<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
INTERAMERICAS COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<C> <C> <C>
TEXAS 4813 87-0464860
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------------
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
TELEPHONE: (305) 377-6790
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
DOUGLAS G. GEIB II
CHIEF FINANCIAL OFFICER
INTERAMERICAS COMMUNICATIONS CORPORATION
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
TELEPHONE: (305) 377-6790
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies of Communications to:
ANDREW HULSH, ESQ.
BAKER & MCKENZIE
701 BRICKELL AVENUE
MIAMI, FLORIDA 33131
TELEPHONE: (305) 789-8900
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
---------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 read the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE(1) FEE(1)(2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
14% Senior Notes due
2007..................... $150,000,000 100% $150,000,000 $44,250
==================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
(2) Registration fee calculated as .0295 of one percent of the book value of the
aggregate offering price of the Senior Notes as set forth in Section 6(b) of
the Securities Act of 1933, as amended, and Rule 457(b)(2) promulgated
thereunder.
---------------------
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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED DECEMBER 10, 1997
PROSPECTUS
[INTERAMERICAS COMMUNICATIONS LOGO]
OFFER TO EXCHANGE
14% SENIOR NOTES DUE OCTOBER 27, 2007,
FOR ALL OUTSTANDING 14% SENIOR NOTES DUE OCTOBER 27, 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998 UNLESS EXTENDED.
InterAmericas Communications Corporation, a Texas corporation ("ICCA" and,
together with its subsidiaries, the "Company") hereby offers (the "Exchange
Offer"), upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its 14% Senior Notes due
October 27, 2007 (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
registration statement of which this Prospectus is a part (the "Registration
Statement"), for each $1,000 principal amount of its issued and outstanding 14%
Senior Notes due October 27, 2007 (the "Existing Notes"), of which $150.0
million in aggregate principal amount are outstanding as of the date hereof. The
Existing Notes were originally issued and sold by ICCA in a transaction that was
exempt from the registration requirements of the Securities Act, as part of an
offering by ICCA (the "Initial Offering") of 150,000 Units (the "Units"). The
Initial Offering was consummated on October 27, 1997 (the "Closing Date"). Each
Unit issued in the Initial Offering consisted of (i) $1,000 principal amount of
Existing Notes and (ii) 35 warrants (collectively, the "Warrants"), each Warrant
representing the right to purchase one share of Common Stock, .001 par value, of
ICCA (the "Common Stock), at an exercise price of $4.40 per share. The Existing
Notes and Warrants will be separately tradable upon the effectiveness of this
Registration Statement. The Existing Notes and Warrants are sometimes referred
to herein as the "Private Securities".
The form and terms of the New Notes are the same as the form and terms of
the Existing Notes for which they may be exchanged pursuant to the Exchange
Offer, except that the New Notes will have been registered under the Securities
Act, and hence the New Notes will not bear legends restricting the transfer
thereof. The New Notes will evidence the same indebtedness as the Existing Notes
(which they replace) and will be entitled to the benefits of an indenture dated
as of October 27, 1997 governing the Existing Notes and the New Notes (the
"Indenture"). Interest on the New Notes will be payable semi-annually on April
27 and October 27 of each year commencing on April 27, 1998. The New Notes will
bear interest from and including October 27, 1997. Holders (as defined herein)
whose Existing Notes are accepted for exchange will be deemed to have waived the
right to receive any interest accrued on the Existing Notes. The Existing Notes
and the New Notes are sometimes referred to herein collectively as the "Senior
Notes." See "The Exchange Offer" and "Description of New Notes."
(continued on next page)
---------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 19 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN
THE NEW NOTES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1997
<PAGE> 3
(continued from previous page)
The Senior Notes will be redeemable at the option of ICCA, in whole or in
part, at any time on or after October 27, 2002, at the redemption prices set
forth herein plus accrued and unpaid interest and Liquidated Damages (as defined
herein), if any, to the date of redemption. In addition, at the option of ICCA,
up to 33 1/3% of the aggregate principal amount of Senior Notes may be redeemed
at any time on or prior to October 27, 2000 at a redemption price of 114% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption date, with the net cash proceeds
received by ICCA after the date of the Indenture from the issuance and sale of
its Qualified Capital Stock (as defined herein) to the public in a registered
public offering or one or more Strategic Equity Investors (as defined herein) to
the extent that such cash proceeds have been, and continue to be, designated as
Designated Equity Proceeds (as defined herein) to be used for such purpose as
provided in the definition thereof; provided that at least 66 2/3% of the
original aggregate principal amount of the Senior Notes remain outstanding
immediately after the occurrence of each such redemption; and provided, further,
that such redemption occurs within 45 days of the date of the closing of any
such public offering or sale to such Strategic Equity Investors. In the event of
a Change of Control, Holders of the Senior Notes will have the right to require
ICCA to purchase their Senior Notes, in whole or in part, at a price equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of repurchase. There can be
no assurance that ICCA will have the financial resources necessary to repurchase
the Senior Notes upon a Change of Control. See "Risk Factors -- Risks Related to
Change of Control Provision."
The New Notes will rank senior in right of payment to all subordinated
indebtedness of ICCA incurred in the future, if any. The New Notes will rank
pari passu in right of payment of all senior indebtedness of ICCA incurred in
the future, if any. The New Notes will be secured by a first priority pledge
pursuant to the Proceeds Pledge and Escrow Agreement (as defined herein). See
"Description of New Notes -- Proceeds Pledge and Escrow Agreement." All of the
operations of ICCA are conducted through its subsidiaries and, therefore, ICCA
is dependent upon the cash flow of its subsidiaries to meet its obligations,
including its obligations under the New Notes. The obligations under the New
Notes will be effectively subordinated to all indebtedness and other liabilities
and commitments (including trade payables and lease obligations) of ICCA's
subsidiaries. Any right of ICCA to receive assets of any of its subsidiaries
upon the latter's liquidation or reorganization (and the consequent right of the
Holders of the New Notes to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors, except to the extent
that ICCA is itself recognized as a creditor of such subsidiary and any
indebtedness of such subsidiary senior to that held by ICCA. On a pro forma
basis after giving effect to the Initial Offering, the application of the
proceeds therefrom and the consummation of the Iusatel Acquisition (as defined
herein), as of September 30, 1997, ICCA's subsidiaries would have had
approximately $1.5 million of indebtedness and $5.3 million of trade payables
and other liabilities outstanding. In addition, under the Indenture, ICCA's
subsidiaries are permitted to incur certain additional indebtedness (as defined
herein), the terms of which may restrict the ability of its subsidiaries to pay
dividends to ICCA. See "Description of New Notes -- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock" and
"Risk Factors -- Holding Company Structure; Inability to Access Cash Flow."
The Company will accept for exchange any and all validly tendered Existing
Notes not withdrawn prior to 5:00 p.m., New York City time, on ,
1998 unless extended by the Company, in its sole discretion (the "Expiration
Date"). Tenders of Existing Notes may be withdrawn at any time prior to the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer -- Conditions." Existing Notes may be tendered only in
integral multiples of $1,000.
Holders of Existing Notes whose Existing Notes are not tendered and
accepted in the Exchange Offer will continue to hold such Existing Notes and
will be entitled to all the rights and preferences and will be subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange
(i)
<PAGE> 4
Offer, the holders of Existing Notes will continue to be subject to the existing
restrictions upon transfer thereof and the Company will have no further
obligation to such holders to provide for the registration under the Securities
Act of the Existing Notes held by them; provided, however, that, if any Holder
of the Existing Notes notifies ICCA within 20 days of the consummation of the
Exchange Offer: (A) that such Holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) that such
Holder may not resell the New Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and that the Prospectus contained in the
Exchange Offer Registration Statement (as defined herein) is not appropriate or
available for such resales by such Holder, or (C) that such Holder is a broker-
dealer and holds Existing Notes acquired directly from the Company or one of its
affiliates, then the Company shall: cause to be filed a Shelf Registration
Statement (as defined herein) pursuant to Rule 415 under the Securities Act,
which may be an amendment to the Exchange Offer Registration Statement on or
prior to the Shelf Filing Deadline (as defined herein), which Shelf Registration
Statement shall provide for resales of all Existing Notes. In the event of a
Registration Default (as defined in the Registration Rights Agreement), the
Company is required to pay Liquidated Damages. See "The Exchange
Offer -- Liquidated Damages" and "Description of New Notes -- Registration
Rights; Liquidated Damages."
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the A/B Exchange Registration Rights Agreement
dated as of October 27, 1997 (the "Registration Rights Agreement") between the
Company and the Initial Purchaser (as defined herein). ICCA makes the Exchange
Offer in reliance on the position of the Staff of the Securities and Exchange
Commission (the "Commission") as set forth in certain no-action letters issued
to other parties in other transactions. However, the Company has not sought its
own no-action letter and there can be no assurance that the Staff of the
Commission would make a similar determination with respect to the Exchange Offer
as in such other circumstances. Based on these interpretations of the Staff of
the Commission, the Company believes that the New Notes issued pursuant to this
Exchange Offer in exchange for Existing Notes may be offered for resale, resold
and otherwise transferred by holders thereof (other than any such holder which
is (i) a broker-dealer who acquired such Existing Notes directly from the
Company for resale pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an affiliate of the Company within
the meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act; provided
that the holder is acquiring the New Notes in the ordinary course of its
business and is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of the New Notes. Holders of Existing Notes wishing to accept the Exchange Offer
must represent to the Company, as required by the Registration Rights Agreement,
that such conditions have been met. Each broker-dealer that receives the New
Notes for its own account in exchange for the Existing Notes, where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Existing Notes where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has indicated its intention
to make this Prospectus (as it may be amended or supplemented) available to any
broker-dealer for use in connection with any such resale for a period of 120
days after the Expiration Date. See "Plan of Distribution." The Company believes
that none of the registered holders of the Existing Notes is an affiliate (as
such term is defined in Rule 405 under the Securities Act) of the Company.
The Private Securities have been designated eligible for trading in the
Private Initial Offerings, Resales and Trading through Automated Linkages
("PORTAL") Market of the National Association of Securities
(ii)
<PAGE> 5
Dealers, Inc. (the "NASD"). The Company does not intend to list the New Notes on
any national securities exchange or to seek the trading thereof through any
automated quotation system. The Company has been advised by UBS Securities LLC,
the Initial Purchaser (the "Initial Purchaser") of the Units in the Initial
Offering, that it currently intends to make a market in the New Notes. However,
the Initial Purchaser is not obligated to do so and any market-making activities
with respect to the New Notes may be discontinued at any time without notice. In
addition, such market making activity will be subject to certain limitations
imposed by the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Accordingly, no assurance can be given regarding the future development of a
market for the New Notes, or the ability of holders of the New Notes to sell
their New Notes or the price at which such holders may be able to sell their New
Notes. If such a market were to develop, the New Notes could trade at prices
that may be higher or lower than the initial public offering price depending on
many factors, including prevailing interest rates, the Company's operating
results and the market for similar securities. See "Risk Factors -- Lack of
Public Market."
The Company will not receive any proceeds from, and has agreed to bear all
registration expenses of, the Exchange Offer. See "Use of Proceeds." No
dealer-manager is being used in connection with this Exchange Offer. See "Plan
of Distribution" and "The Exchange Offer -- Resale of New Notes."
The Common Stock is traded on the Nasdaq SmallCap Market ("Nasdaq") under
the symbol "ICCA." On December 8, 1997, the last sale price for the Common Stock
as reported by Nasdaq was $2 1/16 per share.
(iii)
<PAGE> 6
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, OR ANY UNDERWRITER, AGENT OR DEALER. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL NOR ANY RESALE MADE
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION.
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE SECURITIES LAWS. ALL STATEMENTS REGARDING ICCA'S AND ITS SUBSIDIARIES'
EXPECTED FINANCIAL POSITION, BUSINESS AND FINANCING PLANS ARE FORWARD-LOOKING
STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN
SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, THERE CAN BE NO ASSURANCE THAT
SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH EXPECTATIONS ("CAUTIONARY
STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION,
THE INFORMATION UNDER "RISK FACTORS," "MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS." ALL SUCH
FORWARD-LOOKING STATEMENTS ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE
CAUTIONARY STATEMENTS.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF EXISTING NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS EXCHANGE
OFFER), ALL DEALERS OFFERING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT
PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
The New Notes will be available initially only in book-entry form. The
Company expects that the New Notes issued pursuant to this Exchange Offer will
be issued in the form of one or more fully registered global notes which will be
deposited with, or on behalf of, the Depositary (as defined herein) and
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the global note representing the New Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depositary and its participants. After the initial issuance of such global note,
New Notes in certificated form will be issued in exchange for the global note
only as set forth in the Indenture. See "Description of Senior Notes -- Book
Entry."
---------------------
<PAGE> 7
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT
IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER
OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
THE INFORMATION CONTAINED IN THIS PROSPECTUS HAS BEEN FURNISHED BY THE
COMPANY AND OBTAINED FROM INTERNAL COMPANY SURVEYS, INDUSTRY PUBLICATIONS AND
CURRENTLY AVAILABLE INFORMATION BELIEVED BY THE COMPANY TO BE RELIABLE. THERE
CAN BE NO ASSURANCE AS TO THE ACCURACY AND COMPLETENESS OF SUCH INFORMATION.
THIS PROSPECTUS CONTAINS SUMMARIES, BELIEVED TO BE ACCURATE, OF CERTAIN TERMS OF
CERTAIN DOCUMENTS BUT REFERENCE IS MADE TO THE ACTUAL DOCUMENTS, COPIES OF WHICH
WILL BE MADE AVAILABLE UPON REQUEST, FOR THE COMPLETE INFORMATION CONTAINED
THEREIN. ALL SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY THIS REFERENCE.
2
<PAGE> 8
EXCHANGE RATE DATA
This Prospectus contains translations of certain Peruvian Nuevo Sol and
Chilean Peso amounts into U.S. dollars at specified rates solely for the
convenience of the reader. These translations should not be construed as
representations that the Peruvian Nuevo Sol and Chilean Peso amounts actually
represent such U.S. dollar amounts or could be converted into U.S. dollars at
the rate indicated, or at all.
PERU
The following table sets forth, for the periods ending on the date
indicated, the high, low, average and period-end free-market exchange rate. The
Federal Reserve Bank of New York does not report a noon buying rate for Peruvian
Nuevo Sol.
<TABLE>
<CAPTION>
PERIOD-
PERIOD- HIGH LOW AVERAGE(1) END
- ------- ---- ---- ---------- -------
<S> <C> <C> <C> <C>
Year ended December 31, 1994................................ 2.27 2.04 2.19 2.18
Year ended December 31, 1995................................ 2.35 2.17 2.25 2.30
Year ended December 31, 1996................................ 2.60 2.30 2.45 2.60
Nine months ended September 30, 1997........................ 2.68 2.61 2.66 2.65
</TABLE>
- ---------------
Source: Extel Pricing Database.
(1) Average daily exchange rate.
CHILE
The following table sets forth, for the periods ending on the date
indicated, the high, low, average and period-end free-market exchange rate. The
Federal Reserve Bank of New York does not report a noon buying rate of Chilean
Pesos.
<TABLE>
<CAPTION>
PERIOD-
PERIOD HIGH LOW AVERAGE(1) END
- ------ ------ ------ ---------- -------
<S> <C> <C> <C> <C>
Year ended December 31, 1994............................... 433.67 398.25 419.83 400.21
Year ended December 31, 1995............................... 418.76 367.94 396.60 406.91
Year ended December 31, 1996............................... 424.87 402.68 412.16 424.87
Nine months ended September 30, 1997....................... 427.94 412.38 417.19 414.90
</TABLE>
- ---------------
Source: Extel Pricing Database and Chilean Central Bank.
(1) Average daily exchange rate.
Unless otherwise indicated, industry and demographic data used throughout
this Prospectus have been obtained from the following industry publications and
have not been independently verified by the Company: Bank of America World
Information Services (March 1997); Telecom Markets in South America, Pyramid
Research, Inc. (October 1996) (the "Pyramid Research Report"); Subsecretaria de
Telecomunicaciones of the Republic of Chile (1997); National Bureau of
Statistics of the Republic of Peru (1997); Telefonica del Peru, S.A. 1996 Annual
Report and Press Release in connection with the presentation of 2nd Quarter 1997
financial results dated July 31, 1997.
3
<PAGE> 9
AVAILABLE INFORMATION
ICCA has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act with respect to the New Notes offered hereby. As permitted by the
rules and regulations of the Commission, this Prospectus omits certain
information, exhibits and undertakings contained in the Registration Statement.
For further information with respect to ICCA and the New Notes offered hereby,
reference is made to the Registration Statement, including the exhibits thereto
and the financial statements, notes and schedules filed as a part thereof. In
addition, ICCA is subject to the informational and reporting requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. The Registration Statement, the exhibits
and schedules thereto, reports and other information filed with or furnished to
the Commission by ICCA may be inspected at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at 7 World Trade Center, 13th Floor,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 6061-2511. Copies of such materials may be obtained,
at prescribed rates, by mail from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 and such material may
be accessed through the web site maintained by the Commission at
http://www.sec.gov.
Pursuant to the Indenture, the Company has agreed to furnish to the Trustee
and to registered holders of the Senior Notes, without cost to the Trustee or
such registered holders, copies of all reports and other information that would
be required to be filed by the Company with the Commission under the Exchange
Act, whether or not ICCA is then required to file reports with the Commission.
In the event that ICCA ceases to be subject to the informational requirements of
the Exchange Act, ICCA has agreed that, so long as any Senior Notes remain
outstanding, it will file with the Commission (but only if the Commission at
such time is accepting such voluntary filings) and distribute to holders of the
Senior Notes, as applicable, copies of the financial information that would have
been contained in such annual reports and quarterly reports, including
management's discussion and analysis of financial condition and results of
operations, that would have been required to be filed with the Commission
pursuant to the Exchange Act. ICCA will also furnish such other reports as it
may determine or as may be required by law.
4
<PAGE> 10
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information, including risk factors and financial statements and notes thereto,
located elsewhere in this Prospectus. Certain of the information contained in
this summary and elsewhere in this Prospectus including information with respect
to the Company's plans and strategy for its business, acquisitions and related
financings, are forward-looking statements. Such forward-looking statements are
subject to material risks, uncertainties and contingencies, many of which are
beyond the control of the Company. For a discussion of important factors that
could cause actual results to differ materially from these forward-looking
statements, see "Risk Factors." As used herein, the term "Latin America" means
Central America, South America and Mexico. Except as otherwise indicated, all
dollar amounts are expressed in United States dollars and references to
"dollars" and "$" are to United States dollars. See "Glossary of Defined Terms,"
for definitions of certain technical and industry terms used herein.
THE COMPANY
The Company is a new provider of high bandwidth integrated
telecommunications services to high volume users in Santiago, Chile and Lima,
Peru, including business customers and other telecommunications carriers. The
Company believes that the size, expected growth and increasing deregulation of
the telecommunications industry in Latin America offers the Company considerable
opportunities to broaden its existing service offerings and to expand its
recently commenced operations into additional key Latin American business
centers.
Prior to November 1996, the Company operated as a development stage company
whose activities primarily consisted of the acquisition of licenses, concessions
and rights-of-way in certain key Latin American markets. Beginning in November
1996, with the hiring of Patricio Northland as the Company's President and Chief
Executive Officer, the Company has focused on the development and operation of
high capacity fiber optic networks in Lima, Peru and Santiago, Chile. Mr.
Northland has over 16 years of experience as an international telecommunications
executive and entrepreneur. Mr. Northland was previously President and founder
of AmericaTel Corporation, a Miami-based international telecommunications
carrier focused on traffic originating and terminating in Latin America, which
he successfully grew and in which he subsequently sold his interest in 1996 to
Entel, Chile's major long distance carrier.
In May 1996, the Company acquired an operating company in Peru which holds
one of only two local concessions that compete with Telefonica del Peru S.A.
("Telefonica") to provide local private line voice and data services. The
Company intends to expand its existing service offerings to provide local public
switched telephony upon the planned 1999 liberalization of Peru's
telecommunications markets. The Company also intends to apply for a concession
to provide public switched long distance services as regulation permits. The
Company currently offers high speed data transmission services on a private line
basis, including area network interconnection, remote terminal access, dedicated
channels for access to the Internet and voice services on a private line basis.
The Company's services are provided through its 60 kilometer digital fiber optic
network in Lima, Peru, which the Company intends to expand to 90 kilometers by
the end of 1997 and to approximately 230 kilometers by the end of 1998. When
completed, the Company's fiber optic network will extend throughout the major
commercial and industrial districts of Lima and the port city of Callao
(combined population of 7.5 million). The Company believes that its planned
fiber optic network expansion and early implementation of private line and
value-added services prior to the scheduled expiration of Telefonica's exclusive
concession for public switched local and long distance services in July 1999
will enable the Company to develop a strong customer base and network presence.
In Chile, the Company currently holds a concession to provide voice and
data transmission services and value-added services on a private line basis and,
upon consummation of the Iusatel Acquisition, will acquire an operating company
that provides public switched national and international long distance services.
The
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<PAGE> 11
Company also maintains a concession to own and operate satellite earth stations
throughout Chile and plans to apply for a concession to provide local public
switched telephony services in Santiago. The Company currently provides similar
services to those offered in Peru, as well as (i) private line remote analog
digital telephone access and digital links for PBX to PBX connections, (ii)
local and wide area network design and engineering and (iii) systems
installation, integration and support services. The Company's services are
provided through its 120 kilometer digital fiber optic network which currently
extends through most of Santiago's downtown business district and the outlying
industrial park and airport corridors. With the consummation of the Iusatel
Acquisition, completion of last mile connections to its existing network and
approval of a local telephony concession, the Company believes that it will be
able to substantially broaden its product and service offerings and
significantly increase its revenues in Chile.
Local and long distance telecommunications revenues in Peru were
approximately $885.5 million in 1996 and are estimated by Pyramid Research, Inc.
("Pyramid") to increase to approximately $1.9 billion in the year 2000,
representing a compound annual growth rate of 21%. Local and long distance
telecommunications revenues in Chile were approximately $1.1 billion in 1996 and
are estimated by Pyramid to increase to approximately $2.2 billion in the year
2000, representing a compound annual growth rate of 16%.
Upon completion of its anticipated upgrades, all of the Company's existing
and planned fiber optic networks will employ SDH transmission technology with
centralized network monitoring control and maintenance. The Company believes its
networks allow it to provide its customers with uniform, reliable, high quality
services which are competitive with or exceed those services provided by former
PTTs and other carriers in the markets in which it operates.
While the Company only recently is commenced its current operations, the
Company's customers already include, among others, Xerox de Chile S.A.,
Autorentas del Pacifico (Hertz) Ltda. and Nike de Chile S.A. in Chile and Sony
Music Entertainment Peru S.A., Banco Interbank del Peru S.A. ("Interbank") and
one ISP in Peru. Upon completion of its networks the Company will be able to
market aggressively its service offerings to additional business customers and
other telecommunications carriers. The Company also believes that dedicated
access to ISPs will represent a significant source of new customer relationships
in both Chile and Peru because of the anticipated rapid increase in the number
of high speed Internet users throughout Latin America.
BUSINESS STRATEGY
The Company's goal is to become a leading provider of high bandwidth
telecommunications services to businesses and other high volume users and
carriers operating in key Latin American business centers. The Company follows a
regional business strategy in Latin America as set forth below. The Company has
modified this strategy to adapt to the specific economic and regulatory
environments of each market in which the Company operates and intends to operate
in the future. See "Business -- Business and Services -- Chile -- Country
Strategy," and " -- Peru -- Country Strategy."
Focus on Key Markets in Latin America
The Company believes that the size and growth potential of key Latin
American business centers coupled with the ongoing liberalization of the
telecommunications markets throughout the region offer the Company
considerable growth opportunities. The Company intends to build upon its
existing operations and expertise and to leverage its existing customer
base by expanding the geographic reach and density of its existing networks
as well as by entering additional key Latin American business centers that
have (i) a significant level of unsatisfied demand for high quality,
state-of-the art telecommunications services, (ii) a favorable regulatory
environment and (iii) significant projected economic growth.
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<PAGE> 12
Enter Markets Early
The Company seeks to enter markets in Latin America where it can
construct or acquire fiber optic networks and offer telecommunications
services in advance of full market liberalization. The Company has already
implemented this strategy in Lima, where it is one of the first companies
to have established a telecommunications system prior to the scheduled
liberalization of Peru's telecommunications markets in July 1999, at which
time the exclusivity provisions of Telefonica's concession will expire and
the local and long distance markets are scheduled to be opened to
competition by new entrants. The Company believes that this early entry
into the Lima market will enable the Company to establish strong business
relationships with its targeted customers prior to onset of widespread
competition.
Provide a Broad Range of High Quality Telecommunications Services
The Company intends to follow the strategy implemented by CLECs in the
United States of installing advanced equipment into their existing fiber
optic networks that enable interconnections with existing public networks
and the provision of switched telephone services. As regulation permits,
the Company will seek to secure a growing portion of its existing and
targeted customers' telecommunications business by adding local, long
distance, enhanced voice and data services to the private line services it
currently offers. The Company believes its customers require maximum
reliability, high quality service, broad geographic coverage, strong
customer service and the opportune introduction of innovative services
delivered in a timely and cost-effective manner. The Company believes that
these needs are often left unmet by the former PTT in markets where the
Company currently operates.
Target Business Customers and Telecommunications Carriers
The Company's strategy is to target business customers and
telecommunications carriers in key Latin American business centers. These
customers are typically located in major metropolitan areas, require high
reliability, high volume data transmission and voice capabilities and, in
the case of telecommunications carriers, very large capacity to
interconnect POPs. In addition, many of the Company's existing and targeted
customers have operations in more than one key Latin American business
center in which the Company currently operates or may operate in the
future. The Company believes that by leveraging its customer base it will
achieve operating synergies through the reduction of advertising and other
related costs.
Growth Through Acquisitions and New Licenses
The Company expects to opportunistically enter additional key Latin
American business centers in part by acquiring controlling interests in
existing companies that have licenses, concessions and rights-of-way to
install and operate fiber optic networks or by applying for such licenses
and concessions and negotiating such rights-of-way directly. The Company
may also acquire other telecommunications service providers in existing and
targeted markets that enable the Company to expand or enhance its current
operations. The Company believes that many emerging local and long distance
carriers, cellular providers and recently privatized PTTs are likely to
seek alliances with local access providers with fiber optic systems, such
as the Company, to compete more effectively in the growing
telecommunications markets.
Growth Through Strategic Alliances
The Company intends to establish strategic alliances with the
following entities for the following purposes: (i) to engage major
international carriers to facilitate the termination or completion of
dedicated international calls to or from the countries where carriers'
customers operate and (ii) to enter into joint bids with local turnkey
integrators and equipment vendors for the sale of value-added services,
such as video-conferencing, Internet, frame relay, ATM networks, PBX and
private telephone networks.
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<PAGE> 13
Unify Marketing Efforts
The Company intends to conduct its business under a single brand name
in the markets in which it operates to develop name recognition for its
services. The Company believes that the use of a recognized brand name will
facilitate customer referrals and achieve economies of scale through a
unified marketing campaign.
THE IUSATEL ACQUISITION
To further the Company's objective of expanding its presence and service
offerings in key Latin American business centers, the Company has entered into
an agreement (the "Iusatel Agreement") to acquire (the "Iusatel Acquisition")
Iusatel Chile, S.A. ("Iusatel"), located in Santiago, Chile.
Iusatel currently provides domestic and international long distance
services in Chile through its own gateway switch and satellite earth station, as
well as through interconnections with other Chilean long distance carriers. The
Company believes that the acquisition of Iusatel will enable the Company to: (i)
provide long distance services to its existing corporate customers; (ii) bundle
a variety of service offerings, including long distance and data services, to
attract additional customers; and (iii) access the approximately $178.2 million
Chilean international long distance market. By implementing such bundling
strategy and by expanding Iusatel's marketing and advertising activities, the
Company believes that it will be able to increase Iusatel's market share from
its current level.
The Iusatel Agreement provides for the purchase by the Company of 99.9% of
the issued and outstanding capital stock of Iusatel for $5.9 million in cash
(the "Iusatel Purchase Price"). The Iusatel Purchase Price may be reduced,
dollar-for-dollar, to the extent that the net worth of Iusatel as of December
31, 1997 is less than $500,000, and may be increased by up to a maximum of
$850,000 based upon Iusatel's operating results for the 12 months ending
December 31, 1998. The Iusatel Agreement is subject to a number of conditions,
many of which, including governmental consent, are beyond the Company's control.
There can be no assurance that the Iusatel Acquisition will be consummated on
the terms described herein or at all. See "Risk Factors -- Risks Related to the
Iusatel Acquisition."
---------------------
The Company was incorporated in Nevada in April 1989 and reincorporated in
Texas in July 1994. The Company's principal executive offices are located at
1221 Brickell Avenue, Miami, Florida 33131, and its telephone number at such
offices is (305) 377-6790.
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<PAGE> 14
THE EXCHANGE OFFER
The Exchange Offer
The Exchange Offer:........ The Company is hereby offering to exchange $1,000
principal amount of New Notes for each $1,000
principal amount of Existing Notes that are
properly tendered and accepted. The Company will
issue New Notes on or promptly after the Expiration
Date. There is $150.0 million aggregate principal
amount of Existing Notes outstanding. See "The
Exchange Offer."
ICCA makes this Exchange Offer in reliance on the
position of the Staff of the Commission as set
forth in certain no-action letters issued to other
parties in other transactions. However, the Company
has not sought its own no-action letter and there
can be no assurance that the Staff of the
Commission would make a similar determination with
respect to the Exchange Offer as in such other
circumstances. Based on these interpretations of
the Staff of the Commission, the Company believes
that the New Notes issued pursuant to this Exchange
Offer in exchange for Existing Notes may be offered
for resale, resold and otherwise transferred by
holders thereof (other than any such holder which
is (i) a broker-dealer who acquired the Existing
Notes directly from the Company for resale pursuant
to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an
affiliate of the Company within the meaning of Rule
405 under the Securities Act), without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that the
holder is acquiring the New Notes in the ordinary
course of its business and is not participating,
does not intend to participate, and has no
arrangement or understanding with any person to
participate, in the distribution of the New Notes.
Each broker-dealer that receives the New Notes for
its own account in exchange for the Existing Notes,
where such Existing Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
Registration Rights
Agreement:............... The Existing Notes and Warrants were sold by the
Company on October 27, 1997 to the Initial
Purchaser pursuant to a Purchase Agreement dated
October 21, 1997 by and between the Company and the
Initial Purchaser (the "Purchase Agreement").
Pursuant to the Purchase Agreement, ICCA and the
Initial Purchaser entered into the Registration
Rights Agreement, which grants the holders of the
Existing Notes certain exchange and registration
rights. See "The Exchange Offer -- Termination of
Certain Rights." This Exchange Offer is intended to
satisfy such rights, which terminate upon the
consummation of the Exchange Offer. The holders of
the New Notes are not entitled to any exchange or
registration rights with respect to the New Notes.
Expiration Date:........... The Exchange Offer will expire at 5:00 p.m., New
York City time, on, , 1998 unless
the Exchange Offer is extended by the
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<PAGE> 15
Company in its sole discretion, in which case the
term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended.
Accrued interest on the New
Notes and Existing
Notes:................... The New Notes will bear interest from and including
October 27, 1997. Holders whose Existing Notes are
accepted for exchange will be deemed to have waived
the right to receive any interest accrued on the
Existing Notes.
Conditions to the Exchange
Offer:................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company reserves the right to terminate or amend
the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition. See "The Exchange Offer -- Conditions."
The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Existing
Notes being tendered for exchange.
Procedures for Tendering
Existing Notes:.......... Each holder of Existing Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with such Existing Notes and any other required
documentation to State Street Bank & Trust Company,
N.A. as Exchange Agent, at the address set forth
therein. By executing the Letter of Transmittal,
each holder will represent to the Company that,
among other things, (i) the New Notes to be
acquired by the holder of the Existing Notes in
connection with the Exchange Offer are being
acquired by the holder in the ordinary course of
business of the holder; (ii) the holder has no
arrangement or understanding with any person to
participate in the distribution of New Notes; (iii)
the holder acknowledges and agrees that any person
who is a broker-dealer registered under the
Exchange Act or is participating in the Exchange
Offer for the purposes of distributing the New
Notes must comply with the registration and
prospectus delivery requirements of the Securities
Act in connection with a secondary resale
transaction of the New Notes acquired by such
person and cannot rely on the position of the Staff
of the Commission set forth in no-action letters
(See "The Exchange Offer -- Resale of New Notes");
(iv) the holder understands that a secondary resale
transaction described in clause (iii) above and any
resales of New Notes obtained by such holder in
exchange for Existing Notes acquired by such holder
directly from ICCA should be covered by an
effective registration statement containing the
selling securityholder information required by Item
507 or Item 508, as applicable, of Regulation S-K
of the Commission; and (v) the holder is not an
"affiliate," as defined in Rule 405 under the
Securities Act, of the Company. If the holder is a
broker-dealer that will receive New Notes for its
own account in exchange for Existing Notes that
were acquired as a result of market-
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<PAGE> 16
making activities or other trading activities, the
holder is required to acknowledge in the Letter of
Transmittal that it will deliver a prospectus in
connection with any resale of such New Notes;
however, by so acknowledging and by delivering a
prospectus, the holder will not be deemed to admit
that it is an "underwriter" within the meaning of
the Securities Act. See "The Exchange
Offer -- Procedure for Tendering."
Special Procedures for
Beneficial Owners:....... Any beneficial owner whose Existing Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Existing Notes in the
Exchange Offer should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. See
"The Exchange Offer -- Procedures for Tendering."
If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal
and delivering his Existing Notes, either make
appropriate arrangements to register ownership of
the Existing Notes in such owner's name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may
take considerable time and may not be able to be
completed prior to the Expiration Date.
Guaranteed Delivery
Procedures:.............. Holders of Existing Notes who wish to tender their
Existing Notes and whose Existing Notes are not
immediately available or who cannot deliver their
Existing Notes, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal to State Street Bank & Trust Company,
as Exchange Agent, prior to the Expiration Date,
must tender their Existing Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."
Acceptance of the Existing
Notes and Delivery of the
New Notes:............... Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company will
accept for exchange any and all Existing Notes
which are properly tendered in the Exchange Offer
prior to the Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be delivered on
or promptly after the Expiration Date. See "The
Exchange Offer -- Terms of the Exchange Offer."
Withdrawal Rights:......... Tenders of Existing Notes may be withdrawn at any
time prior to the Expiration Date. See "The
Exchange Offer -- Withdrawal of Tenders."
Certain Federal Income Tax
Considerations:.......... For a discussion of certain federal income tax
considerations relating to the exchange of the New
Notes for the Existing Notes, see "Certain Federal
Income Tax Considerations."
Exchange Agent:............ State Street Bank & Trust Company, N.A. is serving
as the exchange agent (the "Exchange Agent") in
connection with the Exchange Offer. See "The
Exchange Offer -- Exchange Agent."
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<PAGE> 17
Information Agent:......... Kissell Blake, Inc. is serving as the information
agent (the "Information Agent") in connection with
the Exchange Offer. See "The Exchange
Offer -- Information Agent."
Remaining Existing
Notes:................... Holders of Existing Notes who do not tender their
Existing Notes in the Exchange Offer or whose
Existing Notes are not accepted for exchange will
continue to hold such Existing Notes and will be
entitled to all the rights and preferences, and
will be subject to the limitations applicable
thereto under the Indenture. All untendered and
tendered but unaccepted Existing Notes
(collectively, the "Remaining Existing Notes") will
continue to bear legends restricting their
transfer. In general, the Existing Notes may not be
offered or sold, unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws. To the extent that the Exchange Offer is
effected, the trading market, if any for Remaining
Existing Notes could be adversely affected. See
"Risk Factors -- Failure to Exchange Existing
Notes" and "The Exchange Offer."
The New Notes
The Exchange Offer applies to $150.0 million aggregate principal amount of
the Existing Notes. The form and terms of the New Notes are the same as the form
and terms of the Existing Notes for which they may be exchanged pursuant to the
Exchange Offer except that the New Notes will have been registered under the
Securities Act and, therefore, the New Notes will not bear legends restricting
transfer thereof. The New Notes will evidence the same debt as the Existing
Notes (which they replace) and will be entitled to the benefits of the
Indenture. See "Description of New Notes" for further information and for
definitions of certain capitalized terms used below.
Maturity................... October 27, 2007
Interest................... Interest on the New Notes will be payable
semi-annually in cash at a rate of 14% per annum,
on April 27 and October 27 of each year, commencing
on April 27, 1998.
Proceeds Pledge and Escrow
Agreement................ ICCA has used approximately $57.3 million of the
net proceeds of the Initial Offering to purchase a
portfolio of securities that are pledged and
escrowed in an account under the Trustee's
exclusive dominion and control for the payment of
interest on the Senior Notes through October 27,
2000 and, under certain circumstances, as security
for repayment of principal of the Senior Notes.
$69.3 million of the net proceeds of the Initial
Offering has been pledged and escrowed as security
for all obligations of ICCA under the Senior Notes
and the Indenture and has been deposited in an
account under the Trustee's exclusive dominion and
control pending application of such funds by ICCA
for the payment of (a) Permitted Expenditures, (b)
in the event of a Change of Control, the Change of
Control Payment and (c) in the event of a Special
Offer to Purchase or a Special
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<PAGE> 18
Mandatory Redemption, the purchase or redemption
price in connection therewith.
In the event that on or after October 27, 2000
Collateral Funds remain in the Collateral Account,
each Holder of New Notes will have the right to
require ICCA to repurchase all or any part of such
Holder's New Notes (the "Special Offer to
Purchase") at an offer price in cash equal to 101%
of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages,
if any, thereon to the date of purchase; provided
that, if after the Special Offer to Purchase is
consummated at least $20.0 million in aggregate
principal amount of Senior Notes does not remain
outstanding, ICCA will be required by the terms of
the Indenture to redeem all of the Senior Notes
(the "Special Mandatory Redemption") at a
redemption price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase. See "Description
of New Notes -- Proceeds Pledge and Escrow
Agreement."
Optional Redemption........ The New Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or
after October 27, 2002, at the redemption prices
set forth herein plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of
redemption. In addition, at the option of ICCA, up
to 33 1/3% of the aggregate principal amount of New
Notes may be redeemed at any time on or prior to
October 27, 2000 at a redemption price of 114% of
the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net cash
proceeds received by ICCA after the date of the
Indenture from the issuance and sale of its
Qualified Capital Stock to the public in a
registered public offering or to one or more.
Strategic Equity Investors to the extent that such
net cash proceeds have been, and continue to be,
designated as Designated Equity Proceeds to be used
for such purpose as provided in the definition
thereof; provided that at least 66 2/3% of the
original aggregate principal amount of the Senior
Notes remain outstanding immediately after the
occurrence of each such redemption and provided,
further, that such redemption occurs within 45 days
of the date of the closing of any such public
offering or sale to such Strategic Equity
investors.
Change of Control.......... In the event of a Change of Control, Holders of the
New Notes will have the right to require ICCA to
purchase their New Notes, in whole or in part, at a
price equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the date of
repurchase. See "Risk Factors -- Risks Related to
Change of Control Provision."
Ranking.................... The New Notes will rank senior in right of payment
to all subordinated indebtedness of ICCA incurred
in the future, if any. The New Notes will rank pari
passu in right of payment to all senior
indebtedness of ICCA incurred in the future, if
any. The New Notes will be secured by a first
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<PAGE> 19
priority pledge pursuant to the Proceeds Pledge and
Escrow Agreement. All of the operations of ICCA are
conducted through its subsidiaries and, therefore,
ICCA is dependent upon the cash flow of its
subsidiaries to meet its obligations, including its
obligations under the New Notes. The obligations
under the New Notes will be effectively
subordinated to all indebtedness and other
liabilities and commitments (including trade
payables and lease obligations) of ICCA's
subsidiaries. Any right of ICCA to receive assets
of any of its subsidiaries upon the latter's
liquidation or reorganization (and the consequent
right of the Holders of the Senior Notes to
participate in those assets) will be effectively
subordinated to the claims of that subsidiary's
creditors, except to the extent that ICCA is itself
recognized as a creditor of such subsidiary, in
which case the claims of ICCA would still be
subordinate to any security in the assets of such
subsidiary and to any indebtedness of such
subsidiary senior to that held by ICCA. On a pro
forma basis after giving effect to the Initial
Offering, the application of the proceeds therefrom
and the consummation of the Iusatel Acquisition, as
of September 30, 1997, ICCA's subsidiaries would
have had approximately $1.5 million of indebtedness
and $5.3 million of trade payable and other
liabilities outstanding. In addition, under the
Indenture, ICCA's subsidiaries are permitted to
incur certain additional Indebtedness, the terms of
which may restrict the ability of its subsidiaries
to pay dividends to ICCA. See "Description of New
Notes -- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock" and
"Risk Factors -- Holding Company Structure;
Inability to Access Cash Flow."
Covenants.................. The Indenture pursuant to which the New Notes will
be issued will contain certain covenants that,
among other things, limit the ability of ICCA and
its subsidiaries to incur additional Indebtedness
and issue preferred stock, pay dividends or make
other distributions, repurchase Equity Interests
(as defined herein) or subordinated Indebtedness,
engage in sale or leaseback transactions, create
certain liens, enter into certain transactions with
affiliates, sell assets of ICCA or its
subsidiaries, issue or sell Equity Interests of
ICCA or its subsidiaries or enter into certain
mergers and consolidations. In addition, under
certain circumstances, Holders of the New Notes
will have the right to require ICCA to offer to
purchase New Notes at a price equal to 100% of the
principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the
date of purchase, with the proceeds of certain
Asset Sales. See "Description of New Notes."
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<PAGE> 20
NO CASH PROCEEDS TO THE COMPANY
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the New Notes offered hereby and has agreed to
pay the expenses of the Exchange Offer. In consideration for issuing the New
Notes as contemplated in this Prospectus, the Company will receive, in exchange,
the Existing Notes representing an equal aggregate principal amount at maturity.
The form and terms of the New Notes are identical in all material respects to
the form and terms of the Existing Notes, except as otherwise described herein
under "The Exchange Offer -- Terms of the Exchange Offer." The Existing Notes
surrendered in exchange for New Notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the New Notes will not result in any increase
in the outstanding indebtedness of the Company. See "Use of Proceeds."
RISK FACTORS
An investment in the New Notes involves a high degree of risk. Prospective
investors of the New Notes should consider all of the information contained in
this Prospectus before exchanging their Existing Notes pursuant to the Exchange
Offer. In particular, prospective investors should consider the factors set
forth herein under "Risk Factors."
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<PAGE> 21
PRESENTATION OF FINANCIAL INFORMATION
INTERAMERICAS COMMUNICATIONS CORPORATION
The consolidated financial statements of ICCA and its subsidiaries have
been prepared in accordance with generally accepted accounting principles in the
United States ("U.S. GAAP"). As a result, the operations of ICCA and its
consolidated subsidiaries are stated in U.S. dollars.
The financial statements of subsidiaries outside the United States are
prepared using the local currency as the functional currency. Assets and
liabilities of these subsidiaries are translated at the rate of exchange at the
balance sheet date. The resultant translation adjustments are included in equity
as cumulative translation adjustments, a separate component of stockholders'
equity. Income and expense items are translated at average monthly rates of
exchange. Gains and losses from foreign currency transactions of these
subsidiaries are included in the statement of operations.
IUSATEL
The financial statements of Iusatel (such statements, together with the
notes thereto, being referred to herein as the "Iusatel Financial Statements")
have been prepared in accordance with generally accepted accounting principles
in Chile ("Chilean GAAP"). Chilean GAAP varies in certain significant respects
from U.S. GAAP. Note 28 to the Iusatel Financial Statements contained elsewhere
in this Prospectus provides a description of the principal differences between
Chilean GAAP and U.S. GAAP as they relate to Iusatel.
Chilean GAAP requires that the financial statements be restated to reflect
the full effects of loss in the purchasing power of the Chilean Peso on the
operations of Iusatel. See Notes 2 and 4 to the Iusatel Financial Statements
contained elsewhere in this Prospectus. For comparative purposes, the Iusatel
Financial Statements and the amounts disclosed in the related notes for the year
ended December 31, 1995 have been restated in terms of Chilean Pesos based on
December 31, 1996 purchasing power. In accordance with Chilean regulations and
accounting practices, the restatement was calculated based on the official
Consumer Price Index of the National Institute of Statistics of Chile, which was
6.6% for the year ended November 30, 1996. The interim September 30, 1996 and
1997 financial statements have also been restated for general price-level
changes, but are expressed in constant Chilean Pesos of September 30, 1997. The
effect of not updating the December 31, 1995 and 1996 financial statements to
September 30, 1997 constant Pesos is not significant because the change in the
inflation index applicable for the restatement of financial statements for the
nine month period ended September 30, 1997 was only 3.9%. Additionally, if the
updating by the 3.9% increase had been made, it would have been applied to all
amounts and disclosures shown in the December 31, 1995 and 1996 financial
statements and accordingly, there would be no changes in the relationships among
the amounts and disclosures in those financial statements. Balances in U.S.
dollars included in the Iusatel balance sheet for the years ended December 31,
1995 and 1996 and for the nine months ended September 30, 1997 have been
translated at the "Observed Exchange Rate" as determined by the Central Bank of
Chile using the exchange rates of Ch$406.91, Ch$424.87, and Ch$414.47, per US
$1, respectively.
References herein to "U.S. dollars" or "U.S. $" are to the lawful currency
of the United States. References herein to Chilean "Pesos" or "Ch$" are to the
lawful currency of Chile. Amounts may be expressed in thousands of constant
Chilean Pesos ("ThCh$") or thousands of US dollars ("ThUS$"). With respect to
Iusatel, this Prospectus contains translations of certain Chilean Pesos amounts
into U.S. dollars at specified rates solely for the convenience of the reader.
These translations should not be construed as representations that the peso
amounts actually represent such U.S. dollar amounts or could be converted into
U.S. dollar amounts at the rate indicated. Unless otherwise indicated, such U.S.
dollar amounts have been translated from Chilean Pesos at the exchange rate at
September 30, 1997 of Ch$414.47 per US $1, as reported by Banco de Chile (the
"Chilean Central Bank"). See "Exchange Rate Data."
16
<PAGE> 22
SUMMARY CONDENSED CONSOLIDATED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth summary condensed consolidated historical
and pro forma combined financial data of the Company. The summary condensed
consolidated historical statement of operations data for the years ended
December 31, 1994, 1995 and 1996 were derived from the consolidated financial
statements of the Company which were audited by Price Waterhouse LLP,
independent certified accountants, and which are included elsewhere in this
Prospectus. The summary condensed consolidated historical statement of
operations data for the nine months ended September 30, 1996 and 1997 and
balance sheet data as of September 30, 1997 were derived from the unaudited
consolidated financial statements of the Company, which are included elsewhere
in this Prospectus and which, in the opinion of management of the Company,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of such unaudited interim
periods. The statement of operations data for the nine months ended September
30, 1997 are not necessarily indicative of results of operations that may be
expected for future periods or for the year ended December 31, 1997.
The summary condensed unaudited pro forma combined balance sheet of ICCA as
of September 30, 1997 gives effect to the Iusatel Acquisition and the Initial
Offering as if they had each occurred at that date and the related summary
condensed unaudited pro forma combined statements of operations for the year
ended December 31, 1996 and the nine-month period ended September 30, 1997 give
effect to the Iusatel Acquisition and the Initial Offering as if they had each
occurred at the beginning of the relevant period. The Iusatel Acquisition is
accounted for under the purchase method of accounting.
The information contained in this table should be read in conjunction with
"Prospectus Summary -- The Iusatel Acquisition," "Unaudited Pro Forma Condensed
Combined Financial Information," "Selected Historical Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements including the notes thereto appearing
elsewhere in this Prospectus.
17
<PAGE> 23
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------- ---------------------------------------
PRO FORMA PRO FORMA
1994 1995 1996(1) 1996 1996(1) 1997 1997
------- ------- ------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT NET LOSS PER COMMON SHARE)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales........................... $ 34 $ 224 $ 652 $ 8,474 $ 477 $ 853 $ 7,206
Operating expenses.............. (2,207) (2,722) (5,009) (16,644) (3,290) (9,251) (17,658)
------- ------- ------- -------- -------- ------- --------
Loss from operations............ (2,173) (2,498) (4,357) (8,170) (2,813) (8,398) (10,452)
Other income (expense).......... (45) (56) (23) (467) 25 48 (102)
Interest expense................ (313) (319) (246) (22,993) (96) (1,543) (18,023)
------- ------- ------- -------- -------- ------- --------
Net loss................. $(2,531) $(2,873) $(4,626) $(31,630) $ (2,884) $(9,893) $(28,577)
======= ======= ======= ======== ======== ======= ========
Net loss per common share......... $ (1.30) $ (0.31) $ (0.31) $ (2.14) $ (.20) $ (.61) $ (1.77)
Weighted average shares
outstanding................... 1,952 9,407 14,796 14,796 14,346 16,170 16,170
OTHER FINANCIAL DATA:
EBITDA(2)....................... $(2,097) $(2,102) $(3,651) (6,495) $ (2,295) $(7,740) (9,114)
Depreciation and amortization... 76 396 706 1,675 518 658 1,338
Capital expenditures............ 1,849 720 1,453 1,835 334 1,855 1,956
Ratio of earnings to fixed
charges(3).................... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
------------------------
HISTORICAL PRO FORMA
---------- -----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents, excluding restricted cash(4)... $ 299 $ 12,695
Restricted bank deposits and escrows(4)................... 164 120,150
Total assets.............................................. 13,721 172,343
Current portion of long-term debt and lease obligations,
net of original issue discounts......................... 2,845 300
Long-term debt and lease obligations, net of original
issue discounts......................................... 463 132,560
Total stockholders equity................................. 7,147 31,896
</TABLE>
- ---------------
(1) Historical financial data includes the operations of Resetel and HSA (each
as defined herein) from their respective dates of acquisition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(2) "EBITDA" represents income (loss) from operations before interest,
depreciation and amortization. EBITDA is presented because it is commonly
used in the telecommunications industry to measure operating performance,
asset value and financial leverage. However, EBITDA should not be considered
as an alternative to net income as a measure of operating results, cash
flows or as a measure of liquidity in accordance with generally accepted
accounting principles. Also, EBITDA as defined herein may not be comparable
to similarly entitled measures reported by other companies.
(3) In calculating the ratio of earnings to fixed charges, earnings consist of
net loss prior to income taxes and fixed charges. Fixed charges consist of
interest expense and amortization of debt issuance costs.
(4) Restricted bank deposits represent cash held by banks that require such
deposits to be maintained in support of loans made to certain of ICCA's
subsidiaries. Restricted escrows represent proceeds from the Offering that
will be disbursed in accordance with the terms of the Indenture. See "Use of
Proceeds" and "Description of New Notes -- Proceeds Pledge and Escrow
Agreement."
18
<PAGE> 24
RISK FACTORS
Prospective purchasers of the New Notes offered hereby should consider
carefully the following risk factors, as well as the other information contained
in this Prospectus, before purchasing the New Notes offered hereby.
RISKS RELATING TO FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus including, without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects," "projects," and words of similar import constitute
forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general national and international economic and
business conditions, as well as conditions in the regions in which the Company
operates; demographic change; existing government regulations and changes in, or
the failure to comply with, government regulations; competition; the loss of any
significant customers; changes in business strategy or development plans;
technological developments; the ability to attract and retain qualified
personnel; the significant indebtedness of the Company; the availability and
terms of capital to fund the expansion of the Company's business; and other
factors referenced in this Prospectus. Certain of these factors are discussed in
more detail elsewhere in this Prospectus including, without limitation, under
the captions "Prospectus Summary;" "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business." Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Company disclaims any obligations to
update any such factors or publicly announce the result of any revisions to any
of the forward-looking statements contained herein to reflect future events or
developments.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
The Company is highly leveraged and has substantial debt service
requirements. As of September 30, 1997, on a pro forma basis after giving effect
to the Initial Offering, the application of the proceeds therefrom and the
consummation of the Iusatel Acquisition, the Company would have had
approximately $150.0 million of total long-term Indebtedness and the Company
would have had stockholders' equity of $33.5 million. In addition, in each year
since its inception, the Company's earnings have been inadequate to cover its
fixed charges by a substantial amount. The Company's earnings were inadequate to
cover its fixed charges by $4.6 million and $9.9 million, respectively, for the
year ended December 31, 1996 and the nine months ended September 30, 1997. On a
pro forma basis after giving effect to the Initial Offering, the application of
the proceeds therefrom and the consummation of the Iusatel Acquisition, for the
year ended December 31, 1996 and the nine months ended September 30, 1997 the
Company's earnings would have been inadequate to cover its fixed charges by
$31.6 million and $28.6 million, respectively. The Company's annual interest
obligations under the Senior Notes substantially exceeds the Company's sales for
the year ended December 31, 1996.
The ability of ICCA to make scheduled payments with respect to its
indebtedness, including the Senior Notes, will depend upon, among other things,
(i) its ability to implement its business plan, to expand its operations and to
successfully develop its customer base in its target markets, (ii) the ability
of ICCA's subsidiaries to remit cash to ICCA in a timely manner and (iii) the
future operating performance of ICCA and its subsidiaries. Each of these factors
is, to a large extent, subject to economic, financial, competitive, regulatory
and other factors, many of which are beyond the Company's control. The Company
expects that it will continue to generate cash losses for the foreseeable
future. No assurance can be given that the Company will be successful in
developing and maintaining a level of cash flow from operations sufficient to
permit it to pay the principal of, and interest on, its indebtedness, including
the Senior Notes. If the Company is unable to generate sufficient cash flow from
operations to service its indebtedness, including the Senior Notes, it may
19
<PAGE> 25
have to modify its growth plans, restructure or refinance its indebtedness or
seek additional capital. There can be no assurance that (i) any of these
strategies could be effected on satisfactory terms, if at all, in light of the
Company's high leverage or (ii) any such strategy would yield sufficient
proceeds to service the Company's indebtedness, including the Senior Notes. See
"-- Historical and Anticipated Operating Losses," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
The Company's high level of indebtedness imposes substantial risks to
Holders of the New Notes, including the following: (i) the ability of the
Company to pay interest and Liquidated Damages, if any, on, and the redemption
price of or the principal amount at maturity of, the Senior Notes when due may
be impaired; (ii) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or general
corporate purposes may be impaired; (iii) a substantial portion of the Company's
cash flow from operations must be dedicated to service its indebtedness and will
not be available for capital expenditures and other purposes in furtherance of
the Company's strategic growth objectives, and the failure of the Company to
generate sufficient cash flow to service such indebtedness could result in a
default under such indebtedness; (iv) the Indenture contains restrictions on the
Company's ability to pay dividends or to repurchase securities and imposes
numerous other operating and financing restrictions, the failure to comply with
which may result in a default under the Indenture; (v) the Company is more
highly leveraged than many of its competitors which may place it at a
competitive disadvantage; (vi) the Company's high degree of leverage could make
it more vulnerable to adverse changes in its business and in general economic
conditions; and (vii) the ability of the Company to satisfy its obligations
under its indebtedness will be dependent upon risks, uncertainties,
contingencies and other factors affecting the business and operations of the
Company, many of which are beyond the control of the Company. The Indenture
limits, but does not prohibit, the incurrence of additional indebtedness by ICCA
and its subsidiaries. See "Description of New Notes -- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock" and
"-- Dividend and Other Payment Restrictions Affecting Subsidiaries."
HOLDING COMPANY STRUCTURE; INABILITY TO ACCESS CASH FLOW
Substantially all of ICCA's assets are held by its subsidiaries and all of
ICCA's operating revenues are derived from the operations of such subsidiaries.
Future acquisitions may be made through present or future subsidiaries of ICCA.
Accordingly, ICCA's ability to pay the principal of, and interest and Liquidated
Damages, if any, when due, on the Senior Notes is dependent upon the earnings of
its subsidiaries and the distribution of sufficient funds from its subsidiaries.
ICCA's subsidiaries will have no obligation, contingent or otherwise, to make
any funds available to ICCA for payment of the principal of, and interest and
Liquidated Damages, if any, on the Senior Notes. In addition, the ability of
ICCA's subsidiaries to make such funds available to ICCA may be restricted by
the terms of such subsidiaries' current and future indebtedness, the
availability of such funds and the applicable laws of the jurisdictions under
which such subsidiaries are organized. Furthermore, ICCA's subsidiaries will be
permitted under the terms of the Indenture to incur certain additional
indebtedness that may severely restrict or prohibit the making of distributions,
the payment of dividends or the making of loans by such subsidiaries to ICCA.
The failure of ICCA's subsidiaries to pay dividends or otherwise make funds
available to ICCA could have a material adverse effect upon ICCA's ability to
satisfy its debt service requirements including its ability to make payments on
the New Notes.
RANKING
The obligations under the New Notes will be effectively subordinated to all
indebtedness and other liabilities and commitments (including trade payables and
lease obligations) of ICCA's subsidiaries. Any right of ICCA to receive assets
of any of its subsidiaries upon the latter's liquidation or reorganization (and
the consequent right of the Holders of the New Notes to participate in those
assets) will be effectively subordinated to the claims of that subsidiary's
creditors, except to the extent that ICCA is itself recognized as a
20
<PAGE> 26
creditor of such subsidiary, in which case the claims of ICCA would still be
subordinate to any security in the assets of such subsidiary held by any
creditor and any indebtedness of such subsidiary senior to that held by ICCA. As
of September 30, 1997, ICCA's subsidiaries would have had approximately $1.5
million of indebtedness and $5.3 million of trade payables and other liabilities
outstanding after giving pro forma effect to the Offering, the use of proceeds
therefrom and the consummation of the Iusatel Acquisition. In addition, under
the Indenture, ICCA's subsidiaries will be permitted to incur certain additional
indebtedness, the terms of which may restrict the ability of such subsidiaries
to pay dividends to ICCA. See "Description of New Notes -- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock" and "--
Dividend and Other Payment Restrictions Affecting Subsidiaries."
HISTORICAL AND ANTICIPATED OPERATING LOSSES
The Company has never generated positive cash flow from consolidated
operations and, since its inception, has incurred significant net operating
losses and negative cash flow. As of September 30, 1997, the Company had an
accumulated deficit of $20.0 million. Since inception through September 30,
1997, the Company's operations have resulted in losses before interest, other
income (loss), taxes, depreciation and amortization ("EBITDA") of $15.6 million.
On a pro forma basis, after giving effect to the Initial Offering, the
application of the proceeds therefrom and the consummation of the Iusatel
Acquisition, the Company would have had EBITDA of ($6.5) million and ($9.1)
million for the year ended December 31, 1996 and for the nine-month period ended
September 30, 1997, respectively. For the year ended December 31, 1996 and the
nine months ended September 30, 1997, the Company incurred a net loss of $4.6
million and $9.9 million, respectively, and generated negative cash flow from
operations of $3.9 million and $3.4 million, respectively. The Company expects
to continue to incur significant operating losses and negative cash flow from
operations for at least the next several years in connection with establishing
its local networks and implementing its business plan. There can be no assurance
that the Company's networks or any of its other services will ever provide a
revenue base adequate to achieve or sustain profitability or to generate
positive cash flow.
SIGNIFICANT FUTURE CAPITAL REQUIREMENTS
Expansion of the Company's existing networks and services and the
development of new networks and services will require significant capital
expenditures. The Company expects to use the net proceeds of the Initial
Offering to meet its capital expenditure requirements and to consummate the
Iusatel Acquisition. See "Use of Proceeds." Although the Company believes that
the proceeds of the Initial Offering are sufficient to fund its current plans,
actual capital expenditures may vary significantly from the Company's estimates
depending on a number of factors, many of which are beyond the Company's
control, including the ability of the Company to complete the Iusatel
Acquisition, the pace and extent of network upgrade and expansion, the magnitude
of potential acquisitions, investments or the impact of strategic alliances, and
levels of incremental sales and regulatory actions, which, individually or
collectively, could cause material changes in the Company's capital expenditure
requirements.
The Company may need additional capital to (i) finance its anticipated
growth, (ii) fund working capital needs and future debt service obligations,
(iii) take advantage of unanticipated opportunities, including more rapid
international expansion, acquisitions of customer bases or businesses or
investments in, or strategic alliances with, companies that are complementary to
the Company's current operations, (iv) develop or expand into new services or
(v) otherwise respond to unanticipated competitive pressures. The Company
currently expects to obtain such additional capital, if necessary, through
internally generated cash flow and from offerings of additional debt or equity
securities. There can be no assurance, however, that the Company will be
successful in producing sufficient internally generated cash flow or raising
sufficient capital on terms acceptable to the Company, if at all. Moreover, the
amount of, and the terms and conditions of the instruments relating to, the
Company's current outstanding indebtedness may adversely affect the
21
<PAGE> 27
Company's ability to raise additional capital. Failure to internally generate or
raise sufficient funds may require the Company to delay, abandon or reduce the
scope of any potential future expansion, which could have a material adverse
effect on the Company's business, financial condition and results of operations.
