareholders of registration and other related rights pursuant to this Amended
and Restated Registration Rights Agreement and to amend certain provisions of
the Original Registration Rights Agreement.
NOW, THEREFORE, in consideration of the premises, mutual
covenants and agreements herein contained and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE 1. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the following terms shall
have the respective meanings set forth below:
"Affiliate" means, with respect to any person, (i) any other
person of which securities or other ownership interests representing more than
fifty percent (50%) of the voting interests are, at the time such determination
is being made, owned, Controlled or held, directly or indirectly, by such
person, or (ii) any other person which, at the time such determination is being
made, is Controlling, Controlled by or under common Control with, such person.
As used herein, "Control," whether used as a noun or verb, refers to the
possession, directly or indirectly,
1
<PAGE>
of the power to direct, or cause the direction of, the management or policies of
a person, whether through the ownership of voting securities or otherwise.
"Agreement" means this Amended and Restated Registration
Rights Agreement, as from time to time assigned, supplemented, amended or
modified in accordance with the terms hereof.
"Board" means the Board of Directors of the Company.
"Commission" means the United States Securities and Exchange
Commission.
"Dollars" or "$" means the currency of the United States or
its foreign currency equivalent at the time the determination is made.
"Initial Shareholders" means, collectively, Militello Limited,
Futurit S.A., SLI.com Inc., Tower Plus International Corp., Roberto
Cibrian-Campoy, Hector A Sierra, Hector R. Bandoni, Sergio S. Monti, Damian
Said, and Alberto E. Tapia.
"Restricted Shares" means any shares of Stock which have not
been registered under the Securities Act and which are owned by any Shareholder.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"Shareholder" means any person who is a party to this
Agreement (other than the Company) and any permitted transferee of such person
who agrees to be bound by the terms hereof.
"Stock" means the Company's common shares, par value $0.01 per
share.
ARTICLE 2. Registration Rights
2.1 DEMAND REGISTRATION.
(a) Upon notice to the Company (x) from Shareholder(s) holding
in the aggregate $15.0 million or more of the Restricted Shares (or Preferred
Shares which are convertible into Restricted Shares) or (y) Class B
Shareholder(s) holding in the aggregate $5.0 million or more of the Restricted
Shares (or Preferred Shares which are convertible into Restricted Shares), such
Shareholders (the "Requesting Shareholders") shall have the right to request in
writing a registration of such shares that are (or which would be upon
conversion) Restricted Shares. Such request (a "Demand Request") by the
Requesting Shareholders shall (i) specify the number of Restricted Shares which
each Requesting Shareholder intends to sell or dispose of, and (ii) state the
intended method or methods by which the Requesting Shareholder intends to sell
or dispose of such Restricted Shares. Upon receipt of a Demand Request pursuant
to this Section 2.1, the Company shall (as requested) (i) cause to be filed,
within the later of (x) ninety (90) days of the date of delivery to the Company
of the Demand Request, or (y) one hundred eighty (180) days after the
effectiveness of the most recently filed registration statement by the Company,
a registration statement covering such Restricted Shares which the Company has
been so requested
2
<PAGE>
to register, providing for the registration under the Securities Act of such
Restricted Shares to the extent necessary to permit the disposition of such
Restricted Shares so to be registered in accordance with the intended method of
distribution specified in such Demand Request, provided, that the Company may
delay making such filing or taking such action by not more than one hundred
twenty (120) days if the Company, prior to the time it would otherwise have been
required to file such registration statement or take such action, determines in
good faith that the filing of such registration statement or the taking of such
action would require the disclosure of material, non-public information that, in
the reasonable judgment of the Company, would be detrimental to the Company if
so disclosed (and a delay would be likely to reduce the detrimental effect of
such disclosure or obviate the need for such disclosure to be made, or would
otherwise adversely affect a financing, acquisition, disposition, merger or
other material transaction), (ii) shall use its best efforts to have such
registration statement declared effective by the Commission as soon as
practicable thereafter, and (iii) refrain from filing any other registration
statements with respect to any other securities of the Company until such date
which is one hundred eighty (180) days following effectiveness of the
registration statement filed in response to the Demand Request. Subject to any
existing written agreement between the Company and Bear, Stearns & Co. Inc., the
underwriter shall be selected by the Requesting Shareholders and shall be
reasonably acceptable to the Company for any registration pursuant to this
Section 2.1.
(b) In the event that the Company is required to file a
registration statement covering any Restricted Shares of any Requesting
Shareholder(s) pursuant to Section 2.1(a) above, the Company shall be permitted
to include newly-issued securities ("Piggyback Securities") in such
registration. Notwithstanding the foregoing, if the managing underwriter of such
proposed registration determines and advises in writing that the inclusion of
all Piggyback Securities proposed to be included in the underwritten public
offering would interfere with the successful marketing of the Requesting
Shareholders' Restricted Shares, then the Company shall not be permitted to
include any Piggyback Securities in excess of the amount, if any, of Piggyback
Securities which the managing underwriter of such underwritten offering shall
reasonably and in good faith agree in writing to include in such offering in
excess of any amount to be registered for the Requesting Shareholder(s). The
Piggyback Securities that are excluded from the underwritten public offering
pursuant to the preceding sentence shall be withheld from the market by the
Company for a period, not to exceed 90 days from the closing of such
underwritten public offering, that the managing underwriter determines is
necessary in order to effect such underwritten public offering.
(c) The Company shall not be required to comply with more than
four (4) Demand Requests, one (1) of which shall be reserved for IAMP (El Sitio)
Investments Ltd. (and its affiliates), one (1) of which shall be reserved for
IMPSAT Corporation, one (1) of which shall be reserved for the Initial
Shareholders, and one (1) of which shall be reserved for the Class B
Shareholders holding a majority of the Class B Preferred Shares or Restricted
Shares issued upon conversion of Class B Preferred Shares; provided, that the
Class B Shareholders and the Class A Shareholders shall each have two (2) Demand
Rights per annum commencing at such time as the Company becomes eligible to
register its Common Shares on Form F-3, for so long as the Company remains, or
at any time the Company is, so eligible.
3
<PAGE>
2.2 PIGGYBACK REGISTRATION.
(a) Each time that the Company proposes for any reason to
register any of its Stock under the Securities Act (a "Proposed Registration"),
other than pursuant to a registration statement on Form F-4 or Form F-8 or
similar or successor forms, the Company shall promptly give written notice of
such Proposed Registration to the holders of the Restricted Shares (which notice
shall be given not less than thirty (30) days prior to the expected effective
date of the Company's registration statement) and shall offer such holders the
right to request inclusion of any of such holder's Restricted Shares in the
Proposed Registration. No registration pursuant to this Section 2.2 shall
relieve the Company of its obligation to register Restricted Shares pursuant to
Section 2.1.
(b) Each Shareholder shall have twenty (20) days from the
receipt of such notice to deliver to the Company a written request specifying
the number of Restricted Shares such Shareholder intends to sell and such
Shareholder's intended method of disposition. Any Shareholder shall have the
right to withdraw such Shareholder's request for inclusion of such Shareholder's
Restricted Shares in any registration statement pursuant to this Section 2.2 by
giving written notice to the Company of such withdrawal. Subject to Section 2.3
below, the Company shall include in such registration statement all such
Restricted Shares so requested to be included therein; provided, however, that
the Company may at any time withdraw or cease proceeding with any such Proposed
Registration if it shall at the same time withdraw or cease proceeding with the
registration of all other equity securities originally proposed to be
registered.
(c) In the event that the Proposed Registration by the Company
is, in whole or in part, an underwritten public offering of securities of the
Company, any request under Section 2.2(b) hereof must specify that the
Restricted Shares be included in the underwriting on the same terms and
conditions as the shares of Stock, if any, otherwise being sold through
underwriters under such registration.
2.3 PRIORITY ON REGISTRATIONS.
(a) If the managing underwriter advises the Company that the
inclusion of such Restricted Shares would cause a Material Adverse Effect, the
Company will be obligated to include in such registration statement, as to each
Shareholder, only a portion of the Restricted Shares such Shareholder has
requested be registered equal to the ratio which such Shareholder's requested
Restricted Shares bears to the total number of Restricted Shares requested to be
included in such registration statement by all Shareholders who have requested
that their Restricted Shares be included in such registration statement, in the
case of Shareholders exercising rights under Section 2.2 hereof. It is
acknowledged by the Shareholders, that pursuant to the foregoing provision, the
securities to be included in such registration shall be allocated (x) if such
registration has been initiated by the Company for securities to be offered by
the Company, first to the Company, second to Shareholders exercising their
piggyback right and third to all others requesting securities to be included
therein and (y) if such registration has been initiated by a Requesting
Shareholder requesting a Demand Registration, first to such Requesting
Shareholder, second to the Company if it exercises its piggyback right and third
to all others requesting securities to be included therein. If as a result of
the provisions of this Section 2.3(a) any Shareholder shall not be entitled to
include all of its Restricted Shares in a registration that
4
<PAGE>
such Shareholder has requested to be so included, such Shareholder may withdraw
such Shareholder's request to include Restricted Shares in such registration
statement. The Restricted Shares that are excluded from the underwritten public
offering pursuant to the preceding sentence shall be withheld from the market by
the Shareholders for the applicable period set forth in Section 2.7, if the
managing underwriter determines it necessary in order to effect such
underwritten public offering.
(b) No Shareholder may participate in any registration
statement hereunder unless such Shareholder completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements, and
other documents reasonably required under the terms of such underwriting
arrangements, including an opinion of its counsel; provided, however, that no
such Shareholder shall be required to make any representations or warranties in
connection with any such registration other than representations and warranties
as to (i) such Shareholder's ownership of its Restricted Shares to be sold or
transferred free and clear of all liens, claims, and encumbrances, (ii) such
Shareholder's power and authority to effect such transfer, and (iii) such
matters pertaining to compliance with securities laws as may be reasonably
requested.
2.4 REGISTRATION PROCEDURES. Whenever any Shareholder has
requested that any Restricted Shares be registered pursuant to the provisions of
this Article 2, the Company will use its commercially reasonable efforts to
effect the registration and the sale of such Restricted Shares in accordance
with the intended method of disposition thereof as set forth in the written
request, and pursuant thereto the Company shall:
(a) prepare and file with the Commission registration
statement(s) with respect to such securities on the appropriate forms, and use
its best efforts to cause such registration statement(s) to become and remain
effective in accordance with Section 2.4(b) hereof and in accordance with all
laws, rules and regulations applicable thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement(s) and the prospectus(es) used in
connection therewith as may be necessary to keep such registration statement(s)
effective until the earlier of (i) the sale of all Restricted Shares covered
thereby or (ii) the date required therefor by the underwriters in the
underwriting agreement, and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all Restricted Shares covered
by such registration statement(s);
(c) furnish to each Shareholder participating in such
registration pursuant to Section 2.1 or Section 2.2 (each, a "Participating
Shareholder") such number of copies of any summary prospectus or other
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the Shareholder
may reasonably request in order to facilitate the public sale or other
disposition of such Restricted Shares;
(d) use its best efforts to register or qualify the Restricted
Shares covered by such registration statement(s) under the securities or blue
sky laws of such jurisdictions as the Participating Shareholder shall reasonably
request and do any and all other acts or things which may be necessary or
advisable to enable the Participating Shareholders to consummate the public sale
or other disposition in such jurisdictions of such Restricted Shares; provided,
however, that
5
<PAGE>
the Company shall not be required to consent to general service of process for
all purposes in any jurisdiction where it is not then subject to process,
qualify to do business as a foreign Company where it would not be otherwise
required to qualify or submit to liability for state or local taxes where it is
not otherwise liable for such taxes;
(e) at any time when a prospectus relating thereto covered by
such registration statement(s) is required to be delivered under the Securities
Act within the appropriate period mentioned in Section 2.4(b) hereof, promptly
notify each Shareholder and each underwriter and (if requested by any such
Shareholder) confirm such notice in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed and, with
respect to a registration statement or any post-effective amendment, when the
same has become effective, (ii) of the issuance by any state securities or other
regulatory authority of any order suspending the qualification or exemption from
qualification of any of the Restricted Shares under state securities or blue sky
laws or the initiation of any proceedings for that purpose, and (iii) of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing and, at the request of any Participating
Shareholder, prepare, file and furnish to such Participating Shareholder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an 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 in the light
of the circumstances then existing;
(f) if the Company has delivered preliminary or final
prospectuses to any Participating Shareholder and after having done so the
prospectus is amended to comply with the requirements of the Securities Act, the
Company shall promptly notify such Participating Shareholder and, if requested,
the Participating Shareholder shall immediately cease making offers of
Restricted Shares and return all prospectuses to the Company. The Company shall
promptly provide the Participating Shareholder with revised prospectuses and,
following receipt of the revised prospectuses, the Participating Shareholder
shall be free to resume making offers of the Restricted Shares;
(g) furnish, at the request of the Participating Shareholder
on the date such Restricted Shares are delivered to the underwriters for sale in
connection with a registration pursuant to this Article 2, if such Restricted
Shares are being sold through underwriters, or, if such Restricted Shares are
not being sold through underwriters, on the date that the registration statement
with respect to such Restricted Shares becomes effective, (i) an opinion, dated
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Participating Shareholders and (ii) a letter dated such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and the Participating Shareholders;
6
<PAGE>
(h) if any proposed registration effected pursuant to Section
2.1 or Section 2.2 involves an underwritten public offering, (i) subject to
Section 2.1, select a reputable managing underwriter to underwrite such public
offering, (ii) cause all Restricted Shares to be listed for trading on the
principal national securities exchange (including, without limitation, the
NASDAQ National Market System) (as defined in the Securities and Exchange Act of
1934, as amended) where the Company's Stock is listed for trading, and (iii)
enter into (x) an underwriting agreement with the underwriter providing for such
representations, warranties, covenants, conditions and indemnities as may be
requested by the underwriter and (y) a deposit agreement with a depositary, if
applicable, providing for such representations, warranties, covenants,
conditions and indemnities as may be requested by the depositary;
(i) before filing a registration statement or amendment
thereto, furnish to each Participating Shareholder and its counsel and other
representatives and the underwriters, if any, copies of each such registration
statement or amendment proposed to be filed, which documents shall be made
available on a timely basis for review and comment by the Participating
Shareholders, the underwriters (if any) and their respective representatives;
(j) make generally available to the Company's security holders
an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act, as promptly as practicable, but in any event no later than
forty-five (45) days after the end of the 12-month period beginning with the
first day of the Company's first fiscal quarter commencing after the effective
date of a registration statement, which earnings statement shall cover said
12-month period, and which requirement will be deemed to be satisfied if the
Company timely files complete and accurate information on Forms 20-F and 6-K
under the Exchange Act and otherwise complies with Rule 158 under the Securities
Act;
(k) if requested by the managing underwriter or any
Participating Shareholder, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or any
Participating Shareholder reasonably requests to be included therein, including,
without limitation, with respect to the Restricted Shares being sold by such
Participating Shareholder, the purchase price being paid therefor by the
underwriters and with respect to any other terms of the underwritten offering of
the Restricted Shares to be sold in such offering, and promptly make all
required filings of such prospectus supplement or post-effective amendment;
(l) as promptly as practicable after filing with the SEC of
any document which is incorporated by reference into a registration statement
(in the form in which it was incorporated), deliver a copy of each such document
to each Participating Shareholder;
(m) cooperate with the Participating Shareholders and the
managing underwriter to facilitate the timely preparation and delivery of
certificates (which shall not bear any restrictive legends unless required under
applicable law) representing securities sold under any registration statement
(if any), and enable such securities to be in such denominations and registered
in such names as the managing underwriter or such sellers may request and keep
available and make available to the Company's transfer agent prior to the
effectiveness of such registration statement a supply of such certificates;
7
<PAGE>
(n) promptly make available for inspection by any
Participating Shareholder, any underwriter participating in any disposition
pursuant to any registration statement, and any attorney, accountant or other
agent or representative retained by any such Participating Shareholder or
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers, directors and
employees to supply all information requested by any such Inspector in
connection with such registration statement; provided, that, unless the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in the registration statement or the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction,
the Company shall not be required to provide any information under this
subparagraph (n) if (A) the Company believes, after consultation with counsel
for the Company, that to do so would cause the Company to forfeit an
attorney-client privilege that was applicable to such information or (B) if
either (i) the Company has requested and been granted from the SEC confidential
treatment of such information contained in any filing with the SEC of documents
provided supplementally or otherwise or (ii) the Company reasonably determines
in good faith that such Records are confidential and so notifies the Inspectors
in writing unless prior to furnishing any such information with respect to (A)
or (B) such Participating Shareholder requesting such information agrees to
enter into a confidentiality agreement in customary form and subject to
customary exceptions; and provided, further, that each Participating Shareholder
agrees that it will, upon learning that disclosure of such Records is sought in
a court of competent jurisdiction, give notice to the Company and allow the
Company at its expense, to undertake appropriate action and to prevent
disclosure of the Records deemed confidential;
(o) provide a CUSIP number for the Restricted Shares included
in any registration statement not later than the effective date of such
registration statement;
(p) cooperate with each Participating Shareholder and each
underwriter participating in the disposition of such Restricted Shares and their
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. ("NASD");
(q) during the period when the prospectus is required to be
delivered under the Securities Act, promptly file all documents required to be
filed with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act;
(r) notify each Participating Shareholder promptly of any
request by the SEC for the amending or supplementing of such registration
statement or prospectus or for additional information;
(s) prepare and file with the SEC promptly any amendments or
supplements to such registration statement or prospectus which, in the opinion
of counsel for the Company or the managing underwriter, is required in
connection with the distribution of the Restricted Shares;
8
<PAGE>
(t) advise each Participating Shareholder, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for such purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued;
and
(u) if the Participating Shareholders so request, to request
acceleration of effectiveness of the registration statement from the Commission,
provided at the time of such request the Company does not, in good faith,
believe it is necessary to amend further the registration statement in order to
comply with the provisions of this Section 2.4. If the Company wishes to further
amend the registration statement prior to requesting acceleration, it shall have
five (5) business days to so amend prior to requesting acceleration.