LIMITED OPERATING HISTORY; ENTRANCE INTO NEWLY OPENING MARKETS
The Company acquired its principal operations in Santiago, Chile in July
1994 and in Lima, Peru in May 1996, and has limited experience in operating its
business. The Company has not commenced operations in any other country.
Prospective investors therefore have limited historical financial and operating
information about the Company upon which to base an evaluation of the Company's
performance and an investment in the New Notes.
The Company's viability, profitability and growth depend upon the
successful implementation of its business plan. A significant portion of the
Company's business plan includes the acquisition or formation of new local
operators in markets where it currently does not have operations and, in many of
its existing and future markets, offering services that have historically been
provided only by PTTs. Accordingly, the Company may face delays and problems
inherent in establishing a new business in an evolving industry, including,
among other things, hiring experienced and qualified personnel. Other risks
associated with the Company's business plan include: (i) securing necessary
licenses and adhering to regulatory requirements relating thereto; (ii)
obtaining any required zoning variances or other governmental or local
regulatory approvals; and (iii) other risks typically associated with any
business venture, such as unanticipated cost increases and the ability to
effectively implement its business strategy. There can be no assurance that the
implementation of the Company's business plan will be successful. The failure to
successfully implement its business plan would have a material adverse effect on
the Company.
RISK ASSOCIATED WITH IMPLEMENTATION OF GROWTH STRATEGY
The Company has a limited operating history and rapid growth by the Company
could place a strain on its management, operating and financial resources. In
addition, while the Company is currently a provider of telecommunications
services in Peru and Chile, the Company will, on an ongoing basis, explore
opportunities to provide additional telecommunications services in Latin
America. The Company's ability to manage growth and expansion effectively will
require continued implementation of, and improvements to, its operating and
financial systems and will require the Company to expand, train and manage its
employee base. Furthermore, the ability of the Company to expand its operations
will, among other things, depend upon its ability to identify acquisitions in
the future, or, if identified, to arrive at price and terms which are attractive
to the Company and may also depend on consents from third parties, including
regulatory authorities. Although the Company believes that it has made adequate
allowances for the costs and risks associated with future growth and expansion,
there can be no assurance that the Company's systems, procedures or controls or
financial resources will be adequate to support the Company's operations, that
management will be able to keep pace with such growth and/or expansion, and that
the Company will be able to successfully consummate future acquisitions on terms
acceptable to the Company, or at all. If the Company is unable to manage growth
and/or expansion effectively, the Company's business, operating results and
financial condition and its ability to generate sufficient cash flow to service
its indebtedness, including the New Notes, will be materially and adversely
affected.
RISKS RELATED TO THE IUSATEL ACQUISITION
Consummation of the Iusatel Acquisition is subject to a number of
regulatory and closing conditions, certain of which are beyond the Company's
control. The consummation of the transactions contemplated under the Iusatel
Agreement are subject to a number of conditions including, without limitation:
(i) obtaining waivers of preferential rights from certain current stockholders
of Iusatel; (ii) acquiring shares
22
<PAGE> 28
from certain stockholders of Iusatel; and (iii) registering Iusatel's shares
held by its stockholders with the Superintendencia de Valores y Seguros of the
Republic of Chile. Accordingly, there can be no assurance as to when the Iusatel
Acquisition will be consummated or that it will be consummated on the terms
described herein or at all.
RISKS RELATED TO POTENTIAL FUTURE ACQUISITIONS
The Company intends in the future to pursue acquisitions of complementary
services, technologies or businesses, although the Company has no present
understandings, commitments or agreements with respect to any such acquisitions
except as described in this Prospectus. Future acquisitions by the Company could
result in potentially dilutive issuances of equity securities, the incurrence of
debt and contingent liabilities and an increase in amortization expenses related
to goodwill and other intangible assets, which could have a material adverse
effect upon the Company's business, financial condition and results of
operations. Acquisitions involve numerous risks, including difficulties in the
assimilation of the operations, technologies, services and products of the
acquired companies and the diversion of management's attention from other
business concerns.
UNCERTAINTY OF MARKET ACCEPTANCE; POTENTIAL LACK OF SUBSCRIBER DEMAND
The Company's success is subject to a number of business, economic,
regulatory and competitive factors, many of which are beyond the Company's
control, including the extent to which prospective subscribers will use the
Company's services. The Company's ability to service its indebtedness, including
the Senior Notes, is subject to the successful implementation of its growth
strategy which, in turn, is premised, among other things, on the Company's
expectation that demand for its current services will increase significantly in
its existing markets and that there will be strong demand for services
introduced by the Company in the future. The Company has only recently begun
providing telecommunications services in Peru. Subscriber demand for the
Company's services in the markets in which it currently operates and in those in
which it expects to operate is uncertain. See "-- Competition" and "-- Rapid
Industry and Technological Change." Failure to gain market acceptance for, or
subscriber demand of, current or planned services would have a material adverse
effect on the Company. In addition, the Company has incurred and will continue
to incur significant operating expenses and has made, and will continue to make,
significant capital investments. Accordingly, any material miscalculation by the
Company with respect to its strategy or business plan is likely to have a
material adverse effect on the Company. See "-- Significant Future Capital
Requirements" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
CONSTRUCTION RISKS
The operating companies in which the Company invests may require
substantial construction of new, or additions to existing, network systems.
Construction activity may require the Company to obtain qualified
subcontractors, the availability of which varies significantly from country to
country. Construction projects are subject to overruns and delays not within the
control of the Company or its subcontractors, such as those caused by government
entities, financing delays and catastrophic occurrences. Delays also can arise
from design changes and material or equipment shortages or delays in delivery.
Services to buildings can be delayed if the operating companies or their
subcontractors have difficulty in obtaining easements from private parties.
Failure to complete construction on a timely basis could jeopardize a system's
subscriber contracts, franchises and licenses or the Company's ability to
preempt its competition.
FAILURE TO EXCHANGE EXISTING NOTES
The New Notes will be issued in exchange for Existing Notes only after
timely receipt by the Exchange Agent of such Existing Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Existing Notes desiring to tender such Existing
Notes in exchange
23
<PAGE> 29
for New Notes should allow sufficient time to ensure timely delivery. Neither
the Exchange Agent nor the Company is under any duty to give notification of
defects or irregularities with respect to tenders of Existing Notes for
exchange. Existing Notes that are not tendered or are tendered but not accepted
will, following consummation of the Exchange Offer, continue to be subject to
the existing restrictions upon transfer thereof. In addition, any holder of
Existing Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes will be required to comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Existing Notes, where such Existing
Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. See "Plan
of Distribution." To the extent that Existing Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Existing Notes could be adversely affected. See "The Exchange Offer."
DISCRETIONARY USE OF FUNDS
The Company expects to use the proceeds from the Initial Offering as
follows: (i) $62.0 million to expand and operate the Company's fiber optic
network in Peru and Chile; (ii) up to $7.2 million to consummate the Iusatel
Acquisition; (iii) $2.9 million to redeem the Convertible Debentures; (iv) $1.5
million to pay existing short-term liabilities of the Company, including
outstanding bank debt and trade payables; (v) $975,000 to pay indebtedness under
the Bridge Notes; and (vi) the remaining amounts for general corporate purposes.
The Indenture requires the Company to allocate at least 60% of the aggregate
amount of Collateral Funds released from the Collateral Account for Permitted
Expenditures in connection with Acquisition Costs or Systems Costs directly
related to Telecommunication Businesses in Peru. The Company cannot predict in
which, if any, of its existing or future development opportunities it will
ultimately invest. While the Company currently expects to use the proceeds of
the Initial Offering as set forth above, if the Company does not invest in these
projects or invests a different amount than currently anticipated, subject to
the terms of the Indenture and the Proceeds Pledge and Escrow Agreement, the
Company would use any remaining cash to fund other development projects and/or
acquisitions and for general corporate purposes. See "Use of Proceeds."
Pursuant to the Proceeds Pledge and Escrow Agreement, the Company deposited
$69.3 million of the net proceeds in an account under the Trustee's exclusive
dominion and control pending application of such funds by the Company for the
payment of (i) Permitted Expenditures; (ii) in the event of a Change of Control,
the Change of Control Payment and (iii) in the event of a Special Offer to
Purchase or a Special Mandatory Redemption, the purchase or redemption price in
connection therewith. In the event that on or after October 27, 2000, Collateral
Funds remain in the Collateral Account, each Holder of Senior Notes will have
the right to require the ICCA to repurchase all or any part of such Holder's
Senior Notes at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase; provided that, if after the Special Offer to
Purchase is consummated at least $20.0 million in aggregate principal amount of
the Senior Notes does not remain outstanding, ICCA will be required by the terms
of the Indenture to redeem all of the Senior Notes at a redemption price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase. See
"Description of New Notes -- Proceeds Pledge and Escrow Agreement."
After the consummation of the Special Offer to Purchase, the Company shall
apply all funds held in the Collateral Account not previously released pursuant
to the terms of the Indenture and the Proceeds Pledge and Escrow Agreement, at
its option, to the acquisition of a controlling interest in a Permitted
Business, making of
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a capital expenditure or acquisition of other assets, in each case, in a
Permitted Business or to the reduction of senior Indebtedness of ICCA or
Indebtedness of any of its Restricted Subsidiaries (as defined herein).
COMPETITION
The international telecommunications industry is highly competitive. The
Company's success depends upon its ability to compete with a variety of other
telecommunications providers in each of its markets, including global alliances
among some of the world's largest telecommunications carriers, PTTs, wireless
telephone companies and microwave carriers. Other existing and potential
competitors include cable television companies, railway companies, electric
companies and other utilities with rights-of-way and large end-users which have
private networks. The intensity of such competition has recently increased and
the Company believes that such competition will continue to intensify as the
number of new market entrants increases. Many of the Company's existing and
potential competitors have substantially greater financial, marketing and other
resources than the Company. If the Company's competitors devote significant
additional resources to the provision of telecommunications services to the
Company's target customer base, such action would have a material adverse effect
on the Company's business, financial condition and/or results of operations.
There can be no assurance that the Company will be able to compete successfully
against such existing and potential competitors.
Competition for customers in the telecommunications industry is primarily
based on price and, to a lesser extent, on the type and quality of services
offered. The Company has no control over the prices set by its competitors, and
some of the Company's competitors may be able to use their financial resources
to cause severe price competition. Any such price competition would have a
material adverse effect on the Company's business, financial condition and
results of operations. Additionally, intensified competition in certain of the
Company's markets may cause the Company to reduce its prices, which may reduce
the Company's revenue and margins. See "Business -- Business and
Services -- Chile -- Competition" and "-- Peru -- Competition."
RAPID INDUSTRY AND TECHNOLOGICAL CHANGE
The international telecommunications industry is changing rapidly due to,
among other things, deregulation, privatization of PTTs, technological
improvements, expansion of telecommunications infrastructure and the
globalization of the world's economies and free trade. In addition, the
telecommunications industry is in a period of rapid technological evolution. The
Company is unable to predict which of the many possible future product and
service offerings will be important to establish and maintain a competitive
position in or what expenditures will be required to develop and provide such
products and services. The Company's future financial performance will depend,
in part, upon its ability to anticipate and adapt to rapid regulatory and
technological changes occurring in the telecommunications industry and upon its
ability to offer, on a timely basis, services that meet evolving industry
standards. There can be no assurance that the Company will be able to adapt to
such technological changes or offer such services on a timely basis or establish
or maintain a competitive position. There can be no assurance that one or more
of these factors will not vary unpredictably, which could have a material
adverse effect on the Company. In addition, there can be no assurance, even if
these factors turn out as anticipated, that the Company will be able to
implement its strategy or that its strategy will be successful in this rapidly
evolving market.
DEPENDENCE UPON NETWORK INFRASTRUCTURE; RISK OF SYSTEM FAILURE; SECURITY RISKS
The Company's success in marketing its services to business and government
users requires that the Company provide adequate reliability, capacity and
security via its network infrastructure. The Company's networks are subject to
physical damage, power loss, capacity limitations, software defects, breaches of
security (by computer virus, break-ins or otherwise) and other factors, certain
of which may cause interruptions in
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service or reduced capacity for customers. Interruptions in service, capacity
limitations or security breaches could have a material adverse effect on the
Company's business, financial condition and results of operations.
GOVERNMENT REGULATORY RESTRICTIONS; DEPENDENCE ON RIGHTS-OF-WAY AND OTHER THIRD
PARTY AGREEMENTS
National and local laws and regulations differ significantly among the
countries in which the Company currently operates and plans to operate. The
interpretation and enforcement of such laws and regulations vary and could limit
the Company's ability to provide certain telecommunications services.
Furthermore, there can be no assurance that changes in current or future laws or
regulations or future judicial intervention would not have a material adverse
effect on the Company. In addition, the Company's strategy is based in large
part upon the expected deregulation of the telecommunications markets in various
countries throughout Latin America. There can be no assurance that any such
countries will proceed with the expected deregulation on schedule, or at all, or
that the trend towards deregulation will not be stopped or reversed. There may
be significant resistance to the implementation of such legislation from PTTs,
regulators, trade unions and other sources. These and other potential obstacles
to deregulation would have a material adverse effect on the Company's operations
and growth. See "Business -- Regulation."
The Company also must obtain easements, rights-of-way, franchises and
licenses (collectively, "local approvals") from various private parties, actual
and potential competitors and local governments in order to construct and
maintain its fiber optic networks. The Company does not yet have all of the
approvals required to implement its network business plan in prospective new
markets, and there can be no assurance that the Company will be able to obtain
and maintain approvals on acceptable terms or that other service providers will
not obtain similar approvals that will allow them to compete against the Company
or enter a market before the Company. Some of the agreements for approvals
obtained by the Company may be short-term or revocable at will, and there can be
no assurance that the Company will have continued access to approvals after
their expiration. If any of these agreements were terminated or could not be
renewed and the Company was forced to remove its fiber optic cable or abandon
its network in place, such termination or non-renewal would have a material
adverse effect on the Company's business, results of operations and financial
condition.
DEPENDENCE UPON SUPPLIERS; SOLE AND LIMITED SOURCES OF SUPPLY
The Company relies on other companies to supply certain key components of
its network infrastructure, including telecommunications services and networking
equipment, which, in the quality demanded by the Company, are available only
from sole or limited sources. The Company is also dependent upon incumbent local
exchange companies to provide telecommunications services to the Company and its
customers. The Company has from time to time experienced delays in receiving
telecommunications services, and there can be no assurance that the Company will
be able to obtain such services on the scale and within the time frames required
by the Company at an affordable cost, or at all. Any failure to obtain such
services or additional capacity on a timely basis at an affordable cost, or at
all, would have a material adverse effect on the Company's business, financial
condition and results of operations. The Company also is dependent on its
suppliers' ability to provide necessary products and components that comply with
various Internet and telecommunications standards and interoperate with products
and components from other vendors and function as intended when installed as
part of the network infrastructure. Any failure of the Company's sole or limited
source suppliers to provide products or components that comply with Internet
standards, interoperate with other products or components used by the Company in
its network infrastructure or by its customers or fulfill their intended
function as a part of the network infrastructure would have a material adverse
effect on the Company's business, financial condition and results of operations.
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DEPENDENCE ON KEY PERSONNEL
The Company is managed by a small number of key executive officers and
operating personnel, including Patricio E. Northland, the Company's Chief
Executive Officer, and Douglas G. Geib II, the Company's Chief Financial
Officer, the loss of certain of whom could have a material adverse effect on the
Company and the ability of the Company to fulfill its financial obligations,
including, without limitation, those under the Senior Notes. The Company
believes that its future success will depend in large part on its continued
ability to attract and retain skilled and qualified personnel with experience in
the telecommunications industry. Such employees are in great demand and are
often subject to competing offers of employment. The Company has not obtained
disability or life insurance policies covering its key executive officers.
COUNTRY RISKS
General. The Company has invested significant resources in Latin America
and intends to continue to make such investments in Latin America in the future.
Accordingly, the Company may be subject to economic, political or social
instability or other developments not typical of investments made in the United
States. Such events could adversely affect the financial condition and results
of operations of the Company, the ability of the Company to repay the Senior
Notes and the market value and liquidity of the Units, Senior Notes, Warrants
and/or Warrant Shares. During the past several years, countries in Latin America
in which the Company operates or plans to operate have been characterized by
varying degrees of inflation, uneven growth rates and political uncertainty. The
Company currently does not have political risk insurance in the countries in
which it conducts business. While the Company carefully considers these risks
when evaluating investment opportunities and seeks to mitigate these and other
risks by diversifying its operations in a number of Latin American countries,
there is no assurance that the Company will not be materially adversely affected
as a result of such risks.
Currency Risks and Exchange Controls. Although ICCA's subsidiaries have
attempted, and will continue to attempt, to match costs and revenues and
borrowings and repayments in terms of their respective local currencies, payment
for a majority of purchased equipment has been, and may continue to be, required
to be made in currencies, including US dollars, other than local currencies. In
addition, the value of ICCA's investment in a subsidiary is partially a function
of the currency exchange rate between the US dollar and the applicable local
currency. In general, the Company does not execute hedge transactions to reduce
its exposure to foreign currency exchange rate risks. Accordingly, the Company
may experience economic loss and a negative impact on earnings with respect to
its holdings solely as a result of foreign currency exchange rate fluctuations,
which include foreign currency devaluations against the dollar. The countries in
which ICCA's subsidiaries now conduct business generally do not restrict the
removal or conversion of local or foreign currency; however, there can be no
assurance that this situation will continue. See Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Inflation and
Exchange Rates" and "Business -- Regulation -- Peru -- Foreign Investment and
Exchange Controls" and "-- Chile -- Foreign Investment and Exchange Controls."
Dependence on Local Economies; Inflation. The Company's operations depend
upon the economies of the markets in which it operates. These markets include
countries with economies in various stages of development or structural reform,
some of which are subject to rapid fluctuations in terms of consumer prices,
employment levels, gross domestic product and interest and foreign exchange
rates. The Company may be subject to such fluctuations in the local economies in
which it operates. To the extent such fluctuations have an effect on the ability
of subscribers to pay for the Company's service, the growth of the Company's
services in such markets could be impacted negatively. Many of the countries in
which the Company operates, or expects to operate, do not have established
credit bureaus, thereby making it more difficult for the Company to ascertain
the creditworthiness of potential subscribers. Accordingly, the Company may
experience a higher level of bad debt expense than otherwise would be the case.
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Certain of the Company's targeted markets are in countries in which the
rate of inflation is significantly higher than that of the United States. The
Company intends to price its products and services in US dollars to mitigate any
effects of inflation; however, there can be no assurance that any significant
increase in the rate of inflation in such countries could be offset, in whole or
in part, by corresponding price increases by the Company, even over the
long-term. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation -- Inflation and Exchange Rates."
Import Duties on Equipment. The Company's operations are highly dependent
upon the successful and cost-efficient importation of infrastructure equipment
from the United States. In the Latin American markets where the Company operates
or plans to operate infrastructure equipment is subject to significant import
duties and other taxes. Any significant increase in import duties in the future
could have a material adverse effect on the Company's results of operations.
Tax Risks Associated with Foreign Operations. Distributions of earnings
and other payments, including interest, received from ICCA's subsidiaries and
affiliates may be subject to withholding taxes imposed by the jurisdictions in
which such entities are formed or operating, which will reduce the amount of
after-tax cash ICCA can receive from such entities. In general, a United States
corporation may claim a foreign tax credit against its federal income tax
expense for such foreign withholding taxes and for foreign income taxes paid
directly by foreign corporate entities in which it owns 10% or more of the
voting stock. The ability to claim such foreign tax credits and to utilize net
foreign losses is, however, subject to numerous limitations, and the Company may
incur incremental tax costs as a result of these limitations or because the
Company is not in a tax-paying position in the United States.
ICCA may also be required to include in its income for United States
federal income tax purposes its proportionate share of certain earnings of those
foreign corporate subsidiaries that are classified as "controlled foreign
corporations" without regard to whether distributions have been actually
received from such subsidiaries. See "Business -- Taxation -- Peru" and
"-- Chile."
Enforcement of Agreements. A number of the agreements ICCA enters into
with its non-United States subsidiaries, dealers, subscribers and agents are
governed by the laws of, and are subject to dispute resolution in the courts of,
or through arbitration proceedings in, the country or region in which the
operation is located. The Company cannot accurately predict whether such forum
will provide it with an effective and efficient means of resolving disputes that
may arise in the future. Even if the Company is able to obtain a satisfactory
decision through arbitration or a court proceeding, it could have difficulty
enforcing any award or judgment on a timely basis. The Company's ability to
obtain or enforce relief in the United States is uncertain.
Foreign Corrupt Practices Act. As a United States corporation, ICCA is
subject to the regulations imposed by the Foreign Corrupt Practices Act (the
"FCPA"), which generally prohibits United States companies and their
intermediaries from making improper payments to foreign officials for the
purpose of obtaining or keeping business. Any determination that the Company has
violated the FCPA would have a material adverse effect on the Company.
Changes in Country Policy; Change in Regulatory Agencies and Political
Structures. The Company has obtained and is seeking to acquire licenses in
countries throughout Latin America and, accordingly, is subject to government
regulation in each market. Much of the Company's planned growth is predicated
upon the liberalization of telecommunications markets. The Company has
confronted, and is likely to continue to confront, changes in government policy
or circumstances that can affect the Company's business and results of
operations. There can be no assurance that such events in the future will not
have a material adverse effect on the Company's results of operations.
The governments of the countries in Latin America vary widely with respect
to structure, constitution and stability. While Latin American governments have
historically exercised extensive influence over their
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economies, the role of government has declined as countries have liberalized
their political structures and economies. However, there can be no assurance
that future developments in the government administration of local economies
would not materially and adversely impair the Company's business and financial
condition, the value of the Units, the Senior Notes, the Warrants and/or the
Warrant Shares or the Company's ability to pay principal of or interest and
Liquidated Damages, if any, on the Senior Notes.
Labor Issues. In most Latin American countries labor unions are considered
to be strong and influential. Accordingly, while none of the Company's
operations are currently unionized, no assurance can be given that the Company
will not encounter strikes or other types of conflicts with labor unions or the
Company's personnel in the Company's markets or that such labor disputes will
not have an adverse effect on the Company. In addition, in response to pressure
by labor unions, many Latin American governments in which the Company targets
operations have, at times, actively regulated cross-border transactions,
including placing limitations on imported goods. Such regulations may result in
delays and increased costs for the Company.
TRANSACTIONS AND RELATIONSHIPS WITH RELATED PARTIES
The Company has engaged in a large number of transactions with its
shareholders, directors, officers and other related parties. There can be no
assurance that the terms of these transactions were the same as those that would
have resulted from transactions among unrelated parties. The Indenture will
restrict the Company's ability to engage in transactions with related parties
after consummation of the Offering. See "Certain Relationships and Related Party
Transactions," "Description of New Notes -- Certain Covenants -- Affiliate
Transactions" and the Report of Independent Certified Public Accountants
contained in the consolidated financial statements of the Company contained
elsewhere in this Prospectus.
ORIGINAL ISSUE DISCOUNT
Because a portion of the purchase price for each Unit issued and sold in
the Initial Offering was allocable to the Warrants included therein for federal
income tax purposes, the Senior Notes may be treated as issued with original
issue discount unless such original issue discount is considered de minimus. The
New Notes should be treated as a continuation of the Existing Notes. If original
issue discount exists, purchasers of the New Notes therefore generally will be
required to include amounts in gross income for Federal income tax purposes in
advance of receipt of the cash interest payments on the New Notes to which the
income is attributable. See "Certain Federal Income Tax Considerations" for a
more detailed discussion of the federal income tax consequences to the
purchasers of the New Notes resulting from the purchase, ownership or
disposition thereof.
If a bankruptcy case is commenced by or against the Company under Title 11
of the United States Code, as amended (the "Bankruptcy Code"), after the Initial
Offering, the claims of a Holder of the Senior Notes with respect to the
principal amount thereof may be limited to an amount equal to the sum of (i) the
initial offering price of the Senior Notes and (ii) that portion of the original
issue discount that is not deemed to constitute "unmatured interest" for
purposes of the Bankruptcy Code. Any original issue discount that was not
accrued as of such bankruptcy filing may be deemed to constitute "unmatured
interest." A Holder of a Senior Note may not have any claim with respect to that
portion of the issue price of a Unit allocated to the Warrant issued as part of
such Unit.
LACK OF DIVIDENDS
ICCA does not anticipate paying dividends on the Common Stock for the
foreseeable future, and the ability of ICCA to make dividend payments on the
Common Stock is restricted by certain covenants in the Indenture. See "Price
Range of Common Stock and Dividend Policy" and "Description of New Notes --
Certain Covenants -- Restricted Payments."
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SHARES ELIGIBLE FOR FUTURE SALE
As of November 14, 1997, ICCA had outstanding 18,984,300 shares of Common
Stock, of which 9,177,708 shares are "restricted securities" subject to
restrictions set forth in Rule 144 ("Rule 144") promulgated under the Securities
Act. Of the restricted securities, upon expiration of a lock-up agreement
described below, 9,177,708 shares may be sold under Rule 144 upon the expiration
of the applicable one-year holding period. These periods will expire between May
1998 and October 30, 1998. In addition, as of November 14, 1997, ICCA had
reserved for issuance 7,162,921 shares of Common Stock issuable upon the
exercise of outstanding stock options as compared with 3,662,921 shares at
December 31, 1996, and warrants to purchase an aggregate of 8,378,900 shares of
Common Stock as compared with 680,171 shares at December 31, 1996.
During October 1997, the Company issued 851,162 shares of Common Stock in
connection with the conversion of $1.45 million aggregate principal amount of
its 8% Convertible Debentures, plus related accrued interest and issued 250,620
shares of Common Stock in connection with the conversion of $500,000 aggregate
principal amount of its 7% Convertible Debentures, plus, related accrued
interest.
All of the executive officers and directors and certain shareholders of
ICCA were deemed to beneficially own 8,822,083 shares of Common Stock (including
options to purchase 3,543,333 shares) as of the Closing Date of the Initial
Offering, have agreed not to sell, otherwise dispose of or pledge any shares of
Common Stock or securities convertible into or exercisable or exchangeable for
such Common Stock for a period of 180 days from the commencement of the Initial
Offering without the prior written consent of the Initial Purchaser.
Certain individuals and entities have certain rights with respect to the
registration under the Securities Act of the public offer and sale of shares of
Common Stock acquired in connection with various unrelated financing
transactions. As of November 14, 1997, holders of approximately 16,469,588
shares of Common Stock, including 14,512,921 shares of Common Stock issuable
upon the exercise of outstanding options and warrants had registration rights
with respect to such shares.
Sales of substantial amounts of Common Stock in the public market under
Rule 144, pursuant to the exercise of registration rights or otherwise, and even
the potential for such sales, may have a material adverse effect on the
prevailing market price of the Common Stock and the Warrants included in the
Units and could impair the Company's ability to raise capital through the sale
of its equity securities.
POSSIBLE ADVERSE EFFECTS OF AUTHORIZATION OF PREFERRED STOCK
ICCA's Articles of Incorporation authorizes the issuance of 10,000,000
shares of preferred stock, par value $.001 per share ("Preferred Stock"), on
terms which may be fixed by the Board of Directors of ICCA without further
shareholder approval. The terms of any series of Preferred Stock, which may
include priority claims to assets and dividends and special voting rights, could
adversely affect the rights of holders of the New Notes. The issuance of
Preferred Stock, while providing flexibility in connection with possible
acquisitions, financing and other corporate transactions, could have the effect
of preventing or making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, capital stock of ICCA, which may
adversely affect the market price of the New Notes. The Indenture limits the
ability of the Company to issue Preferred Stock. See "Description of New
Notes -- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock."
RISKS RELATING TO CHANGE OF CONTROL PROVISION
In the event of a Change of Control, the holders of the Senior Notes will
have the right to require ICCA to repurchase all or any portion of their Senior
Notes at a price equal to 101% of the aggregate principal
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amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the date of repurchase. There can be no assurance that ICCA will
have the financial resources to effect any such repurchase. If ICCA has the
resources to repurchase the Senior Notes upon a Change in Control, such payment
may have a material adverse effect on ICCA's liquidity, results of operations
and financial condition. Moreover, ICCA's repurchase obligation could have the
effect of delaying, deferring or preventing a Change of Control of ICCA and
could limit the price that certain investors might be willing to pay in the
future for ICCA's Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Description of the New Notes -- Repurchase at the Option of
Holders -- Change of Control." In addition, ICCA is a holding company and
substantially all of its assets are held by its subsidiaries and all of ICCA's
revenues are derived from the operations of such subsidiaries. Accordingly,
ICCA's ability to pay the principal of, and interest and Liquidated Damages, if
any, on the Senior Notes upon a Change of Control is dependent upon earnings of
its subsidiaries and the distribution of funds from its subsidiaries. See
"-- Holding Company Structure; Inability to Access Cash Flow."
Indebtedness of ICCA's subsidiaries and the applicable laws of the
jurisdictions under which ICCA's subsidiaries are organized may restrict ICCA's
current and future subsidiaries from paying any dividends or making any other
distributions to ICCA. Thus, in the event a Change of Control occurs, ICCA could
seek the consent of its subsidiaries' lenders under such Indebtedness to the
purchase of the Senior Notes or could attempt to refinance the borrowings that
contain such restrictions. If ICCA did not obtain such a consent or repay such
borrowings or if the applicable laws of the jurisdictions under which ICCA's
subsidiaries are organized restrict such subsidiaries' ability to pay dividends
or make other distributions to ICCA, ICCA would likely not have the financial
resources to purchase Senior Notes and its subsidiaries would be restricted in
paying dividends to ICCA for the purpose of such purchase. In addition, any such
Indebtedness may prohibit ICCA from purchasing any Senior Notes prior to their
maturity, and may also provide that certain change of control events with
respect to ICCA would constitute a default thereunder. In the event a Change of
Control occurs at a time when ICCA is prohibited from purchasing Senior Notes,
ICCA could seek the consent of its lenders to the purchase of Senior Notes or
could attempt to refinance the borrowings that contain such prohibition. If ICCA
did not obtain such consent or repay such borrowings, ICCA would remain
prohibited from purchasing Senior Notes. In such event, ICCA would be required
to seek to refinance the Senior Notes or such other borrowings, and there can be
no assurance that ICCA would be able to consummate any such refinancing. See
"Description of New Notes -- Repurchase at the Option of Holders -- Change of
Control" and "--Substantial Leverage; Ability to Service Indebtedness."
ABSENCE OF A PUBLIC MARKET FOR THE NEW NOTES
The New Notes are new securities for which there is currently no market.
Although the Initial Purchaser has informed the Company that it currently
intends to make a market in the New Notes, it is not obligated to do so and any
such market making may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the New Notes. The Senior Notes are expected to be eligible for trading in the
PORTAL market. The Company does not intend to apply for listing of the New Notes
on any securities exchange or for quotation through NASDAQ. If a market for the
New Notes were to develop, the New Notes could trade at prices that may be
higher or lower than their initial offering price depending upon many factors,
including prevailing interest rates, the Company's operating results and the
markets for similar securities.
POSSIBLE SUBORDINATION OR RECOVERY OF PAYMENTS UNDER FRAUDULENT CONVEYANCE LAWS
Under applicable provisions of the Bankruptcy Code or comparable provisions
of state fraudulent transfer or conveyance law, if the Company, at the time it
issued the Senior Notes, (a) incurred such obligation with an intent to hinder,
delay or defraud creditors, or (b)(i) received less than reasonably equivalent
value or fair
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consideration in respect thereof and (ii)(A) was insolvent at the time of
incurrence, (B) was rendered insolvent by reason of such incurrence (and the
application of the proceeds thereof), (C) was engaged or was about to engage in
a business or transaction for which the assets remaining with the Company
constituted unreasonably small capital to carry on its business, or (D) intended
to incur, or believed that it would incur, debts beyond its ability to pay such
debts as they mature, then, in each such case, a court of competent jurisdiction
could avoid, in whole or in part, the Senior Notes or, in the alternative,
subordinate the Senior Notes to existing or future indebtedness of the Company.
The measure of insolvency for purposes of the foregoing will vary depending upon
the law applied in such case. Generally, however, the Company would be
considered insolvent if the sum of its debts, including contingent liabilities,
was greater than all of its assets at fair valuation or if the present fair
saleable value of its assets was less than the amount that would be required to
pay the probable liability on its existing debts, including contingent
liabilities, as they become absolute and matured.
Management believes that, for purposes of the Bankruptcy Code and state
fraudulent transfer or conveyance laws, the Senior Notes are being issued
without the intent to hinder, delay or defraud creditors and for proper purposes
and in good faith, that the Company will receive reasonably equivalent value or
fair consideration in respect thereof and that the Company, after the issuance
of the Senior Notes and the application of the proceeds thereof, will be
solvent, will have sufficient capital for carrying on its business and will be
able to pay its debts as they mature. There can be no assurance, however, that a
court passing on such questions would agree with management's view.
EFFECT OF BANKRUPTCY ON ABILITY TO REALIZE UPON SECURITY
In order to secure its obligations under the Senior Notes, the Company
executed and delivered the Proceeds Pledge and Escrow Agreement. The Company
granted a first priority security interest to the Trustee, for the benefit of
the Holders of the Senior Notes, in the Pledged Securities, the Pledge Account,
the Collateral Funds and the Collateral Account. See "Description of New Notes."
The proceeds of the Initial Offering constitute "cash collateral" within
the meaning of Section 363(a) of the Bankruptcy Code. If the Company becomes the
debtor in a proceeding under the Bankruptcy Code, the Company could petition the
Bankruptcy Court for permission to use this cash collateral to finance its
operations during the pendency of its bankruptcy case. Bankruptcy courts are
authorized by Section 363 of the Bankruptcy Code to permit such use of cash
collateral if the secured party consents or if the interests of the secured
party are "adequately protected," which may be accomplished by giving the
secured party a perfected lien on substitute collateral of equal value. There
can be no assurance that the bankruptcy court would not approve such a petition
and permit a substitution of collateral. See "Description of New Notes."
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CONVERTIBLE DEBENTURES
On February 3, 1997, ICCA issued $1.5 million aggregate principal amount of
7% Convertible Debentures (the "7% Convertible Debentures") due February 3, 2000
and warrants to purchase an aggregate of 100,000 shares of Common Stock. On May
6, 1997, ICCA issued $2.0 million aggregate principal amount of 8% Convertible
Debentures (the "8% Convertible Debentures") due April 30, 1998 and warrants to
purchase an aggregate of 20,000 shares of Common Stock. Original issue discounts
of $167,000 and $31,000 related to the 7% Convertible Debentures and the 8%
Convertible Debentures, respectively, resulted from proceeds allocated to the
related warrants. The 7% Convertible Debentures and the 8% Convertible
Debentures are collectively referred to as the "Convertible Debentures." The net
proceeds of the Convertible Debentures were used to pay for (i) capital
expenditures related to the Company's fiber optic networks, (ii) operating
expenses of ICCA's wholly owned subsidiaries and (iii) corporate expenses
primarily related to salaries, professional fees, travel, rent, and similar
items.
At the option of the Company, the Convertible Debentures may be redeemed at
predetermined premiums, at any time or from time to time, upon not less than ten
nor more than twenty days prior written notice. The prepayment price for the 7%
Convertible Debentures and 8% Convertible Debentures shall equal 117% and 130%,
respectively, of the principal amount to be prepaid plus accrued interest. In
addition, the Convertible Debentures are convertible based on predetermined
formulas, at the option of the holders, into Common Stock at any time prior to
maturity at a conversion price that will be less than the closing bid price as
reported by the Nasdaq SmallCap Market at time of conversion. The Company may be
required to pay certain penalties if it fails to convert the Convertible
Debentures, in a timely manner, pursuant to written notices received from the
holders.
In connection with the Convertible Debentures, the Company is required to
file with the Commission a registration statement covering a sufficient number
of shares of Common Stock into which the Convertible Debentures may be converted
(the "Registered Shares"). As of November , 1997, the Company had not filed
such registration statements with the Commission. Pursuant to the terms of the
Convertible Debentures, the Company will be required to pay the holders certain
penalties until such time as the Company either files the registration statement
or redeems the Convertible Debentures. On July 3, 1997 the holders of the 7%
Convertible Debentures filed suit against the Company and certain of its
officers for failure to file a registration statement to register the shares of
Common Stock issuable upon the conversion of the 7% Convertible Debentures and
warrants to purchase 100,000 shares of Common Stock. See "Business -- Legal
Proceedings."
During October 1997, the Company issued 851,162 shares of Common Stock in
connection with the conversion of $1.45 million aggregate principal amount of
its 8% Convertible Debentures, plus related accrued interest and issued 250,620
shares of Common Stock in connection with the conversion of $500,000 aggregate
principal amount of its 7% Convertible Debentures, plus, related accrued
interest.
The Company intends to redeem all outstanding Convertible Debentures prior
to December 31, 1997. Approximately $1.0 million and $550,000 in aggregate
principal amount of the 7% Convertible Debentures and 8% Convertible Debentures,
respectively, were outstanding at such time and that the Company will be
required to pay an aggregate $2.9 million to extinguish its liabilities related
to the Convertible Debentures, including outstanding principal, related accrued
interest, redemption premiums, and penalties related to non-registration and
non-conversion. The payment of this amount would result in an extraordinary loss
on debt extinguishment of approximately $1.2 million. The actual payment, and
therefore the magnitude of the Company's loss on debt extinguishment, could be
lower or higher than the aforementioned amounts. See "Use of Proceeds,"
"Unaudited Pro Forma Condensed Combined Financial Information" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
33
<PAGE> 39
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the New Notes offered hereby and has agreed to
pay the expenses of the Exchange Offer. In consideration for issuing the New
Notes as contemplated in this Prospectus, the Company will receive, in exchange,
Existing Notes representing an equal aggregate principal amount at maturity. The
form and terms of the New Notes are identical in all material respects as the
form and terms of the Existing Notes, except as otherwise described herein under
"The Exchange Offer -- Terms of the Exchange Offer." The Existing Notes
surrendered in the exchange for New Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the New Notes will not result in
any increase in the outstanding indebtedness of the Company.
34
<PAGE> 40
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of September 30, 1997 on (i) an actual basis and (ii) on a pro
forma basis giving effect to the Offering, the application of the proceeds
therefrom and the consummation of the Iusatel Acquisition, as if they occurred
at that date.
The information contained in this table should be read in conjunction with
"Prospectus Summary -- The Iusatel Acquisition," "Unaudited Pro Forma Condensed
Combined Financial Information," "Selected Historical Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements including the notes thereto appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
----------------------
ACTUAL PRO FORMA
--------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT NOTES)
<S> <C> <C>
Cash, restricted bank deposits and escrows:
Cash and cash equivalents................................. $ 299 $ 12,695
Restricted bank deposits and escrows...................... 164 120,150(1)
-------- --------
Total cash, restricted bank deposits and
escrows.......................................... $ 463 $132,845
======== ========
Short-term debt:
Bank lines of credit and Bridge Notes..................... $ 1,407 $ --
8% Convertible Debentures, net of unamortized original
issue discount......................................... 532 --
7% Convertible Debentures, net of unamortized original
issue discount......................................... 861 --
Iusatel notes payable..................................... -- 687
Lease obligations......................................... 45 300
-------- --------
Total short-term debt............................. $ 2,845 $ 987
======== ========
Long-term debt:
Senior Notes, net of original issue discount.............. $ -- $131,625(2)
Capital lease obligations................................. 463 513
-------- --------
Total long-term debt.............................. $ 463 $132,138
======== ========
Stockholders' equity:
Preferred Stock, $.001 par value, authorized 10,000,000
shares, none issued.................................... -- --
Common Stock, $.001 par value, authorized 50,000,000
shares, 16,152,518 shares issued and outstanding
(actual); and 19,084,300 shares issued and outstanding
(pro forma)............................................ $ 19 $ 19
Additional paid in capital................................ 27,026 26,945
Outstanding warrants...................................... 298 26,548(2)
Accumulated deficit....................................... (20,044) (21,464)
Cumulative translation adjustments........................ (152) (152)
-------- --------
Total stockholders' equity........................ $ 7,147 $ 31,896
======== ========
Total Capitalization.............................. $ 10,455 $164,034
======== ========
</TABLE>
(1) Represents a portion of the net proceeds from the issuance of the Senior
Notes (i) $57.3 million which were used to purchase a portfolio of Pledged
Securities that was pledged and escrowed for payment of interest on the
Senior Notes through 2000 and (ii) $62.0 million which was pledged and
escrowed as security for all obligations of ICCA under the Senior Notes and
the application of such funds by ICCA for payment of (a) Permitted
Expenditures, (b) in the event of a Change of Control, the Change of Control
Payment and (c) in the event of a Special Offer to Purchase or a Special
Mandatory Redemption, the purchase or redemption price in connection
therewith. See "Description of New Notes -- Proceeds Pledge and Escrow
Agreement."
(2) Includes $18,375,000 of the proceeds of the Initial Offering which were
attributed to the Warrants based on their estimated fair value. Such amount
will be recorded as additional original issue discount ("OID") with respect
to the Senior Notes and will be amortized over the life of the Senior Notes,
using the effective interest method. Outstanding warrants include such OID
and $7,875,000 attributable to the value of warrants issued to UBS
Securities.
35
<PAGE> 41
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Existing Notes were sold by the Company on October 27, 1997 (the
"Closing Date") to the Initial Purchaser pursuant to the Purchase Agreement. The
Initial Purchaser subsequently placed the Existing Notes with qualified
institutional buyers in reliance on Rule 144A and Regulation S under the
Securities Act. As a condition to the sale of the Existing Notes, the Company
and the Initial Purchaser entered into the Registration Rights Agreement on
October 27, 1997. Pursuant to the Registration Rights Agreement, the Company
agreed that, unless the Exchange Offer is not permitted by applicable law or
Commission policy, it would (i) file with the Commission a Registration
Statement under the Securities Act with respect to the New Notes within 45 days
after the Closing Date; (ii) use its reasonable best efforts to cause such
Registration Statement to become effective under the Securities Act at the
earliest possible time, but in no event later than 120 days after the Closing
Date; (iii) in connection with the foregoing, file (A) all pre-effective
amendments to the Registration Statement as may be necessary in order to cause
the Registration Statement to become effective, (B) if applicable, a
post-effective amendment to the Registration Statement pursuant to Rule 430A
under the Securities Act and (C) cause all necessary filings in connection with
the registration and qualification of the New Notes to be made under the Blue
Sky laws as are necessary to meet the consummation of the Exchange Offer; and
(iv) upon effectiveness of the Registration Statement, to commence the Exchange
Offer, maintain the effectiveness of the Registration Statement for at least 20
business days (or a longer period if required by law) and deliver to the
Exchange Agent New Notes in the same aggregate principal amount as the Existing
Notes that were tendered by holders thereof pursuant to the Exchange Offer.
Further, the Company is expected to use its reasonable best efforts to cause the
Exchange Offer to be consummated on the earliest practicable date after the
Registration Statement becomes effective, but in no event later than 30 business
days thereafter. A copy of the Registration Rights Agreement has been filed as
an exhibit to the Registration Statement of which this Prospectus is a part. The
Registration Statement of which this Prospectus is a part is intended to satisfy
certain of the Company's obligations under the Registration Rights Agreement and
the Purchase Agreement.
RESALE OF THE NEW NOTES
ICCA makes the Exchange Offer in reliance on the position of the Staff of
the Commission as set forth in certain no-action letters issued to other parties
in other transactions. However, the Company has not sought its own no-action
letter and there can be no assurance that the Staff of the Commission would make
a similar determination with respect to the Exchange Offer as in such other
circumstances. Based on these interpretations of the Staff of the Commission,
the Company believes that the New Notes issued pursuant to this Exchange Offer
in exchange for Existing Notes may be offered for resale, sold or otherwise
transferred by holders thereof (other than any such holder which is (i) a
broker-dealer who acquired such Existing Notes directly from the Company for
resale pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the holder is acquiring the New Notes in the ordinary course of its
business and is not participating, does not intend to participate, and has no
arrangement with any person to participate, in the distribution of the New
Notes. However, if any holder acquires the New Notes in the Exchange Offer for
the purpose of distributing or participating in the distribution of the New
Notes or is a broker-dealer, such holder cannot rely on the position of the
Staff of the Commission enumerated in certain no-action letters issued to third
parties and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-dealer
that receives New Notes for its own account in exchange for Existing Notes,
where such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities,
36
<PAGE> 42
must acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Existing Notes where such Existing Notes were acquired by such broker-dealer as
a result of market-making or other trading activities. Pursuant to the
Registration Rights Agreement, the Company has agreed to make this Prospectus,
as it may be amended or supplemented from time to time, available to
broker-dealers for use in connection with any resale for a period of 120 days
after the Expiration Date. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Existing
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of New Notes in exchange for each
$1,000 principal amount of outstanding Existing Notes surrendered pursuant to
the Exchange Offer. Existing Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the New Notes are the same as the form and terms of
the Existing Notes for which they may be exchanged pursuant to the Exchange
Offer, except that the New Notes will be registered under the Securities Act and
hence the New Notes will not bear legends restricting their transfer thereof.
The New Notes will evidence the same indebtedness as the Existing Notes (which
they replace) and will be issued under, and be entitled to the benefits of, the
Indenture, which also authorized the issuance of the Existing Notes, such that
both series will be treated as a single class of debt securities under the
Indenture.
As of the date of this Prospectus, $150.0 million aggregate principal
amount of the Existing Notes are outstanding and registered in the name of Cede
& Co., as nominee for the Depository Trust Company (the "Depositary"), in the
case of Existing Notes sold pursuant to Rule 144A, and CEDEL, S.A., in the case
of Existing Notes sold pursuant to Regulation S. Only a registered holder of the
Existing Notes (or such holder's legal representative or attorney-in-fact), as
reflected on the records of the Trustee under the Indenture, may participate in
the Exchange Offer. There will be no fixed record date for determining
registered holders of the Existing Notes entitled to participate in the Exchange
Offer.
Holders of the Existing Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
The Company shall be deemed to have accepted validly tendered Existing
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Existing Notes for the purposes of receiving the New Notes from the
Company.
Holders who tender Existing Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Existing Notes pursuant to the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "-- Fees and Expenses."
37
<PAGE> 43
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1998 unless the Company, in its sole discretion, extends the
Exchange Offer, in which cash the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice, (ii) will mail to the
registered holders an announcement thereof, (iii) will issue a press release or
other public announcement which shall include disclosure of the approximate
number of Existing Notes deposited to date, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Existing Notes, (ii) to extend the Exchange Offer, or (iii) if any
conditions set forth below under "-- Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such delay,
extension or termination to the Exchange Agent. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof to the registered holders. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and
the Company will extend the Exchange Offer for a period of five to 10 business
days depending upon the significance of the amendment and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to 10 business day period.
INTEREST ON THE NEW NOTES
The New Notes bear interest at a rate equal to 14% per annum. Interest on
the New Notes is payable semi-annually on each April 27 and October 27,
commencing on the first such date following their date of issuance. Holders of
New Notes will receive interest on April 27, 1998 from the date of initial
issuance of the New Notes, plus an amount equal to the accrued interest on the
Existing Notes from the date of initial delivery to the date of exchange thereof
for New Notes. Holders of Existing Notes that are accepted for exchange will be
deemed to have waived the right to receive any interest accrued on the Existing
Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Existing Notes may tender such Existing Notes
in the Exchange Offer. To tender in the Exchange Offer a holder must complete,
sign and date the Letter of Transmittal, or facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent at the address set forth below under "-- Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Existing Notes must be received by the Exchange Agent along with the Letter
of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Existing Notes, if such procedure is
available, into the Exchange Agent's account at the Depositary pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth in herein and in the
Letter of Transmittal.
38
<PAGE> 44
THE METHOD OF DELIVERY OF EXISTING NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR EXISTING NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) of the Existing Notes whose Existing Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Existing Notes, either make appropriate
arrangements to register ownership of the Existing Notes in such owner's name or
obtain a properly completed bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "The Exchange Offer -- Withdrawal of Tenders"), as the case may be,
must be guaranteed by an Eligible Institution (as defined below) unless the
Existing Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution, as
defined below. In the event that signatures on a Letter of Transmittal or a
notice of withdrawal, as the case may be, are required to be guaranteed, such
guarantee must be made by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. a commercial
bank or trust company having an office or correspondent in the United States or
an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act which is a member of one of the recognized signature guarantee
programs identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Existing Notes listed therein, such Existing Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Existing
Notes.
If the Letter of Transmittal or any Existing Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Existing Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Existing Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Existing Notes not properly tendered or any Existing Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Existing Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all
39
<PAGE> 45
parties. Unless waived, any defects or irregularities in connection with tenders
of Existing Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects or irregularities with
respect to tenders of Existing Notes, neither the Company, the Exchange Agent
nor any other person shall incur any liability for failure to give such
notification. Tenders of Existing Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived.
While the Company has no present plan to acquire any Existing Notes which
are not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Existing Notes which are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Existing Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "-- Conditions,"
to terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Existing Notes in the open market, in privately negotiated transactions
or otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes to be acquired by the holder of the Existing Notes in
connection with the Exchange Offer are being acquired by the holder in the
ordinary course of business of the holder, (ii) the holder has no arrangement or
understanding with any person to participate in the distribution of New Notes,
(iii) the holder acknowledges and agrees that any person who is a broker-dealer
registered under the Exchange Act or is participating in the Exchange Offer for
the purposes of distributing the New Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes acquired by such person and cannot
rely on the position of the Staff of the Commission set forth in certain
no-action letters, (iv) the holder understands that secondary resale transaction
described in clause (iii) above and any resales of New Notes obtained by such
holder in exchange for Existing Notes acquired by such holder directly from the
Company should be covered by an effective registration statement containing the
selling securityholder information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission, and (v) the holder is not an
"affiliate," as defined in Rule 405 of the Securities Act, of the Company. If
the holder is a broker-dealer that will receive New Notes for its own account in
exchange for Existing Notes that were acquired as a result of market-making
activities or other trading activities, the holder is required to acknowledge in
the Letter of Transmittal that it will deliver a prospectus in connection with
any resale of such New Notes; however, by so acknowledging and by delivering a
prospectus, the holder will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
RETURN OF EXISTING NOTES
If any tendered Existing Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Existing Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Existing Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Existing Notes tendered by book-entry transfer into the Exchange Agent's
account at the Depositary pursuant to the book-entry transfer procedures
described below, such Existing Notes will be credited to an account maintained
with the Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Existing Notes at the Depositary for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make
book-entry delivery of Existing Notes by causing the Depositary to transfer such
Existing Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of
Existing Notes may be effected through book-entry transfer at the Depositary,
the Letter of Transmittal or
40
<PAGE> 46
facsimile thereof, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address set forth below under "The Exchange -- Exchange Agent" on
or prior to the Expiration Date or pursuant to the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Existing Notes and (i) whose Existing
Notes are not immediately available or (ii) who cannot deliver their Existing
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Existing Notes and
the principal amount of Existing Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Exchange Date, the Letter of Transmittal
(or a facsimile thereof) together with the certificate(s) representing the
Existing Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Existing
Notes in proper form for transfer and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within five New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Existing Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Existing Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Existing Notes to be withdrawn (the "Depositor"), (ii) identify the Existing
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Existing Notes), and (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Existing Notes were tendered (including any required signature guarantees). All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company in its sole discretion, whose
determination shall be final and binding on all parties. Any Existing Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Existing Notes so withdrawn are validly retendered. Properly withdrawn Existing
Notes may be retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
41
<PAGE> 47
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the New Notes for, any Existing
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Existing Notes, if the Exchange Offer violates applicable
law, rule or regulation or an applicable interpretation of the Staff of the
Commission.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Existing
Notes and return all tendered Existing Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Existing Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Existing Notes (see "The Exchange Offer -- Withdrawal of Tenders")
or (iii) waive such unsatisfied conditions with respect to the Exchange Offer
and accept all properly tendered Existing Notes which have not been withdrawn.
If such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that will
be distributed to the registered holders of the Existing Notes, and the Company
will extend the Exchange Offer for a period of five to 10 business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during such
five to 10 business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Existing Notes eligible to participate in this
Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Company's continuing obligations (i) to indemnify the
holders (including any broker-dealers) and certain parties related to the
holders against certain liabilities (including liabilities under the Securities
Act), (ii) to provide, upon the request of any holder of a transfer-restricted
Existing Note, the information required by Rule 144A(d)(4) under the Securities
Act in order to permit resales of such Existing Notes pursuant to Rule 144A,
(iii) to use its best efforts to keep the Registration Statement effective to
the extent necessary to ensure that it is available for resales of
transfer-restricted Existing Notes by broker-dealers for a period of 120 days
from the date on which the Registration Statement is declared effective and (iv)
to provide copies of the latest version of the Prospectus to broker-dealers upon
their request for a period of 120 days from the date on which the Registration
Statement is declared effective; provided, however, that, if any Holder of the
Existing Notes notifies ICCA within 20 days of the consummation of the Exchange
Offer: (A) that such Holder is prohibited by applicable law or Commission policy
from participating in the Exchange Offer, or (B) that such Holder may not resell
the New Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement (as defined herein) is not appropriate or available for
such resales by such Holder, or (C) that such Holder is a broker-dealer and
holds Existing Notes acquired directly from the Company or one of its
affiliates, then the Company shall: cause to be filed a Shelf Registration
Statement (as defined herein) pursuant to Rule 415 under the Act, which may be
an amendment to the Exchange Offer Registration Statement on or prior to the
Shelf Filing Deadline (as defined herein), which Shelf Registration Statement
shall provide for resales of all Existing Notes. In the event of a Registration
Default (as defined herein), the Company is required to pay Liquidated Damages.
See "-- Liquidated Damages" and "Description of New Notes -- Registration
Rights; Liquidated Damages."
LIQUIDATED DAMAGES
In the event of a Registration Default under and as defined in the
Registration Rights Agreement, the Company is required to pay liquidated damages
to each holder of Transfer Restricted Securities (as defined below), during the
first 90-day period immediately following the occurrence of such Registration
Default in an amount equal to $0.05 per week per $1,000 principal amount of
Senior Notes constituting Transfer
42
<PAGE> 48
================================================================================
Restricted Securities held by such holder for each week or portion thereof that
the Registration Default continues. Transfer Restricted Securities shall mean
each Senior Note until the earlier to occur of: (i) the date on which such
Senior Note has been exchanged for a New Note in the Exchange Offer and to be
resold to the public by the Holder thereof without complying with the prospectus
delivery requirements of the Securities Act, (ii) the date on which such Senior
Note has been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement (as defined in the Registration
Rights Agreement) and (iii) the date on which such Senior Note is distributed to
the public pursuant to Rule 144 under the Securities Act or by a broker-dealer
pursuant to the "Plan of Distribution" contemplated by the Registration
Statement. The amount of the liquidated damages will increase by an additional
$0.05 per week per $1,000 principal amount of Senior Notes constituting Transfer
Restricted Securities for each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of liquidated damages of $0.50
per week per $1,000 principal amount of Senior Notes constituting Transfer
Restricted Securities. All accrued liquidated damages shall be paid to Record
Holders by wire transfer of immediately available funds or by federal funds
check or on each Damages Payment Date as set forth under the Indenture.
Following the cure of all Registration Defaults, the payment of liquidated
damages will cease. The filing and effectiveness of the Registration Statement
of which this Prospectus is a part and the consummation of the Exchange Offer
will eliminate all rights of the holders of Existing Notes eligible to
participate in the Exchange Offer to receive damages that would have been
payable if such actions had not occurred.
EXCHANGE AGENT
State Street Bank & Trust has been appointed as Exchange Agent in
connection with the Exchange Offer. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the Letter of
Transmittal and requests for Notice of Guaranteed Delivery should be directed to
the Exchange Agent addressed as follows:
<TABLE>
<C> <C>
By Mail: By Hand Delivery:
State Street Bank & Trust Company
State Street Bank & Trust Company Corporate Trust Department
P.O. Box 778 4th Floor
Boston, Massachusetts 02102-0078 Two International Place
Attention: Sandra Szczsponik Boston, Massachusetts 02102-0078
Attention: Sandra Szczsponik
By Overnight Delivery: By Facsimile:
Corporate Trust Department State Street Bank & Trust Company
State Street Bank & Trust Company (617) 664-5232
4th Floor
Two International Place Confirm by Telephone:
Attention: Sandra Szczsponik
(617) 664-5314
</TABLE>
State Street Bank & Trust Company is an affiliate of the Trustee under the
Indenture.
INFORMATION AGENT
Kissel Blake, Inc. has been appointed as Information Agent in connection
with the Exchange Offer. The Information Agent may contact the Holders of
Existing Notes by mail, telephone, telegraph, facsimile and personal interview
and may request brokers, dealers and other nominees for Existing Noteholders to
forward material relating to the Exchange Offer to beneficial owners of Existing
Notes. ICCA will pay the Information Agent reasonable and customary compensation
for all such services in addition to reimbursing the Information
43
<PAGE> 49
Agent for reasonable out-of-pocket expenses in connection therewith. ICCA has
agreed to indemnify the Information Agent against certain liabilities and
expenses in connection with the Exchange Offer, including, without limitation,
certain liabilities under the federal securities laws. Questions and requests
for assistance may be requested from the Information Agent at the following
address: Kissel-Blake, Inc., 110 Wall Street, New York, New York 10005, Toll
Free Number (800) 554-7733.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$250,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, Exchange Information Agent, accounting and legal
fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Existing Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Existing Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Existing
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Existing Notes which are not exchanged for the New Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Existing
Notes may be resold only (i) to a person whom the seller reasonably believes is
a qualified institutional buyer (as defined in rule 144A under the Securities
Act) in a transaction meeting the requirements of Rule 144A, (ii) in a
transaction meeting the requirements of Rule 144 under the Securities Act, (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act or (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the Company
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the New Notes.
44
<PAGE> 50
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information consists
of the Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30,
1997 and the Unaudited Pro Forma Condensed Combined Statements of Operations for
the year ended December 31, 1996 and the nine months ended September 30, 1997
(collectively the "Pro Forma Statements"). The Unaudited Pro Forma Condensed
Combined Balance Sheet as of September 30, 1997 gives effect to the Initial
Offering, the use of the proceeds therefrom and the consummation of the Iusatel
Acquisition, as if they each had occurred at that date and the related Unaudited
Pro Forma Condensed Combined Statements of Operations for the year ended
December 31, 1996 and the nine months ended September 30, 1997 gives effect to
the Initial Offering, the application of proceeds therefrom and the consummation
of the Iusatel Acquisition as if they each had occurred at the beginning of the
relevant period. The Iusatel Acquisition is accounted for under the purchase
method of accounting.
The September 30, 1997 historical balance sheet information for ICCA and
Iusatel has been derived from the unaudited September 30, 1997 balance sheets of
ICCA and Iusatel, respectively, included in this Prospectus. The information for
the nine months ended September 30, 1997 have been derived from ICCA's and
Iusatel's unaudited statement of operations for the nine months ended September
30, 1997 included elsewhere herein. The pro forma adjustments relating to the
purchase by ICCA of Iusatel represent the Company's preliminary determinations
of these adjustments and are based upon available information and certain
assumptions the Company considers reasonable under the circumstances. Final
amounts could differ from those set forth herein. The unaudited historical
financial information of ICCA referred to above, in the opinion of management of
ICCA, include all adjustments consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of ICCA for the unaudited
interim periods.
The Pro Forma Statements and accompanying notes should be read in
conjunction with the Company's consolidated financial statements and Iusatel's
Financial Statements, including the notes thereto, appearing elsewhere in this
Prospectus. The Pro Forma Statements do not purport to represent what the
Company's results of operations or financial position would actually have been
if the aforementioned transactions or events had occurred on the dates specified
or to project the Company's results of operations or financial position for any
future periods or at any future date. The pro forma adjustments are based upon
available information and certain adjustments that the Company believes are
reasonable. In the opinion of the Company, all adjustments have been made that
are necessary to present fairly the Pro Forma Statements.
45
<PAGE> 51
INTERAMERICAS COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA PRO FORMA
ICCA IUSATEL(1) ADJUSTMENTS(2) ICCA
------- ---------- -------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 299 211 $ 12,185(a) $ 12,695
Restricted bank deposits and escrows.................. 164 -- 83,686(b) 83,850
Accounts receivable, net.............................. 76 1,518 -- 1,594
Notes and other receivables........................... 80 145 -- 225
Due from related parties.............................. 27 -- -- 27
Prepaid expenses and other............................ 496 437 -- 933
------- ------ -------- --------
Total current assets........................... 1,142 2,311 95,871 99,324
Restricted escrows...................................... -- -- 36,300(c) 36,300
Property and equipment, net............................. 5,956 3,000 -- 8,956
Intangibles, net........................................ 4,826 17 5,977(d) 10,820
Deferred financing costs and other...................... 1,797 -- 15,146(e) 16,943
------- ------ -------- --------
Total assets................................... $13,721 $5,328 $153,294 $172,343
======= ====== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank lines of credit and Bridge Notes................. $ 1,407 -- $ (1,407)(f) $ --
8% Convertible Debentures, net of original issue
discount............................................ 532 -- (532)(g) --
7% Convertible Debentures, net of original issue
discount............................................ 861 -- (861)(i) --
Accounts payable and accrued expenses................. 2,982 1,454 -- 4,436
Notes payable......................................... -- 687 -- 687
Due to related parties................................ 47 1,389 -- 1,436
Lease obligations, current............................ 45 255 -- 300
Other current liabilities............................. 85 1,016 (73)(h) 1,028
------- ------ -------- --------
Total current liabilities........................... 5,959 4,801 (2,873) 7,887
Senior Notes, net of original issue discount............ -- -- 131,625(j) 131,625
Lease obligations, long-term............................ 463 50 -- 513
Other................................................... 152 270 -- 422
------- ------ -------- --------
Total liabilities................................... 6,574 5,121 128,752 140,447
------- ------ -------- --------
Stockholders' equity.................................... 7,147 207 24,542(k) 31,896
------- ------ -------- --------
Total liabilities and stockholders' equity..... $13,721 5,328 $153,294 $172,343
======= ====== ======== ========
</TABLE>
46
<PAGE> 52
INTERAMERICAS COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 NINE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------------------- -------------------------------------------------
HISTORICAL HISTORICAL
-------------------- PRO FORMA PRO FORMA -------------------- PRO FORMA PRO FORMA
ICCA IUSATEL(2) ADJUSTMENTS(3) ICCA ICCA IUSATEL(2) ADJUSTMENTS(3) ICCA
------- ---------- -------------- --------- ------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales..................... $ 652 $ 7,822 $ -- $ 8,474 853 $ 6,353 $ -- $ 7,206
Operating expenses:
Cost of sales........... 958 5,598 -- 6,556 942 3,995 -- 4,937
Selling, general and
administrative........ 3,345 5,068 -- 8,413 7,651 3,732 -- 11,383
Depreciation and
amortization.......... 706 519 450(a) 1,675 658 342 338(a) 1,338
------- ------- -------- -------- ------- ------- -------- --------
Total operating
expenses........ 5,009 11,185 450 16,644 9,251 8,069 338 17,658
------- ------- -------- -------- ------- ------- -------- --------
Loss from operations...... (4,357) (3,363) (450) (8,170) (8,398) (1,716) (338) (10,452)
Other income (expense).... (23) (444) -- (467) 48 (150) -- (102)
Interest expense.......... (246) (1,361) (21,386)(b) (22,993) (1,543) (200) (16,280)(b) (18,023)
------- ------- -------- -------- ------- ------- -------- --------
Net loss.................. $(4,626) $(5,168) $(21,836) $(31,630) (9,893) (2,066) $(16,618) $(28,577)
======= ======= ======== ======== ======= ======= ======== ========
Net loss per common
share................... $ (0.31) $ (2.14) (.61) $ (1.77)
======= ======== ======= ========
Weighted average common
shares outstanding
(000's)................. 14,796 14,796 16,170 16,170
======= ======== ======= ========
</TABLE>
47
<PAGE> 53
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS)
(1) Represents condensed financial information derived from the Iusatel
Financial Statements included elsewhere in this Prospectus. The Iusatel
Financial Statements have been prepared in accordance with Chilean GAAP. For
comparative purposes, the amounts disclosed for the year ended December 31, 1995
have been restated in terms of Chilean Pesos of December 31, 1996 purchasing
power while the unaudited interim September 30, 1997 amounts are expressed in
constant Chilean Pesos of September 30, 1997. Such financial statements also
include, for the convenience of the reader, translation of amounts from Chilean
Pesos into U.S. dollars at the exchange rate on September 30, 1997 of
Ch$414.47 = US$1.
The information below for Iusatel reconciles the Chilean GAAP convenience
translation balances to US GAAP. The adjustment column reflects (a) the
principal differences between Chilean GAAP and US GAAP included in Note 28 to
the Iusatel Financial Statements; and (b) the impact of remeasuring
(translating) amounts in accordance with the criteria set forth in Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation," using the
current rate method of translation, as the Chilean Peso is considered to be the
functional currency and the books and records are maintained in that currency as
follows:
- Assets and liabilities are translated using the current exchange rate at
the balance sheet date.
- Paid-in capital is translated at historical exchange rates.
- Accumulated losses are translated at the weighted average of the
historical rates in effect when the income was earned.
- All revenues and expenses are translated using the exchange rate of the
transaction date.
- Adjustments from translation of the financial statements are reported in
a separate component of equity.
- Exchange gains and losses from translations and balances that are
receivable or payable in a currency other than the functional currency
are included in income.
<TABLE>
<CAPTION>
IUSATEL'S BALANCE SHEET AT SEPTEMBER 30, 1997
-----------------------------------------------
CHILEAN GAAP US GAAP US GAAP
THUS$ ADJUSTMENTS THUS$
--------------- -------------- ----------
<S> <C> <C> <C>
Current assets............................. $2,312 $ -- $2,311
Fixed assets............................... 3,607 (607) 3,000
Other assets............................... 18 (1) 17
------ ----- ------
$5,936 $(608) $5,328
====== ===== ======
Current liabilities........................ $4,801 $ -- $4,801
Long-term liabilities...................... 320 -- 320
Shareholders' equity....................... 815 (608) 207
------ ----- ------
$5,936 $(608) $5,328
====== ===== ======
</TABLE>
<TABLE>
<CAPTION>
IUSATEL'S STATEMENT OF OPERATIONS FOR THE
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 NINE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------ ------------------------------------
CHILEAN GAAP US GAAP US GAAP CHILEAN GAAP US GAAP US GAAP
THUS$ ADJUSTMENTS THUS$ THUS$ ADJUSTMENTS THUS$
------------ ----------- ------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Sales.................... $ 8,150 $ (328) $7,822 $ 6,420 $(67) $ 6,353
Operating expenses:
Cost of sales.......... 4,846 752 5,598 4,644 (649) 3,995
Selling, general and
administrative....... 5,256 (188) 5,068 3,774 (42) 3,732
Depreciation and
amortization......... 539 (20) 519 346 (4) 342
------- ------- ------- ------- ---- -------
10,641 544 11,185 8,764 (695) 8,069
------- ------- ------- ------- ---- -------
Loss from operations..... (2,491) (872) (3,363) (2,344) 628 (1,716)
Other income (expense)... 276 (720) (444) (415) 265 (150)
Interest expense......... (1,417) 56 (1,361) (204) 4 (200)
------- ------- ------- ------- ---- -------
Net loss............... $(3,632) $(1,536) $(5,168) $(2,963) $897 $(2,066)
======= ======= ======= ======= ==== =======
</TABLE>
48
<PAGE> 54
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
(2) Represents pro forma adjustments to reflect the Offering, the application of
proceeds therefrom and the consummation of the Iusatel Acquisition as
follows:
(a) Cash and cash equivalents:
<TABLE>
<S> <C> <C>
Proceeds from Senior Notes................................ $ 150,000
Cash used to pay estimated transaction fees and expenses
of the Senior Note Offering............................. (7,500)
Cash used to pay short-term bank lines of credit and
Bridge Notes, net of
restricted bank deposits................................ (1,365)
Cash used to pay Convertible Debentures*.................. (2,900)
Cash used for Iusatel Acquisition**....................... (5,900)
Cash transferred to short-term restricted escrows:**
Collateral Account...................................... $(62,850)
Pledge Account.......................................... (21,000) (83,850)
--------
Cash transferred to long-term restricted escrows:**
Pledge Account (interest due after one year on Senior
Notes)................................................ (36,300)
---------
$ 12,185
=========
</TABLE>
(b) Restricted bank deposits and escrows:
<TABLE>
<S> <C> <C>
Proceeds from the Senior Note Offering.................... $ 83,850
Restricted bank deposits used to pay bank lines of
credit.................................................. (164)
---------
83,686
=========
</TABLE>
(c) Restricted escrows (long-term):
<TABLE>
<S> <C> <C>
Pledge Account (for interest payments due beyond one year
on Senior Notes)........................................ $ 36,300
=========
</TABLE>
(d) Intangible assets, net:
<TABLE>
<S> <C> <C>
Intangible assets acquired in the Iusatel Acquisition..... $ 5,977
=========
</TABLE>
(e) Deferred financing costs and other:
<TABLE>
<S> <C> <C>
Estimated transaction fees and expenses related to Senior
Notes................................................... $ 7,500
Value of warrants issued to UBS Securities................ 7,875
Write-off unamortized deferred financing costs related to
Convertible Debentures and Bridge Notes................. (229)
---------
$ 15,146
=========
</TABLE>
(f) Bank lines of credit and Bridge Notes:
<TABLE>
<S> <C> <C>
Payment of short-term bank lines of credit................ $ (557)
Payment of Bridge Notes................................... (950)
Unamortized value of the Bridge Notes warrants............ 100
---------
$ (1,407)
=========
</TABLE>
(g) 8% Convertible Debentures:
<TABLE>
<S> <C> <C>
Payment of original principal amount...................... $ (550)
Unamortized value of warrants............................. 18
---------
$ (532)
=========
</TABLE>
(h) Other current liabilities:
<TABLE>
<S> <C> <C>
Payment of accrued interest on Convertible Debentures..... $ (73)
=========
</TABLE>
49
<PAGE> 55
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
(i) 7% Convertible Debentures:
<TABLE>
<S> <C> <C>
Payment of original principal amount.................... $ (1,000)
Unamortized value of warrants........................... 139
---------
$ (861)
=========
</TABLE>
(j) Senior Notes:
<TABLE>
<S> <C> <C>
Issuance of Senior Notes.................................. $ 150,000
Proceeds of the Senior Note Offering attributable to the
Warrants based on their estimated fair value***......... (18,375)
---------
$ 131,625
=========
</TABLE>
(k) Stockholders equity:
<TABLE>
<S> <C> <C>
Value attributable to 5,250,000 Warrants.................. $ 18,375
Value attributable to 2,250,000 warrants issued to UBS
Securities.............................................. 7,875
Eliminate historical equity of Iusatel.................... (207)
Extraordinary loss on early extinguishment of debt........ (1,420)
Reduction in additional paid in capital to eliminate value
of beneficial conversion feature on Convertible
Debentures.............................................. (365)
Value of 100,000 vested shares of Common Stock expected to
be issued to a director upon consummation of the Iusatel
Acquisition............................................. 284
---------
$ 24,542
=========
</TABLE>
* Cash used to pay Convertible Debentures reflects the Company's current
estimate of the amount required to redeem the 7% Convertible Debentures and
the 8% Convertible Debentures. This amount includes the original principal,
accrued interest, redemption premiums, penalties for not filing a
registration statement to register the shares of Common Stock issuable upon
conversion of the Convertible Debentures and penalties for not converting
the 8% Convertible Debentures pursuant to certain conversion notices. See
"Business -- Legal Proceedings" and the "Convertible Debentures."
** Deposits to the Collateral Account includes an additional $850,000 that may
be used to pay for contingent payments, if any, related to the Iusatel
Acquisition. See "The Iusatel Acquisition" and "Description of Senior
Notes -- Proceeds Pledge and Escrow Agreement."
*** Represents the proceeds of the Senior Note Offering attributable to the
Warrants based on their estimated fair value. Such amount will be recorded
as additional original issue discount ("OID") with respect to the Senior
Notes and will be amortized over the life of the Senior Notes, using the
effective interest method.
50
<PAGE> 56
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS, CONTINUED
(IN THOUSANDS OF U.S. DOLLARS)
(3) Represents pro forma adjustments to reflect the Senior Note Offering, the
application of proceeds therefrom and the consummation of the Iusatel
Acquisition on the condensed consolidated statements of operations for the
year ended December 31, 1996 and for the nine months ended September 30,
1997. The 1996 historical operating results for Resetel and HSA prior to the
acquisition by the Company in 1996 have not been included in the pro forma
tables for the year ended December 31, 1996 since such amounts are not
significant.
<TABLE>
<CAPTION>
FOR THE
FOR THE NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
(a) Depreciation and amortization:
Represents the amortization of intangible assets
acquired in the Iusatel Acquisition over a 10
year period...................................... $ 450 $ 338
======== ========
(b) Interest Expense
Interest expense on $150.0 million of Senior Notes
at an interest rate of 14.0% per annum........... $(21,000) $(15,750)
Represents current amortization expense related to
deferred financing costs and the original issue
discount attributable to warrants using the
effective interest method over a 10 year
period........................................... (1,386) (1,040)
Elimination of historical interest expense of
Iusatel for debt that will not be assumed by the
Company pursuant to the Iusatel Acquisition*..... 1,000 --
Elimination of previously recorded interest costs
associated with the issuance of the Convertible
Debentures during 1997 including actual interest
expense, beneficial conversion option, and
amortization of original issue discount
attributable to warrants and deferred financing
costs, net of capitalized interest............... -- 510
-------- --------
$(21,386) $(16,280)
======== ========
</TABLE>
51
<PAGE> 57
SELECTED HISTORICAL FINANCIAL DATA
ICCA
The selected historical financial data presented below as of December 31,
1995 and 1996 and for the years ended December 31, 1994, 1995 and 1996 have been
derived from the consolidated financial statements of the Company which were
audited by Price Waterhouse LLP, independent certified public accountants, and
which are included elsewhere in this Prospectus. The selected historical
financial data presented below as of September 30, 1997 and for the nine months
ended September 30, 1996 and 1997 have been derived from the unaudited
consolidated financial statements of the Company which are included elsewhere in
this Prospectus and which, in the opinion of the management of the Company,
include all adjustments, consisting of normal recurring accruals, necessary for
a fair presentation of the financial position and the results of operations for
such unaudited interim periods. The statement of operations data for the nine
months ended September 30, 1997 are not necessarily indicative of results that
are expected for subsequent periods or for a full year. The selected historical
financial data set forth below are qualified in their entirety by, and should be
read in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements,
including the notes thereto, and other financial information included elsewhere
in this Prospectus.
The Consolidated Financial Statements of the Company have been prepared in
accordance with U.S. GAAP. The financial statements of subsidiaries outside the
United States are prepared using the local currency as the functional currency.
Assets and liabilities of these subsidiaries are translated at the rate of
exchange at the balance sheet date. The resultant translation adjustments are
included as a separate component of stockholders' equity. Income and expense
items are translated at average monthly rates of exchange. Gains and losses from
foreign currency transactions of these subsidiaries are included in the
statement of operations.
IUSATEL
The selected historical financial data presented below as of December 31,
1995 and 1996 and for each of the two years in the period ended December 31,
1996 have been derived from the financial statements of Iusatel which were
audited by Langton Clarke Y Cia. Ltda.\ Coopers & Lybrand, independent
accountants, and which are included elsewhere in this Prospectus. The selected
historical financial data presented below as of September 30, 1997 and for the
nine months ended September 30, 1996 and 1997 have been derived from the
unaudited financial statements of Iusatel, which are included elsewhere in this
Prospectus. The statement of operations data for the nine months ended September
30, 1997 are not necessarily indicative of results that are expected for
subsequent periods or for a full year. The selected historical financial data
set forth below are qualified in their entirety by, and should be read in
conjunction with, the Iusatel Financial Statements, including the notes thereto
and other financial information included elsewhere in this Prospectus.
The Iusatel Financial Statements have been prepared in accordance with
Chilean GAAP. Chilean GAAP varies in certain significant respects from U.S.
GAAP. Note 28 to the 1996 Iusatel Financial Statements provide a description of
the principal differences between Chilean GAAP and U.S. GAAP.
Chilean GAAP requires that the financial statements be restated to reflect
the full effects of loss in the purchasing power of the Chilean Peso on the
operations of Iusatel. See Notes 2 and 4 to the Iusatel Financial Statements
contained elsewhere in this Prospectus. For comparative purposes, the Iusatel
Financial Statements and the amounts disclosed in the related notes for the year
ended December 31, 1995 have been restated in terms of Chilean Pesos based on
December 31, 1996 purchasing power. In accordance with Chilean regulations and
accounting practices, the restatement was calculated based on the Official
Consumer Price Index of the National Institute of Statistics, which was 6.6% for
the year ended November 30, 1996. The interim September 30, 1996 and 1997
financial statements have also been restated for general price-level changes,
but are expressed in constant Chilean Pesos of September 30, 1997. The effect of
not updating the December 31, 1995 and 1996 financial statements to September
30, 1997 constant pesos is not significant because the change in the inflation
index applicable for the restatement of financial statements for the nine month
period ended September 30, 1997 was only 3.9%. Additionally, if the updating by
the 3.9% increase had been made, it would have been applied to all amounts and
disclosures shown in the December 31, 1995 and 1996 financial statements and
accordingly, there would be no changes in the relationships among the amounts
and disclosures in those financial statements.
Balances in U.S. dollars included in the Iusatel balance sheets have been
translated into Chilean Pesos at the "Observed Exchange Rate" determined by the
Central Bank of Chile in effect at each period end using an
52
<PAGE> 58
SELECTED HISTORICAL FINANCIAL DATA, CONTINUED
average exchange rate of Ch$ per US$ as of December 31, 1995 and 1996, and as of
September 30, 1997 of Ch$406.91, Ch$424.87, and Ch$414.47, respectively.
Reference herein to "U.S. dollars" or "U.S. $" are to the lawful currency
of the United States. References herein to "pesos" or "P" are to the lawful
currency of Chile. Amounts may be expressed in thousands of constant Chilean
Pesos ("ThCh$") or thousands of US dollars ("ThUS$"). With respect to Iusatel,
the United States dollar amounts disclosed in the accompanying financial
statements as of December 31, 1996 and September 30, 1997 are presented solely
for the convenience of the reader at the September 30, 1997 exchange rate of
Ch$414.47 per U.S.$1. These translations should not be construed as
representations that the Chilean Peso amounts actually represent such U.S.
dollar amounts or could be converted into U.S. dollar amounts at the rate
indicated.
INTERAMERICAS COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS,
EXCEPT NET LOSS PER COMMON SHARE)
<S> <C> <C> <C> <C> <C>
Historical Operating Data(1):
Sales.......................................... $ 34 $ 224 $ 652 $ 477 $ 853
Operating expenses............................. (2,207) (2,722) (5,009) (3,290) (9,251)
------- ------- ------- ------- -------
Loss from operations........................... (2,173) (2,498) (4,357) (2,813) (8,398)
Other income (expense)......................... (45) (56) (23) 25 48
Interest expense............................... (313) (319) (246) (96) (1,543)
------- ------- ------- ------- -------
Net loss............................... $(2,531) $(2,873) $(4,626) $(2,884) $(9,893)
======= ======= ======= ======= =======
Ratio of earnings to fixed charges(2).......... -- -- -- -- --
Net loss per common share...................... $ (1.30) $ (0.31) $ (0.31) $ (0.20) $ (.61)
Weighted average shares outstanding............ 1,952 9,407 14,796 14,346 16,170
Cash Flows:
Cash used in operating activities.............. $ (489) $(2,150) $(3,934) $(3,471) $(3,435)
Cash used in investing activities.............. (2,049) (1,170) (2,968) (1,834) (1,855)
Cash provided by financing activities.......... 2,649 3,263 7,570 7,697 4,940
Other Financial Data:
EBITDA(3)...................................... $(2,097) $(2,102) $(3,651) $(2,295) $(7,740)
Depreciation and amortization.................. 76 396 706 518 658
Capital expenditures........................... 1,849 720 1,453 334 1,855
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------- SEPTEMBER 30,
1995 1996 1997
------ ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................. $ 57 $ 723 $ 299
Restricted bank deposits(4)............................... -- -- 164
Total assets.............................................. 4,347 10,354 13,721
Current debt:
8% Convertible Debentures, net of original issue
discount............................................. -- -- 532
7% Convertible Debentures, net of original issue
discount............................................. -- -- 861
Bank line of credit and Bridge Notes................... -- -- 1,407
Notes payable.......................................... 1,647 -- --
Lease obligations, current............................. 11 114 45
Long-term liabilities:
Lease obligations...................................... 210 248 463
Stockholders' equity................................... 670 8,280 7,147
</TABLE>
53
<PAGE> 59
SELECTED HISTORICAL FINANCIAL DATA, CONTINUED
IUSATEL CHILE, S.A.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------ -----------------------------------
1995 1996 1996 1996 1997 1997
----------- ----------- -------- ----------- ----------- -------
(THCH$) (THUS$) (THCH$) (THCH$) (THUS$)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Historical Operating Data:
Revenues......................... $ 1,134,550 $ 3,377,825 $ 8,150 $ 2,588,309 $ 2,661,035 $ 6,420
Expenses......................... (3,464,352) (4,410,341) (10,641) (3,202,881) (3,632,752) (8,764)
----------- ----------- -------- ----------- ----------- -------
Operating loss................... (2,329,802) (1,032,516) (2,491) (614,572) (971,717) (2,344)
Other income (expense)........... (7,745) (103,780) (250) (40,959) (219,662) (530)
Interest expense................. (483,033) (587,189) (1,417) (434,935) (84,220) (203)
Price-level restatement.......... 240,350 217,977 526 169,902 45,661 110
----------- ----------- -------- ----------- ----------- -------
Net loss.................. $(2,580,230) $(1,505,508) $ (3,632) $ (920,564) $(1,227,894) $(2,963)
=========== =========== ======== =========== =========== =======
Ratio of earnings to fixed
charges(3)..................... -- -- -- -- -- --
Historical Cash Flows:
Cash used in operating
activities..................... $(1,565,535) $(1,665,108) $ (4,017) (1,172,831) (91,972) (222)
Cash used in investing
activities..................... (380,459) (159,169) (384) (628,780) (41,777) (101)
Cash provided by financing
activities..................... 1,895,552 1,773,834 4,280 1,786,258 197,222 476
Other Financial Data:
EBITDA(2)........................ $(2,167,600) $ (809,237) $ (1,952) $ (789,235) (1,115,446) (2,691)
Depreciation and amortization.... 162,202 223,279 539 169,229 146,287 346
Capital expenditures............. 549,955 159,169 384 628,780 41,777 101
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
------------------------------------ --------------------
1995 1996 1996 1997 1997
----------- ----------- -------- ---------- -------
(THCH$) (THCH$) (THUS$) (THCH$) (THUS$)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents..................... $ 72,075 $ 23,758 $ 57 $ 87,945 $ 211
Total assets.................................. 2,491,757 3,342,962 8,066 2,460,228 5,936
Current debt:
Short-term bank liabilities................. 3,385,197 3,353,913 8,092 12,000 29
Lease obligations, current.................. 108,308 114,386 276 105,860 255
Notes payable............................... 156,182 280,143 676 284,611 687
Long-term liabilities:
Lease obligations........................... 165,972 91,306 220 20,689 50
Notes payable............................... 1,212 245,961 593 94,301 228
Payable to related companies................ 660,193 2,328,098 5,617 -- --
Stockholders equity........................... (2,705,421) (4,210,929) (10,160) 337,764 815
</TABLE>
- ---------------
(1) Historical financial data includes the operations of Resetel and HSA from
their respective dates of acquisition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(2) In calculating the ratio of earnings to fixed charges, earnings consist of
net loss prior to income taxes and fixed charges. Fixed charges consist of
interest expense and amortization of debt issuance costs.
(3) "EBITDA" represents income (loss) form operations before interest,
depreciation and amortization. EBITDA is presented because it is commonly
used in the telecommunications industry to measure operating performance,
asset value and financial leverage. However, EBITDA should not be considered
as an alternative to net income, as a measure of operating results, cash
flows or as a measure of liquidity in accordance with generally accepted
accounting principles. Also, EBITDA as defined herein may not be comparable
to similarly entitled measures reported by other companies.
(4) Restricted bank deposits represent cash held by banks that require such
deposits to be maintained in support of loans made to certain of ICCA's
subsidiaries.
54
<PAGE> 60
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and the notes thereto appearing
elsewhere in this Prospectus.
OVERVIEW
General
The Company is a new provider of high bandwidth integrated
telecommunication services to high volume users through state of the art fiber
optic networks located in Santiago, Chile and Lima, Peru. The Company began
development of its networks in Chile and Peru in 1994 and 1996, respectively. As
of June 30, 1997, the Company had (i) constructed a 120 kilometer fiber optic
network which extends through most of Santiago's downtown business district and
the outlying industrial and airport corridor and (ii) completed construction of
60 kilometers of its fiber optic network in Lima. The Lima network, when
completed, is expected to be approximately 230 kilometers in length and will
extend throughout the major commercial and industrial districts of Lima, and the
port city of Callao.
The Company has historically operated as a Latin American
telecommunications development stage company which has developed its operations
in Latin America through the acquisition of holding and operating companies that
own licenses, concessions or rights-of-way in what the Company believes to be
attractive markets. The following table sets forth the name, principal market
and date of acquisition of each entity acquired by the Company.
<TABLE>
<CAPTION>
NAME MARKET DATE OF ACQUISITION
- ---- ------ -------------------
<S> <C> <C>
Hewster Servicios Intermedios, S.A. ("HSI")................. Santiago July 15, 1994
VISAT, S.A. ("VISAT")....................................... Santiago September 23, 1994
Red de Servicios Empresariales de Telecomunicaciones, S.A.
("Resetel")............................................... Lima May 7, 1996
Hewster, S.A. ("HSA")....................................... Santiago July 31, 1996
Iusatel Chile S.A. ("Iusatel").............................. Santiago pending
</TABLE>
HSI is a Chilean corporation engaged in the development of a fiber optic
network in Santiago, Chile. VISAT is a Chilean corporation that holds a
government concession to provide intermediate telecommunications services,
including the installation and operation of a network of 12 satellite earth
stations and a switch throughout Chile, which allows the Company to transmit
either "C" or "KU" bands for satellite communications and broad band
distribution. Resetel is a Peruvian corporation that holds a concession to build
and operate a fiber-optic telecommunications network in Lima and Callao, Peru.
HSA is a Chilean corporation that provides various network installation and
systems integration services. HSI and HSA were combined to operate under the
name of Hewster Chile, S.A. ("Hewster Chile") Currently, Hewster Chile, Visat,
and Resetel are substantially wholly-owned subsidiaries of ICCA. Iusatel is a
Chilean corporation which currently provides domestic and international long
distance services in Chile through its own gateway switch and satellite earth
station, as well as through interconnections with other Chilean long distance
carriers.
Due to lack of capital, the Company has been unable to complete its fiber
optic networks and last mile connections in order to provide meaningful revenue
generation. Thus, to date, the majority of the Company's revenues have been
generated through systems integration and consulting fees provided by the
Company's Hewster Chile operations. With the proceeds of the Initial Offering,
the Company anticipates that it will have the capital necessary to complete and
leverage its networks to provide significant, sustainable network-based
telecommunications revenues. Due to the changing scope of its operations, the
Company believes that its historical operating results and statistics may not be
indicative nor representative of future results and statistics.
55
<PAGE> 61
Sales
Today, the Company derives its sales primarily from services provided by
Hewster Chile which provides voice and data communications services on a private
line basis, and supplies its customers with local and wide-area network design,
engineering, systems integration and support services. The Company expects sales
to increase significantly over the next few years due to the continued expansion
of its operations.
Costs of Sales
Cost of sales include both the cost of services provided and the cost of
equipment sold. Today, cost of sales relate principally to the Company's
operations in Chile. Such costs of services include payments under lease
agreements to install and operate the Company's fiber optic network in the
Santiago subway system. The lease agreement requires payments based on monthly
invoicing of the Company, subject to minimum amounts. The Company anticipates
that the cost of sales will increase with the expansion of its operations.
However, as a percentage of sales, the Company anticipates that the cost of
sales will decrease over time as a result of economies of scale in its
operations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist principally of
compensation expense, professional fees, consulting services, travel costs,
office rent and other general corporate expenses. As ICCA's subsidiaries expand
their operations, complete construction of their fiber optic networks and add
new customers, the Company expects a larger portion of selling, general and
administrative expenses to be incurred at the subsidiary level. The Company
expects selling, general and administrative expenses to increase over time as it
continues to expand its operations. However, selling, general, and
administrative expenses as a percentage of sales is expected to decrease over
time with the expansion of the Company's operations, although during the next
several years such costs could represent a higher percentage of sales compared
to historical amounts, as the Company funds the infrastructure necessary to
enhance sales in the future.
Selling general and administrative expenses for the nine month period ended
September 30, 1997 include non-cash compensation and consulting expense of
$4,640,000 related to the value of shares of Common Stock and stock options
issued to certain officers and former directors of the Company.
Depreciation and Amortization
The Company depreciates its property and equipment over their estimated
useful lives, which approximate twenty years for its fiber optic networks.
Intangible assets acquired in the acquisition of HSI, HSA and Visat are being
amortized over ten years. The concession purchased in the acquisition of Resetel
is being amortized over its estimated useful life of twenty years. The Company
believes that depreciation and amortization will continue to increase with the
expansion of its operations.
Interest Expense
The Company currently incurs interest expense on capital leases and also
incurs interest and related expenses attributable to the Company's Convertible
Debentures that were issued during the nine months
56
<PAGE> 62
ended September 30, 1997. Interest expense has been reduced for amounts
capitalized related to the Company's construction of its fiber optic networks.
Interest costs reported with respect to the Company's Convertible
Debentures include interest expense related to the stated coupon rate of
interest, the value attributable to the ability of the holders to convert the
debentures at a share price less than the closing bid price (as reported by the
Nasdaq SmallCap Market) at time of conversion ("beneficial conversion features")
and amortization of (i) deferred financing costs and (ii) original issue
discounts related to detachable warrants. The value attributable to the
beneficial conversion features have been expensed at date of issuance because
the agreements could allow holders of the Convertible Debentures to convert at
that date. As a result, for the nine months ended September 30, 1997 the Company
incurred noncash interest cost of $810,000 related to the fair value of the
beneficial conversion features.
Interest expense for the nine month period ended September 30, 1997 include
non-cash costs of $852,000 related to the value of 300,000 shares of Common
Stock issued to an individual for certain financial assistance provided to the
Company.
The Company expects interest expense to increase significantly in the
future due to the impact attributable to the Initial Offering.
Income Taxes
The Company is subject to federal, state and foreign income taxes but has
incurred no liability for such taxes due to net operating losses incurred. These
net operating losses could be used to offset future taxable income. The
Company's net deferred tax assets, which result primarily from the future
benefit of these net operating losses, are fully offset by a valuation allowance
for the same amount because of the uncertainty surrounding the future
realization of these net operating loss carryforwards. However, as the Company
expands its fiber optic networks in Chile and Peru, the Company expects to
generate taxable income. Certain tax benefits could expire prior to the time the
Company generates taxable income.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Sales. The Company's sales were $853,000 for the nine months ended
September 30, 1997 as compared to $477,000 for the nine months ended September
30, 1996. This increase of approximately $376,000, was attributable to the
acquisition of HSA on July 31, 1996.
Cost of Sales. The Company's cost of sales, relating principally to the
Company's operations in Chile, was $942,000 for the nine months ended September
30, 1997 as compared to $618,000 for the nine months ended September 30, 1996.
This increase of approximately $324,000, was attributable to services provided
by HSA.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses were $7,651,000 for the nine months ended
September 30, 1997 as compared to $2,154,000 for the nine months ended September
30, 1996. This increase of approximately $5,497,000, was primarily attributable
to non-cash compensation and consulting expense of $4,640,000 related to the
value of shares of Common Stock and stock options issued to certain officers and
former directors of the Company, an increase in corporate expenses related to
salaries, professional fees and travel attributable to the ongoing support of
the Company's subsidiary operations, as well as corporate development
opportunities, and expenses attributable to the Company's Resetel and Hewster
subsidiaries which were acquired by the Company in May and July 1996,
respectively.
Depreciation and Amortization. The Company's depreciation and amortization
expenses were $658,000 for the nine months ended September 30, 1997 as compared
to $518,000 for the nine months ended
57
<PAGE> 63
September 30, 1996. This increase of $140,000 was primarily attributable to an
increase in amortization expense related to the intangible assets purchased in
the acquisitions of Resetel and Hewster.
Interest Expense. The Company's interest expense was $1,543,000 for the
nine months ended September 30, 1997 as compared to $96,000 for the nine months
ended September 30, 1996. This increase of approximately $1,447,000 was due to
additional financing costs related to the issuance of Convertible Debentures in
February and May 1997 and the non-cash charge of $852,000 related to the value
of 300,000 shares of Common Stock issued to an individual for certain financial
assistance provided to the Company. Of the total interest cost incurred by the
Company for the nine month period ended September 30, 1997, $600,000 of such
costs were capitalized in connection with the Company's construction of its
fiber optic network in Lima, Peru.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Sales. The Company's sales were $652,000 for the year ended December 31,
1996 as compared to $224,000 for the year ended December 31, 1995. This increase
of approximately $428,000, was attributable to additional services provided by
the Company through its HSA subsidiary, which was acquired in July 1996.
Cost of Sales. The Company's cost of sales was $958,000 for the year ended
December 31, 1996 as compared to $408,000 for the year ended December 31, 1995.
This increase of approximately $550,000, was attributable to added costs
associated with the increase in sales discussed above.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses were $3,345,000 for the year ended December
31, 1996 as compared to $1,918,000 for the year ended December 31, 1995. This
increase of approximately $1,427,000, was primarily attributable to an increase
in corporate expenses related to salaries, professional fees, consulting fees
and travel attributable to the ongoing support of the Company's subsidiary
operations as well as corporate development opportunities, and expenses
attributable to the Company's Resetel and HSA subsidiaries which were acquired
by the Company in May 1996 and July 1996, respectively.
Depreciation and Amortization. The Company's depreciation and amortization
expenses were $706,000 for the year ended December 31, 1996 as compared to
$396,000 for the year ended December 31, 1995. This increase of $310,000 was
attributable to an increase in amortization expense related to the intangible
assets purchased in the acquisitions of Resetel and Hewster, as well as
additional depreciation expense related to commencement of operations of the
Company's fiber optic network in Chile.
Interest Expense. The Company's interest expense was $246,000 for the year
ended December 31, 1996 as compared to $319,000 for the year ended December 31,
1995. This decrease of approximately $73,000, was due to a reduction in the
Company's outstanding indebtedness during 1996.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
The Company commenced operations in Chile during July 1994. Therefore,
sales and costs of sales were minimal during 1994.
Sales. The Company's sales were $224,000 for the year ended December 31,
1995 as compared to $34,000 for the year ended December 31, 1994. This increase
of approximately $190,000, was attributable to a full year of operations during
1995.
Cost of Sales. The Company's cost of sales was $408,000 for the year ended
December 31, 1995 as compared to $163,000 for the year ended December 31, 1994.
This increase of approximately $245,000 was
58
<PAGE> 64
primarily attributable to costs related to payments under the lease agreements
to install and operate the fiber optic network through Santiago's Metro subway
system.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses were $1,918,000 for the year ended December
31, 1995 as compared to $1,968,000 for year ended December 31, 1994. This
decrease of approximately $50,000, was primarily attributable to a reduction in
legal and other professional fees relating to the 1994 incorporation of the
Company that were partially offset by an increase in salaries related to a full
year's operation of HSI.
Depreciation and Amortization. The Company's depreciation and amortization
expenses were $396,000 for the year ended December 31, 1995 as compared to
$76,000 for the year ended December 31, 1994. This increase of $320,000 was
attributable to an increase in depreciation expense related to commencement of
operations in 1995 of the Company's fiber optic network in Chile.
Interest Expense. The Company's interest expense of $319,000 for the year
ended December 31, 1995 was comparable to $313,000 for the year ended December
31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has been primarily engaged in start-up
activities requiring substantial expenditures. Consequently, the Company has
reported losses from operations, before interest, of approximately $2.2 million,
$2.5 million and $4.4 million for the years ended December 31, 1994, 1995 and
1996, respectively, as well as a loss from operations, before interest, for the
six months ended June 30, 1997 of approximately $2.3 million. In addition, the
Company has reported cash used in investing activities of approximately $2.0
million, $1.2 million and $3.0 million for the years ended December 31, 1994,
1995 and 1996, respectively, as well as cash used in investing activities for
the nine months ended September 30, 1997 of approximately $1.9 million. Cash
used in investing activities related primarily to the purchase of property and
equipment and the acquisitions of Visat and HSA. Further development of the
Company's business and the expansion of its fiber optic networks, service
offerings and customer base will require significant additional expenditures,
and the Company expects that it will have significant operating losses and net
cash outflows from operating and investing activities in the foreseeable future.
Since inception, the Company has funded its cash needs through a
combination of private equity and debt placements.
On October 27, 1997, the Company completed the Initial Offering pursuant to
Rule 144A and Regulation S promulgated under the Securities Act of 150,000
Units, consisting of an aggregate of $150 million aggregate principal amount of
14% Senior Notes due October 27, 2007 and 5,250,000 warrants (the "Unit
Warrants") to purchase 5,250,000 shares of Common Stock of the the Company at an
exercise price of $4.40 per share. The Unit Warrants entitle the holders thereof
to acquire an aggregate of 5,250,000 shares of Common Stock, representing
approximately 15.2% of the Common Stock of the Company on a fully diluted basis
as of the date of the consummation of the Initial Offering (assuming full
vesting and exercise of all options and warrants outstanding at November 14,
1997), at an exercise price of $4.40 per share. In addition, UBS Securities LLC,
the Initial Purchaser of the Units in the Initial Offering, was granted
2,250,000 warrants to acquire 2,250,000 shares of Common Stock of the Company at
an exercise price of $4.40 per share.
The net proceeds to the Company from the Initial Offering were
approximately $142.5 million, after deducting the underwriting discount and
estimated offering expenses. In addition, approximately $57.3 million of the
proceeds were used to purchase a portfolio of securities that was deposited in
escrow for payment of interest on the Senior Notes through October 27, 2000 and,
under certain circumstances, as security for repayment of principal of the
Senior Notes. The Company expects to use the remaining proceeds as follows
59
<PAGE> 65
(all amounts represent approximations): (i) $62.0 million to expand and operate
the Company's fiber optic networks in Peru and Chile; (ii) up to $7.2 million to
consummate the Iusatel Acquisition; (iii) $2.9 million to redeem the Convertible
Debentures; (iv) $1.5 million to pay existing short-term liabilities of the
Company, including outstanding bank debt and trade payables; (v) $975,000 to pay
indebtedness under the Bridge Notes (as defined herein); and (vi) the remaining
amounts for general corporate purposes. While the Company currently expects to
use the proceeds of the Offering as set forth above, there can be no assurance
that the Company's actual expenditures will equal the currently anticipated
amounts.
As part of its business strategy, the Company intends to continue to
evaluate potential acquisitions, joint ventures and strategic alliances in
companies that own existing networks or companies that provide services that
complement the Company's existing businesses. Although the Company continues to
consider potential acquisitions from time to time, other than the pending
acquisition of Iusatel, no agreement in principle to acquire or effect any
acquisition has been reached. Furthermore, there can be no assurance that the
acquisition of Iusatel will be consummated upon the terms presently contemplated
or at all. New sources of capital such as credit facilities and other
borrowings, and additional debt and equity issuances, may be used to fund such
acquisitions and similar strategic investments.
The Company intends to redeem all outstanding Convertible Debentures prior
to December 31, 1997. The Company estimates that approximately $1.0 million and
$550,000 in aggregate principal amount of the 7% Convertible Debentures and 8%
Convertible Debentures, respectively, will be outstanding at such time and that
the Company will be required to pay an aggregate of $2.9 million to extinguish
its liabilities related to the Convertible Debentures, including outstanding
principal, related accrued interest, redemption premiums, and penalties related
to non-registration and non-conversion. The payment of this amount would result
in an extraordinary loss on debt extinguishment of approximately $1.2 million.
The actual payment, and therefore the magnitude of the Company's loss on debt
extinguishment, could be lower or higher than the aforementioned amounts. See
"Unaudited Pro Forma Condensed Combined Financial Information."
As of the Closing Date of the Initial Offering, the Company has become
highly leveraged and has substantial debt service requirements. As of September
30, 1997, on a pro forma basis after giving effect to the Initial Offering, the
application of the proceeds therefrom and the consummation of the Iusatel
Acquisition, the Company would have had approximately $150.0 million of total
long-term indebtedness. In addition, in each year since its inception the
Company had net losses from operations and therefore had insufficient earnings
to cover its fixed charges on a pro forma basis after giving effect to the
Initial Offering, the application of proceeds therefrom and the consummation of
the Iusatel Acquisition. The Company's annual interest obligations under the
Senior Notes substantially exceeds the Company's net income. See "Risk
Factors -- Substantial Leverage; Ability to Service Indebtedness."
The ability of ICCA to make scheduled payments with respect to its
indebtedness, including the Senior Notes, will depend upon, among other things,
(i) its ability to implement its business plan, and to expand its operations and
to successfully develop its customer base in its target markets, (ii) the
ability of ICCA's subsidiaries to remit cash to ICCA in a timely manner and
(iii) the future operating performance of ICCA and its subsidiaries. Each of
these factors is, to a large extent, subject to economic, financial,
competitive, regulatory and other factors, many of which are beyond the
Company's control. The Company expects that it will continue to generate cash
losses for the foreseeable future. No assurance can be given that the Company
will be successful in developing and maintaining a level of cash flow from
operations sufficient to permit it to pay the principal of, and the interest on,
its indebtedness, including the Senior Notes. If the Company is unable to
generate sufficient cash flow from operations to service its indebtedness,
including the Senior Notes, it may have to modify its growth plans, restructure
or refinance its indebtedness or seek additional capital. There can be no
assurance that (i) any of these strategies can be effected on satisfactory
terms, if at all, in light of the Company's high leverage or (ii) any such
strategy would yield sufficient proceeds to service the Company's indebtedness,
including the Senior Notes. Any failure by the Company to satisfy its
obligations
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with respect to the Senior Notes at maturity or prior thereto would constitute a
default under the Indenture and could cause a default under other agreements
governing current or future indebtedness of the Company.
Substantially all of ICCA's assets are held by its subsidiaries and
substantially all of ICCA's sales are derived from operations of such
subsidiaries. Future acquisitions may be made through present or future
subsidiaries of ICCA. Accordingly, ICCA's ability to pay the principal of, and
interest and Liquidated Damages, if any, when due, on the Senior Notes is
dependent upon the earnings of its subsidiaries and the distribution of
sufficient funds from its subsidiaries. ICCA's subsidiaries will have no
obligation, contingent or otherwise, to make funds available to ICCA for payment
of the principal of, and interest and Liquidated Damages on, if any, the Senior
Notes. In addition, the ability of ICCA's subsidiaries to make such funds
available to ICCA may be restricted by the terms of such subsidiaries' current
and future indebtedness, the availability of such funds and the applicable laws
of the jurisdictions under which such subsidiaries are organized. Furthermore,
ICCA's subsidiaries will be permitted under the terms of the Indenture to incur
indebtedness that may severely restrict or prohibit the making of distributions,
the payment of dividends or the making of loans by such subsidiaries to ICCA.
The failure of ICCA's subsidiaries to pay dividends or otherwise make funds
available to ICCA could have a material adverse effect upon ICCA's ability to
satisfy its debt service requirements including its ability to make payments on
the Senior Notes. See "Risk Factors -- Holding Company Structure; Inability To
Access Cash Flow" and "Description of Senior Notes -- Certain
Covenants -- Dividends and Other Payment Restrictions Affecting Subsidiaries."
The Company believes the net proceeds from the Initial Offering will be
sufficient to satisfy the Company's liquidity needs through the end of 1999;
however, there can be no assurance that the Company will have sufficient
resources to meet its subsequent liquidity requirements.
To accelerate its growth rate and to finance the launch or build-out of
additional markets, the Company will consider obtaining financing from various
sources, including vendor financing provided by equipment suppliers, project
financing from commercial banks and international agencies, bank lines of credit
and the sale of equity and debt securities. To the extent ICCA or any of its
subsidiaries issues debt, its leverage and debt service obligations will
increase. There can no assurance that the Company will be able to raise such
capital on satisfactory terms, if at all. In addition, the Indenture related to
the Senior Notes will limit the ability of ICCA and its subsidiaries to incur
additional indebtedness.
INFLATION AND EXCHANGE RATES
Inflation and exchange rate variations may have substantial effects on the
Company's results of operations and financial condition. Generally, the effects
of inflation in many Latin American countries, including Chile and Peru, have
been offset in part by a devaluation of the local countries' currencies relative
to the U.S. dollar. Nevertheless, the devaluation of each country's currency may
have an adverse effect on the Company.
A substantial portion of the Company's purchases of capital equipment and
interest on the Senior Notes, is payable in U.S. dollars. To date, the Company
has not hedged its currency risks with third parties and generally intends to be
paid for its services in U.S. dollars or in local currencies with a pricing
adjustment that is structured to protect the Company against the risk of
fluctuations in exchange rates. However, sales to customers of the Company will
be generally denominated in local currencies, and substantial or continued
devaluations in such currencies relative to the U.S. dollar could have a
negative effect on the ability of customers of the Company to absorb the costs
of devaluation. This could result in the Company's customers seeking to
renegotiate their contracts with the Company or, failing satisfactory
renegotiation, defaulting on such contracts.
In addition, from time to time, Latin American countries have experienced
shortages in foreign currency reserves and restrictions on the ability to
expatriate local earnings and convert local currencies into U.S. dollars. Also,
currency devaluations in one country may have adverse effects in another
country, as in late 1994 and
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1995, when several Latin American countries were adversely impacted by the
devaluation of the Mexican peso. Any devaluation of local currencies in the
country where the Company operates, or restrictions on the expatriation of
earnings or capital from such countries, could have a material adverse effect on
the business, results of operations and financial condition of the Company. See
"Risk Factors -- Country Risks."
NET OPERATING LOSS CARRYFORWARDS
At December 31, 1997, the Company had net operating loss carry forwards
("NOLs") of approximately $3.8 million for U.S. income tax purposes and
approximately $4.5 million for foreign income tax purposes. These carryforwards
are available to offset future taxable income, if any, and expire for U.S.
income tax purposes in the years 2007 through 2011 and do not expire for foreign
income tax purposes.
EFFECTS OF NEW ACCOUNTING STANDARDS
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. This
statement is effective for financial statements issued for periods ending after
December 15, 1997. SFAS 128 supersedes APB Opinion No. 15 and replaces primary
and fully diluted EPS with basic and diluted EPS. Basic EPS is computed by
dividing net income available to common shareholders by the weighted average
common shares outstanding. Diluted EPS includes all dilutive potential common
shares. The Company does not expect the new standard to have a material impact
on its financial position or results of operations for 1997.
In February 1997, the FASB issued SFAS No. 129, Disclosure of Information
about Capital Structure. This statement is effective for financial statements
issued for periods ending after December 15, 1997. SFAS 129 supersedes specific
disclosure requirements of APB Opinion No. 10 and No. 15 and FASB Statement No.
47 and consolidates them into this Statement. FAS 129 contains no change in
disclosure requirements for the Company as the Company was previously subject to
the requirements of the above superseded statements.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
effective for fiscal years beginning after December 15, 1997. This statement
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set of general-
purpose financial statements. This statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This statement does not
require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement.
This statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position.
Management does not expect the new standard to have significant changes in
the disclosure requirements for the Company in 1998.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, effective for financial statements for
periods beginning after December 15, 1997. This statement establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
This statement supersedes FASB Statement No. 14, Financial Reporting for
Segments of a Business Enterprise, but retains the requirement to report
information about major customers. It amends FASB Statement No. 94,
Consolidation of All Majority-
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Owned Subsidiaries, to remove the special disclosure requirements for previously
unconsolidated subsidiaries. In the initial year of application, comparative
information for earlier years is to be restated. This statement need not be
applied to interim financial statements in the initial year of its application,
but comparative information for interim periods in the initial year of
application is to be reported in financial statements for interim periods in the
second year of application. Management does not expect the new standard to have
a material impact on the disclosure requirements for the Company in 1998.
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BUSINESS
OVERVIEW
The Company is a new provider of high bandwidth integrated
telecommunications services to high volume users in Santiago, Chile and Lima,
Peru, including business customers and other telecommunications carriers. The
Company believes that the size, expected growth and increasing deregulation of
the telecommunications industry in Latin America offers the Company considerable
opportunities to broaden its existing service offerings and to expand its
recently commenced operations into additional key Latin American business
centers.
Prior to November 1996, the Company operated as a development stage company
whose activities primarily consisted of the acquisition of licenses, concessions
and rights-of way in certain key Latin American markets. Beginning in November
1996, with the hiring of Patricio Northland as the Company's President and Chief
Executive Officer, the Company has focused on the development and operation of
high capacity fiber optic networks in Lima, Peru and Santiago, Chile. Mr.
Northland has over 16 years of experience as an international telecommunications
executive and entrepreneur. Mr. Northland was previously President and founder
of AmericaTel Corporation, a Miami-based international telecommunications
carrier focused on traffic originating and terminating in Latin America, which
he successfully grew and in which he subsequently sold his interest in 1996 to
Entel, Chile's major long distance carrier.
In May 1996, the Company acquired an operating company in Peru which holds
one of only two local concessions that compete with Telefonica to provide local
private line voice and data services. The Company intends to expand its existing
service offerings to provide local public switched telephony upon the planned
1999 liberalization of Peru's telecommunications markets. The Company also
intends to apply for a concession to provide public switched long distance
services as regulation permits. The Company currently offers high speed data
transmission services on a private line basis, including area network
interconnection, remote terminal access, dedicated channels for access to the
Internet and voice services on a private line basis. The Company's services are
provided through its 60 kilometer digital fiber optic network in Lima, Peru,
which the Company intends to expand to 90 kilometers by the end of 1997 and to
approximately 230 kilometers by the end of 1998. When completed, the Company's
fiber optic network will extend throughout the major commercial and industrial
districts of Lima and the port city of Callao (combined population of 7.5
million). The Company believes that its planned fiber optic network expansion
and early implementation of private line and value-added services prior to the
scheduled expiration of Telefonica's exclusive concession for public switched
local and long distance services in July 1999 will enable the Company to develop
a strong customer base and network presence.
In Chile, the Company currently holds a concession to provide voice and
data transmission services and value-added services on a private line basis and,
upon consummation of the Iusatel Acquisition, will acquire an operating company
that provides public switched national and international long distance services.
The Company also maintains a concession to own and operate satellite earth
stations throughout Chile and plans to apply for a concession to provide local
public switched telephony services in Santiago. The Company currently provides
similar services to those offered in Peru, as well as (i) private line remote
analog digital telephone access and digital links for PBX to PBX connections,
(ii) local and wide area network design and engineering and (iii) systems
installation, integration and support services. The Company's services are
provided through its 120 kilometer digital fiber optic network which currently
extends through most of Santiago's downtown business district and the outlying
industrial park and airport corridors. With the consummation of the Iusatel
Acquisition, completion of last mile connections to its existing network and
approval of a local telephony concession, the Company believes that it will be
able to substantially broaden its product and service offerings and
significantly increase its revenues in Chile.
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Local and long distance telecommunications revenues in Peru were
approximately $885.5 million in 1996 and are estimated by the Pyramid Research
Report to increase to approximately $1.9 billion in the year 2000, representing
a compound annual growth rate of 21%. Local and long distance telecommunications
revenues in Chile were approximately $1.1 billion in 1996 and are estimated by
the Pyramid to increase to approximately $2.2 billion in the year 2000,
representing a compound annual growth rate of 16%.
Upon completion of its anticipated upgrades, all of the Company's existing
and planned fiber optic networks will employ SDH transmission technology with
centralized network monitoring control and maintenance. The Company believes its
networks allow it to provide its customers with uniform, reliable, high quality
services which are competitive with or exceed those services provided by former
PTTs and other carriers in the markets in which it operates.
While the Company only recently commenced its current operations, the
Company's customers already include, among others, Xerox de Chile S.A.,
Autorentas del Pacifico (Hertz) Ltda, and Nike de Chile S.A. in Chile and Sony
Music Entertainment Peru S.A., Interbank and one ISP in Peru. Upon completion of
its networks, the Company will be able to market aggressively its service
offerings to additional business customers and other telecommunications
carriers. The Company also believes that dedicated access to ISPs will represent
a significant source of new customer relationships in both Chile and Peru
because of the anticipated rapid increase in the number of Internet high speed
users throughout Latin America.
BUSINESS STRATEGY
The Company's goal is to become a leading provider of high bandwidth
telecommunications services to business and other high volume users and carriers
operating in key Latin American business centers. The Company follows a regional
business strategy in Latin America as set forth below. The Company has modified
this strategy to adapt to the specific economic and regulatory environments of
each market in which the Company operates. See "-- Business and
Services -- Chile -- Country Strategy" and "-- Peru -- Country Strategy."
Focus on Key Markets in Latin America
The Company believes that the size and growth potential of key Latin
American business centers coupled with the ongoing liberalization of the
telecommunications markets throughout the region offer the Company considerable
growth opportunities. The Company intends to build upon its existing operations
and expertise and to leverage its existing customer base by expanding the
geographic reach and density of its existing networks as well as by entering
additional key Latin American business centers that have (i) a significant level
of unsatisfied demand for high quality, state-of-the art telecommunications
services, (ii) a favorable regulatory environment and (iii) significant
projected economic growth.
Enter Markets Early
The Company seeks to enter markets where it can construct or acquire fiber
optic networks and offer telecommunications services in advance of full market
liberalization. The Company has already implemented this strategy in Lima, where
it is one of the first companies to have established a telecommunications system
prior to the scheduled liberalization of Peru's telecommunications markets in
July 1999, at which time the exclusivity provisions of Telefonica's concession
will expire and the local and long distance markets are scheduled to be opened
to competition by new entrants. The Company believes that this early entry into
the Lima market will enable the Company to establish strong business
relationships with its targeted customers prior to onset of widespread
competition.
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Provide a Broad Range of High Quality Telecommunications Services
The Company intends to follow the strategy implemented by CLECs in the
United States of installing advanced equipment into their existing fiber optic
networks that enable interconnections with existing public networks and the
provision of switched telephone services. As regulation permits, the Company
will seek to secure a growing portion of its customers' existing and targeted
telecommunications business by adding local, long distance, enhanced voice and
data services to the private line services it currently offers. The Company
believes its customers require maximum reliability, high quality service, broad
geographic coverage, strong customer service and the opportune introduction of
innovative services delivered in a timely and cost-effective manner. The Company
believes that these needs are often left unmet by the former PTT in markets
where the Company currently operates.
Target Business Customers and Telecommunications Carriers
The Company's strategy is to target business customers and
telecommunications carriers in key Latin American business centers. These
customers are typically located in major metropolitan areas, require high
reliability, high volume data transmission and voice capabilities and, in the
case of telecommunications carriers, very large capacity to interconnect POPs.
In addition, many of the Company's existing and targeted customers have
operations in more than one key Latin American business center in which the
Company currently operates or may operate in the future. The Company believes
that by leveraging its customer base it will achieve operating synergies through
the reduction of advertising and other related costs.
Growth Through Acquisitions and New Licenses
The Company expects to opportunistically enter additional key Latin
American business centers in part by acquiring controlling interests in existing
companies that have licenses, concessions and rights-of-way to install and
operate fiber optic networks or by applying for such licenses and concessions
and negotiating for such rights-of-way directly. The Company may also acquire
other telecommunications service providers in existing and targeted markets that
enable the Company to expand or enhance its current operations. The Company
believes that many emerging local and long distance carriers, cellular providers
and recently privatized PTTs are likely to seek alliances with local access
providers with fiber optic systems, such as the Company, to compete more
effectively in the growing telecommunications markets.
Growth Through Strategic Alliances
The Company intends to establish strategic alliances with the following
entities for the following purposes: (i) to engage major international carriers
to facilitate the termination or completion of dedicated international calls to
or from the countries where carriers' customers operate and (ii) to enter into
joint bids with local turnkey integrators and equipment vendors for the sale of
value-added services, such as video-conferencing, Internet, frame relay, ATM
networks, PBX and private telephone networks.
Unify Marketing Efforts
The Company intends to conduct its business under a single brand name in
the markets in which it operates to develop name recognition for its services.
The Company believes that the use of a recognized brand name will facilitate
customer referrals and achieve economies of scale through a unified marketing
campaign.
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INDUSTRY OVERVIEW
General
The continuing liberalization of the telecommunications industry and
technological change have resulted in an increasingly information-intensive
business environment. Regulatory, technological, marketing and competitive
trends have significantly expanded the Company's opportunities in the converging
voice and data telecommunications markets. Rapid liberalization of the
telecommunications industry in Latin America is expected to expand opportunities
in the local telecommunications services market. Technological advances,
including growth of the Internet, the increased use of packet switching
technology for voice communications and the growth of multimedia applications,
are expected to result in growth in the high-speed data services market. The
Company believes that the current deregulation in many Latin American countries,
coupled with technological innovation, will lead to market developments similar
to those that occurred upon deregulation of long distance telecommunications
services in the United States and the United Kingdom, including an increase in
traffic volume and the continued introduction of new providers of
telecommunications services of varying sizes.
Telecommunications traffic of business customers and telecommunications
carriers has increased dramatically and these customers now insist upon the
quality and high capacity inherent in fiber optic transmission technology such
as the technology used by the Company. As customers require increased bandwidth
capabilities to handle complex voice, video and data telecommunications, the
Company believes that demand for transmission capacity will continue to
increase. Digital signals carried over optical fibers are superior in many
respects to analog signals carried over copper wires, an older technology which
many PTTs continue to use for parts of their networks, although many PTTs are
using fiber optic technology to expand their existing networks. In addition to
offering faster and more accurate transmission of voice and data communications,
digital fiber optic networks generally require less maintenance than comparable
copper wire networks, thereby decreasing operating costs. The capacity of fiber
optic cable is determined in part by the interface of electronic equipment with
the network, thereby allowing network capacity to be increased through a change
in electronics, rather than the fiber itself. Fiber optic cable also provides
enhanced transmission quality as signals are largely immune to electromagnetic
interference.
Latin American Markets
Many countries in Latin America, and most of the region's major
metropolitan markets, have economies that are growing faster than many other
areas of the world. The Company believes that this growth is attributable in
part to an increase in foreign investments, new trade agreements, such as the
NAFTA, Mercosur and the Andean Pact, and the privatization of many industries,
including the telecommunications industry. Many of Latin America's major
metropolitan centers are among the largest cities in the world, are centers of
trade and commerce for a wide region or for an entire country, and are home to a
high concentration of large domestic and multinational corporations that require
advanced telecommunications services. Following the economic recovery of many
Latin American countries in the early 1990's, multinational corporations
headquartered in North America, Europe and Asia began to invest in Latin America
by either establishing new operations or expanding existing operations. In
conducting their activities in Latin America, these multinational corporations
require state-of-the-art telecommunications networks to handle the flow of
information between their headquarters and their branches throughout Latin
America. The telecommunications infrastructure in many of these markets is very
limited or obsolete, resulting in significant unmet demand for advanced
telecommunications services including reliable, high capacity data circuits,
private line LANs and domestic and international long distance connectivity. The
telecommunications industry in Latin America has experienced rapid growth in
large part because most Latin American governments are opening their
telecommunications markets to competition. By the year 2000, the
telecommunications markets in most countries in the region are expected to be
deregulated.