2.5 SUSPENSION OF DISPOSITIONS. Each Participating Shareholder
agrees that upon receipt of any notice (a "Suspension Notice") from the Company
of the happening of any event of the kind described in Section 2.4(e)(iii), such
Participating Shareholder will forthwith discontinue disposition of Restricted
Shares until such Participating Shareholder's receipt of the copies of the
supplemented or amended prospectus, or until it is advised in writing (the
"Advice") by the Company that the use of the prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in the prospectus, and, if so directed by the Company, such
Participating Shareholder will deliver to the Company all copies, other than
permanent file copies then in such Participating Shareholder's possession, of
the prospectus covering such Restricted Shares current at the time of receipt of
such notice. In the event the Company shall give any such notice, the time
period regarding the effectiveness of registration statements set forth in
Section 2.4(b) hereof shall be extended by the number of days during the period
from and including the date of the giving of the Suspension Notice to and
including the date when each seller of Restricted Shares covered by such
registration statement shall have received the copies of the supplemented or
amended prospectus or the Advice. The Company shall use its commercially
reasonable efforts and take such actions as are reasonably necessary to render
the Advice as promptly as practicable.
2.6 COOPERATION UPON A REGISTRATION. The Shareholders and the
Company agree that, in connection with any exercise of registration rights
pursuant to this Article 2, the Shareholders will authorize, and will authorize
and direct the Board to take, such actions as are necessary and appropriate to
effectuate such registration. In addition, each Participating Shareholder agrees
to cooperate fully with the Company and the underwriters of any underwritten
public offering in the preparation of all documentation necessary or desirable
to effectuate any registration of any Restricted Shares under the Securities Act
pursuant to this Article 2, or registration or qualification of any Restricted
Shares pursuant to Section 2.4(d) hereof. In addition, the Company agrees to
cooperate fully with the Participating Shareholders in connection with any such
registration or qualification.
2.7 LIMITATIONS. Notwithstanding anything in this Agreement to
the contrary, if requested in writing by the managing underwriter, if any, of
any underwritten public offering of the Company's capital stock pursuant to this
Article 2, each Shareholder agrees not to offer, sell, contract to sell or
otherwise dispose of any shares of capital stock of the Company except as part
of such underwritten public offering within thirty (30) days before or (i)
ninety (90) days after
9
<PAGE>
the effective date of the registration statement filed with respect to said
offering, and (ii) one hundred eighty (180) days in the case of the Company's
initial public offering, unless in each case expressly authorized to do so by
the managing underwriter; provided, however, that if any officer, director or
shareholder holding 5% or more of the share capital of the Company is not
obligated under this Section 2.7 or a similar provision in another agreement, or
if any such person is released from its obligations under this Section 2.7 or
such other agreement, and accordingly is entitled to sell its shares within the
periods set forth above, then each Class A Shareholder and each Class B
Shareholder shall also be entitled to sell a pro rata amount of its shares in
proportion to the ratio that the number of shares held by such persons that are
not obligated under this Section 2.7 or a similar provision in another agreement
or is otherwise released from such obligation bears to the total number of
shares subject to such obligation.
2.8 EXPENSES. The Company shall pay all expenses incurred by
the Company in complying with Sections 2.1, 2.2 and 2.4 hereof, including,
without limitation, all registration and filing fees (including all expenses
incident to filing with the NASD), fees and expenses of complying with the
securities or blue sky laws of all such jurisdictions in which the Restricted
Shares are proposed to be offered and sold (including reasonable fees and
disbursements of counsel in connection with blue sky qualification of Restricted
Shares), rating agency fees, printing expenses, messenger and delivery expenses,
the Company's internal expenses (including without limitation all salaries and
expenses of its officers and employees performing legal or accounting duties),
fees and expenses incurred in connection with any listing of the Restricted
Shares, fees and expenses of counsel for the Company and its independent
certified public accountants (including the expenses of any special audit or
cold comfort letters required by or incident to such performance), securities
act liability insurance (if the Company elects to obtain such insurance) and
fees and disbursements of underwriters (to the extent the Company is liable
therefor under the terms of any underwriting agreement), whether or not any
registration statement becomes effective; provided, however, that all
underwriting discounts and selling commissions applicable to the Restricted
Shares covered by registrations effected pursuant to Section 2.1 or Section 2.2
hereof shall be borne by the Participating Shareholders, in proportion to the
number of Restricted Shares sold by each such Participating Shareholder, and
except as expressly provided in this Section 2.8, in no event shall the Company
pay any fees or expenses attributable to any counsel, accountants or other
persons retained or employed by the Participating Shareholders. Further to the
foregoing, the Company shall pay all reasonable and customary expenses incurred
by any Participating Shareholder, including, without limitation, all reasonable
expenses and fees of one (1) firm of counsel for all Participating Shareholders
(which shall be selected by a majority (based on the number of Restricted
Securities to be sold) of the Participating Shareholders), plus, to the extent
reasonably necessary, one (1) firm of local counsel for all of the Participating
Shareholders in each state or country where reasonably necessary (the
"Expenses").
2.9 INDEMNIFICATION.
(a) In the event of any registration of any Restricted Shares
under the Securities Act pursuant to this Article 2 or registration or
qualification of any Restricted Shares pursuant to Section 2.4(d) hereof, the
Company shall indemnify and hold harmless each Participating Shareholder, each
underwriter of such shares, if any, each broker or any other person acting on
behalf of the Participating Shareholders, each director, officer, employee and
10
<PAGE>
partner of any of the foregoing and each other person, if any, who controls any
of the foregoing persons, within the meaning of the Securities Act (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities or
expenses, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of, are related
to, result from or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any registration statement under which
such Restricted Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any document incident to registration or qualification of any
Restricted Shares pursuant to Section 2.4(d) hereof, or arise out of, are
related to, result from or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or, with respect to any prospectus,
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or any violation by the Company of the
state securities or blue sky laws applicable to the Company and relating to
action or inaction required of the Company in connection with such registration
or qualification under such state securities or blue sky laws and the Company
shall reimburse on demand each Indemnified Person for any legal or any other
costs and expenses reasonably incurred by any of them in connection with
investigating, preparing for, defending or settling any such loss, claim,
damage, liability or action by any governmental agency or body; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, preliminary or final
prospectus or amendment or supplement thereto or any document incident to
registration or qualification of any Restricted Shares pursuant to Section
2.4(d) hereof, in reliance upon and in conformity with written information
furnished to the Company by any Participating Shareholder, underwriter, broker,
other person or controlling person specifically for use in the preparation
thereof or arises out of or is based upon the Indemnified Person's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such Indemnified Person with
a sufficient number of copies of the same; provided further, that the Company
shall not be liable for any settlement made without its prior written consent,
such consent not to be unreasonably withheld.
(b) Before Restricted Shares shall be included in any
registration pursuant to this Article 2, each Participating Shareholder will
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any registration statement and
prospectus, and each such Participating Shareholder and any underwriter acting
on its behalf shall have agreed to indemnify and hold harmless (in the same
manner and to the same extent as set forth in paragraph (a) above) the Company,
each director of the Company, each officer of the Company who signs such
registration statement, every other Participating Shareholder and any person who
controls the Company within the meaning of the Securities Act, with respect to
any untrue statement or omission from such registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, if such untrue statement or omission was made in reliance
upon and in conformity with written information furnished to the Company by the
Participating Shareholder or such underwriter specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus or amendment or supplement; provided, however, that
11
<PAGE>
the maximum amount of liability in respect of such indemnification shall be
limited to an amount equal to the net proceeds actually received by such
Participating Shareholder from the sale of Restricted Shares effected pursuant
to such registration.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action involving a claim referred to in Section
2.9(a) or (b) hereof, such indemnified party will, if a claim in respect thereof
is to be made against the indemnifying party under this Section 2.9, give prompt
written notice to the latter of the commencement of such action (provided that
the failure to give such notice shall not limit the rights of such indemnified
party unless and to the extent such failure is prejudicial to its ability to
defend such action). In case any such action is brought against an indemnified
party, the indemnifying party will be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and, after notice to such indemnified party from the
indemnifying party of its election to assume the defense thereof; provided,
however, that, if any indemnified party shall have reasonably concluded that
there may be one or more legal defenses available to such indemnified party
which are different from, in conflict with or additional to those available to
the indemnifying party, or that such claim or litigation involves or could
reasonably be expected to have an effect upon matters beyond the scope of the
indemnity agreement provided in this Section 2.9, or if the indemnifying party
fails to take diligent action to defend such claim within twenty (20) days
following notice thereof from the indemnified party, the indemnifying party
shall not have the right to assume the defense of such action on behalf of such
indemnified party, or that such claim or litigation involves or could have an
effect upon matters beyond the scope of the indemnity agreement provided in this
Section 2.9, or if the indemnifying party fails to take diligent action to
defend such claim within twenty (20) days following notice thereof from the
indemnified party, and such indemnifying party shall reimburse such indemnified
party and any person controlling such indemnified party for the fees and
expenses of counsel retained by the indemnified party which are reasonably
related to the matters covered by the indemnity agreement provided in this
Section 2.9. If the indemnifying party does assume its own defense, from such
time the indemnified party shall bear the expenses of its own separate counsel.
If such defense is not assumed by the indemnifying party as permitted hereunder,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its written consent, which consent shall
not be unreasonably withheld. If such defense is assumed by the indemnifying
party pursuant to the provisions hereof, such indemnifying party shall not make
any settlement of the applicable claim indemnified against hereunder without the
written consent of the indemnified party or parties, which consent shall not be
unreasonably withheld. An indemnifying party that is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party and any other such indemnified party with respect to such
claim, unless in the reasonable judgment of any indemnified party, a conflict of
interest may exist between such indemnified party with respect to such claim, in
which event the indemnifying party shall be obligated to pay the reasonable fees
and disbursements of such additional counsel or counsels.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which an Indemnified
Person makes a claim for indemnification pursuant to this Section 2.9, but it is
judicially determined (by the entry of a final
12
<PAGE>
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced notwithstanding the fact that this Section
2.9 provides for indemnification in such case, then the Company and the
Participating Shareholder will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject as is appropriate to
reflect, as between the indemnifying party, on the one hand, and the indemnified
party on the other hand, the relative fault of the indemnifying party, on the
one hand, and the indemnified party, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, it being understood that the parties acknowledge that the
overriding equitable consideration to be given effect in connection with this
provision is the ability of one party or the other to correct the statement or
omission which resulted in such losses, claims, damages or liabilities, and that
it would not be just and equitable if contribution pursuant hereto were to be
determined by pro rata allocation or by any other method of allocation which
does not take into consideration the foregoing equitable considerations.
Notwithstanding the foregoing, (i) the Participating Shareholder will not be
required to contribute any amount in excess of the proceeds to it of all
Restricted Shares sold by it pursuant to such registration statement, (ii) no
underwriter shall be required to contribute any amount in excess of the proceeds
to it from the offering pursuant to such registration statement, and (iii) no
person or entity guilty of fraudulent misrepresentation, within the meaning of
Section 11(f) of the Securities Act, shall be entitled to contribution from any
person or entity who is not guilty of such fraudulent misrepresentation. If
indemnification is available under this Section 2.9, the indemnifying parties
shall indemnify each indemnified party to the full extent provided in Section
2.9(a) and 2.9(b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 2.9(d).
(e) Notwithstanding any of the foregoing, if in connection
with an underwritten public offering of any Restricted Shares, the Company, the
Participating Shareholder and the underwriters enter into an underwriting or
purchase agreement relating to such offering which contains provisions covering
indemnification among the parties, the indemnification provided thereunder shall
be in addition to (and not in lieu of) the indemnification provided to the
Shareholders hereunder.
(f) The indemnification and contribution required by this
Section 2.9 shall be made by periodic payment of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred; provided, that if a court of
competent jurisdiction finally determines that any Indemnified Person which has
received payments hereunder does not have an indemnification right under Section
2.9 for any reason, then such Indemnified Person shall within five (5) days of
such final determination, refund all amounts received hereunder to the Company.
(g) The indemnification and contribution provided for
hereunder will remain in full force and effect regardless of any investigation
made by or on behalf of any Indemnified Person and will survive the transfer of
securities.
ARTICLE 3. MISCELLANEOUS
13
<PAGE>
3.1 NOTICES. Any and all notices, designations, consents,
offers, acceptances, or any other communication required or permitted to be
given by any provision of this Agreement shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by registered
mail or telecopied with acknowledgment of receipt sent by telecopier, registered
mail or delivered in person, as the case may be, to such party at the address or
telecopier number, as the case may be, set forth on the signature pages hereto
or to such other address or telecopier number, as the case may be, as such party
may from time to time designate in writing to the other parties. All such
notices, requests, consents and other communications shall be deemed to have
been received: (a) in the case of personal delivery or registered mail, on the
date of receipt; or (b) in the case of telecopying, on the date of
acknowledgment thereof.
3.2 AMENDMENT AND WAIVER. No change or modification of, or
waiver of compliance with, this Agreement shall be valid unless the same shall
be in writing and signed by all of the parties hereto which hold at least 50,000
shares of the Stock, on an as-converted basis.
3.3 TERMINATION. This Agreement may be terminated at any time
by an instrument in writing signed by all of the parties hereto. This Agreement
shall terminate automatically as to any Shareholder which transfers all of its
Restricted Shares. Unless sooner terminated, this Agreement shall terminate
eight (8) years from the date hereof, unless, at any time within one (1) year
prior to such date, all of the parties extend its duration for as many
additional periods, each not to exceed eight (8) years, as they may desire.
3.4 NO WAIVER. No failure or delay on the part of the
Shareholders or any of them in exercising any right, between the Company and the
Shareholders or any of them shall operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the simultaneous or later exercise of any other right, power or privilege. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies which the Shareholders or any of them would otherwise
have. No notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Shareholders or any of
them to take any other or further action in any circumstances without notice or
demand.
3.5 SPECIFIC PERFORMANCE. Each party to this Agreement
acknowledges that the other parties will suffer irreparable injury in the event
of any breach of any provision of this Agreement and that therefore the remedy
at law for any breach or threatened breach of any such provision of this
Agreement will be inadequate. Accordingly, upon a breach or threatened breach of
any such provision of this Agreement by any party hereto, the other parties
shall, in addition and without prejudice to any of the rights and remedies they
may have, be entitled as a matter of right, without proof of actual damages, to
seek specific performance of such provisions of this Agreement and to such other
injunctive or equitable relief to enforce, or prevent any violations (whether
anticipatory, continuing or future) of, such provisions of this Agreement.
3.6 COUNTERPARTS AND HEADINGS. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument. All
headings and any cover page or table of
14
<PAGE>
contents are inserted for convenience or reference only and shall not affect its
meaning or interpretation.
3.7 NOUNS AND PRONOUNS. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice-versa.
3.8 EXPENSES. Except as provided in Section 2.8 hereto, each
of the parties to this Agreement shall bear its own expenses, including, without
limitation, the fees and disbursements of its respective counsel, in connection
with the negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby.
3.9 GOVERNING LAW. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
U.S.A., without regard to its conflict of law rules.
3.10 SUBMISSION TO JURISDICTION; CONSENT TO SERVICE OF
PROCESS.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
Borough of Manhattan, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action or proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any suit, action or proceeding by
the mailing of a copy thereof in accordance with the provisions of Section 3.1
hereof.
3.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the Company and its successors, and each
of the Shareholders and their respective executors, administrators and personal
representatives and heirs and their successors and assigns.
3.12 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, invalid or unenforceable, the remaining provisions hereof shall
nevertheless continue in full force and effect as though the illegal, invalid or
unenforceable provisions were not a part hereof, and the parties shall exert
their best efforts to amend this Agreement to include a provision which is
legal, valid and enforceable and which carries out the original intent of the
parties.
3.13 COMPLETE AGREEMENT. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior and
15
<PAGE>
contemporaneous arrangements or understandings, whether written or oral, between
or among any of the parties hereto, with respect to the subject matter hereof.
3.14 FURTHER ASSURANCES. Each of the parties to this Agreement
agrees to execute such other documents and take such other action as may be
reasonably necessary to implement and carry out the intent of this agreement.
3.15 CONFIDENTIALITY. Each Shareholder (other than Intel
Atlantic, Inc.) covenants and agrees to treat any non-public information
provided to it by the Company concerning the business and finances of the
Company ("Corporate Information") as confidential and agrees further that it
will not use, exploit, reproduce, disclose or provide Corporate Information to
any third party (other than any agents of the Shareholder who are bound by
substantially similar obligations of confidentiality) on its own behalf or
otherwise, except with the consent of the Company or as required by law, legal
process or any federal or state regulatory body having jurisdiction over such
Shareholder. The provisions of this Section 3.15 shall not apply to any
information which:
(a) was within the public domain prior to the time of
disclosure of Corporate Information to the Shareholder or which comes into the
public domain other than as a result of a breach by the Shareholder of this
Section 3.15;
(b) was in the possession of the Shareholder (or any of its
officers, directors, employees, agents, principals, or affiliates) before the
Shareholder received the Corporate Information;
(c) was rightfully acquired by the Shareholder from a third
party without, to the knowledge of the Shareholder, any restriction or any
obligation of confidentiality; or
(d) was independently developed by the Shareholder without any
use or reference to the Corporate Information.
The provisions of this Section 3.15 shall survive the
termination of this Agreement, either in whole or as to any Shareholder, for a
period of two (2) years.
The obligations of Intel Atlantic, Inc., with respect to the
treatment of Corporate Information are set forth in Exhibit A hereto.
[Rest of Page Intentionally Left Blank]
16
<PAGE>
WHEREOF, the parties hereto have signed this Agreement as of
the day and year first above written.
EL SITIO, INC.
By: _____________________________________
Title:
Notice Address:
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attention: Roberto Cibrian-Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue, 31st Floor
New York, New York 10022
Attention: Neil A. Torpey
Telephone: (212) 318-6034
Telecopier: (212) 318-4090
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
IAMP (EL SITIO) INVESTMENTS LTD.
By:
----------------------------------------
Title:
Notice Address:
c/o 404 Washington Avenue, 9th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
WASHBURN ENTERPRISES INC.
By:
--------------------------------------
Title:
Notice Address:
c/o 404 Washington Avenue, 9th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
CHESTNUT HILL (EL SITIO), LLC
By:
------------------------------------------
Title:
Notice Address:
c/o GCC Investments, Inc.
1300 Boylston Street
Chestnut Hill, MA 02647
Attn: Michael A. Greeley
Telephone: (617) 975-3222
Telecopier: (617) 975-3201
with a copy to:
Phillip J. Szabla
Vice President and General Counsel
GC Companies, Inc.
1300 Boylston Street
Chestnut Hill, MA 02467
Telephone: (617) 264-8098
Telecopier: (617) 264-8206
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
TOWER PLUS INTERNATIONAL CORP.
By:
----------------------------------------
Title:
Notice Address:
c/o Nicholas Juan Alonso
Plaza Independencia 811 PB
11100 Montevideo, Uruguay
Telephone: (5892) 902-1515
Telecopier: (5892) 902-5454
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
ROBERTO CIBRIAN-CAMPOY
By:
---------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
HECTOR A. SIERRA
By:
------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
HECTOR R. BANDONI
By:
----------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
SERGIO S. MONTI
By:
-----------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
DAMIAN SAID
By:
--------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
ALBERTO E. TAPIA
By:
-------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
JULIEN SEVAUX
By:
--------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
GILES DARD
By:
--------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
GUSTAVO BLUFSTEIN
By:
-------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
MADELAINE CORP. S.A.
By:
-------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
ROBERTO J. GARAT
By:
---------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
COMPANIA DE INVERSIONES MONTEVIDEO BVI
By:
----------------------------------
Title:
Notice Address:
Plaza Independencia 831/508
Montevideo, Uruguay
Tel: (05982) 901-44-29
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
THE HENRY B. WILSON TRUST OF 1996
By:
--------------------------------------
Title:
Notice Address:
100 Wilshire Boulevard
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
THE HENRY WILSON IRREVOCABLE TRUST
OF 1997, FBO SCOTT WILSON
By:
----------------------------------------
Title:
Notice Address:
100 Wilshire Boulevard
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
THE HENRY WILSON IRREVOCABLE TRUST
OF 1997, FBO HENRY BIRKS WILSON, JR.
By:
---------------------------------------
Title:
Notice Address:
100 Wilshire Boulevard
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
THE HENRY WILSON IRREVOCABLE TRUST
OF 1997, FBO ERINN PALMER BERKSON
By:
------------------------------------
Title:
Notice Address:
100 Wilshire Boulevard
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
THE HENRY WILSON IRREVOCABLE TRUST
OF 1997, FBO TYLER HEARTT WILSON
By:
---------------------------------
Title:
Notice Address:
100 Wilshire Boulevard
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
BARBARA HUYETT
By:
-------------------------------
Notice Address:
100 Wilshire Boulevard
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
VAMAGRA S.A.
By:
---------------------------------------
Title:
Notice Address:
Piedras 172, 4th Floor
1030 Buenos Aires, Argentina
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
T.V. AZTECA, S.A. DE C.V.
By:
---------------------------------------
Title:
Notice Address:
TV Azteca, S.A. de C.V.
Periferico Sur, No. 4121
Col. Fuentes de Pedregal
14141 Mexico, D.F.
Attn:
Adrian Steckel
Telephone: 011-525420-1302
Telecopier: 011-525420-1409
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Leslie N. Silverman
Telephone: (212) 225-2584
Telecopier: (212) 225-3999
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
SUMMIT INVESTMENT MANAGEMENT LTD.
By:
------------------------------------
Title:
Notice Address:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
with a copy to:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
MILITELLO LIMITED
By:
---------------------------------------
Title:
Notice Address:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
FUTURIT S.A.
By:
------------------------------------
Title:
Notice Address:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
QUANTUM DOLPHIN PLC
By:
------------------------------------
Title:
Notice Address:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
SLI.COM INC.
By:
------------------------------------
Title:
Notice Address:
Bouchard 547 Piso 14
Buenos Aires, Argentina
Attn: Guillermo Liberman
Telephone: (54 11) 4316-9952
Telecopier: (54 11) 4313
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
DUNAS OVERSEAS LTD.
By:
------------------------------------
Title:
Notice Address:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
RENEE SAENZ ARMAS
By:
-----------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campay
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
ELINSTAR INTERNATIONAL CORPORATION
By:
------------------------------------
Title:
Notice Address:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
DANIEL ROTSZTAIN
By:
-------------------------------------
Title:
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campay
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
ALFREDO JIMINEZ DE ARECHEGA
By:
-------------------------------------
Title:
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campay
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 9122, ext. 104
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
RAFAEL BUSTAMENTE
By:
-----------------------------------------
Title:
Notice Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
IMPSAT CORPORATION
By:
----------------------------------
Title:
Notice Address:
ImpSat Corporation
Alferez Pareja 256
1107 Buenos Aires, Argentina
Attn: Hector Alonso
Telephone:
Telecopier: (541) 11-328-0140
with a copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004-1202
Attn: Neil M. Goodman
Telephone: (202) 942-5191
Telecopier: (202) 942-5999
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
INTEL ATLANTIC, INC.
By:
---------------------------------------
Title:
Notice Address:
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: M&A Portfolio Manager - M/S RN6-46
Fax Number: (408) 765-6038
With copies to:
Intel Atlantic, Inc.
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
Fax Number: (408) 765-1859
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
UTILITIVEST II, L.P.
By: Utilitivest II, L.L.C., its General Partner
By:
-------------------------------------------
Name: Hurdle H. Lea III
Title: Vice President and Director of
Utilitivest II, L.L.C.
Notice address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
UTILITIVEST III, L.P.
By: Utilitivest III, L.L.C., its General Partner
By: -------------------------------------------
Name: Hurdle H. Lea III
Title: Vice President and Director of
Utilitivest III, L.L.C.
Notice address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
[Signature Page to Amended and Restated Registration Rights Agreement - El
Sitio, Inc.]