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The following table sets forth certain historical and projected economic
data and selected information regarding the telecommunications markets in the
Latin American countries where the Company operates:
PERU
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998 1999 2000
ECONOMIC DATA* ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Population (millions)......... 22.5 22.9 23.4 23.8 24.3 24.8 25.3 25.8
Real GDP (in constant 1990 US$
billions)................... 36.5 41.2 44.1 45.3 47.6 50.2 53.1 56.5
Inflation (%)................. 39.5 15.4 10.2 11.8 10.0 9.1 8.3 7.5
TELECOMMUNICATIONS DATA**
Main Lines in Service (in
thousands).................. 673.0 772.4 1,109.2 1,435.1 1,595.5 1,850.8 2,093.6 2,437.7
Penetration Rate (main lines
per 100 pop)................ 2.9 3.4 4.7 5.9 6.6 7.5 8.3 9.4
Service Revenues (US$
millions)................... 655.8 590.7 825.9 880.4 1,216.2 1,410.8 1,595.9 1,858.2
Local Services (US$
millions)................. 190.7 251.4 459.1 506.9 676.0 784.2 887.1 1,032.9
Toll Services (US$
millions)................. 235.2 123.2 130.9 143.1 192.8 223.6 253.0 294.5
International Services (US$
millions)................. 229.9 216.1 235.9 230.5 347.4 403.0 455.8 530.8
</TABLE>
CHILE
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998 1999 2000
ECONOMIC DATA* ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Population (in millions)...... 13.8 14.0 14.3 14.5 14.7 15.0 15.2 15.4
Real GDP (constant 1990 US$
billions)................... 38.2 39.8 43.1 46.1 48.8 52.3 55.9 59.8
Inflation (%)................. 12.2 8.9 8.2 6.6 5.7 5.0 5.1 4.7
TELECOMMUNICATIONS DATA**
Main Lines in Service (in
millions)................... 1.5 1.6 1.8 2.2 2.6 3.0 3.5 3.9
Penetration Rate (main lines
per 100 pop)................ 11.0 11.6 13.0 14.9 17.8 20.3 22.9 25.4
Service Revenues (US$
millions)................... 714.10 765.10 1,016.0 1,186.7 1,443.1 1,668.4 1,911.7 2,157.1
Local Services (US$
millions)................. 479.0 560.6 627.8 733.3 891.7 1,030.9 1,181.3 1,332.9
Toll Services (US$
millions)................. 135.2 118.9 235.6 275.2 334.6 386.9 443.3 500.2
International Services (US$
millions)................. 99.9 85.6 152.6 178.2 216.8 250.6 287.1 324.0
</TABLE>
- ---------------
Sources: Bank of America World Information Services (March 1997) and Pyramid
Research Report (October 1996)
* Economic Data includes historical information for the years 1993-1996 and
projections for the years 1997-2000.
** Telecommunications Data includes historical information for the years
1993-1995 and projections for the years 1996-2000.
Competitive Local Market Access
Once the domain of PTTs, the local access market in both developed and
emerging countries is increasingly open to competition. Where permitted, local
markets may be entered via any combination of (i) construction of proprietary
wired network infrastructure, (ii) construction of wireless local loop, PCS or
cellular networks and (iii) resale of the existing local carrier's network.
Companies gaining local access through the use of a fiber optic rings using SDH
technology are uniquely positioned to provide services for large business
customers due to the high capacity of such systems.
In the United States and other developed countries, CAPs have been allowed
to enter markets in advance of complete deregulation through their provision of
special access services and private line services. Typically, CAPs begin
providing such services through their own fiber optic loop networks, which are
built over existing facilities and often exceed existing providers in terms of
bandwidth, reliability and enhanced service capability. Frequently, fixed
wireless technologies are used to cost effectively extend the network from the
fiber optic network to customer locations. Special access services provide high
capacity voice, data and video circuits to connect long distance carriers with
their respective customers. Private line services provide high capacity circuits
to transmit voice, data and video between two or more end-user locations locally
or internationally.
Long distance carriers have traditionally been the first customers for
CAPs. Local access in the markets in which the Company operates in some cases
comprises over forty percent of the cost of a long distance call. For this
reason, long distance carriers, as well as high volume corporate customers, have
great demand for the lower
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cost local access provided by CAPs. In addition, as any communications failure
can result in significant expenses and/or lost revenue to businesses, corporate
and carrier customers often utilize CAPs as a back-up to their primary carrier.
CAPs typically market their private line and special access services by offering
lower prices, higher network reliability and higher quality transmissions and
customer service. Corporate customers utilize such private lines to interconnect
their branch offices and computer networks, and even to connect their internal
PBX networks with the local PTT. Telecommunications carrier networks utilize
CAPs to interconnect their switching centers, to connect major customers to
their networks, and to connect their cellular, microwave and satellite
transmitters. With direct connection to customers, CAPs may also market higher
margin value-added services such as Internet access, database access and
Centrex. Depending on local regulation, the CAP may also provide dial tone for
any calls made to points outside of the local market. In most markets, corporate
customers will begin by transferring a small portion of their telecommunications
requirements to the CAP. As these customers experience the CAP's competitive
cost and superior service, they often transfer increasing amounts of their
business to the new operator.
As deregulation has permitted, most CAPs have attempted to expand their
services from the provision of private line and special access services to the
provision of CLEC switched or dial tone services that are provided through a
combination of the CAP's own network and through interconnection with the local
PTT network. This evolution has enabled CAPs to achieve increased gross margins
over time. Typically, private line services are provided on a flat fee, monthly
rental basis. Switched services, on the other hand, are billed on a volume or
minutes of use basis which generally generates substantially higher revenues and
margins. Through interconnection with the local PTT, new carriers are able to
offer services immediately to any customer on the PTT's network, thereby
significantly increasing the number of customers and markets that they serve
without physically expanding their own networks. The PTTs receive a volume-based
payment for the use of their network.
Although the Company has based its strategy in part on the experiences of
CAPs and CLECs in the United States and other developed countries, there can be
no assurance that the liberalizing Latin American markets will be characterized
by the same trends as were found in such other markets.
BUSINESS AND SERVICES
Peru
Country Overview. Peru is the fourth largest country in South America with
an estimated population of 23.9 million people. Lima, the capital of Peru and
the major economic center in Peru, has a population of approximately 6.8 million
people. According to the 1996 report issued by the Peruvian National Bureau of
Statistics, as of 1993, approximately 70.1% of Peru's population lived in
cities. In 1990, Alberto Fujimori, a political outsider, was elected President
and embarked on a series of economic and political measures to curtail inflation
and restore economic stability. From 1991 through 1996, GDP increased by an
average annual growth rate of 5.2%, although GDP increased by only 2.8% in 1996.
The lower GDP growth rate in 1996 has been largely attributed to the Peruvian
government's effort to reduce expenditures to avoid an overheated economy and to
reduce Peru's current account deficit. Inflation has been dramatically curtailed
as a result of President Fujimori's economic plan, falling from 7,649.7% in 1990
to 11.8% in 1996. GDP is expected to grow at a compound annual growth rate of
6.2% from 1997 to 2002.
Market Overview. The Company believes that demand for telephone service in
Peru has historically been unmet due to lack of investment, high prices, poor
service and long waiting periods for service. One of the goals of the
privatization of Peru's former local and long distance PTT, Telefonica, in 1994
(the "Privatization") was to expand significantly the national
telecommunications network and improve service quality. The number of lines in
service has increased since the Privatization from approximately 772,000 to over
1.4 million at December 31, 1996. Notwithstanding the significant recent growth
in lines in service, Peru continues to have a relatively low penetration rate
with 5.9 lines in service per 100 inhabitants at
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December 31, 1996. The Company believes that continued growth in demand for
telecommunication services in Peru will be influenced by the growth of the
Peruvian economy, foreign investment and international trade, the continued
expansion of the telecommunications network and the rebalancing of tariffs.
Based on 1996 operating results for Telefonica, the local and long distance
telecommunications markets in Peru are estimated to have accounted for
approximately $880.5 million in total revenues, of which approximately $506.9
million are local access and service revenues and approximately $373.6 million
are domestic and international long distance revenues. The Company believes that
Peru's telecommunications market offers an excellent environment for
telecommunications business growth. The Company believes that the Peruvian
economy is also a source of growing demand for telecommunication services with
growing domestic and multinational businesses attracting significant foreign
investment. The following chart presents certain historical and projected
information with respect to the telecommunications market in Peru for the
periods indicated:
<TABLE>
<CAPTION>
TELECOMMUNICATIONS DATA -- PERU*
--------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
---------- ------- ------- ------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TELEPHONE
Minutes (in millions)
Local Services.......................... 3,600.0(1) 4,240.0(1) 4,954.0(1) 7,806.2(2) 4,193.4(3) n/a n/a n/a
Long Distance Domestic.................. 388.0(1) 394.0(1) 461.0(1) 577.0(2) 326.4(3) n/a n/a n/a
Long Distance International............. 179.2(1) 232.4(1) 262.1(1) 294.5(2) 164.6(3) n/a n/a n/a
MAIN LINES IN SERVICE (IN THOUSANDS)...... 673.0(2) 772.4(2) 1,109.2(2) 1,435.1(2) 1,595.5(1) 1,850.8(1) 2,093.6(1) 2,437.7(1)
PENETRATION RATE
(main lines per 100 pop)................ 2.9(4) 3.4(4) 4.7(4) 5.9(2) 6.6(1) 7.5(1) 8.3(1) 9.4(1)
SERVICE REVENUES
Local Services (US$ millions)........... 190.7(1) 251.4(4) 459.1(4) 506.9(3) 676.0(1) 784.2(1) 887.1(1) 1,032.9(1)
Toll Services (US$ millions)............ 235.2(1) 123.2(4) 130.9(4) 143.15(3) 192.8(1) 223.6(1) 253.0(1) 294.5(1)
International Services (US$ millions)... 229.9(1) 216.1(4) 235.9(4) 230.5(3) 347.4(1) 403.0(1) 455.8(1) 530.8(1)
DATA
X-25/Frame Relay Ports (in thousands)..... 0.5(1) 0.7(1) 0.9(1) 1.2(1) 1.5(1) 14.0(1) 29.9(1) 46.6(1)
ISP Host Penetration
(main lines per 100 pop)................ 0.000(5) 0.001(5) 0.003(5) 0.021(5) 0.084(5) 0.208(5) 0.361(5) 0.515(5)
</TABLE>
- ---------------
(1) Source: Pyramid Research Report.
(2) Source: Telefonica del Peru, S.A. 1996 Annual Report.
(3) Source: Telefonica del Peru S.A., 2nd Quarter Report: July 31, 1997.
Translations from 6/30/97 Peruvian Nuevo Sol into US$ at the 6/30/97
exchange rate of 0.377 US$/Peruvian Nuevo Sol.
(4) Source: Telefonica del Peru 1995 Annual Report. Translations from 12/31/95
Peruvian Nuevo Sol into US$ at the 12/29/95 exchange rate of 0.4341
US$/Peruvian Nuevo Sol.
(5) Source: Calculations based on Pyramid Research Report estimates of ISP
hosts and of population for Peru.
(*) Includes historical information for the years 1993-1995 and projections for
the years 1996-2000.
Operating Company Overview. The Company conducts its business in Peru
through its wholly-owned subsidiary, Resetel, which was acquired by the Company
in May 1996. Resetel offers multinational, national and local businesses a broad
array of high quality data, video and voice communications services, including
LAN interconnection, remote terminal access and dedicated channels for access to
the Internet, on a private line basis through a digital fiber optic network in
metropolitan Lima, Peru. The Company has installed and in operation 60
kilometers of its fiber optic network, and plans to expand its network to 90
kilometers by the end of 1997 and to approximately 230 kilometers by the end of
1998. The Company anticipates that its fiber optic network will travel through
the major commercial and industrial districts of Lima and the adjacent port city
of Callao (combined population of approximately 7.5 million people) upon its
scheduled completion in 1998. The Company is one of only two companies which is
currently permitted to compete in the provision of its services with Telefonica.
The Company intends to expand its existing service offerings to provide
local public switched telephony service in Lima upon liberalization of Peru's
telecommunications markets and the expiration of Telefonica's exclusive
concession to provide public switched local and long distance telephony
services, which is scheduled to occur in July 1999. Resetel also intends to seek
approval to provide long distance services as regulation permits. By
implementing its private line and value-added services prior to the expiration
of Telefonica's exclusive concession in 1999, the Company believes that it will
be able to develop a strong customer base and
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network presence that will enable it to rapidly enter the local telephony and
long distance markets upon deregulation.
Country Strategy. The Company intends to leverage Resetel's existing
customer base, its cost efficient, state-of-the-art infrastructure and its
market knowledge to expand its Peruvian operations. The Company is currently
directing its marketing efforts in Lima towards a number of Peru's leading
financial institutions and multinational companies with a strong presence in
Peru.
The Company also intends to expand the focus of its marketing efforts to
include medium- and small-sized businesses which are located in the major
commercial and industrial districts in Lima and in the port city of Callao. The
Company believes, based upon an independent market survey, that a large number
of its targeted business customers are located in commercial buildings which are
not connected to a fiber optic network, but rather are connected to networks
based on older, copper technology with limited capacity. The Company intends to
take advantage of this opportunity by directly offering its services to
businesses identified by management as having a need for the Company's services.
The Company also intends to (i) use an independent marketing firm to identify
commercial multi-tenant buildings in which a critical mass of occupants are
located that have or will have an interest in acquiring the Company's services,
(ii) rapidly connect many of these buildings to the Company's existing fiber
optic network, (iii) offer an extensive selection of high quality voice and data
services on a private line basis and (iv) pursue an aggressive sales and
marketing strategy that includes (A) an advertising and marketing campaign
designed to increase customer awareness of the Company's services, (B) holding
educational seminars which explain the benefits of using the telecommunications
services offered by the Company and (C) employing a highly qualified sales force
with extensive knowledge of the local market. The Company believes that
customers in Peru are seeking to utilize new communications technologies in
order to more effectively compete in the global market. By helping to educate
its customers on the use of the latest technologies and by providing turn-key
corporate networks and telecommunications solutions, the Company expects to
develop strong customer relationships that will help it to increase customer
revenues. The Company believes that this strategy will enable it to gain early
mover advantages, build its customer base and expand the range of services
provided to its customers to include local and long distance telephony upon the
expiration of Telefonica's exclusive concession in July 1999.
The Company believes that the quality of its private line services compares
favorably to similar services offered by its competitors. Accordingly, as part
of its marketing strategy, the Company is offering its services on a trial basis
to several major financial institutions in Lima. Upon completion of the trial
with Interbank in July 1997, the Company was hired to link ten of Interbank's
branches through the Company's network.
In addition, the Company believes that the rapid growth of Internet use in
Peru will provide it with a significant opportunity to further develop its
customer base through the strategic referral of customers between ISPs and the
Company.
Concessions. Resetel provides its services pursuant to a renewable local
carrier concession expiring in 2016. Resetel's concession can be renewed for an
additional 20 years upon prior approval by the Peruvian Ministry of Transport
and Communications. After July 1999, when the local telephony services market
opens for competition, Resetel and other carriers will be able to provide local
telephony services as regulations permit. At such time, Resetel intends to seek
approval to also provide long distance services.
Network Infrastructure. The Company provides its services in Peru through
its digital 60 kilometer fiber optic network, which is expected to expand to 90
kilometers by the end of 1997 and to approximately 230 kilometers by the end of
1998. The Company anticipates that its fiber optic network will extend
throughout the major commercial and industrial districts of Lima and the port
city of Callao (combined population of approximately 7.5 million people) upon
its scheduled completion in 1998. The Company's Lima network employs advanced
node equipment and has been designed to be fully redundant. Configured in
self-healing rings, the network is able to automatically re-route transmissions
through alternate circuits in the
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<PAGE> 77
event of a fiber cut or equipment failure. In most cases where a failure occurs
in a portion of the network, the traffic is re-routed before the customer
notices a problem. The Company believes that this network capability provides
the Company's customers with the highest degree of network reliability currently
available in Peru.
Resetel's network is being expanded around digital nodes which allow remote
monitoring and flexible management of the network's last mile connections that
link individual customer networks to the Company's network. Resetel has
installed four nodes utilizing the SDH protocol and plans to rapidly install 18
additional SDH nodes, as well as a satellite earth station that will enable it
to provide international private line data connections. The Company believes
that it has a competitive advantage through the cost saving efficiencies of its
fiber optic network's "drop and insert" technology. This technology enables the
Company to provide network capacity to users without dedicating a single fiber
strand to a single customer location. While networks without "drop and insert"
technology may have to dedicate entire fiber strands to individual customers,
the Company is able to optimize the capacity of its network through its ability
to share strands among all of the customers on the network. In addition,
customers often want their private networks to provide different amounts of
capacity to different branch offices. "Drop and insert" technology allows the
Company to meet such customer requirements. The Company's network has the
transmission capacity to carry all accepted data requirements for both
compressed and decompressed digital signalization.
The Company has utility pole rights-of-way contracts with two of the
Peruvian utility companies which allows the Company to use utility poles to
route cable throughout most of its existing and planned network.
In conjunction with its sales initiatives, the Company expects to invest in
the "last mile" network links that connect commercial buildings and customer
offices with the Company's fiber optic network by installing fiber optic cable
in selected commercial buildings in the Lima business district.
Customers. Resetel currently services 15 customers in Peru, including
Interbank and Sony Music Entertainment Peru S.A. Resetel will seek to enter into
contracts with new customers for a term of at least two years. Prices charged to
customers vary in accordance with the customer's type of business and the type
and anticipated volume of service to be rendered. Customers are charged an
initial installation fee and are billed monthly on a flat fee basis in
accordance with the terms of each contract.
Competition. Peru's telecommunications market is dominated by Telefonica,
a company formed by the merger in 1994 of the former local telephone service
PTT, Compania Peruana de Telefonos and ENTEL, the former long distance telephone
service PTT. Telefonica is 35% owned by Telefonica de Espana S.A. Telefonica has
announced plans to devote a large amount of its resources over the next few
years to install hundreds of thousands of telephone lines to provide basic
telephone service. The Company believes that the focus of Telefonica on
expanding basic telephone services has created an opportunity for the Company to
capture market share by providing value-added, high bandwidth services to
business customers on a private line basis. Currently, Peru's only other
wireline telecommunications carrier is Tele2000, approximately 58.7% of which is
owned by BellSouth Corporation. Tele2000 currently operates cellular, public pay
phone and cable television services in Lima and other Peruvian cities. Although
Tele2000 has to date focused largely on providing cellular and cable television
services, it owns and operates a fiber optic loop which it may utilize to
compete directly with the Company.
Management believes that following the deregulation of local and domestic
and international long-distance telephony in July 1999, competition in these
services may arise from a variety of new entrants, including telecommunications
carriers providing services in other countries as well as companies currently
providing services in other industries previously liberalized in Peru. Existing
telecommunications service providers may have established customer relationships
as well as other capabilities and resources to expand their current service
offerings and include local carriers, wireless telephone operators, the
providers of data services, cable television network operators and operators of
existing private network infrastructure, such as electric power companies. The
Company believes that there are currently two other companies which have filed
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applications for local concessions. To the Company's knowledge, these companies
do not intend to employ a fiber-optic network service delivery strategy.
The identity of new entrants and the scope of increased competition, and
any corresponding adverse effect on the Company's results, will depend on a
variety of factors. Among such factors are the business strategies and financial
and technical capabilities of potential competitors, prevailing market
conditions at the time competition is permitted, applicable Peruvian regulations
with respect to new entrants and the Company, as well as the effectiveness of
the Company's strategy to prepare for increased competition. See "Risk
Factors -- Competition."
Chile
Country Overview. Chile is a highly urbanized country, with a population
of approximately 14.7 million in 1996, of which 85.0% are estimated to live in
cities. Santiago, the capital of Chile and a major international economic
center, has a population of approximately 5.1 million people. The Chilean
government has implemented a strategy to encourage foreign investment in Chile
and it has privatized and deregulated many industries, including transportation,
energy and telecommunications. Since 1991, the Chilean economy has experienced
high rates of economic growth. From 1991 through 1996, GDP increased by an
average annual rate of 7.3%. Inflation has been dramatically curtailed during
this period, falling from 18.7% in 1991 to 6.6% in 1996. GDP is expected to grow
at a compounded annual growth rate of 7.0% from 1997 through the year 2002.
Market Overview. As the first telecommunications market to commence
deregulation in Latin America, Chile has experienced substantial growth in
telecommunications revenue and telephone density. Total international long
distance revenues have grown from $99.9 million in 1993 to $178.2 million in
1996, representing a compound annual growth rate of 21.0%. Chile's
telecommunications markets continue to be dominated by the former PTTs, although
new entrants have begun to reduce the former PTTs' market share. In the long
distance market, Entel, the former PTT, faces competition from eight other
carriers, and its market share has been reduced to approximately 40.4% for
domestic long distance and 37.5% for international long-distance. As a result of
its open telecommunications market, Chilean subscribers enjoy some of the lowest
prices in the world for long distance telephony services. In the local telephony
market, CTC, the former PTT, which continues to control approximately 96% of the
local telephony market, faces competition from seven other carriers. The Company
believes that the full implementation of its business strategy will enable it to
penetrate this market and further develop its customer base.
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The following table provides some general information on the historical
size and estimated growth of Chile's telecommunications market.
<TABLE>
<CAPTION>
TELECOMMUNICATIONS DATA -- CHILE
------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000
----- ----- ------- ------- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TELEPHONE MINUTES
Local Service........................... -- -- -- -- -- -- -- --
Long Distance Domestic (millions)....... n/a n/a 1,847.2(1) 2,259.0(2) n/a n/a n/a n/a
Long Distance International
(millions)............................ n/a n/a 136.9(3) 172.9(2) n/a n/a n/a n/a
MAIN LINES IN SERVICE
(in thousands).......................... 1,513(4) 1,626(4) 1,846(4) 2,157(4) 2,623(4) 3,032(4) 3,474(4) 3,920(4)
PENETRATION RATE
(main lines per 100 pop)................ 11.0(4) 11.6(4) 13.0(4) 14.9(4) 17.8(4) 20.3(4) 22.9(4) 25.4(4)
SERVICE REVENUES
(US$ millions)
Local Services (US$ millions)........... 479.0(4) 560.6(4) 627.8(4) 733.3(4) 891.7(4) 1,030.9(4) 1,181.3(4) 1,332.9(4)
Toll Services (US$ millions)............ 135.2(4) 118.9(4) 235.6(4) 275.2(4) 334.6(4) 386.9(4) 443.3(4) 500.2(4)
International Services (US$ millions)... 99.9(4) 85.6(4) 152.6(4) 178.2(4) 216.8(4) 250.6(4) 287.1(4) 324.0(4)
DATA
X-25/Frame Relay Ports (in thousands)... 3.3(4) 3.6(4) 4.7(4) 10.2(4) 17.5(4) 25.8(1) 33.9(4) 39.7(4)
ISP Host Penetration
(main lines per 100 pop).............. 0.020(5) 0.022(5) 0.063(5) 0.157(5) 0.279(5) 0.413(5) 0.525(5) 0.601(5)
</TABLE>
- ---------------
n/a -- Information not publicly available.
(1) Statistical measures were changed in 1994 due to the multicarrier system
implementation.
(2) Source: Calculations based on monthly market share data provided by the
Subsecretaria de Telecomunicaciones ("SUBTEL") as of August 1997.
(3) Source: Calculations based on Pyramid Research Report estimates of lines in
services -- includes historical information for the years 1993-1995 and
projections for the years 1996-2000.
(4) Source: Pyramid Research Report -- includes historical information for the
years 1993-1995 and projections for the years 1996-2000.
(5) Source: Calculations based on Pyramid Research Report estimates of ISP hosts
and population for Chile.
Operating Company Overview. The Company conducts its business in Santiago
through its wholly-owned subsidiary, Hewster Chile. Hewster Chile currently
provides businesses in Santiago with high quality voice and data communications
services on a private line basis, including local area network interconnections,
remote terminal access, PBX to PBX connections, remote printing capabilities and
high speed access to the Internet through arrangements with a Chilean based ISP
and private line based services. In addition, Hewster Chile provides its
customers with local and wide area network design, engineering, installation,
systems integration and support services. The Company's Chilean customer base
currently includes approximately 40 large- and medium-sized businesses such as
Xerox de Chile S.A., Autorentas del Pacifico (Hertz) Ltda., Iberia Airlines, The
Aetna Life Insurance Company, Nike de Chile S.A. and one ISP. The Company
believes that its high quality transmission capabilities and responsive customer
service have become important elements in many of its customers'
telecommunications network and operational strategies. The Company provides
network services through its 120 kilometer digital fiber optic network which
covers the downtown business district and outlying industrial park and airport
corridor. This network utilizes advantageous rights-of-way through Santiago's
underground subway system (the "Metro") as well as through certain facilities of
ENERSIS, a Chilean power company.
In addition to private line voice and data transmission services, high
speed access to service providers and several support services currently offered
by the Company, the Company also plans, upon the receipt of necessary
governmental approvals, to offer additional services including local exchange
services and, upon consummation of the Iusatel Acquisition, long distance
services. In September 1997, the Company entered into an agreement to acquire
Iusatel, a Chilean long distance carrier based in Santiago. Iusatel currently
provides national and international long distance services in Santiago through
its own gateway switch and satellite earth station as well as through
interconnection with other Chilean long distance carriers. For the year ended
December 31, 1996, Iusatel reported gross revenues of $8.2 million. The Company
believes that the
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acquisition of Iusatel will enable the Company to: (i) provide long distance
services to its existing corporate customers; (ii) bundle a variety of service
offerings, including long distance and data services, to attract additional
customers; and (iii) access the approximately $178.2 million Chilean
international long distance market. By implementing such bundling strategy and
by expanding Iusatel's marketing and advertising activities, the Company
believes that it will be able to increase Iusatel's market share from its
current level. There can be no assurance that (a) the Company will secure such
concessions, be able to make the necessary network enhancements to provide such
services or successfully market such services to potential customers or (b) the
Iusatel Acquisition will be consummated. See "Risk Factors -- Risk Related to
the Iusatel Acquisition."
The Iusatel Agreement provides for the purchase by the Company of 99.9% of
the issued and outstanding capital stock of Iusatel for $5.9 million in cash
(the "Iusatel Purchase Price"). The Iusatel Purchase Price may be reduced,
dollar-for-dollar, to the extent that the net worth of Iusatel as of December
31, 1997 is less than $500,000, as determined pursuant to an audited balance
sheet. The Iusatel Purchase Price may be increased up to a maximum of $850,000
based upon Iusatel's operating results for the 12 months ending December 31,
1998. The Iusatel Agreement also provides that Hernan Streeter, the principal
shareholder of Iusatel and the former Chairman of the Board of Directors and
Chief Executive Officer and a current shareholder of ICCA, shall remain as
General Manager of Iusatel until December 31, 1997, and shall thereafter be
retained as a consultant for a period of one year. The Iusatel Agreement is
subject to a number of conditions, many of which, including governmental
consent, are beyond the Company's control. See "Risk Factors -- Risks Related to
the Iusatel Acquisition."
Country Strategy. The Company's new management team intends to leverage
Hewster Chile's existing customer base, its cost efficient state-of-the-art
infrastructure and its extensive market knowledge to expand its Chilean
operations. The Company is currently directing its marketing efforts in Santiago
towards medium-and small-sized businesses. Large businesses in Santiago are
typically located in single-tenant buildings and are currently the focus of
Chile's major carriers. Therefore, the Company believes that a substantial
opportunity exists to provide services to medium- and small-sized businesses
which are currently underserved. These businesses are typically located in
multi-tenant buildings throughout downtown Santiago and the outlying industrial
district. The Company believes that, based upon an independent market survey, a
large number of its targeted business customers are located in commercial
buildings which are not connected to a fiber optic network, but rather are
connected to networks through older, copper technology with limited capacity.
The Company intends to take advantage of this opportunity by (i) using an
independent marketing firm to identify commercial, multi-tenant buildings in
which a critical mass of occupants are located that have or will have an
interest in acquiring the Company's services, (ii) rapidly connecting many of
these buildings to the Company's existing fiber optic network, (iii) offering an
extensive selection of high quality voice and data services on a private line
basis as well as local and long distance telephony upon consummation of the
Offering, the Iusatel Acquisition and receipt of the necessary government
approvals and (iv) pursuing an aggressive sales and marketing strategy that
includes a combination of direct sales calls, telemarketing and direct mail
campaigns and an increased advertising budget. The Company believes that this
strategy will enable it to gain early mover advantages, build its customer base
and expand the range of services provided to its existing customers.
Concessions. In 1991, HSI, Hewster Chile's predecessor, was granted a
concession with an unlimited duration to provide intermediate telecommunications
services (the "Hewster Concession"). The Hewster Concession authorized the
installation and operation of the Company's fiber optic cable local network in
metropolitan Santiago. Pursuant to the Hewster Concession, Hewster is authorized
to provide voice and data
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<PAGE> 81
transmission services and certain value-added services on a private line basis.
The Hewster Concession may not be transferred, assigned or leased, nor may
control of Hewster Chile be transferred or assigned, without the prior approval
of SUBTEL. ICCA, through a wholly-owned subsidiary, Visat, also holds a
concession with an unlimited duration to construct and operate a network of
satellite earth stations throughout Chile that can provide national and
international long distance telecommunications services (the "Visat
Concession"). In addition, the Company is authorized to provide services based
on 38 GHz wireless technology in Santiago. Iusatel holds a concession with an
unlimited duration to provide public, switched national and international long
distance services in Chile. Iusatel's concession was issued by the Chilean
Ministry of Transport and Communications in 1993.
Network Infrastructure. The Company provides network services in Chile
through its 120 kilometer fiber optic network which currently covers the
majority of Santiago's downtown business district and the outlying industrial
park and airport corridors. The Company's 120 kilometer digital fiber optic
network travels through the traditional commercial center of Santiago, where
many established businesses are headquartered, and the rapidly growing expansion
areas, including outlying industrial parks, and the airport corridor where many
branch offices and new companies have located.
The Company is in the process of upgrading its fiber optic network in Chile
by replacing the existing PDH nodes with SDH node equipment (the "SDH Upgrade").
The planned SDH Upgrade is expected to be completed by December 1998. As of
September 30, 1997, Hewster Chile has installed nine SDH nodes which will become
fully operational by December 1997.
Upon completion of the SDH Upgrade, the Company's network in Chile will be
fully redundant and will be configured in self-healing rings so that the network
will be able to automatically re-route transmissions through alternate circuits
in the event of a fiber cut or equipment failure. The Company's digital SDH
nodes also will allow for remote monitoring and flexible management of the
network's last mile connections that link individual customer networks to the
Company's network. Currently, CTC, Chilesat and Entel are the only three network
operators which use SDH technology in Chile.
The Company believes that it has a competitive advantage through the
flexibility, cost saving efficiencies and enhanced ability to interconnect
customers achieved through its "drop and insert" technology. This technology
enables the Company to provide network capacity to users without dedicating a
single fiber strand to a single customer location. While networks without "drop
and insert" technology may have to dedicate entire fiber strands to individual
customers, the Company is able to optimize the capacity in its network through
its ability to share strands among all of the customers on the network. In
addition, customers often want their private networks to provide different
amounts of capacity to different branch offices. "Drop and insert" technology
allows the Company to meet such customer requirements. The Company's network has
the transmission capacity to carry both compressed and decompressed digital
signalization.
The portion of the Company's network that passes through the downtown
business and financial district has been installed in Santiago's Metro subway
tunnels. The Metro subway tunnels protect the network from hazards such as
severe weather and vandalism. Metro access points, such as ventilation shafts
and platform entrances, are available every approximately 250 meters along the
subway route. These facilities serve as the "insert" points for last mile
connections between the Company's network and customer buildings. In addition to
its agreement with the Metro, the Company has a utility pole right-of-way
contract with one of Chile's electric companies which allows the Company to use
utility poles to route cable to outlying areas of Santiago.
The Company plans to invest in the "last mile" network links that connect
commercial buildings and customer offices with the Company's fiber optic
network. Where customers are operating in newly developed areas of Santiago, the
Company intends to install its own last mile network infrastructure to connect
those customers with its fiber optic network. In areas of Santiago where the
telecommunications infrastructure is
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more developed, the Company believes that it may grow most efficiently by
leasing such last mile connections from other network operators.
The Company recently installed its first 38 GHz wireless connection between
its fiber optic network and an ISP. The Company intends to utilize this wireless
technology to connect customers more rapidly and efficiently to its fiber optic
network. This wireless connection is deployed by installing wireless
transceivers on rooftops, towers or windows where line-of-sight can be
established between the connected points. This technology will enable the
Company to develop POPs that serve buildings not currently reached by its fiber
optic network without paying interconnection fees to the local telephone
company. 38 GHz technology provides network connections similar to fiber optic
circuits in terms of both bandwidth and service quality.
Upon consummation of the Iusatel Acquisition, the Company intends to invest
in Iusatel to improve the quality of its service through the continuing upgrade
of Iusatel's switching infrastructure and customer service platforms. In
addition, the Company plans to acquire or install an additional satellite
antenna which will enable Iusatel to interconnect with additional international
long distance carriers, subject to regulatory approval. Such additional
satellite capability is expected to enable Iusatel to obtain lower prices for
international transmission services.
Iusatel obtains local access services through interconnection agreements
with the following operators or their subsidiaries: CTC, Complejo Manufacturero
de Equipos Telefonicos S.A.C.I. ("CMET"), Entel, BellSouth Chile S.A.,
Telefonica Manquehue S.A., Lucsic and Compania Nacional de Telefonos S.A.
("CNT"). In 1997, Iusatel installed a new Excel NS 2000 international long
distance gateway switch to handle all international long distance calls as well
as credit card and callback services. Iusatel operates a 9.1 meter satellite
earth station located in Santiago through which it links with Satelitron, a
Mexican carrier, which then links with a number of other carriers through the
Mexican Solidaridad I satellite. Iusatel's satellite earth station is linked
with its gateway switch via a 18-19 GHz microwave link. Iusatel currently
operates a 24-hour network control and operator service center in Santiago to
monitor its network and handle customer service calls. There can be no assurance
that the Iusatel Acquisition will be consummated on the terms described herein
or at all. See "Risk Factors -- Risks Related to the Iusatel Acquisition."
Customers. Hewster Chile currently services approximately 44 customers in
Santiago, including Xerox de Chile S.A., Iusatel Chile S.A., Iberia Airlines,
Autorentas del Pacifico (Hertz) Ltda., Nike de Chile S.A. and The Aetna Life
Insurance Company. Hewster Chile charges a monthly fee for its services based on
the length of the contract and the type and quantity of services provided.
Iusatel provides domestic and international long distance services to
approximately eight large corporations, 800 medium and small-size corporations
and 400 residential customers through annual service contract arrangements. In
addition, during the past three months, Iusatel provided casual dialing services
to approximately 20,000 non-subscriber users. Iusatel also provides routing
services to a number of other long distance carriers including Entel.
Competition. Chile's local and long distance markets were both opened to
competition in 1994, with the only constraint being a four-year long distance
market share cap imposed on Chile's former local services monopoly, CTC. There
are currently five telecommunications groups that provide both local and long
distance services, three of which also provide data services. There are also
three other licensed providers of local telephony services and four other
licensed providers of domestic and international long distance services. In the
long distance market, Entel, the former PTT, has a market share of approximately
40.4% for domestic long distance and 37.5% for international long distance. In
the local telephony market, CTC, the former PTT, has a market share of
approximately 96%. Both CTC and Entel operate fiber optic loops in Santiago,
while Teleductos S.A. operates a passive point-to-point network built using a
star topology.
The Company believes it can successfully compete in the Santiago
telecommunications market by providing customers a competitively priced, bundled
service offering consisting of data, long distance and other value-added
services. In addition, the Company intends to begin offering long distance
services upon
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consummation of the Iusatel Acquisition and local services during 1998 after it
receives a license, as to which there can be no assurance. Such services will be
delivered over the Company's digital fiber optic network which will help the
Company control operating costs and minimize the need to rely on other carriers'
networks. The Company believes that it is well-positioned to develop and
increase its customer base in Santiago because (i) it will be able to gain a
"first mover" advantage in offering services to its targeted customer base of
medium and small-sized businesses which the Company believes have significant
unmet demand for advanced telecommunications services and (ii) its services are
provided via a digital fiber optic network that utilizes the SDH protocol and
"drop and insert" technology, which enables the Company to offer an extensive
range of advanced telecommunications services. The Company believes that its
size and the entrepreneurial culture of its management team will allow it to
react quickly to changes in the marketplace and that, coupled with its strong
commitment to customer service, will differentiate Hewster Chile from its
larger, less flexible competitors.
REGULATION
Peru
Peruvian Telecommunications Laws and Regulations. The principal features
of Peruvian regulation of telecommunications services include the General
Telecommunications Law (the "Peruvian Telecommunications Law"), State Contracts,
the General Regulation to the Telecommunications Law (the "General Regulation"),
and the Regulation (the "OSIPTEL Regulation") for the Organization for
Supervision of Private Investments in Telecommunications ("OSIPTEL"). These laws
and their related governmental authorities constitute the legal and regulatory
framework within which the Company provides services in Peru.
The Peruvian Telecommunications Law sets out the basic framework for the
provision and regulation of telecommunications services, and has the stated
objective of providing a competitive market in telecommunications. The law
grants the Peruvian government the ability to oversee telecommunications
services through the Ministry of Transportation, Communications, Housing and
Construction (the "Ministry of Transportation" or the "Ministry"). The Ministry
has the authority to grant concessions and impose sanctions for the violation of
telecommunications laws. Pursuant to Supreme Decree No. 007-97-MTC, the
Specialized Telecommunications Concession Unit ("STCU") became the government
agency within the Ministry charged with the following functions previously
performed by OSIPTEL: (i) grant, renew and cancel concessions, authorizations,
permits and licenses; (ii) manage the electric spectrum and approve the
assignment of frequencies; and (iii) discontinue the rendering of value added
services offered by concessionaires when such services cause any damage or harm
to the public telecommunications network.
Concessions. A private entity may only provide telecommunications services
in Peru pursuant to a concession granted by STCU and in accordance with a state
contract (the "State Contract") to be entered between the STCU and the
concessionaire. Such concessions, including the concession held by the Company
through Resetel, have a maximum period of twenty years and can be renewed for an
equal term without limitation subject to the submission of an application for
renewal two years prior to the expiration of the concession and compliance with
the requirements under the concession. The State Contract outlines, among other
obligations: (i) a minimum expansion plan for the operator; (ii) required fees
and tariffs; (iii) technology standards for all equipment; and (iv) quality
standards of service.
State Contracts are treated under Peruvian law the same as contracts
between private parties. For this reason, such contracts cannot be modified or
terminated by any subsequent regulation or legislation. The Ministry may,
however, if it is deemed in the public interest, modify the terms of State
Contracts unilaterally if such terms relate to the international
telecommunications policy of the Ministry, or if it is necessary to modify the
contract to comply with international laws, treaties or conventions. These
changes can only take place through an administrative process that provides for
public comment on any proposed changes.
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Local and Long Distance Services. Dial tone and public switched local and
long distance services in Peru will be provided exclusively by Telefonica until
July 1999, at which time the exclusivity provisions in Telefonica's concession
will expire and the local and long distance markets are scheduled to be opened
to competition by new entrants. The Company operates under a concession which
permits it to provide private line, special access and value-added services
within the local telecommunications markets of Lima and Callao. Beginning in
1999, the Company may seek to obtain authorization to begin providing dial tone
as well as public local and long distance switched services.
Technical Requirements. The Company is required to comply with regulations
and detailed technical plans promulgated by the OSIPTEL that apply to such
matters as the transmission, routing, signaling and assignment of numbers in the
Peruvian telephone network as well as use of the radio frequency spectrum.
Before concessionaires initiate service, their facilities must have been
authorized by the Ministry of Communications and must be in full compliance with
the applicable regulations and technical plans. Failure to comply with the
technical plans can be grounds for terminating a concession if the holder does
not comply within a period of time prescribed by the OSIPTEL.
Both Telefonica and operators of private networks must make their networks
available for interconnection with other carriers' networks in order to promote
competition within Peru's telecommunications marketplace.
Fees, Tariffs and Other Charges. In conformity with the Telecommunications
Law, the General Regulation, and the OSIPTEL Regulation, telephone operators,
including the Company, must pay certain fees, tariffs, and other charges which
are primarily comprised of: (i) a concession fee; (ii) annual tariffs; (iii)
payment to OSIPTEL for supervisory services; and (iv) contribution to the Fund
for Private Investment in Telecommunications (FITEL). The Company may set its
own tariff levels for its private line service, subject to certain maximum
tariff levels set by the OSIPTEL.
Foreign Investment and Exchange Controls. The basic legal framework to
attract foreign investment to Peru is provided by the Foreign Investment
Promotion Law. The Law provides for specific rules that guarantee
nondiscriminatory treatment of foreign investors investing in Peru, and provides
mechanisms to stimulate and secure foreign capital. Specifically, under the Law,
foreign investors may freely remit all profit and repatriate all capital
invested in Peru, and may freely convert such local currency proceeds into U.S.
dollars. No registration with any government authority of such profit remittance
or capital repatriation is required under Peruvian law irrespective of whether
the original investment was made in the form of a capital contribution or
intercompany loans. Notwithstanding the low level of restrictions on foreign
investment, Peruvian law provides that if the foreign investor's home country
imposes foreign investment restrictions on investments made by Peruvian
companies in that country, the Peruvian government is authorized to impose
similar restrictions with respect to investments made by companies from that
country. For this reason, foreign investors are encouraged to enter into a legal
stabilization agreement (the "Legal Stabilization Agreement") with the Peruvian
government to guarantee certain rights with respect to their foreign investment
in Peruvian companies.
Legal Stabilization Agreements are entered into for a term of ten years.
Foreign investors who execute such agreements are guaranteed the following
rights, as of the date of the execution of the agreement: (i) maintenance of the
existing tax treatment of the foreign investment; (ii) legal stability as to the
availability of foreign currency for the remittance of profits and repatriation
of capital and (iii) non-discriminatory treatment of the foreign investor.
Foreign investors may enter into the Legal Stabilization Agreement by
submitting an application to the National Commission on Foreign Investments,
provided that the capital contribution is made in the following manner: (i) a
capital contribution in cash of at least $2.0 million within two years of the
date of execution of the agreement; or (ii) a capital contribution in cash of at
least $500,000 and creation of at least 20 employment positions within two years
from the date of the execution of the agreement.
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Chile
Telecommunications Laws and Regulations. The Ley General de
Telecomunicaciones (General Law of Telecommunications), Law No. 18.168 (1982)
(the "Chilean Telecommunications Law") and various decrees issued by the
Ministry of Transportation and Telecommunications and other Chilean governmental
authorities, constitute the legal and regulatory framework within which the
Company provides services in Chile.
In 1994, the Chilean Telecommunications Law was amended to promote greater
competition in the telecommunications sector and to establish a framework for a
multicarrier dialing system. The most significant amendments were: (i) in the
case of local telephone carriers, only their affiliates or other related
companies, rather than the local telephone carriers themselves, can now provide
public long distance services and (ii) the establishment of all carriers'
maximum market shares in the domestic long distance market for a four-year
period and in the international long distance market for three years, each
period measured from the inception of the multicarrier dialing system, as set
forth in the following table. Companies that carry traffic above these units
will be subject to substantial financial penalties and the Undersecretary of
Telecommunications may suspend their service.
MAXIMUM MARKET SHARE CAPS
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4
------ ------ ------ ------
(IN MINUTES)
<S> <C> <C> <C> <C>
Carriers Affiliated with Local Operators:
Domestic Long Distance................................... 35% 45% 55% 60%
International Long Distance.............................. 20 30 40 --
Other Carriers:
Domestic Long Distance................................... 80 70 60 60
International Long Distance.............................. 70 65 60 --
</TABLE>
The Chilean Telecommunications Law also requires providers of public
telephone services to conform to a multicarrier system in which end-users,
rather than local telephone carriers, will determine on a call-by-call or
contractual basis the long distance carrier they want to use. In addition, long
distance carriers are authorized to establish direct connections to end users
through their own networks.
The Chilean Telecommunications Law provides for substantial fines, the
suspension of service and other penalties for violations of the multicarrier
dialing system. The routing of calls by a local telephone company to a long
distance carrier other than the carrier selected by the end user or the
obstruction or delay of an interconnection between the local telephone carrier
and any long distance carrier would constitute violations, and the local
telephone carrier may be required to indemnify the provider of long distance
services for any such violations.
Concessions. The Chilean Telecommunications Law specifies which
telecommunications services require that a provider obtain a concession or
permit from the Ministry of Transportation and Telecommunications. Such
concessions or permits are granted by the Undersecretary of Telecommunications.
Concessions, which may be granted only to entities constituted and domiciled in
Chile, are necessary to provide the following services, among others: (i) public
telecommunications services which are provided to satisfy the telecommunications
needs of the general public and (ii) intermediate telecommunications services
which are transmission and switching services offered by third parties to other
concession holders who provide public telecommunications services or other
services to end-users. Permits, which are granted following a simplified
procedure and may have a shorter duration than concessions, are required to
provide limited services, which are services
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necessary to satisfy specialized needs of businesses or other institutions, but
do not entail carrying traffic across public international and certain
telecommunications networks.
Concessions and permits are granted by the Chilean government for a fixed
term which is presently 30 years. These concessions and permits can be renewed
for the same period if so requested by the concessionaire. However, because the
Company's concession was granted before the establishment of fixed terms, such
concession is deemed to be indefinite in accordance with its terms and with
Transitory Article 3 of such Law. Concessions and permits cannot be assigned,
transferred or leased without the prior authorization of the Undersecretary of
Telecommunications, which authorization cannot be denied without reasonable
cause.
Holders of concessions to provide public telecommunications services must
establish and accept interconnection with others, in accordance with technical
requirements established by the Undersecretary of Telecommunications, to ensure
that users have access to all public services. Concession holders may establish
their own systems or use facilities of other entities.
Any telephone service outage must be corrected within 12 hours or users are
entitled to indemnification and the concession holder is subject to fines.
The Undersecretary of Telecommunications may suspend a concession holder's
service for up to thirty days for failure to comply with technical requirements,
which action may be challenged in the courts within a term of five days as of
the notification to the holder of the concession.
The Chilean Telecommunications Law provides that holders of concessions and
permits shall have access, on equal economic and technical basis, to satellite
systems and international cables.
Existing concessions may be terminated if the concession holder does not
fulfill certain of its obligations, including: (i) fulfillment of the technical
framework applicable to the service; (ii) reiterative sanctions because of the
suspension of transmissions; (iii) nonpayment of a fine imposed on the
concession holder for more than 30 days; and (iv) the unauthorized change of any
of the essential elements of the concession. The holder of the concession can
appeal such termination to the Chilean Supreme Court within ten days if it
believes that the termination was illegal.
Tariff System. Currently, providers of domestic and international long
distance services are subject to maximum tariffs fixed by the Chilean
government.
The Company's services are presently subject to maximum tariffs under the
Chilean Telecommunications Law. The Chilean government establishes the maximum
tariffs of regulated services by using a methodology that provides for the
recovery of investments and the costs of operations of such services, as well as
a profit based on the cost of capital. Under the Chilean Telecommunications Law,
the structure, level and mechanism for indexing the affected services are fixed
every five years by a joint decree issued by the Ministry of Transportation and
Telecommunications and the Ministerio de Economia, Fomento y Reconstruccion (the
"Ministry of the Economy") on the basis of the incremental costs of providing
the tariffed service in each geographical service area where the service is
provided, including capital costs taking into account the expansion plans of the
regulated companies over the five year period. In the absence of expansion
plans, the structure and level of rates are set on the basis of marginal
long-term costs. Maximum tariffs are established on the basis of an economic
model that relies on the costs of an ideally efficient enterprise that offers
only the service subject to tariff. The tariff for each service that is subject
to tariff regulation reflects the theoretical cost components associated with
such service.
Tariffs for domestic long distance telephone services must include the
prices of long distance transmission and switching as well as the price of local
telephone service. Tariffs for international long distance services must include
such price components as the price of domestic and international services, the
cost of access to the local network, as well as the settlement costs with
foreign correspondents.
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Providers of telecommunications services are prohibited from discriminating
among similarly situated users in the price charged for tariffed services. Each
tariff is subject to its own index, which is calculated using the prices of its
principal components. A concessionaire must give two months notice to the
Subsecretaria de Telecomunicaciones (the Undersecretary of Telecommunications)
of changes to the maximum tariff resulting from changes in the applicable index
(including inflation adjustments) and that tariff, upon readjustment, is the
maximum price that users may be charged for the service.
Because the tariff-setting process takes place every five years, providers
of long distance services subject to tariff regulation have to prepare a special
study for each regulated service included in their geographic concession areas.
The purpose of the study is to calculate the total and marginal long-term costs
with respect to each such service and to determine on the basis of such
calculation the structure and level of future tariffs. New tariff proposals must
be presented to the Ministries of Transportation and Telecommunications and of
Economy 180 days prior to the end of each five-year period. The Company and
other intermediate service providers are subject to the maximum tariffs
established by the corresponding authorities for the principal intermediate
service provider.
Encaje or deposit requirement. Thirty percent of amounts borrowed from
abroad must be placed on deposit with the Central Bank for a period equal to the
average term of the loan, with a minimum period of 90 days and a maximum period
of 1 year. These funds do not earn interest. In lieu of making this deposit, the
recipient may comply with the encaje through the purchase of special Central
Bank promissory notes equal to 30% of the principal, which the Central Bank
repurchases on the same date, prior to deduction of an interest rate equal to
LIBOR + 4% for one year. In addition to the 30% deposit requirement, payments
made by a Chilean company on interest in connection with a loan by a foreign
shareholder of such company are treated as dividends for purposes of the
imposition of a 35% withholding tax on the value of the payment of interest.
Foreign Investment and Exchange Controls. Complete foreign ownership of
investments in Chilean entities is possible and there is no minimum period
within which the foreign investments must remain in Chile. Foreign investment
capital may be remitted overseas one year after entering Chile.
The Central Bank requires most transactions relating to foreign investment
to be effected in a "formal" currency market. Appropriate approvals and
registrations must be obtained when foreign investment capital enters the
country to ensure the right to acquire foreign currency to pay for imports,
repatriate capital and profits and pay interest and capital due on foreign
currency loans.
Foreign investment capital may be remitted overseas one year after entering
Chile, but only from the proceeds of sale or liquidation of all or part of the
assets, business, shares or rights representing the investment. Capital
comprising reinvested profits are not subject to the one year restriction.
Annual profits may be remitted overseas at any time. Interim profits and
dividends can be remitted quarterly if supported by audited financial statements
and permitted by the foreign investment contract with the government.
Normally, foreign currency required to repatriate capital and profits must
be obtained in the local formal currency market. Certificates authorizing the
purchase of the foreign currency are issued by the Foreign Investment Committee,
normally within 48 hours in the case of profits. Investors may be able to
operate offshore foreign currency accounts which may be used to repatriate
capital profits directly.
The Foreign Investment Statute guarantees that restrictions applicable to
the remittance of capital and profits will not be less favorable than those
applying generally to the acquisition of foreign currency to pay for imports.
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TAXATION
Peru
The tax structure of Peru is composed of several broad based taxes, a
consumption tax on certain products (e.g. gasoline), a general income tax, an
alternative minimum tax based on a business' assets, a property tax, and a
simplified import tariff. In addition, withholding taxes are imposed on interest
and salary income, and Peru has a recently expanded value added tax (VAT) that
covers certain products and services.
Income Tax. Peruvian corporations or foreign corporations domiciled in
Peru are subject to a federal income tax at a rate of 30% on the net income
realized by the company during the fiscal year. There is no state or municipal
income tax.
Payment of Dividends. Under applicable Peruvian law, amounts paid as
dividends or distributed as profits are not deemed to be taxable income and,
consequently, are not subject to any taxation.
Asset Tax. Peruvian corporations are subject to an annual asset tax
calculated at a rate of 0.5% over the value of the net assets of the company.
The amount of the net asset tax which is due may be credited against the
corporation's income tax.
Value Added Tax. Peruvian corporations are subject to a value added tax
calculated at a rate of 18% over the value of services rendered to customers,
goods imported into Peru, sale of personal or real property and assignment of
fixed assets to an affiliate. Companies are entitled to an off-setting credit
against the value added taxes imposed on the sales of goods and services.
Chile
Taxation. Generally, foreign investors and local businesses are treated
equally, although foreign investors are given the benefit of certain fixed rate
tax options which allow them to limit the impact of future adverse tax changes.
To promote savings and investment, the income of business entities is taxed
in two stages, initially when income is earned and finally when profits are
distributed to the ultimate business owners. The effective rate payable on
foreign investment profits remitted abroad is normally 35%, 15% being payable at
the time profits are earned with the balance due on payment overseas.
Considerable emphasis is placed on indirect taxation through a 18% Value-Added
Tax which contributes about 60% of fiscal revenue.
First Category Income Tax, often referred to as the corporate tax, is paid
by all entities on accrued income from business operations at a rate of 15%.
Chile has a fully integrated tax system allowing this corporate tax to be
credited against personal income taxes payable by resident investors when
business profits are withdrawn by them or, in the case of foreign investors,
against withholding tax payable when profits are remitted overseas. Profit
distributions received by a resident business entity as an investor in another
business entity are not liable to tax until distributed to a non-business or
overseas entity.
Withholding Tax. Additional Withholding Income Tax of 35% is payable by
non-resident individuals and entities on Chilean-source business income
withdrawn or remitted overseas. This tax is withheld by the paying business
entity.
The 15% corporate tax is allowed as a credit against the Additional
Withholding Income Tax payable. As a result, the effective rate payable on
foreign investment profits remitted abroad is normally 35%, 15% being payable at
the time profits are earned with the 20% balance due on payment overseas.
Withholding tax is also imposed on most other payments made abroad. For
example:
1. 35% for royalty payments and patents, license and similar fees;
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2. 4% for interest payments to a foreign or international banking
institution or to a foreign or international financial institution
registered with the Central Bank of Chile. A 35% rate applies to interest
payments to all other entities;
3. 35% for rental payments, this rate can be reduced to 1.75% for
equipment rental payments; and
4. 20% withholding tax applied to remuneration of foreign individuals
not resident in Chile for "technical assistance" or "engineering services"
rendered in Chile or abroad.
These rates can be increased to 80% for royalties or fees for technical
services considered unproductive or unnecessary for the economic development of
the country. All these payments are tax deductible if necessary to produce
income.
Thin Capitalization Rules. Although the tax regime does not impose
restrictions on debt/equity ratios, the Foreign Investment Committee currently
limits borrowing levels when approving investments. The current debt to equity
ratio is 70:30.
Capital Gains. Gain recognized on the sale of shares will be subject to
both the First Category Income Tax and the Additional Withholding Income Tax, if
either (i) the foreign holder has held the shares for less than one year or (ii)
the foreign holder acquired and sold the shares in the ordinary course of
business or as an habitual trader of shares. In all other cases, gain on the
sale of shares will be subject to a sole 15% First Category Tax.
For purposes of determining the capital gains on the disposition of the
shares of the Chilean companies, the tax basis will be the acquisition value
adjusted by the variation of the Chilean Consumer Price Index between the last
day of the month prior to the purchase of the shares and the last day of the
month prior to the disposition of the shares. If the investment in the shares
has been made through DL 600, upon total or partial liquidation of the
investment, no taxes will be applied on gains up to the U.S. dollar equivalent
of the foreign investment.
Income Tax Payment. Chile has a calendar tax year and returns must be
lodged by April 30 of the following year. Business entities are required to make
monthly provisional payments of corporate tax equal to a percentage of the
previous month's gross revenue. The percentage is determined by the ratio of
gross revenue to First Category Income Tax for the business entity for the
preceding year. Any further tax due must be paid on filing of the relevant tax
return. Excess tax paid is recoverable after filing.
EMPLOYEES
As of November 15, 1997, the Company had 75 full-time employees, of whom
approximately 34 are in Resetel, 37 are in Hewster Chile and 4 are in ICCA. The
Company's employees are not represented by any labor union. The Company believes
that relations with its employees are good.
PROPERTIES
ICCA's corporate offices are located at 1221 Brickell Avenue, Miami,
Florida. These offices are occupied under a lease that expires on December 31,
1997 (the "ICCA Lease") at a rent of approximately $3,863 per month. The ICCA
Lease does not specify the conditions for its renewal, but the Company believes
that the current lease may be renewed for an additional one year term without
unreasonable effort or additional expense. The Company's offices in Santiago,
Chile are occupied under a lease which expires in April 1998, at a rent of
approximately $6,400 per month. The Company's offices in Lima, Peru are occupied
under a two year lease terminating on October 14, 1998 at a rent of
approximately $3,500 per month. The Company believes that its current
facilities, together with other contiguous rental space, are adequate to provide
for its current
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needs and that its current facilities and planned lease of replacement
facilities in Chile will be adequate for its current and anticipated needs and
anticipated growth.
LEGAL PROCEEDINGS
On July 3, 1997, NU Investments, LLC and KA Investments LDC (collectively,
the "Plaintiffs"), filed suit in the U.S. District Court for the Northern
District of Illinois, Eastern Division against the Company, Mr. Patricio E.
Northland, President, CEO and Chairman of the Board of the Company, and each of
Phillip S. Magiera and Paul A. Moore, both former directors of the Company,
alleging breach of contract, violation of Section 10(b) of the Securities
Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and fraudulent
misrepresentation for the Company's failure to file a registration statement to
register the resale of shares of Common Stock issuable upon the conversion of
the Plaintiffs' 7% Convertible Debentures and the exercise of warrants to
purchase 100,000 shares of Common Stock. See "Description of Capital Stock --
February 1997 Warrants." The Plaintiffs demand compensatory damages in the
amount of $1.5 million plus prejudgment interest and costs. The Company believes
that it has meritorious defenses to the Plaintiffs' claims, and intends to
defend this action fully and vigorously. Moreover, even if the Company is found
to be liable in this action, it does not believe that any such liability will
have a material adverse effect on the Company's business, financial condition
and results of operation.
On November 21, 1997, Arcadia Importers and Exporters, Inc. ("Arcadia"),
the purchaser of the Company's 8% Convertible Debentures in the aggregate
principal amount of $2,000,000 (the "8% Convertible Debentures"), filed suit in
the Supreme Court of the State of New York against the Company relating to the
failure to file in a timely manner the Registration Statement of which this
Prospectus forms a part with respect to the shares of Common Stock issuable upon
conversion of the 8% Convertible Debentures. Arcadia is seeking damages of not
less than $484,000 plus interest, costs and reasonable attorneys' fees.
The Company believes that it has meritorious defenses to the foregoing
claims, and intends to defend such actions fully and vigorously. Moreover, even
if the Company is found to be liable in either or both of these actions, it does
not believe that any such liability will have a material adverse effect on the
Company's business, financial condition and results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning each of the
executive officers and directors of ICCA:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Patricio E. Northland.................... 42 President, Chairman of the Board of Directors
and Chief Executive Officer
Douglas G. Geib II....................... 41 Chief Financial Officer and Director
David C. Kleinman........................ 62 Director
George A. Cargill........................ 56 Director
Patricio Silva Echenique................. 62 Director
</TABLE>
Patricio E. Northland has over sixteen years of experience as an
international telecommunications executive and entrepreneur. Mr. Northland has
been President, Chairman of the Board of Directors and Chief Executive Officer
of ICCA since November 1996. Born in Chile, Mr. Northland is a U.S. citizen who
brings to the Company many relationships with telecommunications carriers and
potential customers throughout Latin America. In 1991, Mr. Northland founded
AmericaTel Corporation ("AmericaTel"), a Miami-based international
telecommunications carrier focused on traffic originating and terminating in
Latin America, and in 1993, Mr. Northland successfully completed a joint venture
agreement between AmericaTel and Entel, Chile's major long distance carrier.
Under Mr. Northland's leadership, AmericaTel grew to provide satellite-based
voice, data and fax telecommunications services to corporate customers in
several Latin American nations. Prior to his involvement with AmericaTel, Mr.
Northland held key management positions with PanamSat and IntelSat. In 1996, Mr.
Northland sold his interest in AmericaTel to Entel. Mr. Northland holds
engineering degrees from the University of Chile, a master's degree in
communications from George Washington University, and an M.B.A. from The
University of Chicago.
Douglas G. Geib II has been the Chief Financial Officer and a Director of
ICCA since May 1997. For almost 20 years prior thereto, Mr. Geib worked with
Ernst & Young LLP and had been a Partner since 1989. While at Ernst & Young, Mr.
Geib provided corporate finance and audit services, as well as coordinated and
managed various consulting services to clients involved in telecommunications,
healthcare, manufacturing, real estate and consumer products. Mr. Geib holds an
undergraduate business degree from The Ohio State University and an M.B.A. from
The University of Chicago. Mr. Geib is a Certified Public Accountant.
David C. Kleinman has been a Director of ICCA since May 1997. Mr. Kleinman
is currently Senior Lecturer in Business Policy at the Graduate School of
Business of The University of Chicago where he has taught since 1971. Mr.
Kleinman serves as a member of the Board of Directors of Irex Corporation which
trades its stock in the over-the-counter market. Mr. Kleinman is also a member
of the Board of Directors of the Acorn Fund, the Acorn International Fund and
the Acorn USA Fund which are registered under the Investment Company Act of
1940.
George A. Cargill has been a Director of ICCA since July 1994. Mr. Cargill
has been the President and owner of Telectronic S.A., a major Chilean systems
integrator and the Northern Telecom equipment distributor in Chile since 1976.
Prior thereto, Mr. Cargill spent seven years with CTC as a network engineer and
manager of quality control.
Patricio Silva Echenique has been a Director of ICCA since August 1995.