<PAGE>
SCHEDULE A
<PAGE>
EXHIBIT A
November 9, 1999
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
In consideration of the purchase by Intel Atlantic, Inc. ("Intel") of
555,555.55 shares of Class B Preferred Stock of El Sitio, Inc. ("Company"),
pursuant to a Share Purchase Agreement dated November 9, 1999 (the "Purchase
Agreement"), Company and Intel agree to the terms and obligations of this letter
agreement ("Agreement").
1. CONFIDENTIALITY
(a) DISCLOSURE OF TERMS. The terms and conditions of this Agreement,
the Purchase Agreement, the Amended and Restated Shareholders Agreement, dated
November 9, 1999 and the Amended and Restated Registration Rights Agreement,
dated November 9, 1999 (collectively, the "Financing Terms"), including their
existence, shall be considered confidential information and shall not be
disclosed by the Company to any third party except in accordance with the
provisions set forth below.
(b) PRESS RELEASES, ETC. Within sixty (60) days after the closing of
the transactions contemplated by the Purchase Agreement, the Company may issue a
press release disclosing that the Investors, including Intel, have invested in
the Company; provided that the release does not disclose any of the Financing
Terms and the final form of the press release is approved in advance in writing
by the Intel. Intel's name and the fact that Intel is an investor in the Company
can be included in a reusable press release boilerplate statement, so long as
Intel has given the Company its initial approval of such boilerplate statement
and the boilerplate statement is reproduced in exactly the form in which it was
approved. No other announcements regarding Intel in a press release, conference,
advertisement, announcement, professional or trade publication, mass marketing
materials or otherwise to the general public may be made without Intel's prior
written consent.
(c) PERMITTED DISCLOSURES. Notwithstanding the foregoing, (i) the
Company may disclose any of the Financing Terms to its current or bona fide
prospective investors, employees, investment bankers, lenders, accountants and
attorneys, in each case only where such persons or entities are under
appropriate nondisclosure obligations; (ii) the Company may disclose (other than
in a press release or other public announcement described in subsection (b))
solely the fact that Intel is an investor in the Company to any third parties
without the requirement for the consent of any other party or nondisclosure
obligations; and (iii) Intel may disclose its investment in the Company and the
Financing Terms to third parties or to the public at its sole
<PAGE>
discretion and, if it does so, the Company shall have the right to disclose to
third parties any such information disclosed in a press release or other public
announcement by Intel.
(d) LEGALLY COMPELLED DISCLOSURE. In the event that any party is
requested or becomes legally compelled (including without limitation, pursuant
to securities laws and regulations) to disclose the existence of the agreements
referenced in paragraph (a) above or any of the Financing Terms hereof in
contravention of the provisions of this letter, the Company shall provide Intel
with prompt written notice of that fact so that the appropriate party may seek
(with the cooperation and reasonable efforts of the other) a protective order,
confidential treatment or other appropriate remedy. In such event, the Company
shall furnish only that portion of the information which is legally required and
shall exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded such information to the extent reasonably requested
by Intel.
(e) OTHER INFORMATION. The provisions of this Letter Agreement shall be
in addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by any of the parties hereto with respect to
the transactions contemplated hereby. Additional disclosures and exchange of
confidential information between the Company and Intel Corporation shall be
governed by the terms of the Corporate Non-Disclosure Agreement No. 7626010,
dated October 18, 1999, executed by the Company and Intel, and any Confidential
Information Transmittal Records (CITR) provided in connection therewith.
(f) All notices required under this section shall be made pursuant to
Section 9.10 of the Purchase Agreement.
2. MISCELLANEOUS.
2.1 DEFINITIONS. All capitalized terms used but not otherwise defined
in this Agreement have the meaning defined for such terms in the Purchase
Agreement.
2.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
2.3 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
2.4 AMENDMENTS AND WAIVERS. This Agreement may not be amended or
modified without the written consent of Intel and the Company, nor shall any
waiver be effective against any party unless in a writing executed on behalf of
such party.
2.5 SEVERABILITY. If any provision of this Agreement shall be declared
void or unenforceable by any judicial or administrative authority, the validity
of any other provision and of the entire Agreement shall not be affected
thereby.
<PAGE>
The parties hereto have executed this Agreement on the day and year first
written above.
EL SITIO, INC. INTEL ATLANTIC, INC.
By: By:
-------------------------------- ---------------------------------
Name: Name:
-------------------------------- ---------------------------------
Title: Title:
------------------------------- --------------------------------
<PAGE>
Exhibit 10.25
================================================================================
AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
by and among
THE SHAREHOLDERS OF
EL SITIO, INC.
November 9, 1999
================================================================================
<PAGE>
AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT, dated as of
November 9, 1999, entered into by and among and El Sitio, Inc., an international
business company organized and existing under the laws of the British Virgin
Islands (the "Company"), IAMP (El Sitio) Investments Ltd., a British Virgin
Islands international business company ("IAMP"), Washburn Enterprises Inc., a
British Virgin Islands corporation ("Washburn"), Chestnut Hill (El Sitio), LLC,
a Delaware limited liability company ("Chestnut"), and the other shareholders
set forth on the signature page hereto (collectively with IAMP, Washburn,
Chestnut and the Initial Shareholders, the "Shareholders").
W I T N E S S E T H:
WHEREAS, the holders of the Company's Class A Convertible
Preferred Shares (the "Class A Shareholders") entered into a Stockholders
Agreement dated July 2, 1999, as amended October 6, 1999 (as so amended, the
"Original Shareholders' Agreement"), and the Class A Shareholders desire to
include the holders of the Company's Class B Convertible Preferred Shares (the
"Class B Shareholders") as parties to such agreement;
WHEREAS, immediately prior to the Closing (as defined below),
the Shareholders owned, beneficially and of record, such number of shares of
each class of the capital stock of the Company as are set forth on Exhibit 1(a)
hereto;
WHEREAS, on the date hereof (the "Closing"), the Class B
Shareholders are purchasing certain of the Company's Class B Convertible
Preferred Shares, in the amounts set forth on Exhibit 1(b) hereto;
WHEREAS, immediately following the Closing, each Shareholder
will own, beneficially and of record, the number of shares of each class of the
Company's capital stock set forth on Exhibit 1(c) hereto; and
WHEREAS, the Shareholders wish to establish certain agreements
relating to voting, transfers and other matters as provided herein and to amend
and restate the Original Shareholders' Agreement as provided herein.
NOW, THEREFORE, in consideration of the premises, mutual
covenants and agreements herein contained and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE 1. CERTAIN DEFINITIONS
For the purposes of this Agreement, the following terms shall
have the respective meanings set forth below:
"Affiliate" means, with respect to any person, any other
person which, at the time such determination is being made, is Controlling,
Controlled by or under common Control with, such person. As used herein,
"Control," whether used as a noun or verb, refers to the possession,
<PAGE>
directly or indirectly, of the power to direct, or cause the direction of, the
management or policies of a person, whether through the ownership of voting
securities or otherwise.
"Agreement" means this Amended and Restated Shareholders'
Agreement, as from time to time assigned, supplemented, amended or modified in
accordance with the terms hereof.
"Amended and Restated Registration Rights Agreement" means the
Amended and Restated Registration Rights Agreement dated as of November 9, 1999,
among the Company, certain Class A Shareholders and the Class B Shareholders,
attached hereto as Exhibit 3A.
"Board" means the Board of Directors of the Company.
"Class A Preferred Shares" means the Class A Convertible
Preferred Shares of the Company.
"Class B Preferred Shares" means the Class B Convertible
Preferred Shares of the Company.
"Cause" means, with respect to any director, such individual's
(i) commission of an act involving the reckless disregard of his duties to the
Company or any of its subsidiaries, (ii) conviction in a criminal proceeding
(other than a misdemeanor), or (iii) suffering under a mental or physical
condition which has rendered such individual for a period of 180 consecutive
days during the term of this Agreement totally incapacitated and incompetent to
carry out the responsibilities of a director of the Company.
"El Sitio Shares" means, collectively, the common shares, par
value $0.01 per share, of the Company, the Class A Preferred Shares, the Class B
Preferred Shares, and any other class of capital stock of the Company issued at
any time hereafter which has the right to vote in all matters, each as described
in the Memorandum of the Company.
"Ibero Group" means Shareholders which are Affiliates of
Ibero-American Media Partners II Ltd.
"Initial Interest" means the Interest on the date hereof of
each Shareholder.
"Initial Shareholders" means, collectively, Militello Limited,
Futurit S.A., Tower Plus International Corp., SLI. com Inc., Roberto
Cibrian-Campoy, Hector A. Sierra, Hector R. Bandoni, Sergio S. Monti, Damian
Said, Compania de Inversiones Montevideo BVI, Henry B. Wilson Trust, Vamagra
S.A., Julien Sevaux, Elinstar International Corp., Renee Saenz Giles Dard,
Summit Investment Management Ltd., Gustavo Blufstein, Helaine Steden, Jorge Ami,
Roberto J. Garat and Alberto E. Tapia, and the term "Initial Shareholder" means
one of them.
"Interest" of a Shareholder means the aggregate voting
interest represented by the El Sitio Shares directly or indirectly held, as of
the date of determination, by such Shareholder,
2
<PAGE>
expressed as a percentage of the total aggregate voting interest represented by
the El Sitio Shares directly or indirectly held by all of the Shareholders.
"Memorandum" means the Amended and Restated Memorandum of
Association and Amended and Restated Articles of Association of the Company in
the form attached hereto as Exhibit 2.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar U.S. federal law then in force.
"Shareholder" means any person who is a party to this
Agreement and any permitted transferee of such person who agrees to be bound by
the terms hereof in accordance with the terms of Section 5.11.
ARTICLE 2. CORPORATE GOVERNANCE
2.1. BOARD OF DIRECTORS. It is agreed that there shall nine
(9) members and nine (9) alternate members of the Board, all to be elected at
the same time and serving for a term of one fiscal year, and the Memorandum
shall so provide. Each director shall be entitled to vote on all matters
presented to the Board, except as expressly provided herein.
2.2 ELECTION AND REMOVAL OF DIRECTORS.
(a) The Initial Shareholders shall have the right in any
election of directors to the Board to select four (4) directors. Each
Shareholder agrees that the Class A Shareholders shall have the right to
nominate five (5) directors (each a "Class A Preferred Director") to the Board.
The Ibero Group shall have the right to nominate two (2) Class A Preferred
Directors for so long as the Ibero Group shall own ten percent (10%) or more of
its current holdings of El Sitio Shares on an as-converted basis or one (1)
Class A Preferred Director for so long as the Ibero Group shall own one percent
(1%) or more of El Sitio Shares on an as-converted basis. If the Ibero Group
owns less than one percent (1%) of El Sitio Shares on an as-converted basis, the
Ibero Group shall have the right to appoint an observer to the Board, who shall
be entitled to participate in the meetings of the Board, but shall not have any
vote. Chestnut shall have the right to nominate one (1) Class A Preferred
Director to the Board for so long as Chestnut shall own (i) two and one-half
percent (2.5%) or more of its current holdings of El Sitio Shares on an
as-converted basis or (ii) one percent (1%) or more of El Sitio Shares on an
as-converted basis. If Chestnut owns less than one percent (1%) of El Sitio
Shares on an as-converted basis, Chestnut shall have the right to appoint an
observer to the Board, who shall be entitled to participate in the meetings of
the Board, but shall not have any vote. IMPSAT shall have the right to nominate
one (1) Class A Preferred Director to the Board for so long as IMPSAT shall own
(i) two and one-half percent (2.5%) of its current holdings of El Sitio Shares
on an as-converted basis or (ii) one percent (1%) or more of El Sitio Shares on
an as-converted basis. If IMPSAT owns less than one percent (1%) of El Sitio
Shares on an as-converted basis, IMPSAT shall have the right to appoint an
observer to the Board who shall be entitled to participate in the meetings of
the Board, but shall not have any vote. One (1) Class A Preferred Director will
be nominated by the unanimous vote of all of the directors of El Sitio and shall
be independent to
3
<PAGE>
any other holder of common shares or Class A Preferred Shares. The Class B
Shareholders shall have the right to appoint one (1) observer to the Board, who
shall be entitled to participate in the meetings of the Board, but shall not
have any vote.
(b) If, prior to his election to the Board, any
director-nominee shall be unwilling or unable to serve as a director of the
Company, the Shareholder which nominated such director shall be entitled to
nominate a replacement who shall then be the director-nominee for such
Shareholder for purposes of this Article 2. Except as set forth in Section
2.2(c) and to the extent the Shareholders shall otherwise agree in writing, each
Shareholder agrees not to take any action or to cause the Company to take any
action to remove or replace any director (or any alternate therefor) nominated
by another Shareholder.
(c) Each Shareholder agrees to vote in favor of each other's
nominees upon initial election and upon replacement. In particular, upon the
written request of any other Shareholder, each Shareholder agrees to take all
actions available to it, including, without limitation, voting or acting by
written consent, with respect to all of the El Sitio Shares that it is entitled
to vote or so act, to (i) remove from the Board any member who had been
nominated by such other Shareholder and (ii) appoint any new member designated
by such other Shareholder to fill any vacancy on the Board caused by removal,
resignation or death of a member originally nominated by such other Shareholder.
A Shareholder shall have the right to cause the removal of any director
(including those nominated by another Shareholder) for Cause, and upon notice
from a Shareholder of its desire to remove a director for Cause, setting forth a
description of the facts and circumstances which constitute "Cause," each
Shareholder agrees to take any action necessary to remove such member of the
Board for Cause, if Cause exists.
(d) The Shareholders agree that the Memorandum shall provide
for certain notice, quorum and voting requirements for action of the Board and
agree not to take any action inconsistent with such provisions. The Memorandum
shall provide for quarterly meetings of the Board unless a majority in Interest
of the Shareholders otherwise agree. Special meetings of the Board may be held
by conference telephone or any other means consistent with British Virgin
Islands law.
2.3. BOARD ACTION.
(a) Except as provided in Section 2.3(b) below or in the
Memorandum or under applicable law, all actions of the Board shall require the
affirmative vote of five (5) directors. Unless prohibited by law, the directors
shall be permitted to vote on any matter brought before the Board. The
Shareholders and the Company agree to take any action necessary or desirable to
effect the foregoing
(b) The Shareholders agree that the matters set forth below
will require the affirmative vote of three of the five Class A Preferred
Directors:
(i) any guarantees, loans or contractual obligations
to make loans, in either case made by the Company or any Subsidiary to third
parties, in an amount which, jointly or severally, exceeds $50,000;
4
<PAGE>
(ii) execution by the Company or any Subsidiary of
contracts with suppliers or service companies in any amount which requires
annual or single payments which exceed $75,000 above and beyond any budgeted
item in the long term and annual business plans;
(iii) approval of the Company's long term business
plan and any material modifications thereto;
(iv) approval of the Company's Annual Budget (as
defined below) and any material modifications thereto;
(v) incurrence of debt by the Company or any
Subsidiary in amounts not contemplated by the Company's long term business plan
and annual business plan;
(vi) granting of Liens (other than purchase money
security interests) on assets (including shares of any Subsidiary) of the
Company or any Subsidiary not contemplated by the Company's long term business
plan and annual business plan;
(vii) any disposition outside the ordinary course of
business of assets (including shares of any Subsidiary) of the Company or any
Subsidiary having a value of more than $100,000 which constitute less than all
or substantially all of the assets of the Company;
(viii) any transactions between the Company or any of
its Subsidiaries, on the one hand, and any Shareholder or any of its Affiliates,
on the other hand;
(ix) reductions in capital for any reason;
(x) public listing of securities of the Company on a
securities exchange (except in connection with the exercise of demand
registration rights pursuant to the Registration Rights Agreement), other than
in connection with a public offering which raises at least $35.0 million net
proceeds for the Company;
(xi) issuance of equity securities or securities
convertible into or exchangeable for equity securities of the Company; and
(xii) distribution of dividends by the Company.
(c) If in any year the Board shall fail to approve a
business plan for the next fiscal year, the Company's existing long term
business plan in effect for the immediately preceding Fiscal Year (adjusted for
the growth rate and inflation adjustments set forth therein) shall continue in
effect.
2.4. SPECIAL SHAREHOLDER VOTING REQUIREMENTS.
(a) Each Shareholder agrees not to vote in favor of any of
the matters described in this Section 2.4(a) unless Shareholders holding more
than fifty percent (50%) of the Class A Preferred Shares voting as a class and
fifty percent (50%) of the Class B Preferred Shares voting as a class have
approved such matters (except with respect to subsection (ii) below,
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as to which each Shareholder agrees not to vote in favor of unless Shareholders
holding more than fifty percent (50%) of the Class A Preferred Shares have voted
in favor thereof). These matters are as follows:
(i) changes in legal structure of the Company such
as the conversion to a partnership (other than the creation of a subsidiary);
(ii) merger, consolidation or spin-off involving the
Company or sales of all or substantially all of the assets of the Company;
(iii) redemption of capital stock of the Company and
any other share repurchases, as well as a subsequent resale of such repurchased
shares, in excess of $50,000, except that, with respect to employment related
buy-backs, the Company may redeem or repurchase such capital stock without
approval of the Class A Preferred Shares; provided, however, that any such
employment related buy-back is carried out in accordance with a severance
arrangement;
(iv) insolvency, protection measures against
creditors, bankruptcies or any other voluntary or judicial financial
restructuring procedures;
(v) entry by the Company into any business other
than the Internet business or any other service;
(vi) dissolution, winding up or voluntary liquidation
of the Company;
(vii) modification of the benefits, advantages and
conditions of redemption or amortization of one or more classes of preferred
shares, or the creation of a new class of Shares which has rights which are
senior to the Class A Preferred Shares or Class B Preferred Shares;
(viii) creation by the Company of beneficial interests
in the capital stock of the Company; and
(ix) any amendments to the Memorandum relating to the
foregoing items.
(b) Each of the Shareholders will receive at least ten (10)
calendar days prior written notice of any meeting of Shareholders. In case a
quorum is not present at a meeting, the Shareholders attending such meeting
shall take any measures necessary to make such meeting ineffective, and hereby
agree that any action taken at such meeting (other than such measure) shall be
void ab initio. Except as provided in Section 2.4(a) above, actions requiring
approval of the Shareholders will be approved by a vote of a majority of the
Shareholders entitled to vote thereon and present in person or represented by
proxy (or any greater percentage which may be required under applicable law), at
any duly convened meeting of Shareholders at which a quorum is present.
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2.5. RIGHT TO INSPECT RECORDS. Each Shareholder shall have
the right to inspect and examine the books, records, files, long term business
plans and other business plans, and other documents of the Company upon
reasonable notice to the Company and at reasonable times and in a manner so as
not to disrupt business operations. In addition, the Shareholders agree to cause
the Company to provide any and all information reasonably required by any
Shareholder in order to comply with any legal, tax or regulatory requirements
applicable to such Shareholder.
2.6. FINANCIAL REPORTING. The Company shall furnish to the
Shareholders (or, in the case of clause (d) hereof, the Class A Shareholders):
(a) as soon as available, and within ninety (90) days after
the end of each fiscal year thereafter, (i) an audited consolidated balance
sheet of the Company and its Subsidiaries as of the end of such fiscal year,
together with the related consolidated statements of income, shareholders'
equity and cash flows for the fiscal year then ended, prepared in accordance
with United States GAAP, and certified by a "Big 5" firm of independent public
accountants selected by the Board and approved by the Shareholders, such
approval not to be unreasonably withheld (the "ANNUAL FINANCIAL STATEMENT"); and
(ii) any related management letters from such accounting firm. The Annual
Financial Statement shall also include comparative statements from the prior
fiscal year and the most recent Annual Budget (as defined below) delivered by
the Company pursuant to Section 2.6(d) hereof;
(b) as soon as available, and in any event within thirty
(30) days after the end of each quarter in each fiscal year (other than the last
quarter in each fiscal year) a consolidated balance sheet of the Company and its
Subsidiaries and the related statements of income, shareholders' equity and cash
flows, unaudited but prepared in accordance with United States GAAP (except that
such unaudited financial statement need not contain all of the required
footnotes and is subject to normal, recurring non-material year end
adjustments), and certified by the chief financial officer of the Company (the
"QUARTERLY BALANCE SHEET"). The Quarterly Balance Sheet shall be accompanied by
a quarterly management report describing the current status of the Company and
its Subsidiaries and their operations and prospects. The Quarterly Balance Sheet
should be prepared as of the end of such quarter with statements of income,
shareholders' equity and cash flows for such quarter and for the period from the
beginning of the fiscal year to the end of such quarter, in each case with
comparative statements for the prior fiscal year and the most recent Annual
Budget delivered by the Company pursuant to 2.6(d) hereof, and which shall
specifically note and describe all expenditures (in any single transaction or
series of related transactions) in excess of $50,000 not included in the most
recent Annual Budget delivered by the Company pursuant to Section 2.6(d) hereof;
(c) as soon as available, and in any event no later than
twenty (20) days after the end of each month, statements of income and cash
flow, unaudited but prepared in accordance with United States GAAP (except that
such unaudited financial statement need not contain all of the required
footnotes and is subject to normal, recurring non-material year-end adjustments)
and certified by the chief financial officer of the Company, and any other
reports that are prepared by the management of the Company for the Board.
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(d) as soon as available, and in any event no later than
sixty (60) days prior to the start of each fiscal year, capital and operating
expense budget, cash flow projections and income and loss projections for the
Company and its Subsidiaries in respect of such fiscal year and an annual
business plan (the "ANNUAL BUDGET"), all itemized in reasonable detail and
prepared on a monthly basis, and, promptly after preparation, any revisions to
any of the foregoing;
(e) promptly, any document relating to the affairs of the
Company and its Subsidiaries delivered to all of the Shareholders and such other
information as the Shareholders shall reasonably request from time to time; and
(f) promptly, notice, and in any event within ten (10) days
after notice has been received by the Company or its Subsidiaries, of any
material litigation or an adverse event, claim, dispute or any other development
which may be deemed material to the operations, assets or properties of the
Company or its Subsidiaries.
2.7. ETHICAL BUSINESS PRACTICES. Each Shareholder agrees,
severally and not jointly, not to offer or give on behalf of the Company or any
of its Subsidiaries, and the Company agrees not to offer or give, either
directly or through a Third Party (as defined below), anything of value to: (a)
any government official, any political party or official thereof, or any
candidate for political office; (b) any customer or member of the government; or
(c) any other Person, in any such case while knowing or having reason to know
that all or a portion of such money or thing of value may be offered, given or
promised, directly or indirectly, to any customer or member of the government or
candidate for political office for the purpose of the following: (i) influencing
any action or decision of such Person, in his or its official capacity,
including a decision to fail to perform his or its official function; (ii)
inducing such Person to use his or its influence with any government or
instrumentality thereof to effect or influence any act or decision of such
government or instrumentality in order to assist the Company in obtaining or
retaining business for, or with, or directing business to, any Person; or (iii)
where such payment would constitute a bribe, kickback or illegal or improper
payment.
2.8. LIABILITY INSURANCE. The Company will maintain in full
force and effect directors' and officers' liability insurance with a reputable,
financially stable insurance company in such amounts and on such usual and
customary terms (including, without limitation, as to coverage for claims
against directors following the termination of their Board service) as the Board
shall authorize from time to time.
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2.9. COMPENSATION COMMITTEE AND AUDIT COMMITTEE. The Board of
the Company shall have two permanently sitting committees, the Compensation
Committee and the Audit Committee, which committees shall be comprised of three
members each. The Shareholders agree that two (2) representatives shall be
appointed to each committee by the Class A Shareholders, of which one (1)
representative shall be appointed by Ibero Group to each of the committees as
long as the Ibero Group retains its Board seat, and one (1) representative shall
be appointed by Chestnut to each of the committees as long as Chestnut retains
its Board seat. One (1) representative shall be appointed by the Initial
Shareholders to each of the committees.
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ARTICLE 3. TRANSFERS OF SHARES; PREEMPTIVE RIGHTS
3.1. RESTRICTION ON TRANSFER. The El Sitio Shares held by any
Shareholder and comprising its Interest ("Covered Shares") shall not be
transferable, directly or indirectly, except upon the conditions specified in
this Article 3, which conditions are intended, in part, to ensure compliance
with the provisions of the Securities Act in respect of any disposition of any
Covered Shares or any interest therein which would constitute a sale thereof
within the meaning of the Securities Act (a "Transfer"). As used in this Article
3, the term "Transferor" refers to the transferor (whether by voluntary or
involuntary means) of any Covered Shares, the term "Other Shareholder" means the
Shareholder which is not the Transferor, and the term "Subject Shares" means the
shares of Covered Shares that have been or are to be Transferred.
3.2. INVOLUNTARY TRANSFERS. In the event that an Involuntary
Transfer (as hereinafter defined) by any Shareholder of any Covered Shares may
occur, the following procedures shall apply:
(a) The Shareholder to be deprived or divested of Covered
Shares by the Involuntary Transfer shall promptly give written notice of such
Involuntary Transfer in reasonable detail to the Company and to the Other
Shareholders, and the person or persons who take or propose to take any interest
in the Subject Shares as a result of such Involuntary Transfer (the
"Transferee") shall hold such interest subject to the rights of the Other
Shareholder as set forth below.
(b) Upon receipt of the notice referred to in Section 3.2(a)
above or upon discovery of such Involuntary Transfer, the Company shall cause
the appraisal referred to in Section 3.2(c) to be made and each of the Other
Shareholders shall have the irrevocable option, but not the obligation, for a
period of sixty (60) days following receipt by all Other Shareholders of the
results of such appraisal, to purchase the Subject Shares, subject to the terms
set forth herein. Each Other Shareholder may exercise the option for the number
of Subject Shares which bears the same relation to the total number of Subject
Shares as (x) such Other Shareholder's Interest bears to (y) the aggregate
Interest then held by all of the Other Shareholders exercising such option (and
purchasing Subject Shares under Section 3.2(c) below), or for such other number
of Subject Shares as all of the Other Shareholders exercising such option may
agree in writing. In the event that the Other Shareholders elect to purchase, in
the aggregate, less than all of the Subject Shares, then the Other Shareholders
shall have no right to purchase any of the Subject Shares.
(c) The closing for any such sale of Subject Shares to one
or more Other Shareholders shall be at the offices of the Company on a mutually
satisfactory business day within fifteen (15) days after the expiration of such
sixty (60) day period. The purchase price per share of any Subject Shares
purchased pursuant to this Section 3.2 shall be the amount which is equal to the
fair value, as of the Valuation Date (as hereinafter defined), of a Subject
Share, as such fair value is determined by an independent appraiser selected by
the Company and reasonably acceptable to the Shareholders holding, in the
aggregate, the majority of the aggregate Interests, and all costs of any such
appraisal shall be paid by the Company. The "Valuation
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Date" shall be the last day of the calendar quarter immediately preceding the
Involuntary Transfer.
(d) For purposes of this Agreement, the term "Involuntary
Transfer" shall mean any involuntary sale, transfer, encumbrance or other
disposition by or in which any Shareholder shall be deprived or divested of any
right, title or interest in or to any Covered Shares, including, without
limitation, any levy of execution, transfer in connection with bankruptcy,
judicial reorganization, insolvency or similar proceedings or any transfer to a
public officer or agency pursuant to any abandoned property or escheat law;
provided that any Transfer complying with Section 3.3, Section 3.4, Section 3.5
or Section 3.6 hereof shall not be deemed to be an "Involuntary Transfer."