From 1990 through 1994, Mr. Silva served as Ambassador from Chile to the United
States. During his career, Mr. Silva served as a member of the board of
directors of the State Bank of Chile, the Chilean Copper Corporation, and Entel,
Chile's major long distance carrier. He has also served as an executive of the
United Nations Development
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Office for Latin America and as an independent consultant. Mr. Silva holds an
undergraduate degree from the University of Chile and a Ph.D. (ABD) in economics
from the Massachusetts Institute of Technology.
KEY EMPLOYEES OR CONSULTANTS
Luis Thais Diaz, age 54, has been Chairman of the Board of Directors of
Resetel since November 1996. Since July 1996, he has also been Chairman of the
Board of Directors of Drake Beam Morin-Chile, a human resources consulting
company based in the United States. From 1972 through 1996, Mr. Thais served as
representative of the United Nations Secretary General in Central America,
Argentina, Panama, Colombia, Venezuela and Chile. Mr. Thais has supervised
various telecommunications projects in those countries on behalf of the
International Telecommunications Organization.
Moises Blumen Cohen, age 28, has been the Chief Executive Officer of
Resetel since October 1996 and its Administrative Manager since August 1996.
From July 1993 until July 1996, Mr. Blumen was President of Compania Central
911, a Peruvian security alarm installation company founded by Mr. Blumen in
July 1993.
Ivan Van de Wyngard, age 53, has been a consultant to the Company since
October 1997. From 1986 to 1994, Mr. Van de Wyngard was Chief Executive Officer
of Entel. From 1995 to August 1997, Mr. Van de Wyngard was President of
Consultora Internacional de Telecommunicaciones VamCon Ltda., a Chilean
telecommunications consulting company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has an Audit and Compensation
Committee. The members of each committee have been appointed by the Board of
Directors to serve until their respective successors are elected and qualified.
Audit Committee. The Audit Committee reviews the scope and results of the
audit of the financial statements of the Company and reviews the internal
accounting, financial and operating control procedures of the Company. The Audit
Committee also recommends the appointment of auditors and oversees the
accounting and audit functions of the Company. The Audit Committee is currently
composed of Messrs. Silva, Kleinman and Cargill, all of whom, in accordance with
the rules of the Nasdaq SmallCap Market, is independent of management and free
from any relationship that, in the opinion of the Board of Directors, would
interfere with the exercise of independent judgment as a committee member. The
Audit Committee did not meet in fiscal year 1996.
Compensation Committee. The Compensation Committee determines the cash and
other incentive compensation to be paid to the Company's executive officers,
including the award of stock options under the Company's stock option plans as
well as the award of non-qualified stock options and warrants issued pursuant to
individual stock option and warrant agreements. The Compensation Committee is
composed of Messrs. Silva and Kleinman, each of whom is a "disinterested person"
within the meaning of Rule 16b-3 under the Exchange Act. The Compensation
Committee did not meet in fiscal year 1996.
The functions that would normally be performed by the Audit and
Compensation Committees were performed by ICCA's Board of Directors in 1996.
DIRECTORS COMPENSATION
Each non-employee director of ICCA, or of any of its subsidiaries, is
entitled to be paid such compensation for his or her services and reimbursed for
such expenses as fixed by ICCA's Board of Directors. Currently, non-employee
directors of ICCA are entitled to receive annual compensation consisting of
stock options to acquire 50,000 shares of Common Stock at a price calculated on
the average closing price of the Common Stock for the five trading days
immediately preceding the date of such grant.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding the annual
compensation earned by the current Chief Executive Officer of ICCA, the person
who formerly served as Chief Executive Officer of ICCA during part of 1996 and
the other most highly compensated executive officer of ICCA during 1996 (such
persons are hereinafter referred to as the "Named Executive Officers") for
services rendered during 1996, 1995 and 1994.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- ---------------------- ----------
OTHER LONG-TERM
ANNUAL RESTRICTED NUMBER OF INCENTIVE ALL OTHER
NAME AND PRINCIPAL COMPEN- STOCK OPTIONS PLAN COMPEN-
POSITION(S) YEAR SALARY($) BONUS($) SATION($)(1) AWARDS($) (#) PAYOUTS($) SATION($)(1)
- ------------------ ---- --------- -------- ------------ ---------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Patricio E. Northland...... 1996 50,000 -- -- -- 333,334(2) -- --
Chairman of the Board, 1995 -- -- -- -- -- -- --
President and CEO(3) 1994 -- -- -- -- -- -- --
Hernan Streeter............ 1996 110,000 -- -- -- 125,000(4) -- --
Former President and 1995 120,000 -- -- -- 100,000(5) -- --
Chief Executive Officer 1994 55,000 -- -- -- 285,000(6) -- --
Douglas G. Geib II(7)...... 1996 -- -- -- -- -- -- --
Chief Financial Officer 1995 -- -- -- -- -- -- --
1994 -- -- -- -- -- -- --
</TABLE>
- ---------------
(1) Perquisites to each officer did not exceed the lesser of $50,000 or 10% of
the total salary and bonus for any officer.
(2) Includes options to purchase 1,000,000 shares of Common Stock at an exercise
price of $2.81 per share in the following manner: (i) 333,334 which vested
in November 1996 and (ii) 666,666 which vested on September 22, 1997. See
"-- Employment and Consultants Agreements."
(3) Effective as of November 23, 1996.
(4) Includes options to purchase 125,000 shares of Common Stock at an exercise
price of $2.25 per share.
(5) Includes options to purchase 100,000 shares of Common Stock at an exercise
price of $1.96 per share.
(6) Includes options to purchase 100,000 shares of Common Stock at an exercise
price of $0.35 per share and 135,000 shares at an exercise price of $2.50
per share. Also includes options to purchase 50,000 shares of Common Stock
at an exercise price of $2.50 per share.
(7) Mr. Geib commenced employment with the Company on May 1, 1997. See
"-- Employment and Consultants Agreements."
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted in 1996 to ICCA's Named Executive Officers. The Company has no
outstanding stock appreciation rights. None of the Named Executive Officers
exercised options during 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------- ANNUAL RATES OF
PERCENT OF STOCK PRICE
TOTAL OPTIONS APPRECIATION FOR
NUMBER OF GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICES EXPIRATION --------------------
NAME GRANTED FISCAL 1996 PER SHARE DATE 5% 10%
- ---- --------- -------------- --------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Patricio E. Northland.............. 1,000,000 89% $2.81 Jan. 2007 $61,000 $3,000,000
Hernan Streeter.................... 125,000 11 2.25 Mar. 2006 78,000 448,000
Douglas G. Geib II................. 0 -- -- -- --
</TABLE>
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OPTION EXERCISES IN FISCAL 1996 AND
OPTION VALUES AT THE END OF FISCAL 1996
The following table sets forth information with respect to ICCA's Named
Executive Officers concerning the exercise of options during 1996 and
unexercised options held as of the end of 1996.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
NUMBER OF DECEMBER 31, 1996 DECEMBER 31, 1996($)
SHARES ----------------- --------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------------- --------------------
<S> <C> <C> <C> <C>
Patricio E. Northland................. 0 -- --/-- --/--
Hernan Streeter....................... 0 -- --/-- --/--
Douglas G. Geib, II................... 0 -- --/-- --/--
</TABLE>
EMPLOYMENT AND CONSULTANTS AGREEMENTS
In September 1997, the Company entered into an employment and severance
agreement (the "Northland Agreement") with Patricio E. Northland, President,
Chief Executive Officer and Chairman of the Board of Directors of the Company,
which replaced his former employment agreement with the Company. The Northland
Agreement has a term of three years unless terminated earlier for cause, death
or disability, and provides for an initial annual base salary of $350,000,
subject to an increase of $50,000 in each of the second and third year of the
agreement. In addition, Mr. Northland was granted non-qualified stock options to
purchase 300,000 shares of ICCA's Common Stock in the following manner: 100,000
shares which vest on the date of employment at an exercise price of $4.00 per
share; 100,000 shares which vest one year thereafter at an exercise price of
$6.00 per share; and 100,000 shares which vest two years after the date of
employment at an exercise price of $8.00 per share. In consideration of Mr.
Northland's agreement to terminate his former employment agreement with the
Company, which would have provided for a substantial bonus to Mr. Northland upon
consummation of the Offering, the Company agreed to pay Mr. Northland a
performance bonus of $250,000 and vest all of his existing options to acquire
1,000,000 shares of Common Stock granted under his prior employment agreement.
During May 1997, the Company entered into an employment and severance
agreement (the "Geib Agreement") with Douglas G. Geib II, Chief Financial
Officer of ICCA. The Geib Agreement has a term of three years unless terminated
earlier for cause, death or disability, and provides for an annual salary of
$250,000. In addition to the base salary, the Geib Agreement provides for a
primary performance award based upon business criteria which is designed to
enhance shareholder value during each year up to a maximum of 100 percent of the
base salary payable thereunder. Mr. Geib was also granted non-qualified stock
options to purchase 500,000 shares of ICCA's Common Stock at an exercise price
of $2.42 per share. One-third of such options became exercisable on date of
employment, and the remainder vest in equal annual installments over the first
two years of Mr. Geib's three-year employment period.
During October 1997, the Company entered into an agreement with Mr. Ivan
Van de Wyngard (the "Van de Wyngard Agreement) for the performance of certain
management, consulting and advisory services to the Company. Under the Van de
Wyngard Agreement, Mr. Van de Wyngard will receive a monthly fee of $7,500 as
compensation for his services. The Van de Wyngard Agreement has a term of one
year and may be extended upon mutual agreement between the parties.
STOCK OPTIONS AND LONG-TERM INCENTIVE PLAN
As of September 30, 1997 ICCA has outstanding options to purchase 5,475,000
shares of Common Stock. No options have been granted under ICCA's 1994 Long-Term
Incentive Plan (the "Plan").
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During 1996, 2,060,000 stock options were granted by ICCA to its executive
officers and directors. On May 29, 1997, the Board of Directors of ICCA granted
stock options in an aggregate amount of 200,000 shares of Common Stock to Mr.
Kleinman of which 50,000 shares vested on May 29, 1997 and the remainder vest in
equal annual installments over a three year period. During September 1997, ICCA
agreed to grant the following stock options to the following officers of ICCA at
an exercise price of $2.13 per share, the then market value of the Common Stock:
(i) Patricio E. Northland, President, Chief Executive Officer and Chairman, was
granted options to acquire 600,000 shares; and (ii) Douglas G. Geib II, Chief
Financial Officer and a director of ICCA, was granted options to acquire 250,000
shares. In addition, in October 1997, ICCA agreed upon consummation of the
Initial Offering to grant options to acquire an additional 714,000 and 286,000
shares to Mr. Northland and Mr. Geib, respectively, at an exercise price of
$4.40 per share. See "Certain Relationships and Related Party Transactions."
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY AND INDEMNIFICATION
ICCA's Articles of Incorporation and By-laws contain certain provisions
that eliminate the liability of its directors and officers to the fullest extent
permitted by the Texas Business Corporation Act, except that they do not
eliminate liability for: (i) any breach of the duty of loyalty to the Company or
its shareholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) an act or omission
for which the liability of a director is expressly provided by an applicable
statute; or (iv) any transaction from which the director derived an improper
personal benefit. The Texas Business Corporation Act provides that Texas
corporations may indemnify any director, officer or employee made or threatened
to be made a party to a proceeding, by reason of the former or present official
capacity of such person, if such person (i) conducted himself in good faith and
(ii) reasonably believed that his conduct was in the corporation's best
interests or, in the case of any criminal proceeding, that his conduct was not
unlawful and opposed to the corporation's best interests. The indemnification
provision does not permit indemnification of officers, directors and employees
(i) when such persons are found liable to the corporation or (ii) for any
transaction from which such persons derive improper personal benefits. The
foregoing provisions may reduce the likelihood of derivative litigation against
directors, officers and employees of the Company and may discourage or deter
shareholders or management from bringing a lawsuit against directors and
officers for breaches of their fiduciary duties, even though such an action, if
successful, might otherwise have benefited the Company and its shareholders.
The Company has entered into an indemnification agreement with each
director (an "Indemnitee"). Pursuant to the indemnification agreement, the
Company will indemnify an Indemnitee to the fullest extent permitted by law,
notwithstanding that such indemnification is not specifically authorized by the
agreement, ICCA's Articles of Incorporation and By-laws, or statute. In
addition, the Company will indemnify each Indemnitee against any and all
expenses incurred in connection with claims relating to the fact that such
Indemnitee is or was a director, officer, employee, agent or fiduciary of the
Company or any subsidiary of the Company, and the Company will advance all such
expenses. The Company maintains directors' and officers' liability insurance.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling ICCA pursuant to
the foregoing provisions, ICCA has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and therefore unenforceable.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In 1994, 1995 and 1996 the Company spent approximately $946,000, $205,000
and $172,000, respectively, for the purchase of telecommunications equipment and
services from Telectronic, S.A. for its fiber optic network in Chile. Mr.
Cargill, a director of the Company, is a founder and General Manager of
Telectronic, S.A.
In addition, in 1994 and 1995 and prior to it being acquired by the
Company, HSA provided approximately $144,000 and $206,000, respectively, in
telecommunications services to the Company. Hernan Streeter, a principal
shareholder and the former Chairman and President of the Company was the founder
and Chief Executive Officer of HSA. HSA was subsequently acquired by the Company
and merged with HSI. The Company believes that each of the foregoing
transactions was an arms'-length transaction entered into under normal market
conditions and in the ordinary course of business.
In June 1994, the Company entered into a consulting agreement with Maroon
Bells, an entity in which Paul Moore and Phillip Magiera, both former members of
ICCA's Board of Directors, are principals. Pursuant to such consulting
agreement, the Company issued 1,150,000 shares of Common Stock to Maroon Bells,
its assigns and its investors, as consideration for contributed advisory
services in connection with the recapitalization of HSI, which shares were
valued at $0.25 per share by the Board of Directors of ICCA. The Company also
paid Maroon Bells $25,000 and issued to Maroon Bells warrants to purchase 75,000
shares of Common Stock at an exercise price of $0.25 per share in consideration
of consulting services provided under the consulting agreement.
In July 1994, the Company entered into a one-year agreement with Maroon
Bells, which was subsequently amended in October 1994, pursuant to which Maroon
Bells agreed to perform certain financial advisory services for the Company for
a monthly fee of $10,000. The Company paid $60,000 and $100,000 to Maroon Bells
pursuant to this agreement in 1994 and 1995, respectively.
In July 1997, the Company issued to Maroon Bells 80,000 shares of ICCA's
Common Stock in lieu of fees owed to Maroon Bells for consulting services
performed in 1996.
Pursuant to an employment agreement between the Company and Hernan
Streeter, a shareholder and former Chairman of the Board of Directors and Chief
Executive Officer of ICCA, the Company paid salaries to Mr. Streeter in the
amounts of $120,000 and $110,000 in 1995 and 1996, respectively.
During 1995 and 1996, Laura Investments, Ltd., a company wholly-owned by
Hernan Streeter, a shareholder and former Chairman of the Board of Directors and
Chief Executive Officer of ICCA, loaned to the Company approximately $1.6
million. On March 31, 1996 the loans, plus accrued interest, were converted into
839,235 shares of Common Stock.
The Iusatel Agreement provides that Mr. Hernan Streeter, the principal
shareholder of Iusatel and the former Chairman of the Board of Directors and
Chief Executive Officer and a current shareholder of ICCA, will remain as
General Manager of Iusatel until December 31, 1997, and he shall thereafter be
retained as a consultant for a period of one year for a monthly fee of $10,000.
In connection with the Iusatel Acquisition, the Company is expected to pay
to Mr. Silva, a director of the Company, a fee in the aggregate amount of
100,000 shares of Common Stock for his services in facilitating the transaction.
During September 1997, ICCA's Board of Directors ratified the issuance of
the following shares of Common Stock to the following officers of ICCA: (i)
600,000 shares of Common Stock to Patricio E. Northland, President, Chief
Executive Officer and Chairman of the Board and (ii) 250,000 shares of Common
Stock to Douglas G. Geib II, Chief Financial Officer of ICCA. In addition, on
the same date, the Company granted the following stock options to the following
officers of ICCA at an exercise price of $2.13 per share: (i) Patricio E.
Northland, President, Chief Executive Officer and Chairman of the Board, was
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<PAGE> 97
granted options to acquire 600,000 shares of Common Stock, one-third of which
vested immediately and the remainder in equal annual installments over the next
two years; and (ii) Douglas G. Geib II, Chief Financial Officer and a director
of ICCA, was granted options to acquire 250,000 shares of Common Stock, one
third of which vested immediately and the remainder vest in equal annual
installments over the next two years. In addition, in October 1997, ICCA agreed
upon consummation of the Offering to grant options to acquire an additional
714,000 and 286,000 shares to Mr. Northland and Mr. Geib, respectively, at an
exercise price of $4.40 per share -- One third of such options vested
immediately and the remainder vest in equal annual installments over the next
two years.
During October 1997, the Company entered into an agreement with Maroon
Bells, Theodore Swindells, Paul Moore and Phillip Magiera to compensate them for
services rendered to ICCA. Pursuant to such agreement, ICCA agreed to make a
cash payment to Maroon Bells of $500,000 upon consummation of the Offering, and
to issue to each of Messrs. Moore and Magiera 250,000 shares of Common Stock and
options to acquire 250,000 shares of Common Stock at an exercise price of $2.13
per share. Messrs. Moore and Magiera resigned from ICCA's Board of Directors.
Pursuant to a settlement agreement, during October 1997, ICCA agreed to
issue 300,000 shares of Common Stock to Eleazar Donoso as compensation for
certain financial assistance Mr. Donoso provided to ICCA during its development
stage. Mr. Donoso is a co-founder with Mr. Cargill, a director of ICCA, of
Telectronic S.A. and its President. Mr. Donoso is also a shareholder of ICCA.
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DESCRIPTION OF NEW NOTES
The Existing Notes were, and the New Notes will be, issued under the
Indenture, dated as of October 27, 1996, between the Company, as issuer, and
State Street Bank and Trust Company, N.A., as Trustee. A copy of the Indenture
has been filed as an Exhibit to the Registration Statement of which this
Prospectus is a part. The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part thereof by
reference to the Trust Indenture Act of 1939, as amended. Whenever particular
defined terms of the Indenture not otherwise defined herein are referred to,
such defined terms are incorporated herein by reference. For definitions of
certain capitalized terms used in the following summary, see "-- Certain
Definitions."
GENERAL
The Existing Notes were, and the New Notes will be, issued pursuant to an
Indenture (the "Indenture") between the Company and State Street Bank and Trust
Company, N.A. as trustee (the "Trustee"). The terms of the Senior Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Senior Notes are subject to all such terms, and Holders of Senior Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of the material provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. Copies
of the proposed form of Indenture, Proceeds Pledge and Escrow Agreement and
Registration Rights Agreement will be made available to prospective investors as
set forth under "Available Information." The definitions of certain terms used
in the following summary are set forth below under " -- Certain Definitions."
For purposes of this "Description of New Notes," the term "Company" refers only
to InterAmericas Communications Corporation and not to any of its Subsidiaries.
RANKING
The New Notes will rank senior in right of payment to all subordinated
Indebtedness of the Company incurred in the future, if any. The New Notes will
rank pari passu in right of payment to all senior Indebtedness of the Company
incurred in the future, if any. The New Notes will be secured by a first
priority pledge pursuant to the Proceeds Pledge and Escrow Agreement of (1)
securities purchased with a portion of the proceeds from the sale of the Senior
Notes (the "Pledged Securities"), which initially consist of Government
Securities, and the account established with the Trustee for the deposit of the
Pledged Securities (the "Pledge Account"), which will be released to the Company
upon payment in full of the first six scheduled interest payments due on the New
Notes and (2) $62.0 million of the net proceeds of the Offering, which have been
invested in Cash Equivalents (the "Collateral Funds") and placed in an escrow
account (the "Collateral Account") to be held by the Trustee, as Collateral
Agent, pending application of such funds by the Company for the payment of (a)
Permitted Expenditures (as defined below), (b) in the event of a Change of
Control, the Change of Control Payment and (c) in the event of a Special Offer
to Purchase or a Special Mandatory Redemption, the purchase or redemption price
in connection therewith. See
" -- Proceeds Pledge and Escrow Agreement."
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the New Notes. The ability
of the Company's Subsidiaries to make payments will be subject to, among other
things, the terms of such Subsidiaries' Indebtedness, the availability of such
funds and the applicable laws of the jurisdictions under which such Subsidiaries
are organized.
The Obligations under the New Notes will be effectively subordinated to all
Indebtedness and other liabilities and commitments (including trade payables and
lease obligations) of the Company's Subsidiaries.
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<PAGE> 99
Any right of the Company to receive assets of any of its Subsidiaries upon the
latter's liquidation or reorganization (and the consequent right of the Holders
of the Senior Notes to participate in those assets) will be effectively
subordinated to the claims of that Subsidiary's creditors, except to the extent
that the Company is itself recognized as a creditor of such Subsidiary, in which
case the claims of the Company would still be subordinate to any security in the
assets of such Subsidiary and any Indebtedness of such Subsidiary senior to that
held by the Company. As of September 30, 1997, the Company's Subsidiaries would
have had approximately $ million of Indebtedness and $ million of trade
payables and other liabilities outstanding after giving pro forma effect to the
Initial Offering, the use of proceeds therefrom and the Iusatel Acquisition. In
addition, under the Indenture, the Company's Subsidiaries will be permitted to
incur certain additional Indebtedness the terms of which may restrict the
ability of the Company's Subsidiaries to pay dividends to the Company. See "Risk
Factors -- Limitations on Access to Cash Flow of Subsidiaries; Holding Company
Structure" and " -- Certain Covenants -- Incurrence of Indebtedness and Issuance
of Preferred Stock."
PRINCIPAL MATURITY AND INTEREST
The New Notes will be limited to $150.0 million in aggregate principal
amount and will mature on October 27, 2007. Interest on the New Notes will
accrue at the rate of 14% per annum and will be payable in cash semi-annually on
April 27 and October 27 (each, an "Interest Payment Date"), commencing on April
27, 1998 to holders of record on the immediately preceding April 12 and October
12. Interest on the New Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. The Senior Notes will be payable as to
principal, interest and Liquidated Damages, if any, at the office or agency of
the Company maintained for such purpose within the City and State of New York
or, at the option of the Company, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders of the Senior Notes at their
respective addresses set forth in the register of Holders of Senior Notes;
provided that all payments with respect to Senior Notes the Holders of which
have given wire transfer instructions to the Company will be required to be made
by wire transfer of same day funds to the accounts specified by the Holders
thereof. Until otherwise designated by the Company, its office or agency in New
York will be the office of the Trustee maintained for such purpose. The Senior
Notes will be issued in registered form, without coupons, and in denominations
of $1,000 and integral multiples thereof.
PROCEEDS PLEDGE AND ESCROW AGREEMENT
Pursuant to the Proceeds Pledge and Escrow Agreement, upon the closing of
the Initial Offering (the "Closing"), the Company purchased and pledged to the
Trustee for the benefit of the Holders of the Senior Notes the Pledged
Securities in such amount as is sufficient upon receipt of scheduled interest
and principal payments of such securities, in the opinion of a nationally
recognized firm of independent public accountants selected by the Company, to
provide for payment in full of the first six scheduled interest payments due on
the Senior Notes. The Company used approximately $63.0 million of the net
proceeds of the Initial Offering to acquire the Pledged Securities. The Pledged
Securities were pledged by the Company to the Trustee for the benefit of the
Holders of Senior Notes pursuant to the Proceeds Pledge and Escrow Agreement and
are being held by the Trustee in the Pledge Account. Pursuant to the Proceeds
Pledge and Escrow Agreement, immediately prior to an interest payment date on
the Senior Notes, the Company may either deposit with the Trustee from funds
otherwise available to the Company cash sufficient to pay the interest scheduled
to be paid on such date or the Company may direct the Trustee to release from
the Pledge Account proceeds sufficient to pay interest then due. In the event
that the Company exercises the former option, the Company may thereafter direct
the Trustee to release to the Company proceeds or Pledged Securities from the
Pledge Account in like amount. A failure by the Company to pay interest on the
Senior Notes within five days of an Interest Payment Date through October 27,
2000 will constitute an immediate Event of Default under the Indenture.
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Interest earned on the Pledged Securities will be added to the Pledge
Account. In the event that the funds or Pledged Securities held in the Pledge
Account exceed the amount sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by the Company, to provide for
payment in full of the first six scheduled interest payments due on the Senior
Notes (or, in the event an interest payment or payments have been made, an
amount sufficient to provide for payment in full of any interest payments
remaining, up to and including the sixth scheduled interest payment) the Trustee
will be permitted to release to the Company at the Company's request any such
excess amount. The Senior Notes will be secured by a first priority security
interest in the Pledged Securities and in the Pledge Account and, accordingly,
the Pledged Securities and the Pledge Account will also secure all Obligations
of the Company under the Senior Notes and the Indenture to the extent of such
security.
Under the Proceeds Pledge and Escrow Agreement, if the Company makes the
first six scheduled interest payments on the Senior Notes in a timely manner,
all of the remaining Pledged Securities, if any, will be released from the
Pledge Account and thereafter the Senior Notes will be secured only by the
Collateral Funds and the Collateral Account described below to the extent that
Collateral Funds remain in the Collateral Account pursuant to the terms of the
Proceeds Pledge and Escrow Agreement.
In addition to the pledge by the Company of the Pledged Securities, the
Proceeds Pledge and Escrow Agreement required the Company to (i) deposit $62.0
million of the net proceeds of the Initial Offering in an account under the
Trustee's exclusive dominion and control pending application of such funds by
the Company for the payment of (a) Permitted Expenditures, (b) in the event of a
Change of Control, the Change of Control Payment and (c) in the event of a
Special Offer to Purchase or a Special Mandatory Redemption, the purchase or
redemption price in connection therewith and (ii) grant to the Trustee, as
Collateral Agent, for the benefit of Holders of the Senior Notes and itself as
Trustee, a first priority security interest in the Collateral Funds and the
Collateral Account securing all Obligations of the Company under the Senior
Notes and the Indenture. The Collateral Funds are required to be invested in
Cash Equivalents, as directed from time to time by the Company. The Company will
be permitted to obtain release of the Collateral Funds as follows: (a) any
amount of Collateral Funds for Permitted Expenditures, (b) in the event of a
Change of Control, the Change of Control Payment and (c) in the event of a
Special Offer to Purchase or a Special Mandatory Redemption, the purchase or
redemption price in connection therewith; provided that at least 60% of the
aggregate amount of Collateral Funds released from the Collateral Account for
Permitted Expenditures must be released in connection with Acquisition Costs or
Systems Costs directly related to Telecommunications Businesses in Peru.
"Permitted Expenditures" means (1)(A) the purchase price and related
expenses of any acquisition of (i) long-term assets used or useful in a
Permitted Business or (ii) a controlling interest in a Permitted Business
(collectively, "Acquisition Costs") or (B) expenditures by the Company or any
Restricted Subsidiary of the Company directly related to the engineering,
design, construction, installation or development of assets and systems used or
useful in a Permitted Business ("Systems Costs"), in each of clauses (A) and
(B), in connection with Telecommunications Businesses in Chile or Peru; (2) the
repayment of Indebtedness of any Restricted Subsidiary; provided that the
commitments with respect thereto in the case of revolving borrowings are
correspondingly reduced and (3) other general corporate purposes in an amount
not to exceed $20.0 million.
The Proceeds Pledge and Escrow Agreement allows the Company to withdraw
from the Collateral Account such amounts as are estimated by the Company in good
faith and set forth in a written request (as such request may be amended from
time to time), accompanied by a supporting budget or other supporting
documentation, submitted to the Collateral Agent to be necessary for Permitted
Expenditures for the succeeding three months.
In the event that on or after October 27, 2000 Collateral Funds remain in
the Collateral Account, the Company shall make an offer to each Holder of Senior
Notes to repurchase all or any part (equal to $1,000 or
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an integral multiple thereof) of such Holder's Senior Notes (the "Special Offer
to Purchase") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon to the date of purchase
and Liquidated Damages, if any; provided that, if after the Special Offer to
Purchase is consummated at least $20.0 million in aggregate principal amount of
Senior Notes does not remain outstanding, the Company will be required by the
terms of the Indenture to redeem all of the Senior Notes (the "Special Mandatory
Redemption") at a redemption price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase. If required by the terms of
the Indenture to make a Special Offer to Purchase, the Company will mail a
notice to each Holder offering to repurchase Senior Notes in the Special Offer
to Purchase pursuant to the procedures required by the Indenture and described
in such notice. If required by the terms of the Indenture, within ten days
following the consummation of the Special Offer to Purchase, the Company will
mail a notice to each Holder setting forth the terms of the Special Mandatory
Redemption pursuant to the procedures required by the Indenture and described in
such notice. The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the Special
Offer to Purchase.
In the event that the Indenture does not require the Company to make a
Special Mandatory Redemption, after the consummation of the Special Offer to
Purchase, the Company shall apply all funds held in the Collateral Account not
previously released pursuant to the terms of the Indenture and the Proceeds
Pledge and Escrow Agreement, at its option, to the acquisition of a controlling
interest in a Permitted Business, the making of a capital expenditure or the
acquisition of other assets, in each case, in a Permitted Business or to the
reduction of senior Indebtedness of the Company or Indebtedness of any
Restricted Subsidiary of the Company.
In the event of the Company's bankruptcy, the Company, as a debtor in
possession under Chapter 11 of the Bankruptcy Code, would be entitled to
petition the United States Bankruptcy Court having jurisdiction over its case
for permission, under Section 363 of the Bankruptcy Code, to use the Pledged
Securities pledged by it pursuant to the Proceeds Pledge and Escrow Agreement
and the Collateral Funds pledged by it pursuant to the Proceeds Pledge and
Escrow Agreement to fund its operations during the pendency of the
reorganization proceedings. Permission for such use is likely to be granted so
long as the interests of the Trustee, as Collateral Agent, for the benefit of
the Holders of Senior Notes and itself as Trustee, are "adequately protected." A
secured creditor's interest in cash collateral to be used by a debtor in
possession may be adequately protected by, among other means, the granting of
liens on substitute collateral which may be substantially less liquid than Cash
Equivalents and Government Securities. See "Risk Factors -- Effect of Bankruptcy
on Ability to Realize Upon Security."
OPTIONAL REDEMPTION
The New Notes will not be redeemable at the Company's option prior to
October 27, 2002. Thereafter, the New Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on October 27 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002........................................................ 107.000%
2003........................................................ 104.666%
2004........................................................ 102.333%
2005 and thereafter......................................... 100.000%
</TABLE>
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Notwithstanding the foregoing, at any time on or before October 27, 2000,
the Company may on any one or more occasions redeem up to a maximum of 33 1/3%
of the aggregate principal amount of Senior Notes at a redemption price equal to
114% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the redemption date, with the net cash
proceeds received by the Company after the date of the Indenture from the
issuance and sale of its Qualified Capital Stock to the public in a registered
public offering or to one or more Strategic Equity Investors to the extent that
such net cash proceeds have been, and continue to be, designated as Designated
Equity Proceeds to be used for such purpose as provided in the definition
thereof; provided that at least 66 2/3% of the original aggregate principal
amount of the Senior Notes remain outstanding immediately after the occurrence
of each such redemption; and provided, further, that such redemption shall occur
within 45 days of the date of the closing of any such public offering or sale to
such Strategic Equity Investors.
SELECTION AND NOTICE
If less than all of the Senior Notes are to be redeemed at any time,
selection of Senior Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Senior Notes are listed, or, if the Senior Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; provided that no Senior Notes of $1,000 or less shall be
redeemed in part. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Senior Notes to be redeemed at its registered address. Notices of redemption may
not be conditional. If any Senior Note is to be redeemed in part only, the
notice of redemption that relates to such Senior Note shall state the portion of
the principal amount thereof to be redeemed. A new Senior Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Senior Note. Senior Notes
called for redemption become due on the date fixed for redemption. On and after
the redemption date, interest ceases to accrue on Senior Notes or portions of
them called for redemption.
MANDATORY REDEMPTION
Except as set forth above under " -- Proceeds Pledge and Escrow Agreement"
and as set forth below under " -- Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Senior Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of New Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's New Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash (the "Change of Control Payment") equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the date of repurchase. Within ten days following any Change of
Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase New Notes on the date specified in such notice (the "Change of
Control Payment Date"), which date shall be no earlier than 30 days and no later
than 60 days from the date such notice is mailed, pursuant to the procedures
required by the Indenture and described in such notice. The Company will comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the New Notes as
a result of a Change of Control.
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On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all New Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all New
Notes or portions thereof so tendered and (iii) deliver or cause to be delivered
to the Trustee the New Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of New Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each Holder of
New Notes so tendered the Change of Control Payment for such New Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new New Note equal in principal amount to any
unpurchased portion of the New Notes surrendered, if any; provided that each
such new New Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the New Notes to require that the Company
repurchase or redeem the New Notes in the event of a takeover, recapitalization
or similar transaction.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of (a) "all or substantially
all" of the assets of the Company and its Restricted Subsidiaries taken as a
whole and (b) "all or substantially all" of the assets of the Company and its
Restricted Subsidiaries taken as a whole that are related or ancillary to the
business conducted by the Company and its Restricted Subsidiaries in Peru.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of New Notes to
require the Company to repurchase such New Notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than (a) all of the assets of
the Company and its Restricted Subsidiaries taken as a whole or (b) all of the
assets of the Company and its Restricted Subsidiaries taken as a whole that are
related or ancillary to the business conducted by the Company and its Restricted
Subsidiaries in Peru to another Person or group may be uncertain.
The terms of any Indebtedness incurred by the Company's Subsidiaries and
the applicable laws of the jurisdictions under which the Company's Subsidiaries
are organized may restrict the Company's current and future Subsidiaries from
paying any dividends or making any other distribution to the Company. Thus, in
the event a Change of Control occurs, the Company could seek the consent of its
Subsidiaries' lenders to the purchase of the New Notes or could attempt to repay
or refinance the borrowings that contain such restrictions. If the Company did
not obtain such a consent or repay or refinance such borrowings or if the
applicable laws of the jurisdictions under which the Company's Subsidiaries are
organized restrict such Subsidiaries' ability to pay dividends or make other
distributions to the Company, the Company would likely not have the financial
resources to purchase the New Notes and the Subsidiaries would be restricted in
paying dividends to the Company for the purpose of such purchase. In addition,
any future Indebtedness may prohibit the Company from purchasing New Notes prior
to their maturity, and may also provide that certain change of control events
with respect to the Company would constitute a default thereunder. In the event
a Change of Control occurs at a time when the Company is prohibited from
purchasing New Notes, the Company could seek the consent of its lenders to the
purchase of New Notes or could attempt to repay or refinance the borrowings that
contain such prohibition. If the Company did not obtain such consent or repay or
refinance such borrowings, the Company would remain prohibited from purchasing
New Notes. In such event, the Company would be required to seek to refinance the
New Notes or such other borrowings, and there can be no assurance that the
Company would be able to consummate any such refinancing. See "Risk
Factors -- Substantial Leverage; Ability to Service Indebtedness" and
" -- Holding Company Structure; Inability to Access Cash Flow."
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The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Senior Notes validly tendered and not withdrawn under such Change
of Control Offer.
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 80% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; provided that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet) of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Senior Notes or any
guarantee thereof) that are assumed by the transferee of any such assets or
Equity Interests pursuant to a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability and (y) any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are immediately converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 270 days after the Company's or any Restricted Subsidiary's receipt
of any Net Proceeds from an Asset Sale, the Company or such Restricted
Subsidiary may apply such Net Proceeds, at its option, (a) to repay Indebtedness
under a Credit Facility (and to correspondingly reduce commitments with respect
thereto in the case of revolving borrowings) or (b) to the acquisition of a
Permitted Business or a controlling interest in a Permitted Business or the
making of a capital expenditure or the acquisition of other long-term assets, in
each case, in a Permitted Business. Pending the final application of any such
Net Proceeds, the Company may temporarily reduce Indebtedness under any Credit
Facility or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company will be required to make an offer to
all Holders of Senior Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Senior Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the date of purchase, in accordance with the procedures set forth in
the Indenture. To the extent that the aggregate principal amount of Senior Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate principal amount of Senior Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior Notes
to be purchased on a pro rata basis. Upon completion of such offer to purchase,
the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) to the direct or indirect holders of the Company's or any
of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other
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than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or such Restricted Subsidiary or dividends or
distributions payable to the Company or any Wholly Owned Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company; (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Senior Notes, except a payment of interest or principal at
Stated Maturity; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Debt) pursuant to the Debt to Cash Flow Ratio test set forth in
the first paragraph of the covenant described below under the caption
" -- Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after the date of Indenture
(other than Restricted Payments permitted by clauses (ii), (iii) or (iv) of
the following paragraph) shall not exceed, at the date of determination,
the sum of (i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) an amount equal to the net cash proceeds received
by the Company after the date of the Indenture from the issuance and sale
of its Qualified Capital Stock to the extent such net cash proceeds have
been, and continue to be, designated as Designated Equity Proceeds to be
added to the cumulative amount calculated pursuant to this clause (c) as
provided in the definition thereof, plus (iii) an amount equal to the net
cash proceeds received by the Company from the sale of Disqualified Stock
or debt securities of the Company that have been converted into Equity
Interests (other than Equity Interests or convertible debt securities sold
to a Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock), plus (iv) to the extent that any Restricted Investment that was
made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (1) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition,
if any) and (2) the initial amount of such Restricted Investment.
The foregoing provisions will not prohibit the following Restricted
Payments: (i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture; (ii) the redemption, repurchase,
retirement, defeasance or other acquisition of any subordinated Indebtedness or
Equity Interests of the Company in exchange for, or out of the net cash proceeds
(other than any such net cash proceeds that constitute Designated Equity
Proceeds) of the substantially concurrent sale (other than to a Subsidiary of
the Company) of, other Equity Interests of the Company (other than any
Disqualified Stock); provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an
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incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (v) the payment of cash (in lieu of the issuance
of fractional shares of Common Stock) to holders of Warrants at the time of
exercise of such Warrants as required by the terms of the Warrant Agreement
entered into in connection with the Initial Offering; (vi) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any Restricted Subsidiary of the Company held by any member of
the Company's (or any of its Restricted Subsidiaries') management pursuant to
any management equity subscription agreement, stock option agreement or other
similar agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$250,000 in any twelve-month period and no Default or Event of Default shall
have occurred and be continuing immediately after such transaction; and (vii)
any payments specifically described in this Prospectus under the caption "Use of
Proceeds."
The amount of all Restricted Payments (other than cash) shall be the Fair
Market Value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later
than the date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the covenant "Restricted Payments" were computed, together with a copy of any
fairness opinion or appraisal required by the Indenture.
The Board of Directors may designate any Restricted Subsidiary (other than
any Subsidiary of the Company that owns all or a material portion of the assets
(i) owned by the Company or any Subsidiary of the Company on the date of the
Indenture or (ii) owned by any Person described in this Prospectus under the
caption "The Iusatel Acquisition" on the date of the acquisition by the Company
of such Person) to be an Unrestricted Subsidiary if such designation would not
cause a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) and the Company may issue shares of Disqualified Stock if the Company's
Debt to Cash Flow Ratio would have been no greater than 5.5 to 1, in the case of
any such incurrence or issuance on or before December 31, 2000, or no greater
than 5.0 to 1, in the case of any such incurrence or issuance at any time
thereafter, in each case, determined on a pro forma basis (including a pro forma
application of the net proceeds thereof), as if the additional Indebtedness had
been incurred, or the Disqualified Stock had been issued, as the case may be, at
the beginning of the applicable four full fiscal quarter period.
The Indenture also provides that the Company will not incur any
Indebtedness that is contractually subordinated to any other Indebtedness of the
Company unless such Indebtedness is also contractually subordinated to the
Senior Notes on substantially identical terms; provided, however, that no
Indebtedness of
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the Company shall be deemed to be contractually subordinated to any other
Indebtedness of the Company solely by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness under Credit Facilities; provided that the aggregate principal
amount of all Indebtedness (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
thereunder) outstanding under all Credit Facilities after giving effect to
such incurrence, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any other Indebtedness incurred pursuant to
this clause (i), does not exceed an amount equal to $40.0 million less the
aggregate amount of all Net Proceeds of Asset Sales that have been applied
since the date of the Indenture to repay Indebtedness under Credit
Facilities (or any such Permitted Refinancing Indebtedness) pursuant to the
covenant described above under the caption " -- Repurchase at the Option of
Holders -- Asset Sales;" provided, further, that the aggregate principal
amount of Indebtedness at any one time outstanding under Credit Facilities
that is incurred by, or secured by the Capital Stock or assets of, any
Restricted Subsidiary that is located, or that derives substantially all of
its revenue from the conduct of business, in Peru shall not exceed $15.0
million;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Senior Notes;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets
or a new Restricted Subsidiary; provided that such Indebtedness was
incurred by the prior owner of such assets or such Subsidiary prior to such
acquisition by the Company or such Restricted Subsidiary and was not
incurred in connection with, or in contemplation of, such acquisition by
the Company or such Restricted Subsidiary; and provided further that the
principal amount (or accreted value, as applicable) of such Indebtedness
(or accreted value, as applicable), including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (iv), does not exceed $5.0
million at any time outstanding;
(v) Indebtedness of the Company not to exceed, at any one time
outstanding, two times the sum of (A) the Current Market Value as of the
date of issue of any Qualified Capital Stock of the Company issued to the
seller(s) of a Permitted Business as consideration for the acquisition of
such business and (B) the net cash proceeds received by the Company after
the date of the Indenture from the issuance and sale of its Qualified
Capital Stock to the extent that such net cash proceeds have been, and
continue to be, designated as Designated Equity Proceeds to be used for the
purpose of incurring additional Indebtedness pursuant to this clause (v) as
provided in the definition thereof; provided that, to the extent that any
such Qualified Capital Stock ceases to be outstanding for any reason, any
Indebtedness that was incurred as a result of the receipt of net cash
proceeds from the issuance of such Qualified Capital Stock shall cease (as
of the date on which such Qualified Capital Stock ceases to be outstanding)
to be permitted by virtue of this clause (v);
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness or Indebtedness pursuant to a Credit
Facility) that was permitted by the Indenture to be incurred;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly Owned Restricted Subsidiaries;
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provided, however, that (A) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Senior Notes
and (B)(1) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Wholly Owned Restricted Subsidiary and (2) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Wholly Owned Restricted Subsidiary shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be;
(viii) the guarantee by the Company of Indebtedness of the Company or
a Restricted Subsidiary of the Company that was permitted to be incurred by
another provision of this covenant;
(ix) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt; provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company;
(x) Indebtedness of the Company or any Restricted Subsidiary of the
Company (A) in respect of statutory obligations, performance, surety or
appeal bonds or other obligations of a like nature incurred in the ordinary
course of business or (B) under Hedging Obligations; provided that such
agreements (1) are designed solely to protect the Company or its Restricted
Subsidiaries against fluctuations in foreign currency exchange rates or
interest rates and (2) do not increase the Indebtedness of the obligor
outstanding at any time other than as a result of fluctuations in foreign
currency exchange rates or interest rates or by reason of fees, indemnities
and compensation payable thereunder; and
(xi) the incurrence by the Company of additional Indebtedness in an
aggregate principal amount (or accreted value, as applicable) at any time
outstanding, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any other Indebtedness incurred pursuant to
this clause (xi), not to exceed $5.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xi) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest and the accretion of accreted
value will not be deemed to be an incurrence of Indebtedness for purposes of
this covenant.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company may enter into a sale and leaseback
transaction if (i) the Company could have (a) incurred Indebtedness in an amount
equal to the Attributable Debt relating to such sale and leaseback transaction
pursuant to the Debt to Cash Flow Ratio test set forth in the first paragraph of
the covenant described above under the caption " -- Incurrence of Indebtedness
and Issuance of Preferred Stock" and (b) incurred a Lien to secure such
Indebtedness pursuant to the covenant described below under the caption
" -- Liens," (ii) the gross cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value of the property that is the subject
of such sale and leaseback transaction and (iii) the transfer of assets in such
sale and leaseback transaction is permitted by, and the Company applies the
proceeds of such transaction in compliance with, the covenant described above
under the caption " -- Repurchase at the Option of Holders -- Asset Sales."
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Liens
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) the terms of any
Permitted Debt permitted to be incurred by any Restricted Subsidiary of the
Company, (b) Existing Indebtedness as in effect on the date of the Indenture or
by reason of any agreement or instrument in effect on the date of the Indenture,
(c) the Indenture and the Senior Notes, (d) applicable law or regulation, (e)
any instrument governing Indebtedness or Capital Stock of a Person acquired by
the Company or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred, (f) by reason of
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (g) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, (h) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced, (i) any mortgage or other Lien on real property
acquired or improved by the Company or any Restricted Subsidiary after the date
of the Indenture that prohibit transfers of the type described in (iii) above
with respect to such real property, (j) any such customary encumbrance or
restriction contained in a security document creating a Permitted Lien to the
extent related to the property or assets subject to such Permitted Lien, and (k)
with respect to a Restricted Subsidiary, an agreement that has been entered into
for the sale or disposition of all or substantially all of the Company's Equity
Interests in, or substantially all of the assets of, such Restricted Subsidiary.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the
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obligations of the Company under the Senior Notes and the Indenture pursuant to
a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; (iv)
such transaction will not result in the loss or suspension or material
impairment of any licenses or other authorizations that are material to the
future prospects of the Company and its Subsidiaries, taken as a whole; and (v)
except in the case of a merger of the Company with or into a Wholly Owned
Subsidiary of the Company or into a parent corporation the principal purpose of
which transaction is to change the state of incorporation of the Company, the
Company or the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (A) will have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt to Cash Flow Ratio test set forth
in the first paragraph of the covenant described above under the caption
" -- Incurrence of Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $250,000, (1) a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors or (2) an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $2.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (w) the Iusatel
Acquisition, (x) any employment agreement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business having terms
consistent with industry practice for reasonably similar companies, (y)
transactions between or among the Company and/or its Restricted Subsidiaries and
(z) Restricted Payments that are permitted by the provisions of the Indenture
described above under the caption " -- Certain Covenants -- Restricted
Payments," in each case, shall not be deemed Affiliate Transactions.
Limitation on Issuances and Sales of Capital Stock of the Company
The Indenture provides that the Company will not transfer, convey, sell,
lease or otherwise dispose of any Equity Interest of the Company to any Person
unless the consideration received therefor is at least equal to the Fair Market
Value of such Equity Interests and all of such consideration is in the form of
cash.
The provisions of the first paragraph of this covenant does not apply to:
(i) the transfer, conveyance, sale, lease or other disposition of all
or substantially all of the Equity Interests of the Company; provided that
the transfer, conveyance, sale, lease or other disposition of all or
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substantially all of the Equity Interest of the Company will be governed by
the provisions of the Indenture described above under the caption
" -- Repurchase at the Option of Holders -- Change of Control" and/or the
provisions described above under the caption " -- Merger, Consolidation or
Sale of Assets" and not by the provisions of this covenant;
(ii) the transfer, conveyance, sale, lease or other disposition of
Equity Interests of the Company in exchange for long-term assets used or
useful in a Permitted Business or a controlling interest in a Permitted
Business; provided that the Company delivers to the Trustee (a) with
respect to any such transfer, conveyance, sale, lease or other disposition
or series of related transfers, conveyances, sales, leases or other
dispositions involving Equity Interests with a fair market value less than
$5.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such transfer, conveyance, sale,
lease or other disposition is fair to the Company's shareholders and (b)
with respect to any such transfer, conveyance, sale, lease or other
disposition or series of related transfers, conveyances, sales, leases or
other dispositions involving Equity Interests with a fair market value
equal to or in excess of $5.0 million, an opinion as to the fairness to the
Company's shareholders of such transfer, conveyance, sale, lease or other
disposition from a financial point of view issued by UBS Securities or any
other investment banking firm of national standing chosen by the Company;
and
(iii) (A) the grant or issuance of options, warrants or other rights
to acquire Capital Stock of the Company ("Options") pursuant to a stock
option plan which (a) shall have been approved by the Company's
stockholders, (b) shall prohibit the granting of Options prior to June 30,
1998 (other than to directors or employees of the Company or any Subsidiary
of the Company appointed or hired subsequent to the date of the Indenture),
(c) shall limit the aggregate number of shares of common stock of the
Company issuable in any fiscal year upon the exercise of Options to 1.0
million (subject to adjustments for stock splits and other customary
events) and (d) shall provide that any Option must have an exercise price
equal to or in excess of the market price for the underlying common stock
of the Company on the date such Option is granted by the Company and (B)
the issuance of Capital Stock of the Company upon the exercise of any such
Option.
Limitation on Issuances and Sales of Capital Stock of Wholly Owned Restricted
Subsidiaries
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Restricted Subsidiary of the Company to, transfer, convey,
sell, lease or otherwise dispose of any Equity Interest of any Wholly Owned
Restricted Subsidiary of the Company to any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Equity Interests of
such Wholly Owned Restricted Subsidiary owned by the Company or any of its
Subsidiaries and (b) the Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with the covenant described
above under the caption
" -- Repurchase at the Option of Holders -- Asset Sales," and (ii) will not
permit any Wholly Owned Restricted Subsidiary of the Company to issue any of its
Equity Interests (other than, if required by applicable law, shares of Capital
Stock (y) constituting directors' qualifying shares and (z) of non-U.S.
Restricted Subsidiaries sold to non-U.S. nationals as required by the laws of
the jurisdiction of incorporation of such non-U.S. Restricted Subsidiary) to any
Person other than to the Company or a Wholly Owned Restricted Subsidiary of the
Company.
Limitations on Issuances of Guarantees of Indebtedness by Subsidiaries
The Indenture provides that the Company will not permit any Subsidiary,
directly or indirectly, to guarantee or pledge any assets to secure the payment
of any other Indebtedness of the Company unless such Subsidiary simultaneously
executes and delivers a supplemental indenture to the Indenture providing for
the guarantee of the payment of the Senior Notes by such Subsidiary, which
guarantee shall be senior to or pari
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passu with such Subsidiary's guarantee of or pledge to secure such other
Indebtedness. Notwithstanding the foregoing, any such guarantee by a Subsidiary
of the Senior Notes shall provide by its terms that it shall be automatically
and unconditionally released and discharged upon any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's stock in,
or all or substantially all the assets of, such Subsidiary, which sale, exchange
or transfer is made in compliance with the applicable provisions of the
Indenture. A form of such guarantee is attached as an exhibit to the Indenture.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than a Permitted Business.
Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Senior Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Senior Notes unless such consideration is
offered to be paid or is paid to all Holders of the Senior Notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Senior Notes are outstanding, the
Company will furnish to the Holders of Senior Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Form 10-Q or, if the Company is eligible to file such Form,
Form 10-QSB and Form 10-K or, if the Company is eligible to file such Form, Form
10-KSB if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Company were required to file such reports, in each case, within the time
periods set forth in the Commission's rules and regulations. In addition,
commencing after the consummation of the Exchange Offer, whether or not required
by the rules and regulations of the Commission, the Company will file a copy of
all such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) within the time periods
set forth in the Commission's rules and regulations and make such information
available to securities analysts and prospective investors upon request. In
addition, the Company has agreed that, for so long as any Senior Notes remain
outstanding, it will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest and
Liquidated Damages, if any, on the Senior Notes, provided, however, that prior
to October 27, 2000, the failure by the Company to pay interest on the Senior
Notes within five days of an Interest Payment Date will constitute an immediate
Event of Default; (ii) default in payment when due of the principal of or
premium, if any, on the Senior Notes; (iii) failure by the Company to comply
with the provisions described under the captions " -- Proceeds Pledge and Escrow
Agreement," " -- Repurchase at the Option of Holders -- Change of Control,"
" -- Repurchase at the Option of Holders -- Asset Sales," " -- Certain
Covenants -- Restricted Payments," " -- Certain Covenants -- Incurrence of
Indebtedness and
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Issuance of Preferred Stock" or " -- Certain Covenants -- Merger, Consolidation
or Sale of Assets;" (iv) failure by the Company for 60 days after notice to
comply with any of its other agreements in the Indenture or the Senior Notes;
(v) breach by the Company of any material representation, warranty or agreement
set forth in the Proceeds Pledge and Escrow Agreement, or repudiation by the
Company of its obligations under the Proceeds Pledge and Escrow Agreement or the
unenforceability of the Proceeds Pledge and Escrow Agreement against the Company
for any reason; (vi) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vii) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $5.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; (viii) except as permitted by the Indenture,
any Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Subsidiary shall deny or disaffirm its obligations under its
Subsidiary Guarantee; and (ix) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken together, would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior Notes
may declare all the Senior Notes to be due and payable immediately. Upon such
declaration, the principal of, premium, if any, and accrued and unpaid interest
and Liquidated Damages, if any, on the Senior Notes shall be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect to the
Company, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, the foregoing amount shall
ipso facto become due and payable without further action or notice. Holders of
the Senior Notes may not enforce the Indenture or the Senior Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Senior Notes may direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders of
the Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest or
Liquidated Damages, if any) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Senior Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Senior Notes. If an Event of Default occurs prior
to October 27, 2002 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Senior Notes prior to October 27, 2002, then
the premium specified in the Indenture shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the Senior
Notes.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of
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Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of principal or premium, if any, interest or
Liquidated Damages, if any on the Senior Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Senior Notes, the Subsidiary Guarantees, the Indenture or the Proceeds Pledge
and Escrow Agreement or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Senior Notes by accepting a
Senior Note waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Senior Notes. Such waiver may not
be effective to waive liabilities under the federal securities laws and it is
the view of the Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Senior Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Senior Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages, if any, on such Senior Notes when such payments are due
from the trust referred to below, (ii) the Company's obligations with respect to
the Senior Notes concerning issuing temporary Senior Notes, registration of
Senior Notes, mutilated, destroyed, lost or stolen Senior Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Senior Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Senior Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the outstanding Senior Notes on the stated
maturity or on the applicable redemption date, as the case may be, and the
Company must specify whether the Senior Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the
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Holders of the outstanding Senior Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other
than the Indenture) to which the Company or any of its Restricted Subsidiaries
is a party or by which the Company or any of its Restricted Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
Senior Notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or others;
and (viii) the Company must deliver to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
Transfer and Exchange
A Holder may transfer or exchange New Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any New Note selected for redemption. Also, the Company is not required to
transfer or exchange any New Note for a period of 15 days before a selection of
New Notes to be redeemed.
The registered Holder of a New Note will be treated as the owner of it for
all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture,
the Senior Notes or the Proceeds Pledge and Escrow Agreement may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Senior Notes then outstanding (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Senior Notes), and any existing default or compliance with any
provision of the Indenture, the Senior Notes or the Proceeds Pledge and Escrow
Agreement may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Senior Notes (including consents
obtained in connection with a tender offer or exchange offer for Senior Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any New Notes held by a non-consenting Holder): (i) reduce the
principal amount of New Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any New Note or alter the provisions with respect to the redemption of the
New Notes (other than provisions relating to the covenants described above under
the caption " -- Repurchase at the Option of Holders" and certain provisions set
forth under the caption "-- Proceeds Pledge and Escrow Agreement"), (iii) reduce
the rate of or change the time for payment of interest on any New Note, (iv)
waive a Default or Event of Default in the payment of principal of or premium,
if any, or interest or Liquidated Damages, if any, on the New Notes (except a
rescission of acceleration of the Senior Notes by the Holders of at least a
majority in aggregate principal amount of the New Notes and a waiver of the
payment default that resulted from such
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acceleration), (v) make any New Note payable in money other than that stated in
the New Notes, (vi) make any change in the provisions of the Indenture relating
to waivers of past Defaults or the rights of Holders of New Notes to receive
payments of principal of or premium, if any, or interest or Liquidated Damages,
if any, on the New Notes, (vii) waive a redemption payment with respect to any
New Note (other than a payment required by one of the covenants described above
under the caption " -- Repurchase at the Option of Holders" and certain
provisions set forth under the caption "-- Proceeds Pledge and Escrow
Agreement") or (viii) make any change in the foregoing amendment and waiver
provisions. In addition, any amendment to the covenants described under the
caption " -- Proceeds Pledge and Escrow Agreement," including the related
definitions will require the consent of the Holders of at least 75% in aggregate
principal amount of the Senior Notes then outstanding if such amendment would
adversely affect the rights of Holders of Senior Notes.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Notes, the Company and the Trustee may amend or supplement the Indenture or the
Senior Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes, to provide for the assumption of the Company's obligations to Holders of
Senior Notes in the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the Holders of Senior Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, or to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Senior Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
Additional Information
Anyone who receives this Prospectus may obtain a copy of the Indenture,
Proceeds Pledge and Escrow Agreement and Registration Rights Agreement without
charge by writing to InterAmericas Communication Corporation, 1221 Brickell
Avenue, Suite 900, Miami, Florida 33131, Attention: Chief Financial Officer.
Registration Rights; Liquidated Damages
The Company and the Initial Purchaser entered into the Registration Rights
Agreement on the Closing Date. Pursuant to the Registration Rights Agreement,
the Company agreed to file with the Commission the Exchange Offer Registration
Statement on the appropriate form under the Securities Act with respect to the
New Notes. Upon the effectiveness of the Exchange Offer Registration Statement,
the Company will offer to the Holders of Transfer Restricted Securities pursuant
to the Exchange Offer who are able to make certain
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representations the opportunity to exchange their Transfer Restricted Securities
for New Senior Notes. If (i) the Company is not permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities notifies
the Company prior to the 20th day following consummation of the Exchange Offer
that (A) it is prohibited by law or Commission policy from participating in the
Exchange Offer or (B) that it may not resell the New Senior Notes acquired by it
in the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) that it is a broker-dealer and
owns Senior Notes acquired directly from the Company or an affiliate of the
Company, the Company will file with the Commission a Shelf Registration
Statement to cover resales of the Senior Notes by the Holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. The Company will use its best
efforts to cause the applicable registration statement to be declared effective
as promptly as possible by the Commission. For purposes of the foregoing,
"Transfer Restricted Securities" means each Existing Note until (i) the date on
which such Existing Note has been exchanged by a person other than a
broker-dealer for a New Note in the Exchange Offer, (ii) following the exchange
by a broker-dealer in the Exchange Offer of an existing Note for a New Senior
Note, the date on which such New Note is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Existing Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iv) the date
on which such Existing Note is distributed to the public pursuant to Rule 144
under the Act.
The Registration Rights Agreement provides that (i) the Company will file
an Exchange Offer Registration Statement with the Commission on or prior to 45
days after the Closing Date, (ii) the Company will use its best efforts to have
the Exchange Offer Registration Statement declared effective by the Commission
on or prior to 120 days after the Closing Date, (iii) unless the Exchange Offer
would not be permitted by applicable law or Commission policy, the Company will
commence the Exchange Offer and use its best efforts to issue on or prior to 30
business days after the date on which the Exchange Offer Registration Statement
was declared effective by the Commission, New Senior Notes in exchange for all
Senior Notes tendered prior thereto in the Exchange Offer and (iv) if obligated
to file the Shelf Registration Statement, the Company will use its best efforts
to file the Shelf Registration Statement with the Commission on or prior to 45
days after such filing obligation arises and to cause the Shelf Registration to
be declared effective by the Commission on or prior to 120 days after such
obligation arises. If (a) the Company fails to file any of the Registration
Statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of such Registration Statements is not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), or (c) the Company fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement, or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in connection
with resales of Transfer Restricted Securities during the periods specified in
the Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the Company will pay
Liquidated Damages to each Holder of Existing Notes, with respect to the first
90-day period immediately following the occurrence of the first Registration
Default in an amount equal to $.05 per week per $1,000 principal amount of
Existing Notes held by such Holder. The amount of the Liquidated Damages will
increase by an additional $.05 per week per $1,000 principal amount of Existing
Notes with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50
per week per $1,000 principal amount of Existing Notes. All accrued Liquidated
Damages will be paid by the Company on each Damages Payment Date to the Global
Note Holder by wire transfer of immediately available funds or by federal funds
check and to Holders of Certificated Securities by wire transfer to the accounts
specified by them or by mailing checks to their registered addresses if no such
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accounts have been specified. Following the cure of all Registration Defaults,
the accrual of Liquidated Damages will cease.
Holders of Existing Notes are required to make certain representations to
the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and are required to deliver information to be
used in connection with the Shelf Registration Statement and to provide comments
on the Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Existing Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 5% or more of the voting securities of a Person shall be
deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business (provided that the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole will be governed by
the provisions of the Indenture described above under the caption "-- Repurchase
at the Option of Holders -- Change of Control" and/or the provisions described
above under the caption "-- Certain Covenants -- Merger, Consolidation or Sale
of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Subsidiaries of Equity Interests of
any of the Company's Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $1.0 million or (b) for net proceeds in
excess of $1.0 million. Notwithstanding the foregoing: (i) a transfer of assets
by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary,
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "-- Certain Covenants -- Restricted Payments," and (iv) sales
of property or equipment that has become worn out, obsolete or damaged or
otherwise unsuitable for use in connection with the business of the Company or
any Restricted Subsidiary, as the case may be, will not be deemed to be Asset
Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease
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included in such sale and leaseback transaction (including any period for which
such lease has been extended or may, at the option of the lessor, be extended).