3.3. RIGHTS OF FIRST OFFER. Except as otherwise expressly
provided in Sections 3.4 and 3.5 hereof, each Shareholder (other than any Class
B Shareholder) hereby agrees that it shall not effect a Transfer of any Covered
Shares and to the extent that any offers made pursuant to this Section 3.3(a)
will not violate the Securities Act, except in accordance with the following
procedures:
(a) In the event that a Shareholder (other than a Class B
Shareholder) wishes to make a Transfer of any Covered Shares, the Transferor
shall first deliver to the Other Shareholders a written notice (the "Offer
Notice"), which Offer Notice shall (i) specify the terms, including the number
of shares of Covered Shares to be sold, and the price per share at which the
Transferor proposes to Transfer such Covered Shares, and (ii) be irrevocable for
a period of fifteen (15) days after delivery thereof, offering (the "Offer") to
the Other Shareholders all of the Subject Shares proposed to be sold by the
Transferor at the purchase price and on the terms specified therein. Each of the
Other Shareholders shall have the right and option, at its sole discretion, for
a period of fifteen (15) days after delivery of the Offer Notice (the
"Acceptance Period"), to accept all, but not less than all, of the Subject
Shares (pro rata among such Other Shareholders so electing on the basis of the
number of El Sitio Shares owned by such Other Shareholders) offered at a price
equal to the purchase price and upon the other terms stated in the Offer Notice.
Such acceptance may be made by delivery of a written notice to the Transferor
within said fifteen (15) day period, which notice shall specify whether such
Shareholder wishes to purchase more than its pro rata share, if Other
Shareholders decline to purchase, and if so, the maximum purchase such
Shareholder elects to make. In the event that any Shareholder elects not to
exercise its pro rata right to purchase, the Other Shareholder(s) shall have the
right to purchase the Subject Shares otherwise allocable to the
non-participating Shareholder pro rata to their participation in the Offer,
subject to the limits set forth in the applicable Offer Notice. In the event
that the Other Shareholders elect not to purchase all of the Subject Shares,
then the Other Shareholders shall have no right to purchase all or any portion
of such Subject Shares and the Transferor shall be free to Transfer the Subject
Shares in accordance with Section 3.3(c). A Shareholder electing to purchase
Subject Shares pursuant to this Section 3.3 is referred to herein as a
"Purchasing Shareholder"). For purposes of this Section 3.3, if the Transferor
is transferring the Company's common shares, then the Class B Shareholders shall
be included as Other Shareholders; in all other cases, the Class B Shareholders
shall not be included as Other Shareholders
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(b) Notwithstanding anything to the contrary contained in
Section 3.3 hereof, in the event the Transferor is one of the (i) Initial
Shareholders, the other Initial Shareholders will have a priority right of first
offer with respect to any Subject Shares offered by an Initial Shareholder, in
accordance with the terms and conditions of the Syndication Agreement among the
Initial Shareholders and dated as of June 10, 1999, before any such right may be
exercised by the Shareholders of any other class or (ii) Class A Shareholders,
the other Class A Shareholders will have a priority right of first offer with
respect to any Class A Preferred Shares offered by a Class A Shareholder, before
any such right may be exercised by the Other Shareholders.
(c) Transfers, if any, of Subject Shares to the Purchasing
Shareholder under the terms of this Section 3.3 shall be made at the offices of
the Company or any other address acceptable to the Company on a mutually
satisfactory business day within fifteen (15) days after the expiration of the
Acceptance Period. The Transferor shall deliver the Subject Shares by delivering
share certificates representing such Subject Shares, duly endorsed for transfer,
against payment of the purchase price thereof, in accordance with the terms of
the Offer.
(d) If effective acceptance shall not be received pursuant
to Section 3.3(a) above, with respect to all Covered Shares offered for sale
pursuant to the Offer Notice, then the Transferor may Transfer all or any part
of the El Sitio Shares so offered for sale at a price not less than the price,
and on terms not more advantageous to the purchaser than the terms stated in the
Offer Notice at any time within one hundred eighty (180) days after the
expiration of the Acceptance Period.
(e) In the event that any Shareholder exercises a purchase
right under Section 3.3(a) and then fails to consummate such purchase in
accordance with the terms of the Offer Notice (each such Shareholder, a
"Defaulting Shareholder"), then, in addition to any remedies at law or in equity
that the Transferor may have in respect of such failure, the Defaulting
Shareholder shall thereafter cease to have any right to receive offers or
purchase shares pursuant to Section 3.3(a).
3.4. EXEMPT TRANSFERS. Anything contained herein to the
contrary notwithstanding, the provisions of Sections 3.3, 3.5 and 3.6 shall not
be applicable to a Transfer (i) to an Affiliate of a Shareholder or for the
benefit of an Affiliate or family member of a Shareholder, if made solely for
personal tax or estate planning purposes of the Transferor, or (ii) in an
offering pursuant to the exercise of registration rights under the Registration
Rights Agreement, provided such Affiliate executes all documents (including the
representation that such Transfer may be effected without registration under the
applicable provisions of the Securities Act and state securities or blue sky
laws) deemed reasonably necessary by the Other Shareholder to cause the
Affiliate to become a party to, and be bound by, the terms of this Agreement.
3.5. TAG-ALONG RIGHTS.
(a) RIGHT TO PARTICIPATE IN SALE. Notwithstanding any other
provision hereof, if any Shareholder party hereto, other than any Class B
Shareholder (such Shareholders, together with their Affiliates, the "Selling
Shareholder(s)") proposes to enter into an agreement with a
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third party to sell or otherwise dispose of for value (such sale or other
disposition for value being referred to as a "Tag-Along Sale") El Sitio Shares
held by it to a third party who is not an Affiliate (any such party, a "Third
Party") pursuant to a bona fide transaction (or series of related transactions)
in which securities representing an aggregate Interest of fifty percent (50%) or
more will be sold to a Third Party, then the Selling Shareholder(s) shall afford
the Other Shareholder(s), (the "Tag-Along Shareholders") the opportunity to
require that the sale by the Selling Shareholder(s) be conditioned upon such
Third Party purchasing that number of El Sitio Shares owned by such Tag-Along
Shareholder which delivers a Tag-Along Notice in accordance with Section 3.5(c)
equal to the product (rounded up to the nearest whole number) of (i) the
quotient determined by dividing (A) the number of El Sitio Shares owned by such
Tag-Along Shareholder, by (B) the number of El Sitio Shares owned by the Selling
Shareholders and all Tag-Along Shareholders which are selling El Sitio Shares in
the contemplated Tag-Along Sale, and (ii) the number of El Sitio Shares proposed
to be sold by all Shareholders in the contemplated Tag-Along Sale. In
negotiating a Tag-Along Sale, the Selling Shareholder(s) shall provide (i) that
the only representations, warranties or covenants which any Tag-Along
Shareholder shall be required to make in connection with any Transfer are
representations and warranties with respect to its own ownership of the shares
to be sold by it and its ability to convey title thereto free and clear of
liens, encumbrances or adverse claims, its due organization, its due
authorization, execution and delivery of the definitive purchase agreement (if
applicable), enforceability of such purchase agreement against it and no
conflict of it with such purchase agreement, and (ii) that the liability of the
Tag-Along Shareholder with respect to any representation and warranty made in
connection with any Transfer is the several liability of such Tag-Along
Shareholder (and not joint with any other person) and that such liability is
limited to the amount of proceeds actually received by such Tag-Along
Shareholder; provided, however, that the foregoing shall not limit the
obligations of such Tag-Along Shareholder, and such Tag-Along Shareholder hereby
expressly agrees to be bound by and be subject to, any escrow or other holdback
arrangement (on a pro rata basis based on the number of shares sold by such
Tag-Along Shareholder in proportion to all shares of the Company sold in such
Tag-Along Sale) provided for in the agreement relating to the Tag-Along Sale.
For purposes of this Section 3.5, if the Selling Shareholder is transferring the
Company's common shares, then the Class B Shareholders shall be included as
Tag-Along Shareholders; in all other cases, the Class B Shareholders shall not
be included as Other Shareholders.
(b) SALE NOTICE. The Selling Shareholder(s) shall provide
each Tag-Along Shareholder and the Company with written notice (the "Tag-Along
Sale Notice") not less than thirty (30) days prior to the proposed date of the
Tag-Along Sale (the "Tag-Along Sale Date"). Each Tag-Along Sale Notice shall be
accompanied by a copy of any agreement relating to the Tag-Along Sale (if
available) and shall set forth: (i) the name and address of the Third Party in
the Tag-Along Sale; (ii) the number of shares proposed to be Transferred by the
Selling Shareholder(s); (iii) the proposed amount and form of consideration to
be paid for such shares expressed on a per share basis and the terms and
conditions of payment offered by the Third Party; (iv) the aggregate number of
shares of the Company held of record by the Selling Shareholder(s) as of the
close of business on the day immediately preceding the date of the Tag-Along
Notice (the "Tag-Along Notice Date"); (v) confirmation that the Third Party has
been informed of the "Tag-Along Rights" provided for herein and has agreed to
purchase shares from
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any Tag-Along Shareholder in accordance with the terms hereof; and (vi) the
Tag-Along Sale Date.
(c) TAG-ALONG NOTICE. Any Tag-Along Shareholder wishing to
participate in the Tag-Along Sale shall provide written notice (the "Tag-Along
Notice") to the Selling Shareholder(s) no less than fifteen (15) days prior to
the Tag-Along Sale Date. The Tag-Along Notice shall set forth the number of El
Sitio Shares that such Tag-Along Shareholder elects to include in the Tag-Along
Sale. The Tag-Along Notice given by any Tag-Along Shareholder shall constitute
such Tag-Along Shareholder's binding agreement to sell the shares specified in
the Tag-Along Notice on the terms and conditions applicable to the Tag-Along
Sale; provided, however, that in the event that there is any material change in
the material terms and conditions of such Tag-Along Sale applicable to the
Tag-Along Shareholder (including, but not limited to, any decrease in the
purchase price that occurs other than pursuant to an adjustment mechanism set
forth in the agreement relating to the Tag-Along Sale) after such Tag-Along
Shareholder gives its Tag-Along Notice, then, notwithstanding anything herein to
the contrary, the Tag-Along Shareholder shall have the right to withdraw from
participation in the Tag-Along Sale with respect to all of its El Sitio Shares
affected thereby. If the Third Party does not consummate the purchase of all the
El Sitio Shares requested to be included in the Tag-Along Sale by any Tag-Along
Shareholder on terms and conditions which are no more favorable in any material
respect to the Selling Shareholder (except as otherwise provided herein), then
the Selling Shareholder(s) shall not consummate the Tag-Along Sale of any of its
shares to the Third Party. If a Tag-Along Notice from any Tag-Along Shareholder
is not received by the Selling Shareholder(s) prior to the fifteen (15) day
period specified above, the Selling Shareholder(s) shall have the right to
consummate the Tag-Along Sale without the participation of such Tag-Along
Shareholder, but only on terms and conditions which are no more favorable in any
material respect to the Selling Shareholder (and in any event, at no greater a
purchase price, except as the purchase price may be adjusted pursuant to the
agreement regarding the relevant sale or other disposition) than as stated in
the Tag-Along Sale Notice and only if such Tag-Along Sale occurs on a date
within one hundred eighty (180) days of the Tag-Along Sale Date. If such
Tag-Along Sale does not occur within such one hundred eighty (180) day period,
the El Sitio Shares that were to be subject to such Tag-Along Sale thereafter
shall continue to be subject to all of the restrictions contained in this
Agreement.
(d) DELIVERY OF SHARES. On the Tag-Along Sale Date, each
Tag-Along Shareholder shall deliver the shares to be sold in connection with the
Tag-Along Sale to the Third Party by delivering share certificates representing
such shares, duly endorsed for transfer, against delivery of immediately
available funds in the amount of the purchase price for such shares.
(e) NO WAIVER. Any election in any instance by a Shareholder
not to exercise its rights to participate in a Tag-Along Sale under this Section
3.5 shall not constitute a waiver of such rights with respect to any other
proposed Transfer of shares of the Company which would trigger such rights.
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3.6. DRAG-ALONG RIGHTS.
(a) GRANT OF DRAG-ALONG RIGHTS. If any Shareholder(s) party
hereto, other than any Class B Shareholder (such Shareholders, together with
their Affiliates, the "Selling Shareholder(s)") proposes to enter into an
agreement with a Third Party to sell or otherwise dispose of for value (such
sale or other disposition for value being referred to as a "Drag-Along Sale") El
Sitio Shares held by it to a Third Party pursuant to a bona fide transaction (or
series of related transactions) in which securities representing an aggregate
Interest of fifty percent (50%) or more will be sold to a Third Party, then the
remaining Shareholder(s), other than the Class B Shareholders (the "Drag-Along
Shareholder") shall, upon the written request of the Selling Shareholder(s),
sell to such Third Party (i) El Sitio Shares owned by such Drag-Along
Shareholder equal to (A) the number of El Sitio Shares owned by such Drag-Along
Shareholder multiplied by (B) a fraction ("Drag-Along Fraction"), the numerator
of which is the number of El Sitio Shares the Selling Shareholder(s) intend to
sell pursuant to this Section 3.6 and the denominator of which is the aggregate
number of El Sitio Shares owned by the Selling Shareholder(s), and (ii) warrants
owned by such Drag-Along Shareholder representing the right to acquire a number
of shares equal to (A) the number of shares underlying such Drag-Along
Shareholders warrants multiplied by (B) the Drag-Along Fraction,
contemporaneously with the sale of such El Sitio Shares by the Selling
Shareholder(s), for, with respect to the El Sitio Shares, the same consideration
and on the same terms as those provided by such Third Party to the Selling
Shareholder(s) and, with respect to the warrants, for the same consideration and
on the same terms as those provided by such Third Party to the Selling
Shareholder(s) less the aggregate exercise price for the warrants so
transferred.
(b) EXERCISE OF DRAG-ALONG RIGHT. The Drag-Along Right shall
be exercisable by written notice given by the Selling Shareholder(s) to each
Drag-Along Shareholder containing the price and other material terms of the
proposed sale and the date of the closing of the proposed sale (the "Drag-Along
Sale Date"), which date shall not be less than twenty (20) nor more than sixty
(60) calendar days after the date of such notice.
(c) DELIVERY OF SHARES. On the Drag-Along Sale Date, each
Drag-Along Shareholder shall deliver the shares to be sold in connection with
the Drag-Along Sale to the Third Party by delivering share certificates
representing such shares, duly endorsed for transfer, against delivery of
immediately available funds in the amount of the purchase price for such shares.
3.7. TRANSFERS IN VIOLATION OF AGREEMENT. If any voluntary
Transfer of El Sitio Shares is made or attempted contrary to the provisions of
this Agreement (such Transfer, an "Unauthorized Transfer"), the Other
Shareholders shall have the right to purchase all or part of such El Sitio
Shares from the owner thereof or the owner's transferee at any time before or
after the Transfer at a purchase price per share equal to (i) if any El Sitio
Shares are listed for trading on NASDAQ or the Bolsa de Comercios de Buenos
Aires, the lesser of (x) eighty percent (80%) of the thirty (30) day average
closing price over the thirty-day period immediately preceding the date of the
initial Transfer contrary to this Agreement, or (y) eighty percent (80%) of the
thirty (30) day average closing price for the thirty days immediately preceding
the date of exercise of
15
<PAGE>
the right granted to the Other Shareholders herein, or (ii) if no El Sitio
Shares are listed for trading on NASDAQ or the Bolsa de Comercios de Buenos
Aires, the lesser of (x) eighty percent (80%) of the Fair Value at the time of
the initial transfer that was contrary to this Agreement, or (y) eighty percent
(80%) of the Fair Value at the time of the Other Shareholders' purchase of such
El Sitio Shares. The term "Fair Value" shall mean the amount at which the El
Sitio Shares would change hands between an independent, willing buyer and an
independent, willing seller, each having reasonable knowledge of all relevant
facts and neither being under any compulsion to act (considering, where
applicable, the relative rights of all outstanding classes or series of capital
stock but not discounting the value of such securities for illiquidity or
because they represent a minority ownership position in the Company), which
amount shall be determined by the Board in its reasonable discretion and in good
faith.
3.8. PREEMPTIVE RIGHTS.
(a) Except for the issuance of the Company's capital stock
or other securities (i) pursuant to a Qualifying IPO (as defined in the
Memorandum), (ii) comprising additional shares or option issuances to Employees
of the Company pursuant to share option plans existing on the date hereof
including the number of shares issuable thereunder as of the date hereof (or
amendments to such plans or new plans if agreed to by the Shareholders), (iii)
comprising Class B Preferred Shares, up to an aggregate of 1,888,889 Class B
Preferred Shares, or (iv) in connection with acquisitions of businesses by the
Company approved by the Shareholders, if the Company at any time after the date
hereof authorizes the issuance or sale of any capital stock of the Company or
any securities of the Company containing options or rights to acquire any shares
of capital stock (other than as a dividend on the outstanding capital stock),
the Company shall first offer to sell to the Shareholders on a pro rata basis,
all of such capital stock or other securities (the "Offered Shares").
(b) In order to exercise its purchase rights under this
Section 3.8, each Shareholder must within twenty (20) business days after
receipt of written notice from the Company describing in reasonable detail the
capital stock or securities being offered, the purchase price thereof and the
payment terms, deliver a written notice to the Company describing its election
hereunder. Such election shall indicate the number of Offered Shares that the
Shareholder in its sole discretion elects to purchase, which may be all or any
portion of the Offered Shares. The Company shall give the Shareholders no less
than fifteen (15) business days notice of the closing of the sale and purchase
of such shares.
(c) Upon the expiration of the 20-day period described
above, the Company shall be entitled to sell such capital stock or securities
which the Shareholder has not elected to purchase during the ninety (90) days
following such expiration on terms and conditions, including price, no more
favorable to the purchasers thereof than those offered to the Shareholders. Any
capital stock or securities offered or sold by the Company to any person after
such 90-day period must be re-offered to the Shareholders pursuant to the terms
of this Section 3.8.
16
<PAGE>
ARTICLE 4. OTHER AGREEMENTS
Ibero-American Media Partners II Ltd., Washburn and the
Company agree to use reasonable efforts to exploit jointly strategic business
opportunities in the future, including, but not limited to: (i) the Ibero Group
advertising on the Internet site of the Company and the Company advertising on
media networks of the Ibero Group and its Affiliates (including agreements
whereby the Company will utilize media networks of the Ibero Group and its
Affiliates as the preferred choice for its advertising expenditures); (ii) the
Company and the Ibero Group developing Internet sites for Ibero Group's media
networks as a preferred provider; (iii) the Company and the Ibero Group sharing
production and advertising sales assets; and (iv) the Company and the Ibero
Group sharing offices and other administrative overhead; provided, however, that
such opportunities are mutually beneficial for both Ibero Group and the Company.
The Ibero Group and the Company agree that these strategic business
opportunities are intended to be a part of a long-term strategic initiative.
ARTICLE 5. MISCELLANEOUS
5.1. NOTICES. Any and all notices, designations, consents,
offers, acceptances, or any other communication required or permitted to be
given by any provision of this Agreement shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by telecopier
with acknowledgment of receipt sent by telecopier or delivered in person, as the
case may be, to such party at the address or telecopier number, as the case may
be, set forth on the signature pages hereto. All such notices, requests,
consents and other communications shall be deemed to have been received: (a) in
the case of personal delivery, on the date of receipt; or (b) in the case of
telecopying, on the date of acknowledgment thereof.
5.2. AMENDMENT AND WAIVER. No change or modification of, or
waiver of compliance with, this Agreement shall be valid unless the same shall
be in writing and signed by each of the Shareholders party hereto which holds an
Interest of one percent (1%) or more.
5.3. TERMINATION. This Agreement may be terminated at any
time by an instrument in writing signed by all of the Shareholders party hereto.
This Agreement shall terminate automatically as to any Shareholder which
transfers all of its El Sitio Shares, or upon the occurrence of a Qualifying IPO
(as defined in the Memorandum). Unless sooner terminated, this Agreement shall
terminate ten (10) years from the date hereof, unless, at any time within one
(1) year prior to such date, all of the parties extend its duration for as many
additional periods, each not to exceed ten (10) years, as they may desire.
5.4. NO WAIVER. No failure or delay on the part of the
Shareholders or any of them in exercising any right, between the Company and the
Shareholders or any of them shall operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the simultaneous or later exercise of any other right, power or privilege. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies which the Shareholders or any of them would otherwise
have. No notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand
17
<PAGE>
in similar or other circumstances or constitute a waiver of the rights of the
Shareholders or any of them to take any other or further action in any
circumstances without notice or demand.
5.5. SPECIFIC PERFORMANCE. Each party to this Agreement
acknowledges that the other parties will suffer irreparable injury in the event
of any breach of any provision of this Agreement and that therefore the remedy
at law for any breach or threatened breach of any such provision of this
Agreement will be inadequate. Accordingly, upon a breach or threatened breach of
any such provision of this Agreement by any party hereto, the other parties
shall, in addition and without prejudice to any of the rights and remedies they
may have, be entitled as a matter of right, without proof of actual damages, to
seek specific performance of such provisions of this Agreement and to such other
injunctive or equitable relief to enforce, or prevent any violations (whether
anticipatory, continuing or future) of, such provisions of this Agreement.
5.6. COUNTERPARTS AND HEADINGS. This Agreement may be
executed in two or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument. All headings and any cover page or table of contents are inserted
for convenience or reference only and shall not affect its meaning or
interpretation.
5.7. NOUNS AND PRONOUNS. Whenever the context may require,
any pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice-versa. Dollars or $ means the currency of the United States or
its foreign currency equivalent at the time the determination is made.
5.8. EXPENSES. Each of the parties to this Agreement shall
bear its own expenses, including, without limitation, the fees and disbursements
of its respective counsel, in connection with the negotiation and execution of
this Agreement and the consummation of the transactions contemplated hereby.
5.9. GOVERNING LAW. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the British Virgin
Islands, without regard to its conflict of law rules.
5.10. DISPUTE RESOLUTION.
(a) Any and all disputes between or among the parties not
involving any Class B Shareholder arising in connection with or relating in any
way to the validity, construction, meaning, enforceability or performance of
this Agreement shall be settled by binding arbitration in accordance with the
rules of arbitration then in effect (the "ICC Rules") of the International
Chamber of Commerce (the "ICC"). Any party or parties electing to refer a matter
to arbitration pursuant hereto (the "Petitioner") shall promptly deliver written
notice (the "Arbitration Notice") to the other parties that it wishes to
commence an arbitration proceeding under this Section 5.10. The Arbitration
Notice shall set forth the matter being referred to arbitration and the name of
the individual selected by the Petitioner as one of the arbitrators.
18
<PAGE>
(b) There shall be three (3) arbitrators, and each party to
the arbitration shall select one (1) arbitrator. Within twenty (20) days of
receipt of the Arbitration Notice, the other party to such arbitration (the
"Respondent") shall appoint an arbitrator (who shall have appropriate
qualifications in relation to the matter in dispute) and notify the Petitioner
of such appointment and submit its counter statement, if any, of the matter
being referred to arbitration. If the Respondent fails to appoint an arbitrator
within such twenty (20) day period, the Petitioner shall request the ICC
President to appoint a second arbitrator who shall have appropriate
qualifications in relation to the matter in dispute. Within twenty (20) days
after appointment of the second arbitrator, the two arbitrators shall appoint
the third arbitrator. If the two arbitrators fail to appoint the third
arbitrator within such twenty (20) day period, either party to the arbitration
may request that the ICC President appoint the third arbitrator, who shall have
appropriate qualifications in relation to the matter in dispute. All three (3)
arbitrators shall be bilingual (Spanish/English). In the event that there are
more than two (2) parties to such arbitration, all three (3) arbitrators shall
be appointed by the ICC President.
(c) The arbitration proceedings shall be conducted in the
English and Spanish languages in London, England, in accordance with the ICC
Rules, and all documents in connection with any such proceedings shall be
submitted in the English or Spanish languages or with a complete and accurate
English or Spanish (as applicable) language translation. In any arbitration, the
decision of the arbitrators shall be final and binding on the parties to the
arbitration and judgment on the decision may be entered in and enforced in any
court of competent jurisdiction in accordance with the New York Convention on
the Recognition and Enforcement of Arbitral Awards. The substantially prevailing
party in such arbitration, in addition to all other relief provided, shall be
entitled to an award of all its reasonable costs and expenses including attorney
fees and expenses and deposits and payments to the ICC.
(d) Each party hereto hereby agrees that each of the parties
hereto shall have the right to seek appropriate emergency or equitable relief to
preserve the arbitral matter or to otherwise protect its rights pending
resolution of the arbitral matter, whether in New York, New York, Argentina or
in any other jurisdiction.
(e) The parties agree to negotiate in good faith to resolve
any dispute involving the Class B Shareholders regarding arising in connection
with or relating in any way to the validity, construction, meaning,
enforceability or performance of this Agreement. If the negotiations do not
resolve the dispute to the reasonable satisfaction of both parties to the
dispute, then each party shall nominate one senior officer of the rank of Vice
President or higher as its representative. These representatives shall, within
thirty (30) days of a written request by either party to call such a meeting,
meet in person and alone (except for one assistant for each party) and shall
attempt in good faith to resolve the dispute. If the disputes cannot be resolved
by such senior managers in such meeting, the parties agree that they shall, if
requested in writing by either party, meet within thirty (30) days after such
written notification for one day with an impartial mediator and consider dispute
resolution alternatives other than litigation. If an alternative method of
dispute resolution is not agreed upon within thirty (30) days after the one-day
mediation, either party may begin litigation proceedings. This procedure shall
be a prerequisite before taking any additional action hereunder.
19
<PAGE>
5.11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of each of the Shareholders and their
respective executors, administrators and personal representatives and heirs and
their successors and assigns. The rights and obligations of any Shareholder
hereunder shall inure to the benefit of and be binding upon any transferee of
such Shareholder, if (i) such transferee agrees in writing to be bound by the
provisions of this Agreement and (ii) the Interest of such transferee would,
immediately upon becoming a party to this Agreement, equal or exceed five
percent (5%).
5.12. SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, invalid or unenforceable, the remaining provisions hereof shall
nevertheless continue in full force and effect as though the illegal, invalid or
unenforceable provisions were not a part hereof, and the parties shall exert
their best efforts to amend this Agreement to include a provision which is
legal, valid and enforceable and which carries out the original intent of the
parties.
5.13. COMPLETE AGREEMENT. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous arrangements or understandings, whether
written or oral, between or among any of the parties hereto, with respect to the
subject matter hereof, other than the Registration Rights Agreement and the
Syndication Agreement among the Initial Shareholders, dated as of June 10, 1999.
5.14. FURTHER ASSURANCES. Each of the parties to this
Agreement agrees to execute such other documents and take such other action as
may be reasonably necessary to implement and carry out the intent of this
agreement.
5.15. CONFLICT WITH MEMORANDUM. In the event that any of the
terms or provisions contained herein conflict with any of the provisions
contained in the Memorandum, the provisions of this Agreement shall govern to
the extent consistent with applicable British Virgin Islands law, as in effect
from time to time.
5.16. CONFIDENTIALITY. Each Shareholder (other than Intel
Atlantic, Inc.) covenants and agrees to treat any non-public information
provided to it by the Company concerning the business and finances of the
Company ("Corporate Information") as confidential and agrees further that it
will not use, exploit, reproduce, disclose or provide Corporate Information to
any third party (other than any agents of the Shareholder who are bound by
substantially similar obligations of confidentiality) on its own behalf or
otherwise, except with the consent of the Company or as required by law, legal
process or any federal or state regulatory body having jurisdiction over such
Shareholder. The provisions of this Section 5.16 shall not apply to any
information which:
(a) was within the public domain prior to the time of
disclosure of Corporate Information to the Shareholder or which comes into the
public domain other than as a result of a breach by the Shareholder of this
Section 5.16;
20
<PAGE>
(b) was in the possession of the Shareholder (or any of its
officers, directors, employees, agents, principals, or Affiliates) before the
Shareholder received the Corporate Information;
(c) was rightfully acquired by the Shareholder from a third
party without, to the knowledge of the Shareholder, any restriction or any
obligation of confidentiality; or
(d) was independently developed by the Shareholder without
any use or reference to the Corporate Information.
The provisions of this Section 5.16 shall survive the
termination of this Agreement, either in whole or as to any Shareholder, for a
period of two (2) years.