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Thompson Bankwatch, Inc.
rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries,
taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act), (ii) the sale, lease, transfer, conveyance or other
disposition (other than to the Company or a Wholly Owned Restricted Subsidiary
of the Company), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries,
taken as a whole, that are related or ancillary to the business conducted by the
Company and its Restricted Subsidiaries in Peru to any "person" (as defined
above), (iii) the adoption of a plan relating to the liquidation or dissolution
of the Company, (iv) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
35% of the Voting Stock of the Company (measured by voting power rather than
number of shares) or (iv) the first day on which a majority of the members of
the Board of Directors of the Company are not Continuing Directors.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any
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deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to Attributable
Debt, commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations), to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Restricted Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior governmental approval (that has not been
obtained), pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the total
amount of Indebtedness of any other Person, to the extent that such Indebtedness
has been guaranteed by the referent Person or one or more of its Restricted
Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified
Stock of such Person and all preferred stock of Restricted Subsidiaries of such
Person, in each case, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof,
(ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (which has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles shall be excluded and (v)
the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not
distributed to the Company or one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or
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a consolidated Subsidiary of such Person, (y) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in
each case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Facility" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities or commercial paper
facilities with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Current Market Value" means, with respect to any shares of Qualified
Capital Stock, (i) the last reported bid price of such Qualified Capital Stock
on the principal national securities exchange on which such Qualified Capital
Stock is then being traded on the fifth Business Day following the consummation
of the acquisition of the applicable Permitted Business or (ii) if such
Qualified Capital Stock is not then listed or traded on a national securities
exchange, the value as determined in good faith by the board of directors of the
issuer of such Qualified Capital Stock (whose determination shall be supported
by a concurring valuation opinion from a nationally recognized investment
banking firm if such Current Market Value exceeds $5.0 million).
"Debt to Cash Flow Ratio" means, as of any date of determination, the ratio
of (a) the Consolidated Indebtedness of the Company as of such date to (b) the
Consolidated Cash Flow of the Company for the four most recent full fiscal
quarters ending immediately prior to such date for which internal financial
statements are available, determined on a pro forma basis after giving effect to
all acquisitions or dispositions of assets made by the Company and its
Restricted Subsidiaries from the beginning of such four-quarter period through
and including such date of determination (including any related financing
transactions) as if such acquisitions and dispositions had occurred at the
beginning of such four-quarter period. In addition, for purposes of calculating
Consolidated Cash Flow for the computation referred to above, (i) acquisitions
that have been made by the Company or any of its Restricted Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the date on which the event for which the
calculation of the Debt to Cash Flow Ratio is made (the "Calculation Date")
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Equity Proceeds" means any net cash proceeds received by the
Company after the date of the Indenture from the issuance and sale of its
Qualified Capital Stock (other than Qualified Capital Stock sold to a Subsidiary
of the Company) providing the basis for (i) a redemption of Senior Notes in a
transaction consummated in compliance with the second paragraph of the section
captioned "-- Optional Redemption," (ii) an addition to the cumulative account
calculated pursuant to clause (c) of the first paragraph of the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments,"
(iii) the
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incurrence of additional Indebtedness pursuant to clause (v) of the second
paragraph of the covenant described above under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock" or (iv)
an Investment pursuant to clause (f) of the definition of "Permitted
Investments," in each case, as designated by a written resolution of the Board
of Directors of the Company filed with the Trustee on or prior to the date on
which such net cash proceeds are received by the Company. In no event shall the
same net cash proceeds be treated as Designated Equity Proceeds for more than
one purpose under the Indenture. Once designated for a particular purpose, such
net cash proceeds may not be redesignated for an alternative purpose. In
addition, to the extent that any such Qualified Capital Stock ceases to be
outstanding for any reason, any Indebtedness, Restricted Payment or Investment
that was incurred or made as a result of the receipt of net cash proceeds from
the issuance of such Qualified Capital Stock shall cease (as of the date on
which such Qualified Capital Stock ceases to be outstanding) to be permitted by
virtue of the issuance of such Qualified Capital Stock.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Senior Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $1.0 million in aggregate principal
amount of (a) Indebtedness of the Company and its Restricted Subsidiaries in
existence on the date of the Indenture and (b) Acquired Debt incurred by the
Company and its Restricted Subsidiaries in connection with the Iusatel
Acquisition, until such amounts are repaid.
"Fair Market Value" means, with respect to assets, Equity Interests or any
other securities having a fair market value (a) of less than $5.0 million, the
fair market value of such assets, Equity Interests or any other securities
determined in good faith by the Board of Directors of the Company (including a
majority of the Independent Directors thereof) and evidenced by a board
resolution and (b) equal to or in excess of $5.0 million, the fair market value
of such assets, Equity Interests or any other securities as determined by an
investment banking firm of national standing; provided that the fair market
value of the assets purchased in an arm's-length transaction by an Affiliate of
the Company (other than a Subsidiary) from a third party that is not also an
Affiliate of the Company or such purchaser and contributed to the Company within
five Business Days of the consummation of the acquisition of such assets by such
Affiliate shall be deemed to be the aggregate consideration paid by such
Affiliate (which may include the fair market value of any non-cash consideration
to the extent that the valuation requirements of this definition are complied
with as to any such non-cash consideration); provided, further, that the fair
market value of Equity Interests issued and sold to the public in a registered
public offering or to one or more Strategic Equity Investors shall be deemed to
be the aggregate cash consideration paid to the Company in such public offering
or by such Strategic Equity Investors.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
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"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligation" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and other agreements and
arrangements designed to protect such Person against fluctuations in interest
rates and (ii) foreign exchange swap agreements, foreign exchange option
agreements, foreign exchange futures agreements and other agreements and
arrangements designed to protect such Person against fluctuations in foreign
currency exchange rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the penultimate paragraph of the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and
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(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
in connection with such Asset Sale, and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness of an Unrestricted Subsidiary (i) as
to which neither the Company nor any of its Restricted Subsidiaries (a) provides
credit support of any kind (including any undertaking, agreement or instrument
that would constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise) or (c) constitutes the lender; (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Senior Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any Telecommunications Business that operates
primarily in Latin American or Caribbean markets or any Telecommunications
Business reasonably related or ancillary thereto.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company that is engaged in a Permitted
Business; (b) any Investment in Cash Equivalents; (c) any Investment by the
Company in a Person, if as a result of such Investment (i) such Person becomes a
Wholly Owned Restricted Subsidiary of the Company that is engaged in a Permitted
Business or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the
Company and that is engaged in a Permitted Business; (d) any Restricted
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "-- Repurchase at the Option of
Holders -- Asset Sales;" (e) any acquisition of assets solely in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the Company;
(f) Investments (measured as of the time made and without giving effect to
subsequent changes in value) in a Person engaged in a Permitted Business, having
an aggregate fair market value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (f) that are at
the time outstanding, not to exceed the sum of (A) $5.0 million plus (B) 100% of
the aggregate net cash proceeds received by the Company after the date of the
Indenture from the issuance and sale of its Qualified Capital Stock to the
extent that such net cash proceeds have been, and continue to be, designated as
Designated Equity Proceeds to be applied to make Investments pursuant to this
clause (f) as provided in the definition thereof; provided that, to be extent
that any such Qualified Capital Stock ceases to be outstanding for any reason,
any Investment that was made as a result of the receipt of net cash proceeds
from the issuance of such Qualified Capital Stock shall cease to be permitted by
virtue of this clause (f) as of the date on which such Qualified Capital Stock
ceases to be outstanding; (g) any Investment in prepaid expenses, negotiable
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instruments held for collection, and lease, utility, workers' compensation,
performance and other similar deposits; (h) loans and advances to employees made
in the ordinary course of business in an aggregate amount not to exceed $1.0
million at any one time outstanding; and (i) Investments made in connection with
Hedging Obligations.
"Permitted Liens" means, without duplication, each of the following:
(i) Liens in favor of the Company or any of its Wholly Owned
Restricted Subsidiaries;
(ii) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Restricted Subsidiary
of the Company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or such Restricted Subsidiary;
(iii) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition;
(iv) Liens existing on the date of the Indenture;
(v) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(vi) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(vii) Liens securing Indebtedness of any Restricted Subsidiary of the
Company that does not exceed $5.0 million at any one time outstanding
represented by Capital Lease Obligations, mortgage financings or purchase
money obligations, in each case incurred for the purpose of financing all
or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of such Restricted
Subsidiary;
(viii) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries;
(ix) Liens created pursuant to the Proceeds Pledge and Escrow
Agreement;
(x) Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary of the Company with respect to obligations
that do not exceed $5.0 million at any one time outstanding and that (a)
are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary;
(xi) Liens securing the Senior Notes;
(xii) easements, rights-of-way, zoning and similar restrictions and
other similar encumbrances or title defects which, in the aggregate, are
not material in amount, and which do not, in any case, materially detract
from the value of the property subject thereto (as such property is used by
the Company or any of its Restricted Subsidiaries) or interfere with the
ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries;
(xiii) Liens arising by reason of any judgment, decree or order or any
court so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been initiated for the review of
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such judgment, decree or order shall not have been finally terminated or
the period within which such proceedings may be initiated shall not have
expired;
(xiv) any interest or title of a lessor under any Capital Lease
Obligation; and
(xv) any extension, renewal or replacement, in whole or in part, of
any Permitted Lien, provided that any such extension, renewal or
replacement shall be no more restrictive in any material respects that the
Lien so extended, renewed or replaced and shall not extend to any
additional property or assets.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Subsidiaries; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Senior Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Senior Notes on terms at least
as favorable to the Holders of Senior Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Principals" means Patricio E. Northland, the current President of the
Company, and Douglas G. Geib II, the current Chief Financial Officer of the
Company.
"Proceeds Pledge and Escrow Agreement" means the Proceeds Pledge and Escrow
Agreement, dated as of the date of the Indenture, by and between the Company and
the Trustee, as Collateral Agent, governing the disbursement of funds from the
Pledge Account and the Collateral Account.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) or trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay,
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redeem or repurchase any such interest or principal prior to the date originally
scheduled for the payment thereof.
"Strategic Equity Investor" means a corporation, partnership or other
entity engaged in one or more Telecommunications Businesses that has, or 80% or
more of the voting power of the Capital Stock of which is owned by a Person that
has an equity market capitalization, at the time of its initial Investment in
the Company, in excess of $2.0 billion.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity (x) of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) or (y) which such Person either alone or together with one
or more Restricted Subsidiaries of such Person has the absolute right, pursuant
to law, contract or otherwise, to direct the payment of dividends or the making
of other distributions, loans or advances by such corporation, association or
other business entity 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 of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means any guarantee of payment of the Senior Notes
by a Subsidiary issued by such Subsidiary pursuant to the covenant described
above under the caption "-- Certain Covenants -- Limitations on Issuances of
Guarantees of Indebtedness by Subsidiaries."
"Telecommunications Business" means any business that derives substantially
all of its revenue from the business of (i) transmitting, or providing services
relating to the transmission of, voice, video or data through owned or leased
transmission facilities, (ii) creating, developing or marketing communications
related network equipment for use in a telecommunications business or (iii)
evaluating, participating in or pursuing any other activity or opportunity that
is primarily related to those identified in (i) or (ii) above; provided that the
determination of what constitutes a Telecommunications Business shall be made in
good faith by the Board of Directors of the Company.
"Unrestricted Subsidiary" means any Subsidiary (other than any Subsidiary
of the Company that owns all or a material portion of the assets (i) owned by
the Company or any Subsidiary of the Company on the date of the Indenture or
(ii) owned by any Person described in this Prospectus under the caption "The
Iusatel Acquisition" on the date of the acquisition by the Company of such
Person) that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution; but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under the
caption "-- Certain Covenants -- Restricted Pay-
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ments." If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock," the Company shall be in default of such covenant). The Board
of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than (i) directors' qualifying shares or
(ii) shares of non-U.S. Restricted Subsidiaries held by non-U.S. nationals as
required by the laws of the jurisdiction of incorporation of such non-U.S.
Restricted Subsidiary) shall at the time be owned by such Person or by one or
more Wholly Owned Restricted Subsidiaries of such Person; provided, that no
Restricted Subsidiary of such Person, all of the outstanding Capital Stock or
other ownership interests of which are not owned by such Person, shall in any
case be a "Wholly Owned Restricted Subsidiary" under the Indenture unless such
Person either alone or together with one or more Wholly Owned Restricted
Subsidiaries of such Person has the absolute right, pursuant to law, contract or
otherwise, to direct the payment of dividends or the making of other
distributions, loans or advances by such Restricted Subsidiary.
PROVISIONS GENERALLY APPLICABLE TO THE SENIOR NOTES
BOOK-ENTRY, DELIVERY AND FORM
All of the Existing Notes were initially issued in the form of one Global
Note (the "Existing Global Note") The Existing Global Note was deposited upon
issuance with the Trustee as custodian for The Depository Trust Company ("DTC"),
in New York, New York, and registered in the name of DTC or its nominee (such
nominee being referred to herein as the "Global Note Holder"), in each case for
credit to an account of a direct or indirect participant in DTC as described
below. The New Notes which will be issued in exchange for the Existing Notes
will be issued in the form of one Global Note (the "New Global Note") and
deposited upon issuance with, or on behalf of, the DTC and registered in the
name of the Global Note Holder.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for New
Notes in certificated form except in the limited circumstances described below.
See "--Exchange of Book-Entry Securities for Certificated Securities."
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DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interests
and transfer of ownership interests of each actual purchaser of each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
The Company expects that, pursuant to procedures established by the DTC,
(i) upon deposit of the New Global Note, the DTC will credit the accounts of
Participants designated by the Exchange Agent with portions of the principal
amount of the New Global Note and (ii) ownership of the New Notes evidenced by
the New Global Note will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by the DTC (with respect to the
interests of the Participants), the Participants and the Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer New Notes evidenced by the New
Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Senior
Notes, the Global Note Holder will be considered the sole Holder under the
Indenture of any Notes evidenced by the Existing Global Note and the New Global
Note. Beneficial owners of Senior Notes evidenced by the Existing Global Note
and the New Global Note will not be considered the owners or Holders thereof
under the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee has any responsibility or liability for any aspect of
the records of the DTC or for maintaining, supervising or reviewing any records
of the DTC relating to the Senior Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Senior Notes, including the
Global Senior Note, are registered as the owners thereof for the purpose of
receiving such payments. Consequently, neither the Company nor the Trustee has
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of Senior Notes. The Company believes, however, that it is
currently the policy of the DTC to immediately credit the accounts of the
relevant Participants with such payments, in amounts proportionate to their
respective holdings of beneficial interests in the relevant security as shown on
the records of the DTC. Payments by the DTC's Participants and the DTC's
Indirect Participants to the beneficial owners of Senior Notes will be governed
by standing instructions and customary practice and will be the responsibility
of the DTC's Participants or the DTC's Indirect Participants.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE NEW NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NEW NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS
OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, premium if any, interest and
Liquidated Damages, if any, on any Senior Notes, registered in the name of DTC
or its nominee will be payable by the Trustee to DTC in its
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capacity as the registered Holder under the Indenture. Under the terms of the
Indenture the Company and the Trustee will treat the persons in whose names the
New Notes, including the New Global Note, are registered as the owners thereof
for the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interest in the New Global Note, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the New Global Note or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised the Company that its current practice, upon receipt of any payment in
respect of securities, is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in the principal amount of beneficial interest in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of
Securities will be governed by standing instructions and customary practices and
will be the responsibility of the Participants or the Indirect Participants and
will not be the responsibility of DTC, the Trustee or the Company. Neither the
Company nor the Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the New Notes, and the
Company and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee for all purposes.
Interests in the New Global Note are expected to be eligible to trade in
DTC's Same-Day Funds Settlement System, and secondary market trading activity in
such interests will therefore settle in immediately available funds, subject in
all cases to the rules and procedures of DTC and its participants. See
"-- Same-Day Settlement and Payment."
Subject to the transfer restrictions set forth under "Notice to Investors,"
transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of New Notes only at the direction of one or more Participants
to whose account with DTC interests in the New Global Note are credited and only
in respect of such porion of the aggregate principal amount of the New Notes as
to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the New Notes, DTC reserves the
right to exchange the New Notes for legended New Notes in certificated form, and
to distribute such New Notes to its Participants.
The information in this section concerning DTC, and its book-entry systems
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the New Global Note among Participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
will have any responsibility for the performance by DTC or its Participants or
Indirect Participants of their respective obligations under the rules and
procedures governing their operations.
EXCHANGE OF BOOK-ENTRY SECURITIES FOR CERTIFICATED SECURITIES
A New Global Note is exchangeable for definitive New Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the New Global Note and the Company
thereupon fails to appoint a successor depositary or (y) has ceased to be a
clearing agency registered under the Exchange Act, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
the New Notes in certificated form or (iii) there shall have occurred and be
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continuing an Event of Default or any event which after notice or lapse of time
or both would be an Event of Default with respect to the New Notes. In addition,
beneficial interests in a New Global Note may be exchanged for certificated New
Notes upon request but only upon at least 20 days prior written notice given to
the Trustee by or on behalf of DTC in accordance with its customary procedures.
In all cases, certificated New Notes delivered in exchange for any New Global
Note or beneficial interests therein will be registered in the names, and issued
in any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures) and will bear the applicable
restrictive legend referred to in "Notice to Investors," unless the Company
determines otherwise in compliance with applicable law.
EXCHANGE OF CERTIFICATED SECURITIES FOR BOOK-ENTRY SECURITIES
New Notes issued in certificated form may not be exchanged for beneficial
interests in any New Global Note unless the transferor first delivers to the
Trustee a written certificate (in the form provided in the Indenture) to the
effect that such transfer will comply with the appropriate transfer restrictions
applicable to such New Notes as described under "Notice to Investors."
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the New Notes
represented by the New Global Note be made by wire transfer of immediately
available funds to the accounts specified by the New Global Note Holder. With
respect to New Notes in certificated form, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof or, if no such account is specified, by mailing a check to each such
Holder's registered address.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
It is the opinion of Baker & McKenzie, counsel to the Company, that the
material federal income tax considerations to holders whose Existing Notes are
exchanged for New Notes are as described herein, subject to the limitations and
conditions set forth below. Except as specifically discussed below with regard
to Non-U.S. Holders (as defined below), this description applies only to initial
investors who hold the Existing Notes and New Notes as capital assets and who,
for United States federal income tax purposes, are (i) individual citizens or
residents of the United States, (ii) corporations, partnerships or other
entities created or organized in or under the laws of the United States or of
any political subdivision thereof (unless, in the case of a partnership,
Treasury Regulations otherwise provide), (iii) estates, the income of which are
subject to United States federal income taxation regardless of the source of
such income or (iv) trusts subject to the primary supervision of a United States
court and the control of one or more United States persons ("U.S. Holders").
Persons other than U.S. Holders ("Non-U.S. Holders") are subject to special
federal income and estate tax considerations that are discussed below. There can
be no assurance that the Internal Revenue Service will agree with the following
discussion. Further, the discussion does not address all aspects of taxation
that may be relevant to particular purchasers in light of their personal
circumstances (including the effect of any foreign, state or local tax laws) or
to certain types of purchasers (including dealers in securities, insurance
companies, foreign persons, financial institutions, tax-exempt entities and
persons holding the Senior Notes as part of a straddle, hedge or conversion
transaction) subject to special treatment under the federal income tax laws.
Moreover, the effect of any applicable state, local or foreign tax laws is not
discussed.
The discussion of the federal income tax consequences set forth below is
based upon currently existing provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), judicial decisions, and administrative interpretations
including, but not limited to, Treasury regulations relating to original issue
discount ("OID Regulations"), all of which are subject to change, possibly with
retroactive effect. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH
PROSPECTIVE PURCHASER OF NEW NOTES IS STRONGLY URGED TO CONSULT HIS OWN TAX
ADVISOR WITH RESPECT TO HIS PARTICULAR TAX SITUATION AND THE PARTICULAR TAX
EFFECTS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN
THE TAX LAWS.
TAX CONSEQUENCES FOR U.S. HOLDERS
Exchange of Existing Notes for New Notes
Because the New Notes should not be considered to differ materially either
in kind or in extent from the Existing Notes, the exchange of New Notes for
Existing Notes pursuant to the Exchange Offer should not be treated as an
"exchange" for federal income tax purposes pursuant to Section 1001 of the Code
and Treasury Regulation Section 1.1001-3. As a result, no material federal
income tax consequences should result to holders exchanging Existing Notes for
New Notes. If, however, the exchange of Existing Notes for New Notes were
treated as a taxable event, such transaction should constitute a
recapitalization for federal income tax purposes and holders would not recognize
a gain or loss upon such exchange.
Interest and Original Issue Discount
Stated interest on the Senior Notes will be taxable to a U.S. Holder as
ordinary interest income at the time it accrues or is paid in accordance with
such holder's method of accounting for tax purposes.
In addition, the Senior Notes will be treated, for federal income tax
purposes, as having been issued with original issue discount ("OID") unless the
amount of the OID is considered de minimus. A U.S. Holder of a Senior Note will
be required to include such OID (other than de minimus OID) in income (as
interest) as it accrues, regardless of the holder's method of accounting for
federal income tax purposes. Accordingly, a U.S. Holder will be required to
include amounts in gross income in advance of the receipt of the cash to which
such income is attributable.
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The amount of OID with respect to a Senior Note will be an amount equal to
the excess of the stated redemption price at maturity of such Senior Note over
the issue price of such Senior Note. The stated redemption price at maturity of
each Senior Note will include all cash payments, including principal and
interest, required to be made thereunder until maturity other than qualified
stated interest. Stated interest on the Senior Note will qualify as qualified
stated interest. The issue price of a Senior Note will be equal to that portion
of the issue price of the Unit allocable to the Senior Note based on the
relative fair market values of the Senior Notes and Warrants forming part of a
Unit at the time of issuance. The OID will be considered de minimus, and thus no
current accrual would be required, if the OID is less than .25% of the stated
redemption price at maturity, multiplied by the number of complete years to
maturity.
The amount of OID accruing with respect to any Senior Note will be the sum
of the "daily portions" of OID with respect to such Senior Note for each day
during the taxable year in which a holder owns a Senior Note ("accrued OID").
The daily portion is determined by allocating to each day in any "accrual
period" a pro rata portion of the OID allocable to that accrual period. An
accrual period may be of any length and may vary in length over the term of a
Senior Note provided that each accrual period is no longer than one year and
each scheduled payment of principal or interest occurs either on the final day
or on the first day of an accrual period. The amount of OID accruing during any
full accrual period with respect to a Senior Note will be equal to the following
amount: (i) the "adjusted issue price" of such Senior Note at the beginning of
that accrual period, multiplied by (ii) the yield to maturity of such Senior
Note. OID allocable to a final accrual period is the difference between the
amount payable at maturity and the adjusted issue price at the beginning of the
final accrual period. If all accrual periods are of equal length, except for an
initial short accrual period, the amount of OID allocable to the initial short
accrual period may be computed under any reasonable method. The adjusted issue
price of a Senior Note at the beginning of its first accrual period will be
equal to its issue price. The adjusted issue price at the beginning of any
subsequent accrual period will be equal to (i) the adjusted issue price at the
beginning of the preceding accrual period, plus (ii) the amount of OID accrued
during the preceding accrual period, minus (iii) any payments other than
qualified stated interest made during the preceding accrual period and on the
first day of such subsequent accrual period.
In the event of a Change of Control, the holders of the Senior Notes will
have the right to require the Company to purchase their Senior Notes. The OID
Regulations provide that the right of holders of the Senior Notes to require
redemption of the Senior Notes upon the occurrence of a Change of Control will
not affect the yield or maturity date of the Senior Notes unless, based on all
the facts and circumstances as of the issue date, it is more likely than not
that a Change of Control giving rise to the redemption right will occur. The
Company has no present intention of treating the redemption provisions of the
Senior Notes as affecting the computation of the yield to maturity of any Senior
Note.
The Company may redeem the Senior Notes at any time on or after October 27,
2002, and, in certain circumstances, may redeem or repurchase all or a portion
of the Senior Notes prior to October 27, 2000 with the proceeds of a sale of its
Qualified Capital Stock to the public in a registered public offering or to one
or more Strategic Equity Investors. Under the OID Regulations, the Company is
deemed to exercise any option to redeem if the exercise of such option would
lower the yield of the debt instrument. The Company believes that it will not be
treated as having exercised an option to redeem under these rules.
If the Company meets the Foreign Active Business Requirement described
below, interest (and original issue discount, if any) paid on the Senior Notes
may be treated as foreign source interest. Due to the factual nature of the
issue, however, it is not certain that the Company will meet such requirement.
Sale, Redemption or other Taxable Disposition
Generally, any sale, redemption or other taxable disposition of Senior
Notes by a U.S. Holder will result in taxable gain or loss equal to the
difference between (1) the sum of the amount of cash and the fair market
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value of any property received upon such sale, redemption or disposition (except
to the extent that cash received is attributable to accrued interest or OID) and
(2) the holder's adjusted tax basis in such Senior Notes. The adjusted tax basis
of a holder in such Senior Notes will equal the issue price of such Senior
Notes, increased by any OID on the Senior Notes previously included in such
holder's income, and reduced by any payments (other than payments of qualified
stated interest) previously made on the Senior Notes. Such gain or loss will be
capital gain or loss, and will be long-term capital gain or loss if the Senior
Notes had been held by the holder for more than one year at the time of the
sale, redemption or disposition. Long-term capital gain realized by an
individual U.S. Holder is generally subject to a maximum tax rate of 28% in
respect of property held for more than one year and to a maximum rate of 20% in
respect of property held in excess of 18 months.
U.S. Holders should be aware that the resale of a Senior Note may be
affected by the "market discount" rules of the Code under which a subsequent
purchaser of a Senior Note acquiring the Senior Note at a market discount
generally would be required to include as ordinary income a portion of the gain
realized upon the disposition or retirement of such Senior Note to the extent of
the market discount that has accrued while the debt instrument was held by such
holder.
TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
Interest
Interest (including OID) paid by the Company to a Non-U.S. Holder will not
be subject to U.S. federal income or withholding tax if such interest is not
effectively connected with the conduct of a trade or business within the U.S. by
such Non-U.S. Holder and either (a) at least 80% of the gross income of the
Company and its direct or indirect subsidiaries during a certain testing period
as described in the Code is non-U.S. source income attributable to the active
conduct of a trade or business outside the U.S. ("Foreign Active Business
Requirement") or (b) the Non-U.S. Holder (i) does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
the Company, (ii) is not a controlled foreign corporation with respect to which
the Company is a "related person" within the meaning of the Code and (iii)
certifies, under penalties of perjury, that such owner is not a U.S. person and
provides such owner's name and address. It is possible that the Company will
meet the Foreign Active Business Requirement described above; because of the
factual nature of this determination, however, it cannot be stated with
certainty that such requirement will be met, and therefore it is recommended
that persons who are able to qualify under the alternative test for exemption
from withholding tax described in (b) above provide the certification described
in (b)(ii) in order to obtain the exemption.
The certification described under the exemption from withholding tax
described in (b)(iii) above is generally required to be made on Form W-8 (or
permitted substitute form) prior to payment. Regulations dealing with
withholding tax on amounts paid to foreign persons and related matters (the "New
Withholding Regulations") were recently issued by the Treasury Department. In
general, the New Withholding Regulations do not significantly alter the
substantive withholding and information reporting requirements, but unify
current certification procedures and forms, clarify reliance standards and
provide certain special procedures for payments made to qualified
intermediaries. The New Withholding Regulations will generally be effective for
payments made after December 31, 1998, subject to certain transition rules.
Accordingly, payments made on or before December 31, 1998 will continue to be
subject to the regulations that existed before the New Withholding Regulations
were issued.
Interest paid to a Non-U.S. Holder that is effectively connected with a
United States trade or business conducted by such Non-U.S. Holder will be taxed
at the graduated rates applicable to United States citizens, resident aliens and
domestic corporations, and will not be subject to withholding tax if the
Non-U.S. Holder gives an appropriate statement to the Company or its paying
agent in advance of the interest payment. In addition to the graduate tax
described above, effectively connected interest received by a Non-U.S. Holder
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that is a corporation may also be subject to an additional branch profits tax at
a rate of 30% ( or such lower rate as may be specified by an applicable income
tax treaty).
Gain on Disposition of Senior Notes
A Non-U.S. Holder will generally not be subject to U.S. federal income tax
on gain recognized on a sale, redemption or other disposition of a Senior Note
unless (i) the gain is effectively connected with the conduct of a trade or
business within the U.S. by the Non-U.S. Holder or (ii) in the case of a
Non-U.S. Holder who is a non-resident alien individual and holds the Senior Note
as a capital assets, such holder is present in the U.S. for 183 or more days in
the taxable year and certain other requirements are met.
Federal Estate Taxes
If interest on the Senior Notes is exempt from withholding of U.S. federal
income tax under the rules described above, the Senior Notes will not be
included in the estate of a deceased Non-U.S. Holder for U.S. federal estate tax
purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each year in which the Senior Notes are outstanding, the Company will
generally be required to provide the Internal Revenue Service with certain
information, including the holder's name, address and taxpayer identification
number (either such holder's social security number or its employer
identification number, as the case may be), and the aggregate amount of interest
(including OID) and principal paid to such holder during the year. These
reporting requirements, however, do not apply with respect to certain holders,
including United States corporations, securities dealers, other financial
institutions, tax-exempt organizations, qualified pension and profit sharing
trusts, and individual retirement accounts.
In the event that a holder fails to establish its exemption from such
information reporting requirements or is otherwise subject to the reporting
requirements described above and fails to supply its correct taxpayer
identification number in the manner required by applicable law, or underreports
its tax liability, the paying agent making payments in respect of a Senior Note
may be required to withhold an amount equal to 31% from any payment of interest
or principal pursuant to the terms of the Senior Notes, or any payment of
proceeds of a redemption of Senior Notes, as the case may be, to a holder. The
New Withholding Regulations provide that to the extent a Non-U.S. Holder
certifies on Form W-8 (or a permitted substitute form) as to such holder's
status as a foreign person, the backup withholding provisions and the
information reporting provisions will generally not apply. If a Non-U.S. Holder
fails to provide such certification, such holder may be subject to certain
information reporting and the 31% backup withholding tax. Amounts paid as backup
withholding do not constitute an additional tax and will be credited against the
holder's federal income tax liabilities, so long as the required information is
provided to the Internal Revenue Service. The Company will report to the holders
of Senior Notes the amount of any "reportable payments" for each calendar year
and the amount of tax withheld, if any, with respect to payment on the
securities.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with the resales of New Notes received in exchange for Existing Notes
where such Existing Notes were acquired as a result of market-making activities
or other trading activities. The Company has agreed that for a period of 120
days after the date on which the Registration Statement is declared effective,
it will make this Prospectus, as amended or supplemented, available to any
broker-dealer that requests such documents in the Letter of Transmittal for use
in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers or any other persons. New Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders (including any broker-dealers) and certain parties related
to the holders against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Legal matters with respect to the New Notes offered hereby will be passed
upon for the Company by Baker & McKenzie, Miami, Florida.
EXPERTS
The consolidated financial statements of InterAmericas Communications
Corporation and its subsidiaries as of December 31, 1996 and 1995 and for each
of the three years in the period ended December 31, 1996, included in this
Prospectus, have been so included in reliance on the report (which contains
explanatory paragraphs relating to the terms of transactions and relationships
with related parties described in Note 10 and the removal of the going concern
paragraph included in their original report, after the Company completed a
private debt offering described in Note 15) of Price Waterhouse LLP, independent
certified public accountants, given on the authority of said firm as experts in
accounting and auditing.
The financial statements of Iusatel Chile S.A. as of December 31, 1996 and
1995 and for each of the two years in the period ended December 31, 1996,
included in this Prospectus, have been audited by Langton Clarke y Cia.
Ltda.\Coopers & Lybrand, independent accountants, as stated in their report
appearing herein, and have been so included in reliance upon such report given
upon the authority of that firm as experts in accounting and auditing.
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GLOSSARY OF DEFINED TERMS
ATM (Asynchronous Transfer Mode): An information transfer standard that is
one of a general class of packet technologies that relay traffic by way of an
address contained within the first five bytes of a standard 53 byte-long packet
or cell. The ATM format can be used by many different information systems,
including LANs, to deliver traffic at varying rates, permitting a mix of data,
voice and video.
Backbone: Refers to the major fiber cable carrying the accumulated
transmissions of many businesses connected to a network system. Similar to a
water main, the backbone is the high volume conduit for transmissions input by
multiple smaller connections (last-mile connections) from business offices.
Bandwidth: The range of frequencies that can be passed through a medium,
such as glass fibers, without distortion. The greater the bandwidth, the greater
the information carrying capacity of such medium. For fiber optic transmission,
electronic transmitting devices determine the bandwidth, not the fibers
themselves.
CAP (Competitive Access Provider): A company that provides its customers
with an alternative to the local telephone company for local transport of
private line, special access telecommunications services and switched access
services. CAPs are also referred to in the industry as alternative access
vendors, alternative local telecommunications service providers (ALTS) and
metropolitan area network providers (MANs).
Carrier's carrier: Refers to a telecommunications network that provides
wholesale telecommunications transmission to other major telecommunications
networks such as long distance, local and cellular telephone companies.
Centrex: Refers to the switching capability provided by a telephone
company's central office to a customer over telephone lines on a subscription
basis. Centrex allows a customer to receive such services as intra-office call
routing and voice mail from a telephone company's switch, thereby avoiding the
purchase of a private switch known as PBX.
CLEC (competitive local exchange carrier): A company that provides local
exchange services in competition with the incumbent local exchange carrier.
CTC: Compania de Telefonos de Chile, S.A., the PTT of Chile which was
privatized in 1987.
Dedicated lines: Telecommunications lines reserved for use by particular
customers along predetermined routes (in contrast to telecommunications lines
within the local telephone PTT's public switched network).
Digital: Describes a method of storing, processing and transmitting
information through the use of distinct electronic or optical pulses that
represent the binary digits 0 and 1. Digital transmission and switching
technologies employ a sequence of these pulses to represent information, as
opposed to the continuously variable analog signal. The precise digital numbers
preclude any distortion (such as graininess or snow, in the case of video
transmission, or static or other background distortion, in the case of audio
transmission).
Drop and insert: Refers to a network's capability to share capacity among
users without dedicating any fiber strand to a single end user.
Earth station: A parabolic antenna and associated electronics for
receiving or transmitting satellite signals.
Enhanced services: Refers to private line services, and LAN and WAN
connectivity services.
Entel: Empresa Nacional de Telefonos, S.A. Privatized in 1989, Entel has
historically been Chile's national long distance company. Under the Multicarrier
Agreement, Entel is now licensed to provide all types of telecommunications
services within Chile.
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ESN (Enhanced Services Network): The name used to describe the
communication services providing digital connectivity, primarily for data
applications via frame relay, ATV, or digital interexchange private line
facilities.
Fiber optics: Fiber optic technology involves sending laser light pulses
across glass strands in order to transmit digital information. Fiber optic cable
currently is the medium of choice for the telecommunications and cable
industries. Fiber is resistant to electrical interference and many environmental
factors that affect copper wiring and satellite transmission.
Frame relay: A form of data communications packet switching that uses
smaller packets and requires less error checking than traditional technologies
such as X.25 or SNA. Frame Relay is used in wide area networks to interconnect
LANs and computer systems. Frame Relay was designed to operate at higher speeds
on modern fiber optic networks.
Gateway Switch: A switch which is used to establish connection with other
carriers.
GHz or Gigahertz: A unit of frequency equal to one billion cycles or hertz
per second.
ILEC (incumbent local exchange carrier): The name used to describe a
company which is the principal local exchange carrier.
Interconnection: Interconnection of facilities between or among local
exchange carriers, including potential physical collocation of one carrier's
equipment in the other carrier's premises to facilitate such interconnection.
ISP (Internet Service Provider): The name used for those companies which
provide its subscribers with access to the Internet.
Internet: The name used to describe the global open network of computers
that permits a person with access to exchange information with any other
computer connected to the network.
LAN (Local Area Network): Refers to the interconnection of computers for
the purpose of sharing files, programs and printers. LANs may include dedicated
computers or file servers that provide a centralized source of shared files and
programs.
Last mile: A shorthand reference to the last section of a
telecommunications path to the ultimate end-user which may be less than or
greater than one mile.
LEC (local exchange carrier): A company providing local telephone
services.
Long distance carriers (interexchange carriers): Long distance carriers
provide services between local exchanges on an interstate or intrastate basis. A
long distance carrier may offer services over its own or another carrier's
facilities.
Long exchange services: Services provided within a geographic area
determined by the appropriate state regulatory authority which calls are
transmitted without toll charges to the calling or called party.
Ministry of Transportation and Telecommunications: Chile's government body
which, through the Undersecretariat of Telecommunications, is responsible for
regulating and registering all telecommunications equipment and services. Its
role is equivalent to that of the Federal Communications Commission in the
United States.
Ministry of Transportation, Communications, Housing and Construction: The
Peruvian government entity with the authority to regulate telecommunications and
with the authority to grant concessions and licenses for telecommunications
service providers such as the Company.
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Multicarrier Agreement: The legislation passed by Chile's Ministry of
Telecommunications in 1994 which opens Chile's long distance market to
competition while temporarily limiting the market share in that market which may
be held by the CTC.
Node: Devices on a network that demand or supply services or where
transmission paths are connected.
PBX (private branch exchange): A customer owned and operated switch on
customer premises, typically used by large businesses with multiple telephone
lines.
PDH (Plesiochronous Digital Hierarchy): Refers to a digital transmission
system that operates as a Time Division Multiplexing (TDM) system by combining
multiple signals of 2 Mbit/s through the use of a multiplexor that operates by
adding "dummy" bits (otherwise known as justification bits). The justification
bits are recognized as such when multiplexing occurs, and discarded as original
signals. This process is known as plesiosynchronous operation. The use of
plesiochronous operation has led to the adoption of the term plesiochronous
digital hierarchy, or PDH.
POPs (points of presence): Locations where a long distance carrier has
installed transmission equipment in a service area that serves as, or relays
calls to, a network switching center of that long distance carrier.
PTT (Public Telephone and Telegraph): A government or privately-owned
monopoly carrier of telecommunications services or having a dominant market
share such as CTC.
Private Line: Refers to a private, dedicated telecommunications connection
between different locations (excluding long distance carriers' POPs).
Public switched network: Refers to traditional public (not dedicated) LEC
networks that switch calls between different customers.
Redundant electronics: Describes a telecommunications facility using two
separate electronic devices to transmit the telecommunications signal so that if
one device malfunctions, the signal may continue without interruption.
Right-of-way: Rights negotiated with the appropriate entity, such as a
utility company or transportation agency, to secure access to poles, ducts,
conduits or subway tunnels, as the case may be, to install the fiber optic
lines.
SONET (Synchronous Optical Network Technology): Refers to a set of
standards for optical communications transmission systems that define the
optical rates and formats, signal characteristics, performance, management and
maintenance information to be embedded within the signals and the multiplexing
techniques to be employed in optical communications transmission systems. SONET
facilitates the interoperability of dissimilar vendors equipment. SONET benefits
business customers by minimizing the equipment necessary for various
telecommunications applications and supports networking diagnostic and
maintenance features. Allows selective adding and dropping of signals.
Switch: A device that opens or closes circuits or selects the paths or
circuits to be used for transmission of information. Switching is the process of
interconnecting circuits to form a transmission path between users.
Switched services: Refers to transportation of switched traffic along
dedicated lines between the local telephone company's central offices and the
long distance carrier's POPs.
SDH (Synchronous digital hierarchy): An open standard for signals used in
optical fiber networks. It provides a basic data transport format that can be
used for all types of digital information (voice, video, data, facsimile and
graphics) and is used internationally. The specified base rate is 51.48 MBPS
(called synchronous transport signal level 1, or STS-1), and specifications
exist for data speeds up to 2.4 Gbps.
Teleport: Refers to a facility capable of transmitting and receiving
satellite signals for other users.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
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PAGE
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<S> <C>
INTERAMERICAS COMMUNICATIONS CORPORATION
Report of Independent Certified Public Accountants..... F-2
Consolidated Balance Sheets as of December 31, 1995 and
1996 (audited) and September 30, 1997 (unaudited)..... F-3
Consolidated Statements of Operations for the years
ended December 31, 1994, 1995 and 1996 (audited) and
the nine months ended September 30, 1996 and 1997
(unaudited)........................................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1994, 1995 and 1996 (audited)
and the nine months ended September 30, 1997
(unaudited)........................................... F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1995 and 1996 (audited) and
the nine months ended September 30, 1996 and 1997
(unaudited)........................................... F-6
Notes to Consolidated Financial Statements............. F-7
IUSATEL CHILE S.A.
Report of Independent Accountants...................... F-28
Balance Sheets at December 31, 1995 and 1996 and
September 30, 1997.................................... F-29
Statements of Income for each of the two years ended
December 31, 1995 and 1996 and the nine month periods
ended September 30, 1996 and 1997..................... F-30
Statements of Changes in Financial Position for each of
the two years ended December 31, 1996 and the nine
month period ended September 30, 1996................. F-31
Statements of Cash Flows for each of the two years
ended December 31, 1995 and 1996 and the nine month
period ended September 30, 1996 and 1997.............. F-32
Notes to Financial Statements.......................... F-33
Ch$ = Chilean pesos
ThCh$ = Thousands of Chilean pesos
US$ = United States dollars
ThUS$ = Thousands of United States dollars
U.F. = The Unidad de Fomento, or U.F., is an inflation-indexed,
peso denominated monetary unit used in Chile. The U.F. rate
is set daily in advance based on the change in the Chilean
Price Index of the previous month.
</TABLE>
F-1
<PAGE> 141
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of InterAmericas Communications Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
InterAmericas Communications Corporation and its subsidiaries at December 31,
1996 and 1995, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. These 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 of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As described in Note 15, the Company completed a private debt offering
subsequent to April 11, 1997. The Company believes that the capital raised
pursuant to the private debt offering will improve the Company's financial
condition to a level at which the Company is expected to meet its foreseeable
cash needs. Accordingly, the going concern paragraph included in our original
report has been removed.
As described in Note 10, the Company has transactions and relationships
with related parties. Because of these relationships, it is possible that the
terms of these transactions may not be the same as those that would result from
transactions among wholly unrelated parties.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Miami, Florida
April 11, 1997
(Except for Note 15,
for which the date
is October 27, 1997)
F-2
<PAGE> 142
INTERAMERICAS COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1995 1996 1997
------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 57 $ 723 $ 299
Restricted bank deposits................................ -- -- 164
Accounts receivable..................................... 8 113 76
Other receivables....................................... 7 97 80
Prepaid expenses........................................ 119 330 467
Due from related parties................................ 93 26 27
Other current assets.................................... 4 38 29
------- -------- ----------
Total current assets............................ 288 1,327 1,142
Property and equipment at cost, net....................... 2,885 3,956 5,956
Intangible assets, net.................................... 1,166 5,029 4,826
Deferred financing costs and other........................ 8 42 1,797
------- -------- ----------
Total assets.................................... $ 4,347 $ 10,354 $ 13,721
======= ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank lines of credit and Bridge Notes................... $ -- $ -- $ 1,407
8% Convertible debentures, net of original issue
discount............................................. -- -- 532
7% Convertible debentures, net of original issue
discount............................................. -- -- 861
Accounts payable........................................ 342 299 2,700
Accrued expenses........................................ 536 674 282
Due to related parties.................................. 779 416 47
Notes payable, including $634 to related parties in
1995................................................. 1,647 -- --
Lease obligations, current.............................. 11 114 45
Other current liabilities............................... -- 171 85
------- -------- ----------
Total current liabilities....................... 3,315 1,674 5,959
Lease obligations, less current portion................... 210 248 463
Deferred income taxes..................................... 152 152 152
------- -------- ----------
Total liabilities............................... 3,677 2,074 6,574
------- -------- ----------
Commitments and contingencies............................. -- -- --
------- -------- ----------
Stockholders' equity
Preferred stock, $.001 par value, authorized 10,000,000
shares, none issued
Common stock, $.001 par value, authorized 50,000,000
shares, issued and outstanding as of December 31,
1995 and 1996 and September 30, 1997, 16,152,518 and
18,984,300 shares, respectively...................... 12 16 19
Additional paid in capital.............................. 6,153 18,493 27,026
Warrants................................................ -- -- 298
Accumulated deficit..................................... (5,525) (10,151) (20,044)
Cumulative translation adjustments...................... 30 (78) (152)
------- -------- ----------
Total stockholders' equity...................... 670 8,280 7,147
------- -------- ----------
Total liabilities and stockholders' equity...... $ 4,347 $ 10,354 $ 13,721
======= ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 143
INTERAMERICAS COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales................................ $ 34 $ 224 $ 652 $ 477 $ 853
---------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of sales...................... 163 408 958 618 942
Selling, general and administrative
expenses........................ 1,968 1,918 3,345 2,154 7,651
Depreciation and amortization...... 76 396 706 518 658
---------- ---------- ---------- ---------- ----------
2,207 2,722 5,009 3,290 9,251
---------- ---------- ---------- ---------- ----------
Loss from operations................. (2,173) (2,498) (4,357) (2,813) (8,398)
Interest expense..................... (313) (319) (246) (96) (1,543)
Interest income...................... 1 10 80 36 48
Other income......................... (46) (66) (103) (11) --
---------- ---------- ---------- ---------- ----------
Net loss............................. $ (2,531) $ (2,873) $ (4,626) $ (2,884) $ (9,893)
========== ========== ========== ========== ==========
Net loss per share................... $ (1.30) $ (.31) $ (.31) $ (.20) $ (.61)
========== ========== ========== ========== ==========
Weighted average common shares
outstanding........................ 1,952,000 9,407,000 14,795,660 14,345,509 16,170,296
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 144
INTERAMERICAS COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE ACCRUED
-------------------- PAID-IN ACCUMULATED TRANSLATION DISTRIBUTIONS
SHARES AMOUNTS CAPITAL DEFICIT ADJUSTMENTS AND WARRANTS TOTAL
---------- ------- ---------- ----------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993........... 19,302 $ -- $ 676 $ (121) $ (80) $ -- $ 475
Recapitalization of HSI shares and
other................................. 331,008 -- 488 -- -- -- 488
Common stock issued in private
placements............................ 315,714 -- 1,002 -- -- -- 1,002
Conversion of debt...................... 4,500,000 5 197 -- -- -- 202
Issuance of notes payable for purchase
of common stock of HSI................ -- -- -- -- -- (6,088) (6,088)
Stock issued for consulting services.... 1,150,000 1 274 -- -- -- 275
Currency translation adjustment......... -- -- -- -- 66 -- 66
Net loss................................ -- -- -- (2,531) -- -- (2,531)
---------- ---- ------- -------- ----- ------- -------
Balances at December 31, 1994........... 6,316,024 6 2,637 (2,652) (14) (6,088) (6,111)
Common stock issued in private
placements............................ 635,761 1 1,962 -- -- -- 1,963
Conversion of debt...................... 4,888,900 5 1,126 -- -- 6,088 7,219
Stock issued for acquisitions........... 111,000 -- 400 -- -- -- 400
Imputed interest on related party
notes................................. -- -- 16 -- -- -- 16
Stock option grants..................... -- -- 12 -- -- -- 12
Currency translation adjustment......... -- -- -- -- 44 -- 44
Net loss................................ -- -- -- (2,873) -- -- (2,873)
---------- ---- ------- -------- ----- ------- -------
Balances at December 31, 1995........... 11,951,685 12 6,153 (5,525) 30 -- 670
Common stock issued in private
placements............................ 1,939,042 2 7,430 -- -- -- 7,432
Conversion of debt...................... 1,011,791 1 1,985 -- -- -- 1,986
Stock issued for acquisitions........... 1,250,000 1 2,812 -- -- -- 2,813
Imputed interest on related party
notes................................. -- -- 40 -- -- -- 40
Stock option grants..................... -- -- 73 -- -- -- 73
Currency translation adjustment......... -- -- -- -- (108) -- (108)
Net loss................................ -- -- -- (4,626) -- -- (4,626)
---------- ---- ------- -------- ----- ------- -------
Balances at December 31, 1996........... 16,152,518 16 18,493 (10,151) (78) -- 8,280
Warrants to purchase common stock
(Unaudited)........................... -- -- -- -- -- 298 298
Beneficial conversion features related
to convertible debentures
(Unaudited)........................... -- -- 810 -- -- -- 810
Currency translation adjustment
(Unaudited)........................... -- -- -- -- (74) -- (74)
Conversion of debt (Unaudited).......... 1,101,782 1 1,993 -- -- -- 1,994
Stock issued to certain officers and
former directors (Unaudited).......... 1,350,000 1 4,639 -- -- -- 4,640
Stock issued for financial assistance
and extinguishment of liability to
related parties (Unaudited)........... 380,000 1 1,091 -- -- -- 1,092
Net loss (Unaudited).................... -- -- -- (9,893) -- -- (9,893)
---------- ---- ------- -------- ----- ------- -------
Balances at September 30, 1997
(Unaudited)........................... 18,984,300 $ 19 $27,026 $(20,044) $(152) $ 298 $ 7,147
========== ==== ======= ======== ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 145
INTERAMERICAS COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................... $(2,531) $(2,873) $(4,626) $(2,884) $(9,893)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization expense.......... 76 396 706 518 658
Amortization of deferred financing costs and
original issue discounts..................... -- -- -- 216 91
Beneficial conversion features on convertible
debentures................................... -- -- -- -- 810
Capitalized interest related to network
construction................................. -- -- -- -- (600)
Services exchanged for common stock............ 275 12 73 -- 852
Non-cash compensation and consulting expense... 4,640
Interest converted to equity................... -- 183 49 -- --
Changes in assets and liabilities:
Accounts receivable.......................... (9) (70) (105) (272) 37
Due from related parties..................... -- -- (73) -- (1)
Other receivables............................ -- -- -- -- 17
Prepaid expenses............................. (221) 167 (217) -- (137)
Other current assets......................... 304 35 93 (127) 9
Other assets................................. (69) 76 (53) -- --
Accounts payable and accrued expenses........ 1,563 (4) 299 (950) 297
Due to related parties....................... 112 (66) (251) -- (129)
Other current liabilities.................... 11 -- 171 28 (86)
Deferred taxes............................... -- (6) -- -- --
------- ------- ------- ------- -------
Cash used in operating activities......... (489) (2,150) (3,934) (3,471) (3,435)
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment............... (1,849) (720) (1,453) (334) (1,855)
Acquisition of Visat............................. (200) (450) -- -- --
Acquisition of Hewster........................... -- -- (1,515) (1,500) --
------- ------- ------- ------- -------
Cash used in investing activities......... (2,049) (1,170) (2,968) (1,834) (1,855)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock......................... 1,490 1,963 7,430 7,443 --
Proceeds from issuance of convertible
debentures..................................... -- -- -- -- 3,500
Net proceeds from issuance of (repayments to)
notes payable and Bridge Notes................. 1,067 893 (1,061) 203 950
Deferred financing costs and other............... -- -- -- 51 --
Proceeds from bank line of credit, net of
restricted bank deposits....................... -- -- -- -- 343
Additions to notes payable to related party...... 92 407 1,232 -- --
(Payments under) proceeds from leasing
obligations.................................... -- -- (31) -- 147
------- ------- ------- ------- -------
Cash provided by financing activities..... 2,649 3,263 7,570 7,697 4,940
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents...................................... 111 (57) 668 2,392 (350)
Effect of exchange rate changes on cash............ -- -- (2) 57 (74)
Cash and cash equivalents at beginning of year..... 3 114 57 57 723
------- ------- ------- ------- -------
Cash and cash equivalents at end of year........... $ 114 $ 57 $ 723 $ 2,506 $ 299
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 146
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
1. ORGANIZATION AND BUSINESS
InterAmericas Communications Corporation ("the Company") and is a new
provider of telecommunications services over a fiber optic network in Santiago,
Chile, and holds international long distance services and satellite
communication concessions and licenses. The Company is currently integrating the
Santiago fiber-loop and satellite station. During 1996 the Company acquired a
telecommunications concession in Peru and commenced operations in Lima. The
Company operates in Chile as Hewster Chile, S.A. ("Hewster") and VISAT S.A.
("Visat") and in Peru as Red de Servicios de Telecomunicaciones, S.A.
("Resetel"). During the three years ended December 31, 1996, the Company has
only generated revenues from Hewster.
The Company is the successor to Theodore Games, Inc. ("TGI"), a "public
shell," which acquired Hewster Servicios Intermedios, S.A. ("HSI") on July 15,
1994 (Note 4). The acquisition of HSI was treated for accounting purposes as a
reverse acquisition as if HSI acquired TGI; accordingly, the historical
financial statements are those of HSI. TGI was originally incorporated in the
State of Nevada in 1989 for the purpose of marketing a copyrighted board game.
On June 28, 1994, the stockholders of TGI approved a 7.025 to 1 reverse stock
split, which resulted in the reduction of outstanding shares of common stock
from 1,405,000 shares, par value $.001 to 200,000 shares, par value $.001. On
July 15, 1994, Maroon Bells Capital Partners, Inc. ("MBCP") acquired from TGI's
stockholders, 150,000 shares of common stock of TGI representing 75% of the
issued and outstanding stock of TGI for $90. Effective July 31, 1994, the
Company sold its board game business. In September 1994, HSI acquired Visat S.A.
(Note 4). Effective October 5, 1994, TGI changed its state of incorporation from
Nevada to Texas and its name to InterAmericas Communications Corporation.
During the three years ended December 31, 1996 the Company concentrated its
efforts on the installation of fiber optic cable, raising capital and acquiring
rights to erect and operate satellite earth stations. The Company has developed
a long-term financial plan to address future cash flow needs which contemplates
significant debt and equity financings (Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies applied in the accompanying
consolidated financial statements follows:
ACCOUNTING 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.
The future recoverability of its investments is contingent upon the
Company's ability to complete its construction of fiber optic networks and to
establish an effective marketing plan that will enable it to generate revenues
in its competitive environment. Given the uncertainties surrounding these
matters, as well as the Company's limited operations to date, it is not
presently known whether the Company's investments in Hewster, Visat and Resetel
will ultimately be recoverable. No adjustment has been recorded in the
accompanying financial statements regarding the recoverability of invested
amounts. The Company continu-
F-7
<PAGE> 147
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
ously evaluates the recoverability of its long lived assets, and provides for
impairment at the time which, in management's judgment, the asset is impaired.
CASH AND CASH EQUIVALENTS
The Company considers all certificates of deposit and highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.
REVENUE RECOGNITION
Revenue is recognized as service is provided in accordance with contracts
with customers.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Maintenance and repair
expenditures are expensed as incurred and expenditures for improvements which
increase the expected useful lives of the assets are capitalized.
Depreciation expense is computed using the straight line method over the
estimated useful lives of the related assets.
INTANGIBLE ASSETS
Long-lived assets are reviewed by management for impairment whenever events
or changes in circumstances indicate that the projected cash flows of related
activities may not provide for cost recovery.
Goodwill relating to the acquisition of Hewster is being amortized using
the straight line method over the estimated useful life of ten years.
Satellite transmission rights acquired in the acquisition of Visat consist
of permits and concessions granted by the Chilean governmental authorities. The
amortization will be calculated using the straight-line method over their
estimated remaining useful lives, approximately ten years.
The concession acquired by Resetel, which was granted by the Peruvian
governmental authorities to operate a fiber optic network in Peru, is being
amortized using the straight line method over the life of the concession, which
is twenty years.
NET LOSS PER SHARE
All share and per share data presented in the financial statements reflect
the retroactive effects of the 7.025 to 1 reverse stock split which occurred on
June 28, 1994. The computation of net loss per share of common stock is computed
by dividing net loss for the year by the weighted average number of shares
outstanding during the year. Antidilutive common stock equivalents are excluded
from the calculation.
F-8
<PAGE> 148
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
COMMON STOCK EXCHANGED FOR OTHER THAN CASH
Common stock exchanged for services and as inducements to make loans have
been recorded as consulting expense or interest expense and additional paid in
capital at the estimated fair value of the common stock as determined by the
Board of Directors of the Company.
INCOME TAXES
The Company uses the liability method in accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
STOCK BASED COMPENSATION
On January 1, 1996 the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS
123 establishes a fair value based method of accounting for stock based
compensation, the effect of which can either be recorded or disclosed. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and is providing proforma
disclosure of net income and earnings per share as if the fair value based
method prescribed by SFAS 123 had been applied in measuring compensation expense
for options granted in 1996 and 1995. In accordance with APB 25 compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities are translated at end-of-period rates of exchange.
Income, expense and cash flows are translated at weighted average rates of
exchange for the period. The resulting currency translation adjustments are
accumulated and reported as a component of stockholders' equity. The effect of
foreign exchange rates on the consolidated statements of operations and of cash
flows is not significant.
RECLASSIFICATIONS
Certain amounts in the 1995 financial statements were reclassified to
conform with the 1996 presentation.
3. FINANCIAL CONDITION
The Company has developed a long-term financial plan to address future cash
flow needs. The plan contemplates significant debt and equity financings to
continue the development of the Chilean and Peruvian telecommunications system
and for working capital. In February 1995, the Company completed a private
placement equity offering which generated net proceeds of approximately $3.0
million. In March and August of 1996, the Company completed private placement
equity offerings of $1.1 million and $6.4 million, respectively. These proceeds
have been used to continue construction and development of the Chilean
telecommunication system, acquire Visat and Hewster, S.A. and provide working
capital. Also in 1996, the Company converted $2 million of debt to equity. The
Company expects that additional financing will be
F-9
<PAGE> 149
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
obtained in the near future; however, no assurance can be given that the
financing will be obtained and the nature of the terms of such financing.
The Company has sustained recurring losses and negative cash flow from
operations and has a net working capital deficiency that raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
4. ACQUISITIONS
ACQUISITION OF HSI
On July 15, 1994, Theodore Games, Inc. ("TGI"), a public shell, now
InterAmericas Communications Corporation, acquired 99.9% of the outstanding
common stock of Hewster Servicios Intermedios, S.A., a Chilean Corporation
controlled by the Company's former President and Chairman of the Board. The
acquisition was effected through the issuance by TGI of two notes to the major
stockholders of HSI in exchange for 99.9% of the issued and outstanding common
stock of HSI. One of the notes, in the amount of $3,112, was convertible into
2.3 million shares of common stock of the Company and the second note, in the
amount of $6,088, was convertible into 4.5 million shares. This $6,088
convertible note was recorded at December 31, 1994 as a liability and as a
reduction of stockholders' equity as "accrued distribution". Effective September
30, 1994, the first note was converted and effective June 30, 1995 the second
note was converted. The former holders of the notes are currently directors of
the Company.
The acquisition of HSI was accounted for as a reverse acquisition,
resulting in HSI acquiring the Company, for accounting purposes, and the
recapitalization of HSI. The Company's negative net worth at the date of
acquisition was $8, represented by assets of $317 and liabilities of $325. The
historical stockholders' equity of HSI was restated for the equivalent number of
shares of TGI's stock outstanding.
ACQUISITION OF VISAT
Effective September 23, 1994, the Company acquired 11 of the 20 issued and
outstanding common shares of Visat for $200. Visat holds a government concession
to provide intermediate telecommunication services, including the installation
and operation of a network of up to 12 satellite earth stations, throughout
Chile. The Company and an officer of the Company and the remaining shareholder
of Visat also entered into an agreement, effective September 1994, whereby the
Company and the officer of the Company agreed to acquire the 9 remaining
outstanding shares of common stock of Visat for $900 ($850 for the Company and
$50 for the officer), payable during 1995. During 1995, the Company paid $450 in
cash and the remaining $400 was satisfied on June 30, 1995 by the issuance of
111,000 shares of common stock. Visat had no operations and no assets other than
a government concession to provide intermediate telecommunication services. The
acquisition is being accounted for under the purchase method of accounting. The
total cost of the acquisition of Visat totaled $1,050 and is included as part of
intangible assets in the accompanying consolidated balance sheet.
ACQUISITION OF RESETEL
Pursuant to a stock purchase agreement dated May 7, 1996, the Company
acquired 100% of the issued and outstanding stock of Resetel, a Peruvian
corporation, in exchange for 1,250,000 shares of Common Stock of the Company. In
addition, the Company paid debts owed to the shareholders and others in the
amount of
F-10
<PAGE> 150
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
approximately $300. The purchase price of approximately $2,819, (including $6 of
capitalized acquisition costs), net of cash acquired of approximately $300, has
been substantially allocated to a concession and is included as part of
intangibles in the accompanying consolidated balance sheet. The acquisition has
been accounted for under the purchase method of accounting. A fair value of
$2.25 was assigned to each share issued to the shareholders of Resetel based on
the net proceeds per share in the March 1996 private placement.
Resetel obtained a local carrier concession to operate a fiber-optic
telecommunications network serving corporate customers in metropolitan Lima,
Peru and the port city of Callao. The Company has commenced the construction and
operation of the fiber-optic network in Peru.
Effective May 1, 1996 the Company has consolidated the financial position,
results of operation and cash flows of Resetel. Resetel results of operations
for the year ended December 31, 1995 and for the four months ended April 30,
1996 were not significant.
ACQUISITION OF HEWSTER, S.A.
On July 31, 1996 the Company's wholly owned subsidiary, Hewster Servicios
Intermedios, S.A. acquired 99% of Hewster, S.A. ("HSA") for $1,500. Hewster,
S.A. was a Chilean corporation controlled by the Company's former President and
Chairman of the Board.
On September 2, 1996, the Company paid $15 to the former Chairman of the
Board of Directors for the acquisition of the remaining 1% of the outstanding
stock of Hewster. The combined entity is operating under the name of Hewster
Chile, S.A.
The acquisition has been accounted for under the purchase method of
accounting. The estimated fair value of net assets acquired amounted to
approximately $183. The excess of cost over the fair value of net assets
acquired in the amount of $1,332 was recorded as goodwill and is included as
part of intangibles in the accompanying consolidated balance sheet. Effective
July 31, 1996, the Company has consolidated the financial position, results of
operation and cash flows of HSA. HSA's result of operations for the year ended
December 31, 1995 and for the seven months ended July 31, 1996 were not
significant.
F-11
<PAGE> 151
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
5. PROPERTY AND EQUIPMENT
Property and equipment consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------ ------
<S> <C> <C>
Fiber optic network......................................... $2,781 $2,868
Office space -- capital lease............................... 218 209
Office equipment, including $0 in 1995 ($311 in 1996) under
capital leases............................................ 117 566
Furniture and fixtures...................................... 34 62
Motor vehicles, including $0 in 1995 ($13 in 1996) under
capital leases............................................ -- 114
Equipment pending installation and construction in
progress.................................................. -- 1,021
Other....................................................... 117 56
------ ------
3,267 4,896
Less: accumulated depreciation, including $9 in 1995 ($132
in 1996) under capital leases............................. (382) (940)
------ ------
$2,885 $3,956
====== ======
</TABLE>
6. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------ ------
<S> <C> <C>
Satellite transmission rights............................... $1,166 $1,166
Concession.................................................. -- 2,819
Goodwill.................................................... -- 1,289
------ ------
1,166 5,274
Less: accumulated Amortization.............................. -- (245)
------ ------
$1,166 $5,029
====== ======
</TABLE>
7. ACCRUED EXPENSES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------ ------
<S> <C> <C>
Accrued expenses consist of:
Purchases of telecommunication equipment.................... $ 14 $ 376
Professional fees........................................... 85 63
Interest.................................................... 80 83
Salaries.................................................... 67 14
Travel...................................................... -- 17
Other....................................................... 290 121
------ ------
$ 536 $ 674
====== ======
</TABLE>
F-12
<PAGE> 152
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
8. NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------ ------
<S> <C> <C>
Promissory note payable to unrelated party, dated May 2,
1995, bearing interest at 8% per annum, due May 1, 1996.
This note is secured by the shares of common stock of HSI
owned by the Company, the shares of VISAT owned by HSI,
and all of the assets of HSI. As part of this note, the
Company issued the note holder warrants to purchase
200,000 shares of common stock of the Company at $3.50 per
share. This note, plus accrued interest, was paid on March
15, 1996.................................................. $1,000 $ --
Promissory note payable to Laura Investments, Ltd (a company
wholly-owned by the former President and Chairman of the
Board), dated September 30, 1995, bearing interest at 6%
per annum. This note, plus accrued interest, was converted
into shares of common stock of the Company as described
below..................................................... 115 --
Promissory note payable to Laura Investments, Ltd, dated
December 31, 1995, bearing interest at 6% per annum. This
note, plus accrued interest, was converted into shares of
common stock of the Company as described below............ $ 284 $ --
Unsecured promissory note payable on demand, dated November
8, 1994, bearing interest at 6% per annum through June 30,
1995, and the lesser of 12% or the highest rate allowed by
applicable law, thereafter. This note, plus accrued
interest, was converted into shares of common stock of the
Company as described below................................ 35 --
Notes payable to MBCP: On June 1, 1994 MPCB loaned the
Company $300 pursuant to a convertible secured promissory
note. MBCP assigned the note as described in Note 10. The
note bears interest at 8% per annum and is due June 30,
1996. A portion of the note ($100) was converted into 1.7
million shares of common stock of the Company on September
23, 1994 upon the completion of the HSI acquisition. The
remaining $200, plus accrued interest, was converted into
shares of common stock as described below................. 200 --
Other notes payable......................................... 13 --
------ ------
$1,647 $ --
====== ======
</TABLE>
On July 8, 1994 the Company borrowed $1,000 through bridge loan financings
from Cabelex Electronique, Ltd. and Teleport Chile, Inc. The bridge loans bear
interest at 7% per annum and are due June 1, 1996. As an inducement to make the
loans, the Company also issued an aggregate of 500,000 shares of restricted
common stock valued at $.20 per share.
Cabelex Electronique, Ltd. transferred its interest in the $1,000 bridge
loan described above to Teleport and the outstanding principal plus accrued
interest at July 1, 1995, of $781 was converted into 388,900 shares of common
stock and the Company issued to Teleport warrants to purchase 388,900 shares of
common stock at $3.00 per share or the price at which any common stock of the
Company is offered for sale pursuant to a private placement, public offering, or
other financing during the outstanding term of this warrant. The Teleport
warrants expire on June 30, 1998. The Company attributed no value to the
warrants given the financial condition of the Company at the time.
F-13
<PAGE> 153
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
In 1996, several loans from related parties were converted to shares of the
Company's common stock in accordance with the respective loan agreements, as
follows:
<TABLE>
<CAPTION>
INTEREST CONVERSION CONVERSION SHARES
PRINCIPAL INTEREST LOAN DATE RATE DATE PRICE ISSUED
--------- -------- --------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
LAURA INVESTMENTS:
Promissory note payable....................... $ 115 9/30/95 6% 3/31/96 $1.87 61,499
Promissory note payable....................... 284 12/31/95 6% 3/31/96 1.96 144,770
Promissory note payable....................... 1,233 3/31/96 6% 3/31/96 1.96 628,980
Interest on promissory note -- 9/30/95........ $ 3 1.87 1,865
Interest on promissory note -- 9/30/95........ 4 1.96 2,171
MBCP:
Convertible note payable...................... $ 200 7/01/94 8% 3/01/96 $2.25 88,888
Ted Swindells note payable.................... 35 11/08/94 6% 1/01/96 1.75 20,000
Accounts payable.............................. 81 Various 0% 3/01/96 1.75 46,515
Interest on notes payable..................... $30 1.75 17,103
---------
1,011,791
=========
</TABLE>
9. STOCKHOLDERS' EQUITY
STOCK OPTIONS
In anticipation of the HSI acquisition, the Board of Directors granted, in
1994, stock options to three key executives to each purchase 100,000 shares of
common stock at a purchase price of $.35 per share, which was no less than the
estimated fair value of the common shares as determined by the Board of
Directors. The options are fully vested and expire in 2004. Subsequently, of the
three, two key executives terminated their relationship with the Company and
200,000 options were cancelled.
Under the terms of employment agreements dated August 1, 1994, three key
executives were granted options to purchase 350,000, 250,000 and 135,000 shares
of common stock, respectively, all at $2.50 per share, which was no less than
the estimated fair value of the common shares as determined by the Board of
Directors. Subsequently, two key executives terminated their relationship with
the Company and 600,000 of the options were cancelled.
On August 1, 1994, the Board of Directors granted one employee options to
purchase 65,000 shares of common stock and another employee options to purchase
15,000 shares of common stock at a purchase price of $2.50 per share, which was
no less than the fair value of the common shares as determined by the Board of
Directors. Options to purchase 50,000 shares of common stock vest monthly over a
three year period and expire on July 31, 2004. The remaining options to purchase
30,000 shares of common stock vest immediately on the date of grant.
On August 1, 1994, for serving on the Board of Directors, options were
granted to each of the four directors to purchase 50,000 shares of common stock
at a purchase price of $2.50 per share, which was no less than the fair value of
the common shares as determined by the Board of Directors. In addition, each
director who served on a committee also received options to purchase an
additional 15,000 shares at $2.50 per share. Six directors serving on a
committee received options to purchase 90,000 shares of common stock. The
options vested immediately on the date of grant.
Effective in September 1994, the Board of Directors and a majority of the
stockholders of the Company approved a Long-term Incentive Plan (the "Plan") for
key employees. The Plan authorizes grants of incentive stock options,
non-qualified stock options and stock equivalents. On December 19, 1995, the
Board of
F-14
<PAGE> 154
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
Directors approved a stock option plan for directors for the years 1995 and
1996. Under this plan the Board, in 1995, granted to each director options to
purchase 10,000 shares and to certain directors additional options were given to
purchase from 90,000 to 150,000 shares of common stock of the Company at a price
based upon the preceding ten day moving average of the closing price of the
stock at December 19, 1995, which was $1.96 per share. The total number of
options granted under the Plan in 1995 was 840,000 options.
On December 19, 1995, the Board of Directors approved the issuance to
outside consultants options to acquire 120,000 shares of common stock of the
Company at a price based upon the preceding ten day moving average of the
closing price of the stock at December 19, 1995, which was $1.96 per share. The
related estimated fair market value of these options ($12) was expensed in 1995.
On March 14, 1996, the Board of Directors granted to five directors and an
underwriter options to purchase 925,000 and 100,000 shares of common stock,
respectively, at a purchase price of $2.25 per share, which was not less than
the fair value of the common shares as determined by the Board of Directors. The
Board also granted options to acquire 35,000 shares of common stock to an
outside consultant. The option price of $2.35 per share was based upon the
stock's trading price from the private placement in February 1996. The related
fair value of these options of $73 is included as part of general and
administrative expenses in the accompanying consolidated statement of operations
for the year ended December 31, 1996.
On November 13, 1996, the Board of Directors granted an option to the Chief
Executive Officer to acquire 1,000,000 shares of common stock at a purchase
price based on the average closing bid price (as reported by the Nasdaq SmallCap
Market) of the first fifteen calendar days after the date of issuance of the
option. The option vests over a two year period and expires in ten years.
PRIVATE PLACEMENTS
In October 1994, the Company commenced a private offering of its common
stock. The Company issued 315,714 shares of common stock and raised $1.1 million
prior to December 31, 1994. In early 1995, the Company closed the private
placement, having issued a total of 951,476 shares of common stock and raised a
total of $3.0 million, net of expenses of $260.
In February 1996, the Company commenced a private offering of its common
stock. The Company issued 500,000 shares of common stock and raised $1.12
million through March 31, 1996, net of expenses of $80.
In June 1996, the Company commenced a private offering of its common stock.
The Company issued 1,439,000 shares of common stock and raised $6.4 million
through August, 1996, net of expenses of $520.
10. RELATED PARTY TRANSACTIONS
Pursuant to a consulting agreement with MBCP and other consultants, as
amended on June 5, 1994, the Company issued 1,150,000 shares of common stock as
consideration for contributed advisory services in connection with the
recapitalization of HSI described in Note 4. These shares were valued at $.25
per share by the Board of Directors. The Company has also paid MBCP $25 and
issued warrants to purchase 75,000 shares of common stock at $.25 per share in
connection with services rendered in connection with the bridge loans totalling
$1,000 described in Note 8. Included in general and administrative expenses at
December 31, 1994 are approximately $300 relating to this compensation.
On July 12, 1994, the Company entered into an agreement with MBCP, amended
October 13, 1994, which provides that MBCP will perform certain financial
advisory services for the Company for a fee of $10
F-15
<PAGE> 155
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
per month up to a maximum of $50 per month. The term of the agreement was for
twelve months. The amounts expensed relating to this agreement were $60 and $100
in 1994 and 1995, respectively.
Pursuant to the terms of the MBCP Note (Note 8), MBCP was to receive
1,700,000 shares of common stock of the Company in connection with the partial
conversion of the Note in the amount of $100.
Pursuant to the terms of an agreement dated March 28, 1997, the Company
accrued $240 for consulting services provided by MBCP for the year ended
December 31, 1996.
In 1996, the Company purchased $493 in equipment whereby MBCP acted as a
broker.
The Company purchased approximately $946, $205 and $172 of certain
telecommunication equipment in 1994, 1995 and 1996, respectively, from
Telectronic, S.A. A Director of the Company is a founder and general manager of
Telectronic, S.A. Prior to its acquisition, Hewster, S.A. provided to the
Company approximately $206 in telecommunications services and $31 in
communication services during 1995. The Company's former President and Chairman
of the Board controlled Hewster, S.A.
The Company has issued notes payable to related parties which are at rates
below those that would have prevailed had the notes been between unrelated
parties. The Company imputed additional interest to these loans in the aggregate
amount of approximately $0, $16 and $40 in 1994, 1995 and 1996, respectively,
based on the prevailing market interest rates. The imputed interest on the loans
was credited as additional paid in capital.
All debt converted to common stock of the Company during the three years
ended December 31, 1996 was transacted with related parties (Note 8).
Pursuant to employment agreements, the Company paid $120 and $110 to a
shareholder in 1995 and 1996, respectively, to serve as President and Chairman
of the Board (Note 13).
Other non-interest bearing balances with related parties are as follows:
Due from related parties:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1995 1996
---- ----
<S> <C> <C>
Inversiones Druma, S.A...................................... $45 $10
Former President and Chairman of the Board and current
shareholder............................................... 48 16
--- ---
$93 $26
=== ===
</TABLE>
F-16
<PAGE> 156
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
Due to related parties:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1995 1996
---- ----
<S> <C> <C>
Hewster, S.A................................................ $ 50 $ --
Inversiones Druma, S.A...................................... 118 --
Telectronic, S.A............................................ 442 98
Directors................................................... 38 --
Shareholders................................................ 50 16
MBCP........................................................ 81 240
General Manager............................................. -- 62
---- ----
$779 $416
==== ====
</TABLE>
In addition, the Company has entered into the following related party
transactions:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Expense reimbursements to directors......................... $ -- $ -- $ 57
Expense reimbursements to other shareholders................ -- -- 166
Consulting fees to directors................................ -- 56 50
Fixed asset installation and maintenance services provided
by a company controlled by a shareholder.................. -- 150 --
Interest paid to a company controlled by a shareholder...... -- -- 86
Communication services paid to a company controlled by a
shareholder............................................... -- 31 --
---- ---- ----
$ -- $237 $359
==== ==== ====
</TABLE>
11. INCOME TAXES
The Company is subject to federal, state and foreign income taxes but has
not incurred a liability for such taxes due to losses incurred. At December 31,
1996 the Company has net tax operating loss carryforwards of approximately
$3,782 for U.S. income tax purposes and approximately $4,466 for foreign income
tax purposes. These carryforwards are available to offset future taxable income,
if any, and expire for U.S. income tax purposes in the years 2007 through 2011
and do not expire for foreign income tax purposes. As a result of a substantial
change in the Company's ownership at July 15, 1994, approximately $475 of the
U.S. net operating loss carryforward is subject to an annual limitation on the
amount that can be utilized.
F-17
<PAGE> 157
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
The Company's deferred tax balances consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------ ------
<S> <C> <C>
Deferred asset:
Net operating loss carryforward........................... $1,036 $2,081
Deferred liability:
Purchase accounting adjustments (VISAT)................... (152) (152)
------ ------
884 1,929
Valuation allowance......................................... (884) (1,929)
------ ------
$ -- $ --
====== ======
</TABLE>
The valuation allowance results from the uncertainty surrounding the future
realization of the net operating loss carryforwards.
The Company has not yet filed its federal and state income tax returns for
the year ended December 31, 1995, for which the extended due date was September
16, 1996. Because of its net operating loss position, management believes that
the tax consequences of not yet filing the 1995 tax return will not have a
material impact on the financial statements and related income tax disclosures.
12. EMPLOYEE STOCK OPTION PLAN
As discussed in Note 9, the Company established in 1994 a Long-term
Incentive Plan (the "Plan") for key employees. The Company applies APB 25 and
related interpretations in accounting for the Plan. The policy of the Company
has been to grant options under the Plan at an exercise price equal to the
estimated market value of the Company's common stock at the date of the grant,
except for certain grants made in 1995 for which $12 was charged to expense in
that year. Had compensation costs for the Company's Plan been determined based
on the fair value at the grant dates of options granted consistent with the
method of SFAS 123, the Company's loss and loss per share would have been
increased to the proforma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C> <C>
Net loss................................. As Reported $(2,873) $(4,626)
Proforma (4,375) (7,510)
Net loss per share....................... As Reported (.31) (.31)
Proforma (.47) (.51)
</TABLE>
The Company's Plan provides for the granting of non qualified stock options
to officers and key employees. Under the terms of the Plan, options have a
maximum term of ten years from the date of the
F-18
<PAGE> 158
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
grant. The options vesting period varies from full vesting upon issuance of
options to one thirty sixth per month to the end of the option term. A summary
of the Plan's activity is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........... -- $ -- 605,000 $2.13 1,565,000 $2.03
Granted.................................... 1,405,000 2.04 960,000 1.96 2,060,000 2.52
Exercised.................................. -- -- -- -- -- --
Cancelled.................................. (800,000) 1.96 -- -- -- --
--------- ----- --------- ----- --------- -----
Outstanding at end of year................. 605,000 $2.13 1,565,000 $2.03 3,625,000 $2.31
========= ===== ========= ===== ========= =====
Options exercisable at year-end............ 534,170 $2.10 1,250,350 $2.57 2,754,734 $2.54
========= ===== ========= ===== ========= =====
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------
WEIGHTED
AVERAGE OPTIONS EXERCISABLE
REMAINING ----------------------
EXERCISE NUMBER CONTRACTUAL NUMBER EXERCISE
PRICE OUTSTANDING LIFE EXERCISABLE PRICE
- -------- ----------- ----------- ----------- --------
<C> <C> <C> <C> <C>
$ .35 100,000 8 100,000 $ .35
1.96 960,000 9 860,000 1.96
2.25 1,025,000 10 1,025,000 2.25
2.35 35,000 8 35,000 2.35
2.50 505,000 8 401,400 2.50
2.81 1,000,000 10 333,334 2.81
--------- ---------
3,625,000 2,754,734
========= =========
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995 and 1996: volatility of 113 percent
(computed based on historical daily stock prices and considered management's
best estimate), risk-free interest rates of 6.72 percent, zero dividend yield
and expected lives ranging from 4 to 8 years. The fair value of options granted
during 1995 and 1996 includes 960,000 shares at a weighted average exercise
price of $1.77 in 1995 and 2,060,000 shares at a weighted average exercise price
of $2.38 in 1996.
13. COMMITMENTS AND CONTINGENCIES
LEASE AGREEMENTS
The Company entered into an operating agreement in 1993 with Metro S.A. to
install and operate the Company's optical fiber telecommunication network in the
tunnels, conduits and stations of lines 1 and 2 of the Santiago subway system.
The Company has given Metro S.A. a $50 performance bond relating to these
leases. The monthly lease rental is equivalent to 15% of the net monthly
invoicing of the company for services rendered in the metropolitan region of
Chile, subject to minimum amounts. The lease expires in the year 2003. Under the
agreement, the Company is obligated to provide certain telecommunications
services to Metro, S.A.
F-19
<PAGE> 159
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
Effective April 8, 1996 the Company entered into a one year lease agreement
by assignment from a consultant to the Company. The Company maintained its
corporate office at this location until December 31, 1996. The original
leaseholder has occupied this office subsequent to December 31, 1996.
Effective December 12, 1996 the Company entered into a one year lease
agreement for its corporate offices in Miami, Florida.
The following summarizes future minimum payments under non-cancelable
operating lease agreements at December 31, 1996:
<TABLE>
<S> <C>
1997........................................................ $ 769
1998........................................................ 776
1999........................................................ 838
2000........................................................ 923
2001........................................................ 1,077
2002-2003................................................... 1,941
------
$6,324
======
</TABLE>
Rental expense for the leases was $88, $255 and $508 for the years ended
December 31, 1994, 1995 and 1996, respectively.
On March 10, 1995 the Company entered into a 144 month capital lease
agreement with Aetfin-Mixto, S.A. for the offices its occupies in Santiago,
Chile. During 1996 the Company entered into several 12-24 month capital lease
agreements for office equipment and vehicles. Its obligations under these
leases, including deferred interest, are summarized as follows:
<TABLE>
<S> <C>
1997........................................................ $ 144
1998........................................................ 82
1999........................................................ 34
2000........................................................ 34
2001........................................................ 34
Thereafter.................................................. 176
-----
504
Less-Amount Representing Deferred Interest.................. (142)
-----
Present Value of Obligations Under Capital Lease............ 362
Less-Current Portion........................................ (114)
-----
$ 248
=====
</TABLE>
EMPLOYMENT AGREEMENT
On November 13, 1996 the Board of Directors appointed a new Chairman and
Chief Executive Officer. The new Chairman and Chief Executive Officer entered
into an agreement with the Company through December 31, 1999. Terms of the
employment and severance agreement include base salary, performance awards up to
100% of base salary, non-qualified stock option to purchase 1,000,000 shares of
the Company's common stock (Note 9), a severance payment equal to 100% of base
salary and 100% vesting of the options.
F-20
<PAGE> 160
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
14. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest was as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Interest.......................... 35 2 153
</TABLE>
Supplemental schedule of noncash investing and financing activities:
Capital lease obligations of $-0-, $221 and $172 were incurred in 1994,
1995 and 1996, respectively, as a result of the Company entering into equipment
leases.
Notes payable were converted to shares of the Company's common stock in the
amounts of $202, $7,219 and $1,986 in 1994, 1995 and 1996, respectively.
In 1996, common stock was issued in connection with the acquisition of
Resetel in the amount of $2,813.
In 1995, common stock was issued for the purchase of Visat in the amount of
$400.
In 1994, notes payable were issued in connection with the acquisition of
Hewster in the amount of $6,088.
15. ISSUANCE OF $150 MILLION SENIOR NOTES
On October 27, 1997, the Company completed a private offering (the "Initial
Offering") pursuant to Rule 144A and Regulation S promulgated under the U.S.
Securities Act of 1933 (the "Act") of 150,000 Units, consisting of an aggregate
of $150 million aggregate principal amount of 14% Senior Notes due October 27,
2007 and 5,250,000 warrants to purchase 5,250,000 shares of Common Stock of the
Registrant at an exercise price of $4.40 per share. The warrants when exercised
would entitle the holders thereof to acquire an aggregate of 5,250,000 shares of
Common Stock, representing approximately 15.2% of the Common Stock of the
Company on a fully diluted basis as of the date of the consummation of the
Initial Offering (assuming full vesting and exercise of all options and warrants
outstanding as of October 22, 1997). In addition, UBS Securities LLC, the
Initial Purchaser of the Units in the Initial Offering, was granted 2,250,000
warrants to acquire 2,250,000 shares of Common Stock of the Company at an
exercise price of $4.40 per share.
The net proceeds to the Company from the Initial Offering were
approximately $142.5 million, after deducting the underwriting discount and
estimated offering expenses. In addition, approximately $57.3 million of the
proceeds were used to purchase a portfolio of securities that was deposited in
escrow for payment of interest on the Senior Notes through October 27, 2000 and,
under certain circumstances, as security for repayment of principal of the
Senior Notes. The Company expects to use the remaining proceeds as follows (all
amounts represent approximations): (i) $62.0 million to expand and operate the
Company's fiber optic networks in Peru and Chile; (ii) up to $7.2 million to
consummate the Iusatel Acquisition (as defined herein); (iii) $2.9 million to
redeem the Convertible Debentures (as defined herein); (iv) $1.5 million to pay
existing short-term liabilities of the Company, including outstanding bank debt
and trade payables; (v) $975,000 to pay indebtedness under the Bridge Notes (as
defined herein); and (vi) the remaining amounts for general corporate purposes.
While the Company currently expects to use the proceeds of the Initial Offering
as set forth above, there can be no assurance that the Company's actual
expenditures will equal the currently anticipated amounts.
F-21
<PAGE> 161
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
As part of its business strategy, the Company intends to continue to
evaluate potential acquisitions, joint ventures and strategic alliances in
companies that own existing networks or companies that provide services that
complement the Company's existing businesses. Although the Company continues to
consider potential acquisitions from time to time, other than the pending
acquisition of Iusatel Chile S.A. ("Iusatel"), no agreement in principle to
acquire or effect any acquisition has been reached. Furthermore, there can be no
assurance that the acquisition of Iusatel will be consummated upon the terms
presently contemplated or at all. New sources of capital such as credit
facilities and other borrowings, and additional debt and equity issuances, may
be used to fund such acquisitions and similar strategic investments.
16. UNAUDITED INTERIM CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The interim financial data as of September 30, 1997 and for the nine months
ended September 30, 1996 and 1997 is unaudited. The information reflects all
adjustments, consisting only of normal recurring adjustments that, in the
opinion of management, are necessary to present fairly the financial position
and results of operations of the Company for the periods indicated. Results of
operations for the interim periods are not necessarily indicative of the results
of operations for the full year.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share." This statement is effective for financial statements issued for periods
ending after December 15, 1997. SFAS 128 supersedes APB Opinion No. 15 and
replaces primary and fully diluted EPS with basic and diluted EPS. Basic EPS is
computed by dividing net income available to common shareholders by the weighted
average common shares outstanding. Diluted EPS includes all dilutive potential
common shares. Because the Company has had a history of operating losses, it
does not expect the new standard to have a material impact on its financial
position or results of operations for 1997.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure." This statement is effective for financial statements
issued for periods ending after December 15, 1997. SFAS 129 supersedes specific
disclosure requirements of APB Opinion No. 10 and No. 15 and FASB Statement No.
47 and consolidates them into this Statement. FAS 129 contains no change in
disclosure requirements for the Company as the Company was previously subject to
the requirements of the above superseded statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," effective for fiscal years beginning after December 15, 1997. This
Statement establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. This Statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This Statement does not
require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement.
This Statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income
F-22
<PAGE> 162
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position.
Management does not expect the new standard to have significant changes in
the disclosure requirements for the Company in 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", effective for financial statements for
periods beginning after December 15, 1997. This statement establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
This statement supersedes FASB Statement No. 14, "Financial Reporting for
Segments of a Business Enterprise," but retains the requirement to report
information about major customers. It amends FASB Statement No. 94,
"Consolidation of All Majority-Owned Subsidiaries," to remove the special
disclosure requirements for previously unconsolidated subsidiaries. In the
initial year of application, comparative information for earlier years is to be
restated. This Statement need not be applied to interim financial statements in
the initial year of its application, but comparative information for interim
periods in the initial year of application is to be reported in financial
statements for interim periods in the second year of application. Management
does not expect the new standard to have a material impact on the disclosure
requirements for the Company in 1998.
The financial statements have been prepared on the going concern basis of
accounting, which contemplates realization of assets and liquidation of
liabilities in the ordinary course of business. The Company has incurred
operating losses since inception while investing in the infrastructure necessary
to generate material operating revenues in the future. In addition, the Company
has funded a significant amount of capital expenditures over the same time
period. The Company's continued funding of its operating expenses, working
capital needs and capital expenditures is dependent on its ability to raise
additional financing in the future. Historically, the Company has been
successful in raising such funds. However, there can be no assurance that the
Company will be successful in raising such funds in the future.
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental schedule of non cash investing and financing activities:
a. During the nine months ended September 30, 1997, the Company
authorized the issuance of 1,101,782 shares of Common Stock to convert
outstanding debt, and related accrued interest, totaling $1,994.
b. During the nine months ended September 30, 1997, the Company issued
80,000 shares of Common Stock to extinguish a $240 liability with a related
party.
c. During the nine months ended September 30, 1997 the Company issued
warrants to purchase shares of Common Stock valued at $298.
d. During the nine months ended September 30, 1997 the Company
deferred approximately $1,755 of offering costs that were not paid as of
the end of this period.
F-23
<PAGE> 163
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
RESTRICTED BANK DEPOSITS AND BANK LINES OF CREDIT
Restricted bank deposits are held by banks that require such deposits to be
maintained in support of loans made to certain of the Company's subsidiaries.
PROPERTY AND EQUIPMENT
Of the total interest incurred by the Company for the nine months ended
September 30, 1997, $600,000 of such costs were capitalized in connection with
the Company's construction of its fiber optic network in Lima, Peru.
NOTES PAYABLE
On February 13, 1997, the Company borrowed $350 from a commercial bank in
Peru. The loan bears interest at 9.5% and matures in 180 days. The loan is
guaranteed by a $350 cash deposit. In addition, the Company established a letter
of credit in the amount of $415 with an expiration term of July 2, 1997. At the
date of expiration, the company converted the letter of credit into a loan
bearing interest at 12.5% and matures in 30 days. These loans have been repaid
with proceeds from the Initial Offering.
On April 1, 1997, Hewster obtained a revolving credit line (the "Credit
Line") from Citibank-Chile in the amount of $228 at an annual interest rate of
10.7%. Indebtedness under the Credit Line is secured by a certificate of deposit
from ICCA in the amount of $160. The Credit Line matures in September 1997.
Borrowings under the Credit Line were used for the purchase of equipment.
Outstanding balances under the credit line were repaid with proceeds from the
Initial Offering.
On February 3, 1997, the Company issued $1.5 million aggregate principal
amount of 7% Convertible Debentures ("7% Convertible Debentures") due February
3, 2000 and Warrants to purchase an aggregate 100,000 shares of the Company's
Common Stock. On May 6, 1997 the Company issued $2.0 million aggregate principal
amount of 8% Convertible Debentures ("8% Convertible Debentures") due April 30,
1998 and Warrants to purchase an aggregate 20,000 shares of the Company's Common
Stock. Original issue discounts of $167 and $31 related to the 7% Convertible
Debentures and the 8% Convertible Debentures, respectively, resulted from
proceeds allocated to the Warrants. The 7% Convertible Debentures and the 8%
Convertible Debentures are collectively referred to as the "Convertible
Debentures." The net proceeds of the Convertible Debentures were used to pay for
(i) capital expenditures related to the Company's fiber optic networks, (ii)
operating expenses of ICCA's wholly owned subsidiaries and (iii) corporate
expenses primarily related to salaries, professional fees, travel, rent, and
similar items.
At the option of the Company, the Convertible Debentures may be redeemed at
predetermined premiums, at any time or from time to time, upon not less than ten
nor more than twenty days prior written notice. The prepayment price for the 7%
Convertible Debentures and 8% Convertible Debentures shall equal 117% and 130%,
respectively, of the principal amount to be prepaid plus accrued interest. In
addition, the Convertible Debentures are convertible based on predetermined
formulas, at the option of the Holders, into Common Stock at any time prior to
maturity at a conversion price that will be less than the closing bid price as
reported by the Nasdaq SmallCap Market at time of conversion ("beneficial
conversion features"). The value attributable to the beneficial conversion
features have been expensed at date of issuance because the agreements could
allow the holders of the Convertible Debentures to convert at that date. As a
result, for the six months ended June 30, 1997 the Company incurred interest
cost of $810 related to the fair value of the beneficial
F-24
<PAGE> 164
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
conversion features. The Company may be required to pay certain penalties if it
fails to convert the Convertible Debentures, in a timely manner, pursuant to
written Notices of Conversion received from the Holders.
In connection with the Convertible Debentures, the Company is required to
file with the Commission (as defined herein) a registration statement covering a
sufficient number of shares of Common Stock into which the Convertible
Debentures may be converted (the "Registered Shares"). As of November 15, 1997,
the Company had not filed such registration statements with the Commission.
Pursuant to the terms of the Convertible Debentures, the Company will be
required to pay the Holders certain penalties until such time as the Company
either files the registration statement or redeems the Convertible Debentures.
Legal Proceedings
On July 3, 1997, NU Investments, LLC and KA Investments LDC (collectively,
the "Plaintiffs"), filed suit in the U.S. District Court for the Northern
District of Illinois, Eastern Division against the Company, Mr. Patricio E.
Northland, President, CEO and Chairman of the Board of the Company, and each of
Phillip S. Magiera and Paul A. Moore, both former directors of the Company,
alleging breach of contract, violation of Section 10(b) of the Securities
Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and fraudulent
misrepresentation for the Company's failure to file a registration statement to
register the resale of shares of Common Stock issuable upon the conversion of
the Plaintiffs' 7% Convertible Debentures and the exercise of warrants to
purchase 100,000 shares of Common Stock. The Plaintiffs demand compensatory
damages in the amount of $1.5 million plus prejudgment interest and costs. The
Company believes that it has meritorious defenses to the Plaintiffs' claims, and
intends to defend this action fully and vigorously. Moreover, even if the
Company is found to be liable in this action, it does not believe that any such
liability will have a material adverse effect on the Company's business,
financial condition and results of operation.
On November 21, 1997, Arcadia Importers and Exporters, Inc. ("Arcadia"),
the purchaser of the Company's 8% Convertible Debentures in the aggregate
principal amount of $2,000,000 (the "8% Convertible Debentures"), filed suit in
the Supreme Court of the State of New York against the Company relating to the
failure to file in a timely manner the Registration Statement of which this
Prospectus forms a part with respect to the shares of Common Stock issuable upon
conversion of the 8% Convertible Debentures. Arcadia is seeking damages of not
less than $484,000 plus interest, costs and reasonable attorneys' fees.
The Company believes that it has meritorious defenses to the foregoing
claims, and intends to defend such actions fully and vigorously. Moreover, even
if the Company is found to be liable in either or both of these actions, it does
not believe that any such liability will have a material adverse effect on the
Company's business, financial condition and results of operations.
The Pending Iusatel Acquisition
During August 1997, the Company entered into an agreement to acquire
Iusatel Chile, S.A. ("Iusatel"), a Chilean long distance carrier based in
Santiago, Chile. Iusatel is controlled by a shareholder of the Company. Iusatel
currently provides national and international long distance services in Chile
through its own gateway switch and satellite earth station as well as through
interconnection with other Chilean long distance carriers.
The Iusatel Agreement provides for the purchase by the Company of 100% of
the issued and outstanding capital stock of Iusatel for $5,900 in cash (the
"Iusatel Purchase Price"). The Iusatel Purchase Price may be reduced to the
extent that the net worth of Iusatel as of December 31, 1997 is less than $500,
as determined pursuant to an audited balance sheet. The Iusatel Purchase Price
may be increased by up to a
F-25
<PAGE> 165
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
maximum of $850 based upon Iusatel's operating results for the 12 months ending
December 31, 1998. The Iusatel Agreement also provides that Hernan Streeter, the
former Chairman and Chief Executive Officer, and a current shareholder, of the
Company, will continue to serve as General Manager of Iusatel until December 31,
1997, and will thereafter serve as a consultant to Iusatel until December 31,
1998 for a monthly fee of $10,000. The Iusatel Agreement is subject to a number
of conditions, many of which, including governmental consent, are beyond the
Company's control. In connection with the Iusatel Acquisition, the Company is
expected to pay a director of the Company, a fee in the aggregate amount of
100,000 shares of Common Stock for his services in facilitating the transaction.
Convertible Debentures
During September 1997, the Company authorized the issuance of 851,162
shares of Common Stock in connection with the conversion of $1.45 million
aggregate principal amount of its 8% Convertible Debentures, plus related
accrued interest and authorized the issuance of 250,620 shares of Common Stock
in connection with the conversion of $500 principal aggregate amount of its 7%
Convertible Debentures, plus, related accrued interest.
The Company intends to redeem all outstanding Convertible Debentures prior
to December 31, 1997. The Company estimates that approximately $1.0 million and
$550 in aggregate principal amount of the 7% Convertible Debentures and 8%
Convertible Debentures, respectively, will be outstanding at such time and that
the Company will be required to pay an aggregate of $2.9 million to extinguish
its liabilities related to the Convertible Debentures, including outstanding
principal, related accrued interest, redemption premiums, and penalties related
to non-registration and non-conversion. The payment of this amount would result
in an extraordinary loss on debt extinguishment of approximately $1,204. The
actual payment, and therefore the magnitude of the Company's loss on debt
extinguishment, could be lower or higher than the aforementioned amounts.
Stock Options and Grants
On May 1, 1997 the Company granted an officer non-qualified stock options
to purchase 500,000 shares of the Company's common stock at $2.42 per share.
During July 1997 the Company issued 80,000 shares of Common Stock granted
on March 28, 1997 to a related party in order to extinguish a $240 obligation
for consulting services that were rendered and accrued for as of December 31,
1996. The value assigned to the Shares approximated the quoted market price of
the Nasdaq SmallCap Market on date of grant.
During September 1997, the Company agreed to issue the following shares of
Common Stock to the following officers of the Company: (i) 600,000 shares of
Common Stock to Patricio E. Northland, President, Chief Executive Officer and
Chairman of the Board and (ii) 250,000 shares of Common Stock to Douglas G. Geib
II, Chief Financial Officer of the Company. In addition, on the same date, the
Company granted the following stock options to the following officers at an
exercise price of $2.13 per share: (i) Patricio E. Northland, President, Chief
Executive Officer and Chairman of the Board, was granted options to acquire
600,000 shares of Common Stock, one-third of which vested immediately and the
remainder in equal annual installments over the next two years; and (ii) Douglas
G. Geib II, Chief Financial Officer and a director of the Company, was granted
options to acquire 250,000 shares of Common Stock, one third of which vested
immediately and the remainder vest in equal annual installments over the next
two years.
Concurrent with the closing of the Initial Offering, the Company granted
options to acquire an additional 714,000 and 286,000 shares to Mr. Northland and
Mr. Geib, respectively at an exercise price of
F-26
<PAGE> 166
INTERAMERICAS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
$4.40 per share, one third of which vest immediately and the remainder vest in
equal installments over the next two years.
Bridge Notes
During August and September 1997, ICCA entered into Bridge Loan Agreements
with certain lenders (some of which are affiliates) pursuant to which such
lenders provided the Company loans of $950 aggregate principal amount of the
Company's 10% Senior Notes (the "Bridge Notes"). As additional consideration for
such loans, the Company issued warrants to acquire, for a period of five years
from the date of the Bridge Notes, 95,000 shares of the Company's Common Stock
at an exercise price equal to the closing market price of ICCA's Common Stock on
the day of issuance. On October 27, 1997 the Company redeemed the Bridge Notes
with the proceeds from the Initial Offering.
Agreement with Maroon Bells and Certain Maroon Bells Affiliates
During October 1997, the Company entered into an agreement with Maroon
Bells, Theodore Swindells, Paul Moore and Phillip Magiera, to compensate them
for past services rendered to ICCA. Pursuant to such agreement, the Company
agreed to make a cash payment to Maroon Bells of $500 upon consummation of the
Offering and to issue to each of Messrs. Moore and Magiera 250,000 shares of
Common Stock and options to acquire 250,000 shares of Common Stock at an
exercise price of $2.13 per share. Messrs. Moore and Magiera resigned from
ICCA's Board of Directors effective as of the date of the agreement.
Donoso Settlement Agreement
Pursuant to a settlement agreement, during October 1997, ICCA agreed to
issue 300,000 shares of Common Stock to Eleazar Donoso for certain financial
assistance Mr. Donoso provided to ICCA during its development stage. Mr. Donoso
is a co-founder with Mr. Cargill, a director of ICCA, of Telectronic S.A. and
its President. Mr. Donoso is also a shareholder of ICCA. The Company recorded a
non cash expense for the three months ended September 30, 1997 of $852 related
to the aggregate fair value of such shares of Common Stock based on the date of
the Settlement Agreement.
Net Employment Agreement with Patricio E. Northland
In September 1997, the Company entered into an employment and severance
agreement (the "Northland Agreement") with Patricio E. Northland, President,
Chief Executive Officer and Chairman of the Board of Directors of the Company,
which replaced his former employment agreement with the Company. The Northland
Agreement has a term of three years unless terminated earlier for cause, death
or disability, and provides for an initial annual base salary of $350,000,
subject to an increase of $50,000 in each of the second and third year of the
agreement. In addition, Mr. Northland was granted non-qualified stock options to
purchase 300,000 shares of ICCA's Common Stock in the following manner: 100,000
shares which vest on the date of the Northland Agreement at an exercise price of
$4.00 per share; 100,000 shares which vest one year thereafter at an exercise
price of $6.00 per share; and 100,000 shares which vest two years thereafter at
an exercise price of $8.00 per share. In consideration of Mr. Northland's
agreement to terminate his former employment agreement with the Company, which
would have provided for a substantial bonus to Mr. Northland upon consummation
of the Initial Offering, the Company agreed to pay Mr. Northland a performance
bonus of $250,000 and vest all of his existing options to acquire 1,000,000
shares of Common Stock granted under his prior employment agreement. The
performance bonus of $250,000 was expensed by the Company in its 1997 third
quarter.
F-27
<PAGE> 167
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Iusatel Chile S.A.:
We have audited the accompanying balance sheets of Iusatel Chile S.A. (the
"Company") as of December 31, 1995 and 1996, and the related statements of
income and changes in financial position for each of the two years ended
December 31, 1996, and the statement of cash flows for the year ended December
31, 1996, all expressed in thousands of constant Chilean pesos. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We have conducted our audits in accordance with generally accepted auditing
standards in Chile, which are substantially the same as those followed in the
United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Iusatel Chile S.A. at
December 31, 1995 and 1996, and the results of their operations and changes in
their financial position for each of the two years ended December 31, 1996, and
its cash flows for the year ended December 31, 1996, in conformity with
generally accepted accounting principles in Chile.
The accompanying financial statements have been prepared assuming that
Iusatel Chile S.A. continues as a going concern. Iusatel Chile S.A. has shown
recurring operating losses and shows negative working capital and shareholders'
equity that raise substantial doubt about its ability to continue as a going
concern. Management's actions regarding these situations are described in Note
27. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
As described in Note 3, the financial statements of the Company for the
year ended December 31, 1996, includes a statement of cash flows in accordance
with generally accepted accounting principles in Chile and a statement of
changes in financial position in compliance with the regulations set forth by
the Superintendency of Securities and Insurance Companies.
Accounting principles generally accepted in Chile vary in certain
significant respects from accounting principles generally accepted in the United
States of America. The application of the latter would have affected the
determination of net income for each of the two years in the period ended
December 31, 1996 and the determination of shareholders' equity as of December
31, 1995 and 1996 to the extent summarized in Note 28 to the financial
statements.
JUAN PABLO HESS LANGTON CLARKE
COOPERS & LYBRAND
Santiago, February 7, 1997
(except with respect to the matters discussed
in Notes 27 and 28, for which the date is
August 11, 1997)
F-28
<PAGE> 168
IUSATEL CHILE S.A.
BALANCE SHEETS
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$) (NOTES 2(C) & 2(L))
<TABLE>
<CAPTION>
FOR THE NINE MONTH
FOR THE YEARS ENDED PERIOD
DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------- -------------------------
1995 1996 1996 1997 1997
THCH$ THCH$ THUS$ THCH$ THUS$
---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.................................................. 55,907 23,758 57 87,284 211
Time deposits......................................... 16,168 -- -- 661 2
Trade accounts receivable, net (Note 5)............... 479,047 902,217 2,177 629,051 1,518
Notes receivable...................................... 7,494 72,248 174 40,551 98
Sundry accounts receivable (Note 6)................... 37,369 130,305 314 19,453 47
Inventories........................................... 627 5,318 13 5,620 14
Taxes recoverable (Note 7)............................ 222,116 206,904 499 135,944 328
Prepaid expenses (Note 8)............................. 187,642 157,605 380 30,755 74
Other................................................. -- 638 2 8,784 21
---------- ---------- ------- ---------- -------
Total current assets............................ 1,006,370 1,498,993 3,617 958,103 2,312
---------- ---------- ------- ---------- -------
FIXED ASSETS: (Note 9)
Land.................................................. 31,132 31,132 75 32,347 78
Machinery & equipment................................. 1,373,753 1,543,272 3,723 1,589,468 3,835
Other fixed assets.................................... 203,351 609,110 1,470 319,416 771
Accumulated depreciation.............................. (161,343) (381,085) (919) (446,375) (1,077)
---------- ---------- ------- ---------- -------
Total fixed assets.............................. 1,446,893 1,802,429 4,349 1,494,856 3,607
---------- ---------- ------- ---------- -------
OTHER ASSETS: (Note 10)
Intangibles........................................... 746 4,010 10 4,168 10
Other................................................. 37,748 37,530 91 3,101 7
---------- ---------- ------- ---------- -------
Total other assets.............................. 38,494 41,540 100 7,269 18
---------- ---------- ------- ---------- -------
Total assets................................ 2,491,757 3,342,962 8,066 2,460,228 5,936
========== ========== ======= ========== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank liabilities (Note 11)................. 3,385,197 3,353,913 8,092 12,000 29
Current portion of lease obligations (Note 12)........ 108,308 114,386 276 105,860 255
Accounts payable (Note 13)............................ 326,863 716,825 1,729 602,560 1,454
Notes payable (Note 14)............................... 156,182 280,143 676 284,611 687
Sundry creditors...................................... -- 2,656 6 41,091 99
Amounts payable to related companies (Note 15)........ 39,697 167,587 404 575,675 1,389
Accrued liabilities (Note 16)......................... 313,643 189,517 457 301,175 727
Withholding taxes (Note 17)........................... 25,380 38,291 92 66,727 161
Income taxes payable.................................. -- 3,222 8 -- --
---------- ---------- ------- ---------- -------
Total current liabilities....................... 4,355,270 4,866,540 11,742 1,989,699 4,801
---------- ---------- ------- ---------- -------
LONG-TERM LIABILITIES:
Long-term portion of lease obligations (Note 12)...... 165,972 91,306 220 20,689 50
Notes payable (Note 14)............................... 1,212 245,961 593 94,301 228
Amounts payable to related companies (Note 15)........ 660,193 2,328,098 5,617 -- --
Other (Note 18)....................................... 14,531 21,986 53 17,775 43
---------- ---------- ------- ---------- -------
Total long-term liabilities..................... 841,908 2,687,351 6,484 132,765 320
---------- ---------- ------- ---------- -------
SHAREHOLDERS' EQUITY: (Note 20)
Paid-in capital....................................... 760,529 760,529 1,835 6,731,002 16,240
Accumulated losses.................................... (885,720) (3,465,950) (8,362) (5,165,344) (12,463)
Loss for the year..................................... (2,580,230) (1,505,508) (3,632) (1,227,894) (2,963)
---------- ---------- ------- ---------- -------
Total shareholders' equity...................... (2,705,421) (4,210,929) (10,160) 337,764 815
---------- ---------- ------- ---------- -------
Total liabilities & shareholders' equity.... 2,491,757 3,342,962 8,066 2,460,228 5,936
========== ========== ======= ========== =======
</TABLE>
The accompanying notes 1 to 28 form an integral part of these financial
statements
F-29
<PAGE> 169
IUSATEL CHILE S.A.
STATEMENTS OF INCOME
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$) (NOTES 2(C) & 2(L))
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIODS
FOR THE YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------- ---------------------------------------
1995 1996 1996 1996 1997 1997
THCH THCH$ THUS$ THCH$ THCH$ THUS$
---------- ---------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Operating revenues........................ 1,134,550 3,377,825 8,150 2,588,309 2,661,035 6,420
Operating expenses excluding
depreciation............................ (1,111,790) (2,008,635) (4,846) (1,421,304) (1,924,900) (4,644)
Operating depreciation.................... (69,502) (189,227) (457) (110,009) (93,827) (226)
---------- ---------- ------ ---------- ---------- ------
Operating margin.................... (46,742) 1,179,963 2,847 1,056,996 642,308 1,550
Administrative and selling expenses
excluding depreciation.................. (2,190,360) (2,178,427) (5,256) (1,606,914) (1,564,123) (3,774)
General and administrative depreciation... (92,700) (34,052) (82) (64,654) (49,902) (120)
---------- ---------- ------ ---------- ---------- ------
Operating loss...................... (2,329,802) (1,032,516) (2,491) (614,572) (971,717) (2,344)
NON-OPERATING RESULTS:
Financial income.......................... 909 3,969 10 -- 2,044 5
Financial expenses........................ (483,033) (587,189) (1,417) (434,935) (84,220) (203)
Other non-operating expenses.............. (8,654) (107,749) (260) (40,959) (219,662) (530)
Price-level restatement (Note 4).......... 240,350 217,977 526 169,902 45,661 110
---------- ---------- ------ ---------- ---------- ------
Non-operating income................ (250,428) (472,992) (1,141) (305,992) (256,177) (618)
---------- ---------- ------ ---------- ---------- ------
Loss before income taxes.................. (2,580,230) (1,505,508) (3,632) (920,564) (1,227,894) (2,963)
Income taxes.............................. -- -- -- -- -- --
---------- ---------- ------ ---------- ---------- ------
Net loss............................ (2,580,230) (1,505,508) (3,632) (920,564) (1,227,894) (2,963)
========== ========== ====== ========== ========== ======
</TABLE>
The accompanying notes 1 to 28 form an integral part of these financial
statements
F-30
<PAGE> 170
IUSATEL CHILE S.A.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$) (NOTES 2(C) & 2(L))
<TABLE>
<CAPTION>
FOR THE NINE
MONTH PERIOD
FOR THE YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------
1995 1996 1996 1996
THCH$ THCH$ THUS$ THCH$
---------- ---------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FUNDS FROM OPERATIONS:
Net Loss....................................... (2,580,230) (1,505,508) (3,632) (920,564)
Depreciation................................... 162,203 223,279 539 169,229
Profit on sale of fixed assets................. (203) -- -- 6,179
Net price-level restatement of non-current
items........................................ (3,603) (3,536) (9) 20,058
---------- ---------- ------ ----------
Total funds from operations............. (2,421,833) (1,285,765) (3,102) (725,098)
---------- ---------- ------ ----------
OTHER SOURCES OF FUNDS:
Sale of fixed assets........................... 940 -- -- --
Increase in long-term liabilities.............. 180,503 244,749 591 256,172
Increase in long-term payable to related
companies.................................... 660,193 1,667,905 4,024 1,576,770
Others......................................... 7,605
---------- ---------- ------ ----------
Total funds from other sources.......... 841,636 1,912,654 4,615 1,840,547
---------- ---------- ------ ----------
Total sources of funds.................. (1,580,197) 626,889 1,513 1,115,449
---------- ---------- ------ ----------
APPLICATION OF FUNDS:
Additions to fixed assets...................... 549,955 575,279 1,388 590,877
Decrease in long-term liabilities.............. 9,272 67,211 162 60,330
Other.......................................... 32,627 3,046 7 3,311
---------- ---------- ------ ----------
Total applications of funds............. 591,854 645,536 1,557 654,518
---------- ---------- ------ ----------
Decrease in working capital........... (2,172,051) (18,647) (45) 460,931
========== ========== ====== ==========
CHANGES IN WORKING CAPITAL:
CURRENT ASSETS -- INCREASES (DECREASES):
Cash and time deposits....................... 71,378 (48,317) (117) (16,830)
Trade accounts receivable, notes receivable
and sundry accounts receivable............. 507,591 580,860 1,401 725,392
Inventories.................................. 627 4,691 11 5,902
Other........................................ 203,096 (44,611) (108) 24,559
---------- ---------- ------ ----------
Net changes in current assets........... 782,692 492,623 1,189 739,023
---------- ---------- ------ ----------
CURRENT LIABILITIES -- (DECREASES) INCREASES:
Short-term bank liabilities.................. (2,236,641) 31,284 75 (27,282)
Current portion of long-term liabilities..... (108,308) (6,078) (15) (30,158)
Accounts and notes payable................... (279,909) (513,923) (1,240) (255,379)
Amounts payable to related companies......... (39,697) (127,890) (309) (36,716)
Accruals and withholding taxes............... (298,889) 111,215 268 78,055
Other........................................ 8,701 (5,878) (14) (6,612)
---------- ---------- ------ ----------
Total changes in current liabilities.... (2,954,743) (511,270) (1,234) (278,092)
---------- ---------- ------ ----------
Decrease in working capital........... (2,172,051) (18,647) (45) 460,931
========== ========== ====== ==========
</TABLE>
The accompanying notes 1 to 28 form an integral part of these financial
statements
F-31
<PAGE> 171
IUSATEL CHILE S.A.
STATEMENTS OF CASH FLOWS
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$) (NOTES 2(C) & 2(L))
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE NINE MONTH PERIOD
DECEMBER 31, ENDED SEPTEMBER 30,
----------------------- ---------------------------------------
1996 1996 1996 1997 1997
THCH$ THUS$ THCH$ THCH$ THUS$
---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss.............................................. (1,505,508) (3,632) (920,564) (1,227,894) (2,963)
ITEMS NOT AFFECTING CASH:
Depreciation.......................................... 223,279 539 169,229 146,287 353
Write-offs and accrued liabilities.................... 421,997 1,018 72,047 370,587 894
Net price-level restatement........................... (217,977) (526) (169,902) (45,661) (110)
CHANGES IN ASSETS AFFECTING CASH FLOW:
Increase (Decrease) in accounts receivable............ (1,050,024) (2,533) (874,221) 421,582 1,017
Increase in inventories............................... (4,935) (12) -- -- --
CHANGE IN LIABILITIES AFFECTING CASH FLOW:
Increase in accounts payable relating to operating
results............................................. 435,978 1,052 510,173 212,090 512
Net increase in income taxes payable.................. 3,222 8 -- -- --
Decrease in interest payable.......................... 12,292 30 -- 31,037 75
Net increase in VAT and other similar payables........ 16,568 40 40,407 -- --
---------- ---------- ---------- ---------- ------
Net cash flow (used) provided by operating
activities.................................... (1,665,108) (4,017) (1,172,831) (91,972) (222)
---------- ---------- ---------- ---------- ------
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings from banks and others...................... 186,772 451 --
Other financing activities............................ 1,587,062 3,829 1,786,258 197,222 476
---------- ---------- ---------- ---------- ------
Net cash flow provided by financing
activities.................................... 1,773,834 4,280 1,786,258 197,222 476
---------- ---------- ---------- ---------- ------
CASH FLOW FROM INVESTING ACTIVITIES:
Fixed assets acquired................................. (159,169) (384) (628,780) (41,777) (101)
---------- ---------- ---------- ---------- ------
Net cash flow used by investing activities............ (159,169) (384) (628,780) (41,777) (101)
---------- ---------- ---------- ---------- ------
Total net (decrease) increase in cash and cash
equivalents................................... (50,443) (122) (15,353) 63,473 153
---------- ---------- ---------- ---------- ------
EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS........ 2,126 5 2,024 53 --
---------- ---------- ---------- ---------- ------
NET CHANGE IN CASH AND CASH EQUIVALENTS................. (48,317) (117) (13,329) 63,526 153
---------- ---------- ---------- ---------- ------
CASH AND CASH EQUIVALENTS -- BEGINNING OF YEAR.......... 72,075 174 71,399 23,758 57
---------- ---------- ---------- ---------- ------
CASH AND CASH EQUIVALENTS -- END OF YEAR................ 23,758 57 58,070 87,284 211
========== ========== ========== ========== ======
</TABLE>
The accompanying notes 1 to 28 form an integral part of these financial
statements
F-32
<PAGE> 172
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
1. NATURE OF OPERATIONS AND BACKGROUND OF THE COMPANY:
(a) Name and registration in the Securities Register:
Iusatel Chile S.A. (the "Company") was originally incorporated under the
name of TDI S.A. under public deed dated March 3, 1992.
On May 19, 1994, the minutes of the first extraordinary shareholders
meeting held on May 5, 1994 were recorded under public deed. This meeting
approved the change of the Company's name to Telecomunicaciones Digitales
Internacionales S.A. and a capital increase, whereby Grupo Iusacell S.A. de
C.V. ("Iusacell") purchased 51% of the share capital.
On August 1, 1994, the minutes of the second extraordinary shareholders
meeting held on July 28, 1994 were recorded under public deed. This meeting
approved the change of the Company's name to Iusatel Chile S.A., the
expansion of the Company's objectives and the related change in its bylaws.
From that date, the Company began the final phase of its start-up,
principally characterized by investment in its infrastructure.
The Company is majority owned by Iusacell; however, its operations are
independently and separately managed. As a result, during the periods
presented Iusacell did not incur any general or corporate expenses on
behalf of the Company. It is management's belief that the financial results
presented herein would not have been materially different had the Company
operated as a separate entity for the periods presented.
The principle objective of the Company is to engage in business within the
telecommunications industry.
The Company is registered under No. 494 in the Securities Register and is
therefore subject to the regulatory authority of the Chilean
Superintendency of Securities and Insurance (the "Superintendency").
(b) Start-up period:
The Company began its normal operations on January 1, 1995, concluding its
development and start-up period.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Presentation:
The financial statements have been prepared in accordance with generally
accepted accounting principles in Chile ("Chilean GAAP") and the
regulations established by the Superintendency. The Company is also subject
to specific provisions contained in Corporations Law 18,046 and its related
regulations.
(b) Comparative financial statements:
For comparative purposes, the financial statements and the amounts
disclosed in the related notes for the year ended December 31, 1995 have
been restated in terms of Chilean pesos of December 31, 1996 purchasing
power. In accordance with Chilean regulations and accounting practices, the
restatement was calculated based on the Official Consumer Price Index of
the National Institute of Statistics, which was 6.6% for the year ended
November 30, 1996. The index is based on the "prior month rule", pursuant
to which the inflation adjustments are based on the Consumer Price Index at
the close of the month
F-33
<PAGE> 173
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
(b) Comparative financial statements, continued:
preceding the close of the respective period or transaction. This index is
considered by the business community, the accounting profession and the
Chilean government to be the index which most closely complies with the
technical requirement to reflect the variation in the general level of
prices in the country and, consequently, is widely used for financial
reporting purposes in Chile.
The interim September 30, 1996 and 1997 financial statements have also been
restated for general price-level changes, but are expressed in constant
Chilean pesos of September 30, 1997. The effect of not updating the
December 31, 1995 and 1996 financial statements to September 30, 1997
constant pesos is not significant because the change in the inflation index
applicable for the restatement of financial statements for the nine month
period ended September 30, 1997 was only 3.9%. Additionally, if the
updating by the 3.9% increase had been made, it would have been applied to
all amounts and disclosures shown in the December 31, 1995 and 1996
financial statements and accordingly, there would be no changes in the
relationships among the amounts and disclosures in those financial
statements.
(c) Price-level restatement:
The financial statements, which are expressed in Chilean pesos, have been
restated to reflect the effects of variations in the purchasing power of
the local currency during each year. For this purpose, and in conformity
with current Chilean regulations, non-monetary assets and liabilities,
equity accounts and income and expense accounts have been restated each
year in terms of year-end constant pesos. The resulting net charge or
credit to income arises as a result of the gain or loss in purchasing power
from the holding of monetary assets and liabilities exposed to the effects
of inflation.
The above-mentioned price-level restatements do not purport to present
appraised or replacement values and are only intended to restate all
non-monetary financial statement components in terms of local currency of
similar purchasing power and to include in the net result for each year the
gain or loss in purchasing power arising from the holding of monetary
assets and liabilities exposed to the effects of inflation.
Certain assets and liabilities are denominated in U.F. units (Unidades de
Fomento). A U.F. is a Chilean inflation-indexed peso denominated monetary
unit which is set daily in advance based on changes in the Consumer Price
Index. The adjustments to the closing balance of U.F.-denominated assets
and liabilities are included in the Price-level restatement account in the
Statement of Income. Each U.F. was equivalent to Ch$ 12,482.81 and Ch$
13,280.43 at December 31, 1995 and 1996, respectively.
F-34
<PAGE> 174
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
(d) Assets and liabilities in US dollars:
Balances in foreign currency included in the balance sheet have been
translated into Chilean pesos at the "Observed Exchange Rate" determined by
the Central Bank of Chile in effect at each year end using the following
exchange rates:
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
US Dollar ("observed" rate)............. 424.87 406.91
</TABLE>
(e) Fixed assets:
Fixed assets are shown at restated acquisition or import cost, including,
in the latter case, deferred customs duties. Assets received under lease
contracts are shown at the present value of the contract.
Depreciation is calculated using the straight-line method on the restated
value of the assets over the related useful lives. Depreciation expense
amounted to ThCh$ 162,203 and ThCh$ 223,279 for the years ended December
31, 1995 and 1996, respectively.