The obligations of Intel Atlantic, Inc. with respect to the
treatment of Corporate Information are set forth in Exhibit 4 hereto.
[The rest of this page has been intentionally left blank]
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement as of the day and year first above written.
EL SITIO, INC.
By:
------------------------------------------
Title:
Notice Address:
Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
with a copy to:
Paul, Hastings, Janofsky & Walker, LLP
399 Park Avenue, 31st Floor
New York, New York 10022
Attn: Neil A. Torpey
Telephone: (212) 318-6034
Telecopier: (212) 318-4090
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
UTILITIVEST II, L.P.
By: Utilitivest II, L.L.C., its General Partner
By:
-------------------------------------
Name: Hurdle H. Lea III
Title: Vice President and Director of
Utilitivest II, L.L.C.
Notice address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
UTILITIVEST III, L.P.
By: Utilitivest III, L.L.C., its General Partner
By:
-------------------------------------
Name: Hurdle H. Lea III
Title: Vice President and Director of
Utilitivest III, L.L.C.
Notice address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
IAMP (EL SITIO) INVESTMENTS LTD.
By:
------------------------------------------
Title:
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
WASHBURN ENTERPRISES INC.
By:
------------------------------------------
Title:
Notice Address:
c/o 404 Washington Avenue, 8th Floor
Miami Beach, Florida 33139
Attn: Benjamin S.A. Moody
Telephone: (305) 894-3578
Telecopier: (305) 894-3599
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1021
Telecopier: (212) 872-1002
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
CHESTNUT HILL (EL SITIO), LLC
By:
------------------------------------------
Title:
Notice Address:
c/o GCC Investments, Inc.
1300 Boylston Street
Chestnut Hill, MA 02647
Attn: Michael A. Greeley
Telephone: (617) 975-3222
Telecopier: (617) 975-320
with a copy to:
Phillip J. Szabla
Vice President and General Counsel
GC Companies, Inc.
1300 Boylston Street
Chestnut Hill, MA 02467
Telephone: (617) 264-8098
Telecopier: (617) 264-8206
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
TOWER PLUS INTERNATIONAL CORP.
By:
------------------------------------------
Notice Address:
c/o Nicholas Juan Alonso
Plaza Independencia 811 PB
11100 Montevideo Uruguay
Telephone: (58 92) 902-1515
Telecopier: (58 92) 902-5454
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
ROBERTO CIBRIAN-CAMPOY
By:
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
HECTOR A. SIERRA
By:
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
HECTOR R. BANDONI
By:
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
SERGIO S. MONTI
By:
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
DAMIAN SAID
By:
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
ALBERTO E. TAPIA
By:
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
JULIEN SEVAUX
By:
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
GILES DARD
By:
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
GUSTAVO BLUFSTEIN
By:
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
MADELAINE CORP. S.A.
By:
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
ROBERTO J. GARAT
By:
------------------------------------------
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibrian Campoy
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
COMPANIA DE INVERSIONES MONTEVIDEO BVI
By:
------------------------------------------
Title:
Notice Address:
Plaza Independencia 831/508
Montevideo, Uruguay
Tel: (05982) 901-44-29
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
THE HENRY B. WILSON TRUST OF 1996
By:
------------------------------------------
Title:
Notice Address:
100 Wilshire Blvd.
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
THE HENRY WILSON IRREVOCABLE TRUST
OF 1997, F.B.O. SCOTT WILSON
By:
------------------------------------------
Title:
Notice Address:
100 Wilshire Blvd.
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
THE HENRY WILSON IRREVOCABLE TRUST
OF 1997, F.B.O HENRY BIRKS WILSON, JR.
By:
------------------------------------------
Title:
Notice Address:
100 Wilshire Blvd.
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
THE HENRY WILSON IRREVOCABLE TRUST
OF 1997, F.B.O. ERINN PALMER BERKSON
By:
------------------------------------------
Title:
Notice Address:
100 Wilshire Blvd.
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
THE HENRY WILSON IRREVOCABLE TRUST
OF 1997, F.B.O. TYLER HEARTT WILSON
By:
------------------------------------------
Title:
Notice Address:
100 Wilshire Blvd.
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
BARBARA HUYETT
By:
------------------------------------------
Notice Address:
100 Wilshire Blvd.
Suite 600
Santa Monica, CA 90401
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
VAMAGRA S.A.
By:
------------------------------------------
Title:
Notice Address:
Pedras 172, 4th Floor
1030 Buenos Aires, Argentina
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
SUMMIT INVESTMENT MANAGEMENT LTD.
By:
------------------------------------------
Title:
Notice Address:
------------------------------------
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------------------------------------
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with a copy to:
------------------------------------
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<PAGE>
ELINSTAR INTERNATIONAL CORP.
By:
------------------------------------------
Title:
Notice Address:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
with a copy to:
------------------------------------
------------------------------------
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<PAGE>
MILITELLO LIMITED
By:
------------------------------------------
Title:
Notice Address:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
with a copy to:
------------------------------------
------------------------------------
------------------------------------
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------------------------------------
<PAGE>
FUTURIT S.A.
By:
------------------------------------------
Title:
Notice Address:
c/o Posadas 1429, Piso 10A
1011, Buenos Aires, Argentina
Attn: Felipe Ostrolencki
Telephone: (54 11) 4447-0312
Telecopier: (54 11) 4749-3315
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
QUANTUM DOLPHIN PLC
By:
------------------------------------------
Title:
Notice Address:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
SLI.COM INC.
By:
------------------------------------------
Title:
Notice Address:
c/o Sociedad Latinoamericana de
Inversiones S.A.
Bouchard 547 Piso 14
1106 Buenos Aires, Argentina
Attention: Guillermo Liberman
Telephone: (54 11) 4316-9952
Telecopier: (54 11) 4313
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
DUNAS OVERSEAS LTD.
By:
------------------------------------------
Title:
Notice Address:
c/o Nicholas Juan Alonso
Plaza Independencia 811 PB
11100 Montevideo Uruguay
Telephone: (58 92) 902-1515
Telecopier: (58 92) 902-5454
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
IMPSAT CORPORATION
By:
------------------------------------------
Title:
Notice Address:
ImpSat Corporation
Alferez Pareja 256
1107 Buenos Aires, Argentina
Attn: Hector Alonso
Telephone:
Telecopier: (541) 11-328-0140
with a copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004-1202
Attn: Neil M. Goodman
Telephone: (202) 942-5191
Telecopier: (201) 942-5999
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
RENEE SAENZ ARMAS
By:
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Title:
Notice Address:
c/o Avenida Belgrano 845, 4th Floor
1092 Buenos Aires, Argentina
Attn: Roberto Cibria Company
Telephone: (54 11) 4343-9122
Telecopier: (54 11) 4343-9122, ext. 104
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
RAFAEL BUSTAMENTE
By:
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Title:
Notice Address:
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[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
INTEL ATLANTIC, INC.
By:
------------------------------------------
Title:
Notice Address:
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: M&A Portfolio Manager - M/S RN6-46
Fax Number: (408) 765-6038
with a copy to:
Intel Atlantic, Inc.
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
Fax Number: (408) 765-1859
[Signature Page to Amended and Restated Shareholders' Agreement -
El Sitio, Inc.]
<PAGE>
EXHIBIT 4
November 9, 1999
Intel Atlantic, Inc.
2200 Mission College Blvd.
Santa Clara, CA 95052
In consideration of the purchase by Intel Atlantic, Inc. ("Intel") of
555,555.55 shares of Class B Preferred Stock of El Sitio, Inc. ("Company"),
pursuant to a Share Purchase Agreement dated November 9, 1999 (the "Purchase
Agreement"), Company and Intel agree to the terms and obligations of this letter
agreement ("Agreement").
1. CONFIDENTIALITY
(a) DISCLOSURE OF TERMS. The terms and conditions of this Agreement,
the Purchase Agreement, the Amended and Restated Shareholders Agreement, dated
November 9, 1999 and the Amended and Restated Registration Rights Agreement,
dated November 9, 1999 (collectively, the "Financing Terms"), including their
existence, shall be considered confidential information and shall not be
disclosed by the Company to any third party except in accordance with the
provisions set forth below.
(b) PRESS RELEASES, ETC. Within sixty (60) days after the closing of
the transactions contemplated by the Purchase Agreement, the Company may issue a
press release disclosing that the Investors, including Intel, have invested in
the Company; provided that the release does not disclose any of the Financing
Terms and the final form of the press release is approved in advance in writing
by Intel. Intel's name and the fact that Intel is an investor in the Company can
be included in a reusable press release boilerplate statement, so long as Intel
has given the Company its initial approval of such boilerplate statement and the
boilerplate statement is reproduced in exactly the form in which it was
approved. No other announcements regarding Intel in a press release, conference,
advertisement, announcement, professional or trade publication, mass marketing
materials or otherwise to the general public may be made without Intel's prior
written consent.
(c) PERMITTED DISCLOSURES. Notwithstanding the foregoing, (i) the
Company may disclose any of the Financing Terms to its current or bona fide
prospective investors, employees, investment bankers, lenders, accountants and
attorneys, in each case only where such persons or entities are under
appropriate nondisclosure obligations; (ii) the Company may disclose (other than
in a press release or other public announcement described in subsection (b))
solely the fact that Intel is an investor in the Company to any third parties
without the requirement for the consent of any other party or nondisclosure
obligations; and (iii) Intel may disclose its
<PAGE>
investment in the Company and the Financing Terms to third parties or to the
public at its sole discretion and, if it does so, the Company shall have the
right to disclose to third parties any such information disclosed in a press
release or other public announcement by Intel.
(d) LEGALLY COMPELLED DISCLOSURE. In the event that any party is
requested or becomes legally compelled (including without limitation, pursuant
to securities laws and regulations) to disclose the existence of the agreements
referenced in paragraph (a) above or any of the Financing Terms hereof in
contravention of the provisions of this letter, the Company shall provide Intel
with prompt written notice of that fact so that the appropriate party may seek
(with the cooperation and reasonable efforts of the other) a protective order,
confidential treatment or other appropriate remedy. In such event, the Company
shall furnish only that portion of the information which is legally required and
shall exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded such information to the extent reasonably requested
by Intel.
(e) OTHER INFORMATION. The provisions of this letter agreement shall be
in addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by any of the parties hereto with respect to
the transactions contemplated hereby. Additional disclosures and exchange of
confidential information between the Company and Intel Corporation or Intel
Atlantic, Inc. shall be governed by the terms of the Corporate Non-Disclosure
Agreement No. 7626010, dated October 18, 1999, executed by the Company and Intel
Corporation, and any Confidential Information Transmittal Records (CITR)
provided in connection therewith.
(f) All notices required under this section shall be made pursuant to
Section 9.10 of the Purchase Agreement.
2. MISCELLANEOUS.
2.1 DEFINITIONS. All capitalized terms used but not otherwise defined
in this Agreement have the meaning defined for such terms in the Purchase
Agreement.
2.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
2.3 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
2.4 AMENDMENTS AND WAIVERS. This Agreement may not be amended or
modified without the written consent of Intel and the Company, nor shall any
waiver be effective against any party unless in a writing executed on behalf of
such party.
2.5 SEVERABILITY. If any provision of this Agreement shall be declared
void or unenforceable by any judicial or administrative authority, the validity
of any other provision and of the entire Agreement shall not be affected
thereby.
2
<PAGE>
The parties hereto have executed this Agreement on the day and year first
written above.
EL SITIO, INC. INTEL ATLANTIC, INC.
By: By:
-------------------------- --------------------------
Name: Name:
-------------------------- --------------------------
Title: Title:
-------------------------- --------------------------
3
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
Argentina: El Sitio Argentina, S.A.
Brazil: O Site Entretenimentos Ltda.
Mexico: El Sitio Entretenimentos, S.A. de C.V.
United States: El Sitio U.S.A., Inc.
Uruguay: Aalefranger, S.A.
<PAGE>
Exhibit 23.1
DELOITTE & TOUCHE LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of El Sitio, Inc. on
Form F-1 of our report dated October 22, 1999 (October 28, 1999 as to the
effects of the share split described in Note 3 and November 5, 1999 as to the
last sentence in the second paragraph in Note 14) appearing in the
Prospectus, which is part of this Registration Statement, and to the
reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
November 18, 1999
<PAGE>
Exhibit 23.2
[LETTERHEAD OF DELOITTE & TOUCHE]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of El Sitio, Inc. on Form
F-1 of our report dated November 5, 1999 (relating to the statements of net
revenues and direct costs and expenses of IMPSAT S.A., Argentina's retail
dail-up access business presented separately herein) appearing in the
Prospectus, which is part of this Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Buenos Aires, Argentina
November 15, 1999
<PAGE>
Exhibit 23.3
[LETTERHEAD OF DELOITTE TOUCHE TOHMATSU]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of El Sitio, Inc. on Form
F-1 of our report dated November 5, 1999 (relating to the statements of net
revenues and direct costs and expenses of MANDIC INTERNET LTDA's retail
dail-up access business presented separately herein) appearing in the
Prospectus, which is part of this Registration Statement and to the reference
to us under the heading "Experts" in such Prospectus.
/s/ Deloitte Touche Tohmatsu
DELOITTE TOUCHE TOHMATSU
Sao Paulo, Brazil
November 15, 1999
<PAGE>
Exhibit 23.4
[LETTERHEAD OF DELOITTE & TOUCHE]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of El Sitio, Inc. on Form
F-1 of our report dated November 4, 1999 (relating to the statements of net
revenues and direct costs and expenses of IMPSAT S.A., Colombia's retail
dail-up access business presented separately herein) appearing in the
Prospectus, which is part of this Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche
Santafe de Bogota, Colombia
November 15, 1999
<PAGE>
Exhibit 23.5
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of El Sitio, Inc. on
Form F-1 of our report dated October 28, 1999 (November 5, 1999 as to the
second sentence in Note 3) relating to the statement of historical net assets
to be sold by IMPSAT corporation presented separately herein, appearing in
the Prospectus, which is part of this Registration Statement, and to the
reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
November 18, 1999