(f) Staff severance indemnities:
The Company has no obligation for the payment of staff severance
indemnities as employee severance benefits are neither legally required nor
included under the terms and conditions of employee contracts.
(g) Staff vacations:
The Company has recorded the cost of staff vacations on an accrued basis as
the vacations are earned by the employees in accordance with Technical
Bulletins Nos. 47 and 48 of the Chilean College of Accountants A.G.
(h) Income tax:
The Company has made no provision for first category income tax as it has
incurred tax losses. The Company has provided for Article 21 Tax under the
Income Tax Law.
(i) Allowance for doubtful accounts and long-distance revenue recognition
criteria
(i) The allowance for doubtful accounts is calculated based upon an
aging of account receivable balances using historical rates of
collection by type of account balance.
No provision has been recorded against un-billed traffic.
Given the significant collection risk associated with the
"audio-text" (data transmission) receivables, the Company has
recorded a 100% provision against the related receivable balance in
the amount of ThCh$ 298,642. As of December 31, 1996, these
services are no longer being provided by the Company.
F-35
<PAGE> 175
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
(ii) Long-distance traffic:
The Company recognizes long-distance traffic revenues during the
period in which the services are provided. Revenues are generated
through contracts with customers and through local telephone
companies that perform dialing services.
(j) Statement of cash flows:
Cash flows generated from operating activities include all core business
related cash flows, interest paid, investment income and all other cash
flows not included in investing or financing activities.
(k) Reclassifications:
Certain reclassifications have been made to the December 31, 1995 figures
to enhance the comparability of the financial statements as of December 31,
1996.
(l) Convenience translation to US dollars (unaudited):
The Company maintains its accounting records and prepares its financial
statements in Chilean pesos. The United States dollar amounts disclosed in
the accompanying financial statements as of December 31, 1996 and September
30, 1997 are presented solely for the convenience of the reader at the
September 30, 1997 exchange rate of Ch$ 414.47 per US$ 1. This translation
should not be construed as representing that the Chilean peso amounts
actually represent or have been, or could be, converted into United States
dollars.
(m) Interim financial data:
In management's opinion the accompanying interim amounts included in these
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of results for
such interim periods. Certain interim information and note disclosures have
been omitted; however, the Company believes that the interim disclosures
made are adequate and that the information presented is not misleading.
3. ACCOUNTING CHANGES:
Effective January 1, 1996, Technical Bulletin No. 50 of the Chilean College
of Accountants A.G. requires the presentation of a statement of cash flows.
Superintendency Circular No. 00238 dated January 17, 1997, requires that
the Company continue to present the statement of changes in financial
position. Consequently, the financial statements for the year ended
December 31, 1996, include both of the above mentioned statements, however
for subsequent periods it will not be necessary to continue to present the
statement of changes in financial position.
F-36
<PAGE> 176
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
4. PRICE-LEVEL RESTATEMENT:
Price-level restatement is summarized as follows:
<TABLE>
<CAPTION>
(CHARGE)/CREDIT TO INCOME
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996
THCH$ THCH$
--------- ---------
<S> <C> <C>
Current assets.............................................. 13,391 6,087
Fixed assets................................................ 92,438 98,144
Other assets................................................ (92) 240
Non-monetary assets......................................... 672 (89,966)
Shareholders' equity........................................ 9,487 167,503
------- -------
Balance of price-level restatements account................. 115,896 182,008
Income statement accounts (net)............................. 124,454 35,969
------- -------
Price-level restatement................................... 240,350 217,977
======= =======
</TABLE>
5. TRADE ACCOUNTANTS RECEIVABLE:
Net trade accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1995 1996
THCH$ THCH$
------- ---------
<S> <C> <C>
Billed accounts receivable.................................. 279,319 896,058
Accrued accounts receivable................................. 245,150 485,495
------- ---------
Total trade receivables..................................... 524,469 1,381,553
Allowance for doubtful accounts............................. (45,422) (479,336)
------- ---------
Total..................................................... 479,047 902,217
======= =========
</TABLE>
6. SUNDRY ACCOUNTS RECEIVABLE:
Sundry accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1995 1996
THCH$ THCH$
------- ---------
<S> <C> <C>
Current accounts............................................ 5,371 5,507
Advances to suppliers....................................... 31,998 2,882
Accounts receivable under Reciprocal carrier agreements..... -- 110,955
Other....................................................... -- 10,961
------- ---------
Totals.................................................... 37,369 130,305
======= =========
</TABLE>
7. TAXES RECOVERABLE:
Taxes recoverable are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1995 1996
THCH$ THCH$
------- ---------
<S> <C> <C>
VAT fiscal credit........................................... 218,191 201,614
Training expense credits.................................... 3,925 5,290
------- ---------
Total..................................................... 222,116 206,904
======= =========
</TABLE>
F-37
<PAGE> 177
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
8. PREPAID EXPENSES:
Prepaid expenses are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1995 1996
THCH$ THCH$
------- ---------
<S> <C> <C>
Legal....................................................... 18,669 --
Insurance................................................... 5,616 4,479
Prepaid advertising......................................... 93,900 100,189
Deferred interest on leasing................................ 17,408 16,353
Prepaid interest............................................ -- 6,703
Prepaid taxes............................................... 9,325 6,448
Software.................................................... 9,784 --
Other....................................................... 8,194 2,833
Commissions................................................. 24,746 20,600
------- ---------
Total..................................................... 187,642 157,605
======= =========
</TABLE>
9. FIXED ASSETS:
Fixed assets are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
1995 1996
THCH$ THCH$
--------- ---------
<S> <C> <C>
Land:....................................................... 31,132 31,132
Machinery & equipment:
Earth station............................................. 675,458 681,001
Miscellaneous machinery & equipment....................... 11,264 12,530
International switch...................................... 290,779 406,967
Network................................................... 9,187 9,187
Internal communications equipment......................... 54,312 6,788
Call-back switch.......................................... -- 51,414
Furniture & installations................................. 160,389 180,542
Vehicles.................................................. 21,046 6,064
Office equipment.......................................... 118,975 170,577
Customer equipment........................................ 32,343 18,202
--------- ---------
Subtotal.......................................... 1,373,753 1,543,272
--------- ---------
Other fixed assets:
Leased assets............................................. 191,220 312,938
Telephone trunk lines..................................... 11,413 11,413
Imported equipment in transit............................. -- 282,026
Other..................................................... 718 2,733
--------- ---------
Subtotal.......................................... 203,351 609,110
--------- ---------
Total fixed assets (gross)........................ 1,608,236 2,183,514
--------- ---------
Less:
Accumulated depreciation for the period................... (161,343) (381,085)
--------- ---------
Total fixed assets (net).......................... 1,446,893 1,802,429
========= =========
</TABLE>
F-38
<PAGE> 178
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
10. OTHER ASSETS:
Other assets are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1996
THCH$ THCH$
------- -------
<S> <C> <C>
Telephone lines............................................. 746 4,010
Long-term deferred interest................................. 29,385 7,322
Long-term time deposits..................................... -- 21,720
Other....................................................... 8,363 8,488
------- -------
Total............................................. 38,494 41,540
======= =======
</TABLE>
11. SHORT-TERM BANK LIABILITIES:
Short-term bank liabilities are summarized as follows:
<TABLE>
<CAPTION>
MONTHLY
INTEREST ACCRUED TOTAL
RATE AMOUNT AMOUNT INTEREST 1996
BANK (%) IN U.F. IN THCH$ THCH$ THCH$
- ---- -------- ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Sud Americano................................... 1.0655 249,361 3,311,621 12,292 3,323,913
Sud Americano................................... 1.0500 -- 30,000 -- 30,000
------- --------- ------ ---------
Total 249,361 3,341,621 12,292 3,353,913
======= ========= ====== =========
</TABLE>
<TABLE>
<CAPTION>
ANNUAL
INTEREST ACCRUED TOTAL
RATE AMOUNT AMOUNT INTEREST 1995
BANK (%) IN U.F. IN THCH$ THCH$ THCH$
- ---- -------- ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Sud Americano................................... 8.48 143,184 1,905,303 7,181 1,912,484
Citibank........................................ 8.56 106,169 1,412,756 6,383 1,419,139
Citibank........................................ 8.56 -- 53,300 274 53,574
------- --------- ------ ---------
Total 249,353 3,371,359 13,838 3,385,197
======= ========= ====== =========
</TABLE>
12. LEASING OBLIGATIONS:
At December 31, 1995 and 1996, the Company had fixed asset lease contracts
outstanding with financial institutions and others, whose installments have the
following maturities:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1996
THCH$ THCH$
------- -------
<S> <C> <C>
Short term.................................................. 108,308 114,386
Long term................................................... 165,972 91,306
------- -------
Total....................................................... 274,280 205,692
======= =======
</TABLE>
F-39
<PAGE> 179
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
13. ACCOUNTS PAYABLE:
Accounts payable are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1996
THCH$ THCH$
------- -------
<S> <C> <C>
Domestic suppliers.......................................... 226,945 550,073
Sundry accounts............................................. 4,974 10,548
Total domestic suppliers.................................... 231,919 560,621
Foreign suppliers........................................... 94,944 156,204
------- -------
Total accounts payable...................................... 326,863 716,825
======= =======
</TABLE>
14. NOTES PAYABLE:
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1996
THCH$ THCH$
------- -------
<S> <C> <C>
Short-term.................................................. 156,182 280,143
Long-term................................................... 1,212 245,961
------- -------
Total....................................................... 157,394 526,104
======= =======
</TABLE>
15. AMOUNTS PAYABLE TO RELATED COMPANIES:
(a) Short-term:
Short-term amounts payable to related companies at December 31, 1995 and
1996 represent amounts payable of ThCh$ 39,697 and ThCh$ 167,587,
respectively, to Satelitron S.A., Mexico, a company related to Iusacell,
for satellite space rentals.
(b) Long-term:
Long-term amounts payable to related parties represent capital
contributions of ThCh$ 660,193 and ThCh$ 2,328,098, at December 31, 1995
and 1996 respectively, from Iusacell S.A. These capital contributions were
legally formalized in January of 1997 upon approval by the Superintendency,
subsequent to the balance sheet date.
F-40
<PAGE> 180
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
16. ACCRUED LIABILITIES:
Accrued liabilities are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1995 1996
THCH$ THCH$
------- -------
<S> <C> <C>
Vacations (Note 2(g))....................................... 40,070 40,978
Pending Invoices............................................ 263,075 84,529
Other....................................................... 10,498 64,010
------- -------
Total..................................................... 313,643 189,517
======= =======
</TABLE>
17. WITHHOLDING TAXES:
Withholding taxes relate to remunerations, taxes and social security
deductions for the month of December, amounting to ThCh$ 25,380 and ThCh$
38,291 at December 31, 1995 and 1996, respectively.
18. OTHER LONG-TERM LIABILITIES:
As of December 31, 1995 and 1996, this account balance included deferred
customs duties, in accordance with Law 18,634, as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------
1995 1996
THCH$ THCH$
------ ------
<S> <C> <C>
Total deferred customs duties............................... 14,531 21,986
====== ======
</TABLE>
19. INCOME TAXES:
No provision was made for first category income tax at December 31, 1995
and 1996, as there were tax losses amounting to approximately Ch$ 3,451
million, and Ch$ 4,726 million, respectively. These losses may be applied
against future profits for an indefinite period of time.
F-41
<PAGE> 181
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
20. SHAREHOLDERS' EQUITY:
(a) The movements in shareholders' equity for the years ended December 31,
1995 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
FULLY PAID FULLY PAID
AND AND
OUTSTANDING OUTSTANDING
SERIES A SERIES B PAID-IN ACCUMULATED NET LOSS FOR
COMMON COMMON CAPITAL DEFICIT THE PERIOD TOTAL
SHARES SHARES THCH$ THCH$ THCH$ THCH$
----------- ----------- ------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balances as of December 31, 1994....... 22,350 23,263 659,372 (767,913) -- (108,541)
Equity price-level restatement......... -- -- 54,070 (62,969) -- (8,899)
Loss for the year...................... -- -- -- -- (2,420,478) (2,420,478)
------ ------ ------- ---------- ---------- ----------
Balances as of December 31, 1995....... 22,350 23,263 713,442 (830,882) (2,420,478) (2,537,918)
------ ------ ------- ---------- ---------- ----------
Price-level restated balance as of
December 31, 1995.................... 22,350 23,263 760,529 (885,720) (2,580,230) (2,705,421)
------ ------ ------- ---------- ---------- ----------
Balances as of December 31, 1995....... 22,350 23,263 713,442 (830,882) (2,420,478) (2,537,918)
Transfer of previous year's results.... -- -- -- (2,420,478) 2,420,478 --
Equity price-level restatement......... -- -- 47,087 (214,590) -- (167,503)
Loss for the year...................... -- -- -- -- (1,505,508) (1,505,508)
------ ------ ------- ---------- ---------- ----------
Balances at December 31, 1996.......... 22,350 23,263 760,529 (3,465,950) (1,505,508) (4,210,929)
====== ====== ======= ========== ========== ==========
</TABLE>
(b) Shareholders' Equity:
The Company's subscribed and paid-in capital at December 31, 1996, amounts
to ThCh$ 760,529, (price-level restated) comprised of 22,350 Series A and
23,263 Series B shares, neither of which have par value.
(c) Share ownership:
<TABLE>
<CAPTION>
1995 1996
------------------------- -------------------------
NO. NO.
TYPE OF SHAREHOLDER SHAREHOLDERS PERCENTAGE SHAREHOLDERS PERCENTAGE
------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Holding of 10% or more........................... 3 100 3 100
Less than 10% holding but investment of U.F. 200
or more........................................ -- -- -- --
Less than 10% holding but investment less than
U.F. 200....................................... -- -- -- --
--------- --------- --------- ---------
Total............................................ 3 100 3 100
========= ========= ========= =========
Control of the Company........................... 1 51 1 51
========= ========= ========= =========
</TABLE>
On December 27, 1996 Iusacell contractually agreed with Inversiones Druma
to increase its interest in Iusatel from 51% to 99.9% of all outstanding
shares in order to sell, cede or transfer these shares to Inversiones Druma
free of any liens or pledges.
F-42
<PAGE> 182
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
20. SHAREHOLDERS' EQUITY, CONTINUED:
(d) The "UNAUDITED" movements in shareholders' equity for the nine months
ended
September 30, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
FULLY PAID FULLY PAID
AND AND
OUTSTANDING OUTSTANDING NET LOSS
SERIES A SERIES B NEW PAID-IN ACCUMULATED FOR THE
COMMON COMMON SHARE CAPITAL DEFICIT PERIOD TOTAL
SHARES SHARES ISSUANCE THCH$ THCH$ THCH$ THCH$
----------- ----------- ----------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995........ 22,350 23,263 -- 659,373 (3,188,391) -- (2,529,018)
Equity price-level restatement...... -- -- -- 88,633 (216,004) -- (127,371)
Loss for the nine month period...... -- -- -- -- -- (871,746) (871,746)
------- ------- ----------- --------- ---------- ---------- ----------
Balance as of September 30, 1996.... 22,350 22,350 -- 748,006 (3,404,395) (871,746) (3,528,135)
======= ======= =========== ========= ========== ========== ==========
Price-level restated balance as of
September 30, 1997................ -- -- -- 789,894 (3,595,041) (920,564) (3,725,711)
======= ======= =========== ========= ========== ========== ==========
Balance as of December 31, 1996..... 22,350 23,263 -- 760,529 (4,971,458) -- (4,210,929)
Capital increase January 24, 1997... (22,350) (23,263) 574,060,412 5,739,915 -- -- 5,739,915
Equity price-level restatement...... -- -- -- 230,558 (193,887) -- 36,671
Loss for the nine month period...... -- -- -- -- -- (1,227,894) (1,227,894)
------- ------- ----------- --------- ---------- ---------- ----------
Balance as of September 30, 1997.... -- -- 574,060,412 6,731,002 (5,165,345) (1,227,894) 337,763
======= ======= =========== ========= ========== ========== ==========
</TABLE>
21. INTERMEDIATE SERVICE CONCESSION:
The Company carries out its business on the basis of Decree Law No. 188 of
the Undersecretary of Telecommunications dated September 17, 1993, whereby
TDI S.A. was granted a concession for intermediate telecommunications
services.
Under public deed dated September 24, 1994, the name TDI S.A. was changed
to Telecomunicaciones Digitales Internacionales S.A. with a capital
increase to permit Iusacell to purchase a controlling interest in the
Company. On August 3, 1994, the bylaws of the Company were amended and its
name was changed to Iusatel Chile S.A.
22. DIRECTORS' REMUNERATION:
No payments were made to directors for attending meetings during the years
ended December 31, 1995 and 1996.
F-43
<PAGE> 183
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
23. GUARANTEES:
(a) Domestic:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1995 1996
THCH$ THCH$
------- ------
<S> <C> <C>
Guarantee in favor of VTR Telecomunicaciones................ -- 21,244
Performance bond D No. 176588 in favor of Santiago Fourth
Civil Court............................................... 15,000 --
Promissory note in favor of Banco Sud Americano to cover a
current account overdraft contract for an amount at
December 31, 1995......................................... 160,000 --
------- ------
Total domestic guarantees................................... 175,000 21,244
======= ======
</TABLE>
(b) International:
Stand-by letter of credit in the amount of ThUS$ 8,000 at December 31, 1995
and 1996, given by its majority shareholder, Iusacell, in favor of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------
1995 1996
THUS$ THUS$
------ ------
<S> <C> <C>
Banco Sud Americano (Bank of Nova Scotia N.Y.).............. 4,500 8,000
Citibank N.A. (N.Y.)........................................ 3,500 --
----- -----
8,000 8,000
===== =====
</TABLE>
24. CONTINGENCIES AND COMMITMENTS:
The Company is unaware of any significant contingencies or commitments
affecting the financial statements.
25. RELEVANT FACTS:
1. On November 29, 1995, the minority shareholders, Inversiones y Servicios
Santa Teresa Ltda. and Sergio Munoz ("Minority Shareholders"), filed a
claim for compensatory damages against Iusacell, in an attempt to
prevent Iusacell from increasing its ownership interest in the Company,
through the capitalization of the amounts advanced to Iusatel, as
described in Note 15(b). This decision was appealed and on May 20, 1996,
and was subsequently rejected by the Chilean Supreme Court.
2. An extraordinary meeting of the board of directors held on June 27,
1996, agreed to accept the resignation of then, general manager of the
Company, Gaston Pereira, and appointed Luis Alberto Reyes as interim
general manager and Alberto Herrerias as executive director of the
Company.
F-44
<PAGE> 184
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
26. STATEMENT OF CASH FLOWS:
(a) Other sources of financing for the year ended December 31, 1996 is
summarized as follows:
<TABLE>
<CAPTION>
1996
THCH$
---------
<S> <C>
Iusacell capital contribution (Note 15(b)).................. 1,708,780
=========
</TABLE>
(b) The following financing activities did not result in cash outflows
during the current year but commit future cash flows:
<TABLE>
<CAPTION>
1996
THCH$
-------
<S> <C>
Purchase of Switch (Siemens)................................ 282,611
PCS call processing platform machine........................ 51,414
-------
Total....................................................... 334,025
=======
</TABLE>
27. SUBSEQUENT EVENTS:
At the extraordinary shareholders meeting held on January 24, 1997, the
following resolutions, among others were adopted:
(a) The 45,613 Series A and B shares were eliminated and were replaced by a
single series of shares.
(b) The paid-in capital, amounting to Ch$ 713,441,959 at December 31, 1996,
and being subscribed and paid, was agreed to be increased to a total
amount of Ch$ 11,968,177,959, representing 1,125,519,213 shares with no
par value, through the issuance of 1,125,473,600 new shares.
(c) Iusacell subscribed and paid for 573,991,536 shares, representing 51%
of the agreed capital increase, in the following manner:
* Ch$ 3,411,817,157 representing the Company's bank liability to
Banco Sud Americano which Iusacell paid on behalf of the Company
on January 4, 1997.
* Ch$ 2,328,098,143 representing the capitalization of long-term
amounts payable to related companies restated at December 31,
1996, comprising contributions made previously by Iusacell for
future capital increases.
The remaining 49% of the above mentioned agreed capital increase was
left available for subscription for a period of three years. These
capital increases are subject to the approval of the Superintendency.
In addition to the above share issuance that has substantially improved
liquidity, the Company has been involved in continuous efforts to formulate
a restructuring plan to improve future operations. Such efforts have
resulted in the development of a new business plan and strategy to address
the Company's current financial situation and disappointing recent
financial performance.
F-45
<PAGE> 185
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
28. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES:
Chilean GAAP varies in certain important respects from the accounting
principles generally accepted in the United States ("U.S. GAAP"). Such
differences involve methods for measuring the amounts shown in the
financial statements, as well as additional disclosures required by U.S.
GAAP.
(a) Differences in Measurement Methods
The principal methods applied in the preparation of the accompanying
financial statements which have resulted in amounts that differ from those
that would have otherwise been determined under U.S. GAAP are as follows:
(i) Inflation accounting:
Chilean GAAP requires that the financial statements be restated to reflect
the full effects of loss in the purchasing power of the Chilean peso on the
financial position and results of operations of reporting entities. The
method, described in Note 2(c), is based on a model which enables
calculation of net inflation gains or losses caused by monetary assets and
liabilities exposed to changes in the purchasing power of local currency.
The model prescribes that the historical cost of all non-monetary accounts
be restated for general price-level changes between the date of origin of
each item and the year-end, but allows direct utilization of latest cost
values for the restatement of inventories, as an alternative to the
price-level restatement of those assets only if the resulting variation is
not material.
The inclusion of price-level adjustments in the accompanying financial
statements is considered appropriate under the prolonged inflationary
conditions affecting the Chilean economy. Accordingly, the effect of
price-level changes is not eliminated in the reconciliation to U.S. GAAP
included under paragraph (a)(v) below.
(ii) Income taxes:
The accounting treatment of income taxes under Chilean GAAP and U.S. GAAP
differs in respect to accounting for deferred income taxes. Under U.S.
GAAP, prescribed by Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes", all temporary differences arising
as a result of transactions that have different accounting and tax
treatments are recognized as deferred tax assets and liabilities as of the
balance sheet date. A valuation allowance is provided against deferred tax
assets that are not recoverable on a more-likely-than-not basis. Under
Chilean GAAP, only deferred tax assets and liabilities that are
non-recurring are recognized in the financial statements. Chilean GAAP also
permits not providing for deferred income taxes where a deferred tax asset
or liability is not expected to be realized.
The Company has deferred tax assets relating to tax loss carryforwards
amounting to ThCh$ 481,241 and ThCh$ 709,008, at December 31, 1995 and
1996, respectively, for which the Company has recorded a full valuation
allowance due to the uncertainty of the realization of such tax loss
carryforwards.
The Company's management considers that the net effect of applying SFAS No.
109 for all periods presented in paragraph (a)(v) below to be immaterial.
F-46
<PAGE> 186
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
28. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, CONTINUED:
(iii) Impairment of Long-Lived Assets:
Under U.S. GAAP, SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of ", requires that assets
to be disposed of be valued at the lower of carrying amount or fair value
less cost to sell. Furthermore, companies are required to review long-lived
assets and certain identifiable intangibles to be held and used for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the sum of the
expected future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the asset, an impairment loss is
recognized. Otherwise, an impairment loss is not recognized. Measurement of
an impairment loss for long-lived assets and identifiable intangibles that
an entity expects to hold and use should be based on the fair value of the
asset. Under Chilean GAAP, the impairment loss related to the Company's
long-lived assets was recorded in the period that the Company's management
decided to dispose of such assets.
The effect of the application of SFAS No. 121 is presented in paragraph
(a)(v) below.
Under U.S. GAAP, such adjustments would be included in the operating costs
of the Company.
(iv) Allowance for doubtful accounts
Based upon information available subsequent to the release date of the
Chilean financial statements, the Company reduced its estimate of
recoverable amounts related to certain accounts receivable which existed as
of December 31, 1996. As a result of this change in estimate, an additional
allowance for doubtful accounts has been recorded for U.S. GAAP purposes.
The effect of the above adjustment is presented in paragraph (a)(v) below.
F-47
<PAGE> 187
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
28. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, CONTINUED:
(v) Effects of conforming to U.S. GAAP:
The adjustments to reported Net income required to conform with U.S. GAAP
are as follows:
<TABLE>
<CAPTION>
FOR THE NINE
MONTH PERIOD
FOR THE YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------ -------------
1995 1996 1997
THCH$ THCH$ THCH$
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Net loss as shown in the Chilean GAAP
financial statements........................ (2,580,230) (1,505,508) (1,227,894)
Impairment of long-lived assets (paragraph
a(iii))..................................... -- (199,829) 199,829
Allowance for doubtful accounts (paragraph
a(iv))...................................... -- (293,998) 293,998
---------- ---------- -----------
Subtotal...................................... -- (493,827) 493,827
Deferred tax effect of the above
adjustments................................. -- 74,074 (74,074)
---------- ---------- -----------
Net loss in accordance with U.S. GAAP......... (2,580,230) (1,925,261) (808,141)
========== ========== ===========
U.S. GAAP loss per share...................... (56.57) (42.21) 0.0015
========== ========== ===========
Weighted average number of common stock
outstanding (Note 20)....................... 45,613 45,613 533,059,355
========== ========== ===========
</TABLE>
(vi) Effects of conforming to U.S. GAAP:
The adjustments required to conform to shareholders' equity amounts with
U.S. GAAP are as follows:
<TABLE>
<CAPTION>
FOR THE
NINE MONTH
FOR THE YEARS ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------- -------------
1995 1996 1997
THCH$ THCH$ THCH$
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Shareholders' equity as shown in the Chilean GAAP
financial statements............................ (2,705,421) (4,210,929) 337,764
Impairment of long-lived assets (paragraph
a(iii))......................................... -- (199,829) --
Allowance for doubtful accounts (paragraph
a(iv)).......................................... -- (293,998) --
---------- ---------- --------
Subtotal.......................................... -- (493,827) --
Deferred tax effect of the above adjustments...... -- 74,074 --
---------- ---------- --------
Shareholders' equity in accordance with U.S.
GAAP............................................ (2,705,421) (4,630,682) 337,764
========== ========== ========
</TABLE>
F-48
<PAGE> 188
IUSATEL CHILE S.A.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
RESTATED FOR GENERAL PRICE-LEVEL CHANGES AND EXPRESSED IN THOUSANDS OF CONSTANT
CHILEAN PESOS (THCH$) AND THOUSANDS OF US DOLLARS (THUS$)
28. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, CONTINUED:
(b) Additional Disclosure:
(i) Statements of Cash Flows:
Information for inclusion in the statement of cash flows presented in U.S.
GAAP format is as follows:
<TABLE>
<CAPTION>
NINE MONTHS
FOR THE YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------ --------------
1995 1996 1997
THCH$ THCH$ THCH$
---------- ---------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. (2,580,230) (1,505,508) (1,227,894)
Adjustments to reconcile net income to net cash provided
by
operating activities:
Depreciation............................................ 162,203 223,279 146,287
Provision for losses on accounts receivable............. 45,422 433,914 264,504
Gain on sale of fixed assets............................ 203 --
Write-off of fixed assets............................... -- -- 221,623
Changes in assets and liabilities:
(Increase) decrease in accounts receivable............ (553,014) (1,014,774) 194,297
---------- ---------- ----------
Decrease in inventories............................... (627) (4,691) (95)
(Increase) decrease in taxes recoverable.............. (55,946) 15,212 79,029
(Increase) decrease in prepaid expenses............... (150,341) 30,037 132,997
(Increase) decrease in other assets................... (29,352) (3,684) 27,770
Increase (decrease) in accounts payable............... 146,427 107,936 (169,162)
Increase (decrease) in accrued liabilities and
other............................................... 300,625 (101,419) 161,125
---------- ---------- ----------
Net cash used by operating activities....................... (2,714,630) (1,819,698) (169,519)
---------- ---------- ----------
Cash flow from investing activities:
Acquisition of fixed assets............................... (274,734) (171,534) (41,777)
---------- ---------- ----------
Net cash (used) provided by investing activities............ (274,734) (171,534) (41,777)
---------- ---------- ----------
Cash flow from financing activities:
Net decrease in short-term bank liabilities............... 2,236,641 (31,284) 14,202
Payments on capital lease obligations..................... -- (68,588) (87,165)
Net increase (decrease) in notes payable.................. 124,211 246,992 87,843
Increase in amounts payable to related parties............ 699,890 1,795,795 259,676
---------- ---------- ----------
Net cash provided (used) by financing activities............ 3,060,742 1,942,915 274,556
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents........ 71,378 (48,317) 63,260
---------- ---------- ----------
Cash and cash equivalents at beginning of period............ 697 72,075 24,685
========== ========== ==========
Cash and cash equivalents at end of period.................. 72,075 23,758 87,945
========== ========== ==========
Supplemental Cash Flow Information:
Interest paid............................................. 99,099 220,340
Supplemental Non-cash Investing and Financing Activities:
a. During the two years ended December 31, 1995 and 1996,
Iusatel financed certain capital expenditures totaling ThCh$
274,280 and ThCh$ 205,692, respectively, by entering into
capital leasing arrangements.
b. During the two years ended December 31, 1995 and 1996,
Iusatel acquired assets and assumed a corresponding
liability with related parties totaling ThCh$ 51,204 and
ThCh$ 385,774, respectively.
</TABLE>
F-49
<PAGE> 189
=========================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company. Neither the making of The
Exchange Offer pursuant to this Prospectus nor the acceptance of the Existing
Notes for surrender for exchange pursuant thereto shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof or that the information contained herein is
correct as of any time subsequent to the date hereof.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................ 4
Prospectus Summary................... 5
Risk Factors......................... 19
Convertible Debentures............... 33
Use of Proceeds...................... 34
Capitalization....................... 35
The Exchange Offer................... 36
Unaudited Pro Forma Condensed
Combined Financial Information..... 45
Selected Historical Financial Data... 52
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 55
Business............................. 64
Management........................... 86
Certain Relationships and Related
Party Transactions................. 91
Description of New Notes............. 93
Certain Federal Income Tax
Considerations..................... 127
Plan of Distribution................. 131
Legal Matters........................ 131
Experts.............................. 131
Glossary of Defined Terms............ 132
Index to Financial Statements........ F-1
</TABLE>
=========================================================
=========================================================
[INTERAMERICAS COMMUNICATIONS LOGO]
------------------------
OFFER TO EXCHANGE
------------------------
14% SENIOR NOTES DUE OCTOBER 27, 2007,
FOR ALL OUTSTANDING
14% SENIOR NOTES DUE OCTOBER 27, 2007
------------------------
, 1997
=========================================================
<PAGE> 190
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ICCA's Articles of Incorporation and By-laws contain certain provisions
that eliminate the liability of its directors and officers to the fullest extent
permitted by the Texas Business Corporation Act, except that they do not
eliminate liability for: (i) any breach of the duty of loyalty to the Company or
its shareholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) an act or omission
for which the liability of a director is expressly provided by an applicable
statute; or (iv) any transaction from which the director derived an improper
personal benefit. The Texas Business Corporation Act provides that Texas
corporations may indemnify any director, officer or employee made or threatened
to be made a party to a proceeding, by reason of the former or present official
capacity of such person, if such person (i) conducted himself in good faith and
(ii) reasonably believed that his conduct was in the corporation's best
interests or, in the case of any criminal proceeding, that his conduct was not
unlawful and opposed to the corporation's best interests. The indemnification
provision does not permit indemnification of officers, directors and employees
(i) when such persons are found liable to the corporation or (ii) for any
transaction from which such persons derive improper personal benefits. The
foregoing provisions may reduce the likelihood of derivative litigation against
directors, officers and employees of the Company and may discourage or deter
shareholders or management from bringing a lawsuit against directors and
officers for breaches of their fiduciary duties, even though such an action, if
successful, might otherwise have benefited the Company and its shareholders.
The Company has entered into an indemnification agreement with each
director (an "Indemnitee"). Pursuant to the indemnification agreement, the
Company will indemnify an Indemnitee to the fullest extent permitted by law,
notwithstanding that such indemnification is not specifically authorized by the
agreement, ICCA's Articles of Incorporation and By-laws, or statute. In
addition, the Company will indemnify each Indemnitee against any and all
expenses incurred in connection with claims relating to the fact that such
Indemnitee is or was a director, officer, employee, agent or fiduciary of the
Company or any subsidiary of the Company, and the Company will advance all such
expenses. The Company maintains directors' and officers' liability insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <C> <S>
3.1 -- Articles of Incorporation of InterAmericas Communications
Corporation previously filed as an Exhibit to the
Registrant's Form 8-A Registration Statement, filed with the
Commission on November 29, 1994 and incorporated herein by
reference.
3.2 -- By-laws of InterAmericas Communications Corporation
previously filed as an Exhibit to the Registrant's Form 8-A
Registration Statement, filed with the Commission on
November 29, 1994 and incorporated herein by reference.
4.1 -- Purchase Agreement, dated as of October 21, 1997 by and
among InterAmericas Communications Corporation, Hewster
Chile S.A. Red de Servicios Empresariales de
Telecommunicaciones S.A. and UBS Securities LLC.
4.2 -- Form of Existing Note.
4.3 -- Indenture, dated as of October 27, 1997 between
InterAmericas Communications Corporation and State Street
Bank & Trust Company, N.A.
4.4 -- A/B Exchange Registration Rights Agreement, dated as of
October 27, 1997, between InterAmericas Communications
Corporation and UBS Securities LLC.
</TABLE>
II-1
<PAGE> 191
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <C> <S>
4.5 -- Warrant Agreement, dated as of October 27, 1997, between the
Company and State Street Bank & Trust Company, N.A.
4.6 -- Warrant Registration Rights Agreement, dated as of October
27, 1997 between InterAmericas Communications Corporation
and UBS Securities LLC.
4.7 -- Specimen of InterAmericas Communications Corporation 14%
Senior Note due October 27, 2007.
4.8 -- Proceeds Pledge and Escrow Agreement, dated as of October
27, 1997 between InterAmericas Communications Corporation
and State Street Bank and Trust Company, N.A.
5.1 -- Opinion and Consent of Baker & McKenzie regarding validity
of the New Notes (to be filed by amendment).
8.1 -- Opinion re tax matters (to be filed by amendment).
10.1 -- Stock Purchase Agreement, dated as of September 9, 1997,
between InterAmericas Communications Corporation and
Inversiones Druma S.A. for the acquisition of 99.9% of the
outstanding shares of capital of Iusatel Chile S.A.,
previously filed as an exhibit to Registrant's Current
Report on Form 8-K, filed with the Commission on September
24, 1997 and incorporated herein by reference.
10.2 -- Employment and Severance Agreement, dated as of October 7,
1997, between InterAmericas Communications Corporation and
Patricio E. Northland, previously filed as an exhibit to
Registrant's Current Report on Form 8-K filed with the
Commission on October 16, 1997 and incorporated herein by
reference.
10.3 -- Settlement Agreement, dated as of October 4, 1997, between
InterAmericas Communications Corporation and each of Maroon
Bells Capital Partners, Inc., Theodore Swindells, Paul A.
Moore and Philip Magiera, previously filed as an exhibit to
Registrant's Current Report on Form 8-K filed with the
Commission on October 16, 1997 and incorporated herein by
reference.
10.4 -- Settlement Agreement, dated as of October 3, 1997, between
InterAmericas Communications Corporation and Eleazar Donoso,
previously filed as an exhibit to Registrant's Current
Report on Form 8-K filed with the Commission on October 16,
1997 and incorporated herein by reference.
15.1 -- Letter re Interim Unaudited Financial Statements (to be
filed by amendment).
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Price Waterhouse LLP.
23.2 -- Consent of Coopers & Lybrand/Langton Clarke y Cia.
23.3 -- Consent of Baker & Mckenzie (included in Exhibit 5.1).
25.1 -- Statement of Eligibility of State Street Bank and Trust
Company, N.A.
27.1 -- Financial Data Schedule previously filed as an exhibit to
Registrant's Quarterly Report on Form 10-QSB, filed with the
Commission on November 13, 1997.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Exchange Agent Agreement.
99.4 -- Form of Information Agent Agreement.
</TABLE>
ITEM 22. UNDERTAKINGS
1. The undersigned Registrant undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to
II-2
<PAGE> 192
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
2. The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph l. immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
4. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 193
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN MIAMI, FLORIDA ON
DECEMBER 10, 1997.
INTERAMERICAS COMMUNICATIONS
CORPORATION
By: /s/ DOUGLAS G. GEIB II
--------------------------------------
Name: Douglas G. Geib II
Title: Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes each of
Patricio E. Northland and Douglas G. Geib II as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICIO E. NORTHLAND Chairman of the Board of December 10, 1997
- ----------------------------------------------------- Directors, President and
Patricio E. Northland Chief Executive Officer
(Principal Executive
Officer)
/s/ DOUGLAS G. GEIB II Chief Financial Officer December 10, 1997
- ----------------------------------------------------- and Director (Principal
Douglas G. Geib II Financial and Accounting
Officer)
/s/ DAVID C. KLEINMAN Director December 10, 1997
- -----------------------------------------------------
David C. Kleinman
/s/ GEORGE A. CARGILL Director December 10, 1997
- -----------------------------------------------------
George A. Cargill
/s/ PATRICIO SILVA ECHENIQUE Director December 10, 1997
- -----------------------------------------------------
Patricio Silva Echenique
</TABLE>
II-4
<PAGE> 194
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <C> <S>
4.1 -- Purchase Agreement, dated as of October 21, 1997 by and
among InterAmericas Communications Corporation, Hewster
Chile S.A. Red de Servicios Empresariales de
Telecommunicaciones S.A. and UBS Securities LLC.
4.2 -- Form of Existing Note.
4.3 -- Indenture, dated as of October 27, 1997 between
InterAmericas Communications Corporation and State Street
Bank & Trust Company, N.A.
4.4 -- A/B Exchange Registration Rights Agreement, dated as of
October 27, 1997, between InterAmericas Communications
Corporation and UBS Securities LLC.
4.5 -- Warrant Agreement, dated as of October 27, 1997, between the
Company and State Street Bank & Trust Company, N.A.
4.6 -- Warrant Registration Rights Agreement, dated as of October
27, 1997 between InterAmericas Communications Corporation
and UBS Securities LLC.
4.7 -- Specimen of InterAmericas Communications Corporation 14%
Senior Note due October 27, 2007.
4.8 -- Proceeds Pledge and Escrow Agreement, dated as of October
27, 1997 between InterAmericas Communications Corporation
and State Street Bank and Trust Company, N.A.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Price Waterhouse LLP.
23.2 -- Consent of Coopers & Lybrand/Langton Clarke y Cia.
25.1 -- Statement of Eligibility of State Street Bank and Trust
Company, N.A.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Exchange Agent Agreement.
99.4 -- Form of Information Agent Agreement.
</TABLE>
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
- --------------------------------------------------------------------------------
PURCHASE AGREEMENT
$150,000,000
150,000 Units of 14% Senior Notes due 2007
and Warrants to Purchase 5,250,000 Shares of Common Stock
of
INTERAMERICAS COMMUNICATIONS CORPORATION
Dated as of October 21, 1997
UBS SECURITIES LLC
- --------------------------------------------------------------------------------
<PAGE> 2
October 21, 1997
UBS SECURITIES LLC
299 PARK AVENUE
NEW YORK, NEW YORK 10171
Ladies and Gentlemen:
1. Issuance of Securities. InterAmericas Communications
Corporation, a Texas corporation (the "Company"), proposes to issue and sell to
UBS Securities LLC (the "Initial Purchaser") 150,000 units (the "Units")
consisting in the aggregate of $150,000,000 in aggregate principal amount of its
14% Senior Notes due 2007 (the "Notes") and warrants (the "Warrants") to
purchase 5,250,000 shares of common stock, par value $.001 per share ("Common
Stock"), of the Company (the "Warrant Shares"), subject to the terms and
conditions set forth herein. The Notes will be issued pursuant to an indenture
(the "Indenture"), to be dated the Closing Date (as defined below), between the
Company and State Street Bank and Trust Company, as trustee (the "Trustee"). The
Warrants will be issued pursuant to a warrant agreement (the "Warrant
Agreement"), to be dated the Closing Date, between the Company and State Street
Bank and Trust Company, as warrant agent (the "Warrant Agent"). The Notes and
the Warrants will not trade separately until the earliest to occur of (i) April
27, 1998; (ii) such earlier date as may be determined by the Initial Purchaser;
(iii) the occurrence of a Change of Control; and (iv) the date of effectiveness
of the Exchange Offer Registration Statement (as defined herein) (such earliest
date, the "Separation Date"). The Units, the Notes and the Warrants are more
fully described in the Offering Memorandum referred to below. The Notes and the
14% Senior Notes due 2007 (the "New Senior Notes") issuable in exchange therefor
are collectively referred to herein as the "Senior Notes." The Units, the Senior
Notes and the Warrants are collectively referred to herein as the "Securities."
The offering of the Securities by the Company is referred to herein as the
"Offering." Capitalized terms used but not otherwise defined herein shall have
the meanings given to such terms in the Indenture and the Registration Rights
Agreement (as defined below), as the case may be.
2. Offering Documents. The Notes will be offered and
sold to the Initial Purchaser pursuant to an exemption from the registration
requirements under the Securities Act of 1933, as amended (the "Securities
Act"). The Company has prepared a preliminary offering memorandum, dated October
8, 1997 (the "Preliminary Offering Memorandum"), and a final offering
memorandum, dated October 21, 1997 (the "Offering Memorandum" and, together with
the Preliminary Offering Memorandum, the "Offering Documents"), relating to the
Company and the Securities.
Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Securities
Act, the Units, the Notes, the Warrants and the Warrant Shares (and all
securities issued in exchange therefor or in substitution thereof) shall bear
the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
<PAGE> 3
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER
OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES
FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR IN ACCORDANCE WITH RULE 144 UNDER
THE SECURITIES ACT, OR PURSUANT TO ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON
AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (b) TO THE
COMPANY, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (2) IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
3. Agreements to Sell and Purchase. On the basis of the
representations and warranties contained in this Purchase Agreement (this
"Agreement"), and subject to its terms and conditions, the Company agrees to
issue and sell to the Initial Purchaser the Units, and the Initial Purchaser
agrees to purchase from the Company the Units on the Closing Date. In addition,
the Company agrees to issue to the Initial Purchaser on the Closing Date
2,250,000 warrants to purchase 2,250,000 shares of Common Stock of the Company
with terms substantially similar to the Warrants to be issued in the Offering as
additional compensation in connection with the Offering.
4. Terms of Offering. (a) The Initial Purchaser has
advised the Company that it will make offers (the "Exempt Resales") of the Units
purchased hereunder on the terms set forth in the Offering Documents, as amended
or supplemented, solely (i) to persons whom the Initial Purchaser reasonably
believes to be "qualified institutional buyers" as defined in Rule 144A under
the Securities Act ("QIBs") and (ii) outside the United States to certain
persons in offshore transactions in reliance on Regulation S under the
Securities Act (each, a "Regulation S Purchaser") (such persons specified in
clauses (i) and (ii) being referred to herein as the "Eligible Purchasers"). The
Initial Purchaser will offer the Units to Eligible Purchasers initially at the
price set forth herein. Such price may be changed at any time without notice.
(b) Holders (including subsequent transferees) of the
Senior Notes will have the registration rights set forth in the registration
rights agreement (the "Registration Rights Agreement"), to be dated the Closing
Date (the form of which is attached as Exhibit A hereto) and holders (including
subsequent transferees) of the Warrants will have the registration rights set
forth in the warrant registration rights agreement (the "Warrant Registration
Rights Agreement"), to be dated the Closing Date (the form of which is attached
as Exhibit A hereto), for so long as such Notes, Warrants or any Warrant Shares
constitute "Transfer Restricted Securities" (as defined in each such agreement,
respectively). Pursuant to
2
<PAGE> 4
the Registration Rights Agreement, the Company will agree to file with the
Securities and Exchange Commission (the "Commission"), under the circumstances
set forth therein, (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") relating to the New Senior Notes to be
offered in exchange for the Notes (the "Exchange Offer") and (ii) under certain
conditions, a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement") relating to the resale by
certain holders of the Senior Notes, and to use its best efforts to cause such
registration statements to be declared effective and to consummate the Exchange
Offer. Pursuant to the Warrant Registration Rights Agreement, the Company will
agree to file with the Commission, under the circumstances set forth therein, a
shelf registration statement pursuant to Rule 415 under the Securities Act (the
"Warrant Shelf Registration Statement") relating to the resale by certain
holders of the Warrants and the Warrant Shares, and to use its best efforts to
cause such Warrant Shelf Registration Statement to be declared effective.
(c) Pursuant to the Indenture, on the Closing Date, the
Company will purchase and pledge to the Trustee, for the benefit of the holders
of the Notes, Government Securities (the "Pledged Securities") in such amount as
will be sufficient to provide for payment in full of the first six scheduled
interest payments due on the Notes. The Pledged Securities will be pledged by
the Company to the Trustee, for the benefit of the holders of Senior Notes,
pursuant to the Proceeds Pledge and Escrow Agreement (the "Proceeds Pledge and
Escrow Agreement"), to be dated the Closing Date, and will be held by the
Trustee in an account (the "Pledge Account") established with the Trustee
pursuant to the Proceeds Pledge and Escrow Agreement.
(d) Pursuant to the Proceeds Pledge and Escrow Agreement,
the Company will also pledge and escrow $63.0 million of the net proceeds of the
Offering (the "Collateral Funds") as security for all obligations of the Company
under the Senior Notes and the Indenture. The Collateral Funds will be deposited
in an account (the "Collateral Account") under the Trustee's exclusive dominion
and control pending application of such funds by the Company for the payment of
(1) Permitted Expenditures, (2) in the event of a Change of Control, the Change
of Control Payment and (3) in the event of a Special Offer to Purchase or a
Special Mandatory Redemption, the purchase or redemption price in connection
therewith.
This Agreement, the Securities, the Warrant Shares, the
Indenture, the Warrant Agreement, the Registration Rights Agreement, the Warrant
Registration Rights Agreement and the Proceeds Pledge and Escrow Agreement are
sometimes referred to herein collectively as the "Operative Documents."
(e) Prior to the Offering, the Company entered into (i)
an agreement (the "Iusatel Agreement") to acquire (the "Iusatel Acquisition")
the outstanding capital stock of Iusatel Chile, S.A. ("Iusatel") and (ii) the
Mutual Release and Settlement Agreement, dated October 4, 1997 (the "Settlement
Agreement"), among the Company, Maroon Bells Capital Partners, Inc., Theodore
Swindels, Paul Moore and Phillip Magiera.
(f) Concurrent with the Offering, the Company will (i)
repay all of its indebtedness under (A) the Company's $1,500,000 aggregate
principal amount of 7% Convertible Debentures due February 3, 2000 (the "7%
Debentures") and the Company's $2,000,000 aggregate principal amount of 8%
Convertible Debentures due April 30, 1998 (the "8% Debentures" and, together
with the 7% Debentures, the "Debentures"), (B) the Company's $950,000 aggregate
principal amount of 10% Senior Notes (the "Bridge Notes") and (C) the revolving
credit line, dated as of April 1, 1997 (the "Credit Line"), between Hewster
Servicios Intermedios, S.A. and Citibank-Chile, and (ii) pay certain fees and
expenses incurred in connection with the Offering.
3
<PAGE> 5
5. Delivery and Payment. Delivery to the Initial
Purchaser of and payment for the Units shall be made at 10:00 a.m., New York
City time, on October 27, 1997 (the "Closing Date"), at the offices of Latham &
Watkins, 885 Third Avenue, New York, New York 10022, or such other time or place
as the Initial Purchaser and the Company shall designate.
One or more Units in definitive form, registered in the name
of Cede & Co., as nominee of The Depository Trust Company ("DTC"), having an
aggregate amount corresponding to the aggregate amount of the Units sold
pursuant to Exempt Resales to Eligible Purchasers (collectively, the "Global
Unit"), each such Global Unit consisting of $1,000 aggregate principal amount of
Notes in definitive form, registered in the name of Cede & Co., as nominee of
DTC (the "Global Note"), and one Warrant in definitive form to purchase 35
shares of Common Stock, registered in the name of Cede & Co., as nominee of DTC
(the "Global Warrant"), shall be delivered by the Company to the Initial
Purchaser (or as the Initial Purchaser so directs), against payment by the
Initial Purchaser of the purchase price therefor, by wire transfer of
immediately available funds to the Company's account or as directed in writing
by the Company, provided that the Company shall give at least two business days'
prior written notice to the Initial Purchaser of the information required to
effect such wire transfer. The Global Unit shall be made available to the
Initial Purchaser for inspection not later than 9:30 a.m. on the business day
immediately preceding the Closing Date.
6. Agreements of the Company. The Company hereby agrees
with the Initial Purchaser:
(a) To advise the Initial Purchaser promptly and, if
requested by the Initial Purchaser, confirm such advice in writing, (i)
of the issuance by any state securities commission of any stop order
suspending the qualification or exemption from qualification of any
Notes for offering or sale in any jurisdiction designated by the
Initial Purchaser pursuant to Section 6(f) hereof, or the initiation of
any proceeding by any state securities commission or any other federal
or state regulatory authority for such purpose and (ii) of the
happening of any event during the period referred to in Section 6(c)
below that makes any statement of a material fact made in the Offering
Documents untrue or that requires any additions to or changes in the
Offering Documents in order to make the statements therein not
misleading. The Company shall use its best efforts to prevent the
issuance of any stop order or order suspending the qualification or
exemption of any Notes under any state securities or Blue Sky laws and,
if at any time any state securities commission or other federal or
state regulatory authority shall issue an order suspending the
qualification or exemption of any Notes under any state securities or
Blue Sky laws, the Company shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchaser and those persons
identified by the Initial Purchaser to the Company as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and
any amendments or supplements thereto, as the Initial Purchaser may
reasonably request. Subject to the Initial Purchaser's compliance with
its representations and warranties and agreements set forth in Section
8 hereof, the Company consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and
supplements thereto required pursuant hereto, by the Initial Purchaser
in connection with Exempt Resales.
4
<PAGE> 6
(c) During such period as in the opinion of counsel for
the Initial Purchaser an Offering Memorandum is required by law to be
delivered in connection with Exempt Resales by the Initial Purchaser
and in connection with market-making activities of the Initial
Purchaser for so long as any Notes are outstanding, (i) not to make any
amendment or supplement to the Offering Memorandum of which the Initial
Purchaser shall not previously have been advised or to which the
Initial Purchaser shall reasonably object after being so advised and
(ii) to prepare promptly upon the Initial Purchaser's reasonable
request, any amendment or supplement to the Offering Memorandum which
may be necessary or advisable in connection with such Exempt Resales or
such market-making activities.
(d) If, during the period referred to in Section 6(c)
above, any event shall occur or condition shall exist as a result of
which, in the reasonable opinion of counsel to the Initial Purchaser or
counsel to the Company, it becomes necessary to amend or supplement the
Offering Memorandum in order to make the statements therein, in the
light of the circumstances when such Offering Memorandum is delivered
to an Eligible Purchaser, not misleading, or if, in the opinion of
counsel to the Initial Purchaser or counsel to the Company, it is
necessary to amend or supplement the Offering Memorandum to comply with
any applicable law, forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein,
as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such
Offering Memorandum will comply with applicable law, and to furnish to
the Initial Purchaser and such other persons as the Initial Purchaser
may designate such number of copies thereof as the Initial Purchaser
may reasonably request.
(e) So long as the Senior Notes are outstanding, (i) to
mail and make generally available as soon as practicable after the end
of each fiscal year to the record holders of the Senior Notes a
financial report of the Company and its subsidiaries on a consolidated
basis (and a similar financial report of all unconsolidated
subsidiaries, if any), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year,
together with comparable information as of the end of and for the
preceding fiscal year, certified by the Company's independent public
accountants and prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved, except as disclosed therein and (ii) to mail and make
generally available as soon as practicable after the end of each
quarterly period (except for the last quarterly period of each fiscal
year) to such holders, a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows (and
similar financial reports of all unconsolidated subsidiaries, if any)
as of the end of and for such period, and for the period from the
beginning of such year to the close of such quarterly period, together
with comparable information for the corresponding periods of the
preceding year, each prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved, except as disclosed therein.
(f) To cooperate with the Initial Purchaser and its
counsel in connection with the qualification of the Units, the Notes
and the Warrants for offer and sale by the Initial Purchaser under the
state securities or Blue Sky laws of such U.S. jurisdictions as the
Initial Purchaser may reasonably request; to continue such
qualification in effect so long as required for the Exempt Resales and
to file such consents to service of process or other documents as may
be necessary in order to effect such qualification; provided, however
that the Company shall not be required in connection therewith to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to service of
process in suits or taxation, other than as to matters and transactions
relating to the Exempt Resales, in any jurisdiction where it is not now
so subject.
5
<PAGE> 7
(g) So long as the Senior Notes are outstanding, to
furnish to the Initial Purchaser as soon as available copies of all
reports or other communications furnished by the Company to its
security holders generally or furnished to or filed with the
Commission, the Nasdaq Stock Market, Inc. or any national securities
exchange on which any class of securities of the Company is listed and
such other publicly available information concerning the Company and/or
its subsidiaries as the Initial Purchaser may reasonably request.
(h) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is
terminated under Section 11 hereof, to pay all costs, expenses, fees
and taxes incident to and in connection with: (i) the preparation,
printing, filing and distribution of the Offering Documents (including,
without limitation, financial statements) and all amendments and
supplements thereto, (ii) the preparation, printing (including, without
limitation, word processing and duplication costs) and delivery of all
Operative Documents, all preliminary and final Blue Sky Memoranda and
all other agreements, memoranda, correspondence and other documents
printed and delivered by the Company in connection herewith and with
the Exempt Resales, (iii) the issuance and delivery by the Company of
the Securities, (iv) the registration or qualification of the
Securities for offer and sale under the securities or Blue Sky laws of
the several states (including, without limitation, the cost of printing
and mailing a preliminary and final Blue Sky Memorandum and the
reasonable fees and disbursements of the Initial Purchaser's counsel
relating to such registration or qualification, which fees and
disbursements shall equal $20,000), (v) furnishing such copies of the
Offering Documents, and all amendments and supplements thereto, as may
be reasonably requested for use in connection with the Exempt Resales,
(vi) the preparation of certificates for the Securities (including,
without limitation, printing and engraving thereof), (vii) the fees,
disbursements and expenses of the Company's and Iusatel's counsel and
accountants, (viii) all expenses and listing fees in connection with
the application for quotation of the Securities in the National
Association of Securities Dealers, Inc. Automated Quotation System --
PORTAL ("PORTAL"), (ix) the rating of the Securities by rating
agencies, (x) all fees and expenses (including fees and expenses of
6
<PAGE> 8
counsel) of the Company in connection with approval of the Securities
by DTC for "book-entry" transfer, (xi) the reasonable fees and expenses
of the Trustee and its counsel in connection with the Indenture, the
Senior Notes and the Proceeds Pledge and Escrow Agreement, (xii) the
reasonable fees and expenses of the Warrant Agent and its counsel in
connection with the Warrant Agreement and the Warrants and (xiii) the
performance by the Company of its other obligations under this
Agreement. For the avoidance of doubt, other than as provided in clause
(iv) of this Section 6(h), the Company shall not be responsible for any
fees and expenses of the Initial Purchaser's counsel.
(i) Not to sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in the
Securities Act) that would be integrated with the sale of the Units in
a manner that would require the registration under the Securities Act
of the sale to the Initial Purchaser or Eligible Purchasers of the
Units, the Notes or the Warrants or to take any other action that would
result in the Exempt Resales not being exempt from registration under
the Securities Act.
(j) For so long as any of the Securities remain
outstanding and during any period in which the Company is not subject
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to make available to any Eligible
Purchaser, beneficial owner or holder of any Securities in connection
with any sale thereof and any prospective purchaser of such Securities,
the information required by Rule 144A(d)(4) under the Securities Act.
(k) To use its best efforts to effect the inclusion of
the Securities in PORTAL and to obtain approval of the Securities by
DTC for "book-entry" transfer.
(l) To the extent permitted by applicable law, not to
claim voluntarily, and to resist actively any attempts to claim, the
benefit of any usury laws against the holders of any Securities.
(m) To apply the net proceeds from the sale of the Units
to be sold hereunder in the manner described in the Offering Memorandum
under the caption "Use of Proceeds."
(n) To do and perform all things required or necessary to
be done and performed under this Agreement by the Company prior to or
after the Closing Date and to satisfy all conditions precedent to the
delivery of the Units.
(o) Not to distribute prior to the Closing Date any
offering material in connection with the offering and sale of the Units
other than the Offering Documents.
(p) To cause the Exchange Offer to be made in the
appropriate form to permit registered New Senior Notes to be offered in
exchange for the Notes and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
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<PAGE> 9
(q) To comply with all of its agreements set forth in the
Registration Rights Agreement, the Warrant Registration Rights
Agreement and the Proceeds Pledge and Escrow Agreement and all
agreements set forth in the representation letters of the Company to
DTC relating to the approval of the Securities by DTC for "book-entry"
transfer.
(r) Prior to the Closing Date, to furnish to the Initial
Purchaser, as soon as they have been prepared in the ordinary course by
the Company, copies of any unaudited interim financial statements for
any period subsequent to the periods covered by the financial
statements appearing in the Offering Memorandum.
(s) Not to take, and to cause its affiliates not to take,
directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities.
(t) Not to, and to cause its affiliates not to, offer,
sell, contract to sell or grant any option to purchase or otherwise
transfer or dispose of any Securities or any other debt or equity
security issued by the Company for a period of 180 days after the
Closing Date (the "Lock-Up Period"), without the prior written consent
of the Initial Purchaser, except for the issue and exchange of New
Senior Notes for Notes in the Exchange Offer and the issue of Warrant
Shares upon exercise of the Warrants by holders thereof.
(u) To comply with the agreements in each Operative
Document.
(v) To take such steps as shall be necessary to ensure
neither the Company nor any of its subsidiaries shall become an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), or (ii) a "holding company" or
a "subsidiary company" or an "affiliate" of a holding company within
the meaning of the Public Utility Holding Company Act of 1935, as
amended (the "Holding Company Act").
(w) To reserve and continue to reserve as long as any
Warrants are outstanding, a sufficient number of shares of Common Stock
for issuance upon exercise of the Warrants.
7. Representations and Warranties of the Company and
each of its Subsidiaries. The Company and each of its subsidiaries, jointly and
severally, represent and warrant to the Initial Purchaser that:
(a) The Offering Documents have been prepared in
connection with the Exempt Resales. The Preliminary Offering Memorandum
as of its date does not, and the Offering Memorandum as of its date
does not and as of the Closing Date will not, and any amendment or
supplement thereto will not, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances which they were
made, not misleading, except that the representations and warranties
contained in this Section 7(a) shall not apply to statements or
omissions in the Offering Documents (or any amendment or supplement
thereto) in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Initial Purchaser
specifically for use therein. No stop order preventing the use of the
Offering Documents, or any amendment or supplement thereto, or any
order asserting that any of the transactions contemplated by this
Agreement are subject to the registration requirements of the
Securities Act, has been issued.
8
<PAGE> 10
(b) Each of the Company and its subsidiaries (1) has been
duly organized, is validly existing as a corporation or the equivalent
under the laws of Chile or Peru, as applicable, in good standing under
the laws of its jurisdiction of organization, (2) has all corporate
power and authority (or the equivalent power and authority in Chile or
Peru, as applicable) to carry on its business as it is described in the
Offering Documents and to own, lease and operate its properties, and
(3) is duly qualified and in good standing as a foreign corporation or
the equivalent under the laws of Chile or Peru, as applicable,
authorized to do business in each jurisdiction in which the nature of
its business or its ownership or leasing of property requires such
qualification except, with respect to this clause (3), where the
failure of the Company and its subsidiaries to be so qualified or in
good standing does not and could not reasonably be expected to (A)
individually or in the aggregate, result in a material adverse effect
on the assets, liabilities, business, results of operations, condition
(financial or otherwise), cash flows, affairs or prospects of the
Company and its subsidiaries, taken as a whole or (B) in any manner
draw into question the validity of this Agreement, any other Operative
Document, the Iusatel Agreement or the Settlement Agreement or the
ability of the Company and its subsidiaries to conduct their respective
businesses as in the manner set forth in the Offering Memorandum (any
of the events set forth in clauses (A) or (B), a "Material Adverse
Effect"). After giving effect to the Iusatel Acquisition, each of the
Company and its subsidiaries (1) will be duly organized, will be
validly existing as a corporation or the equivalent under the laws of
Chile or Peru, as applicable, in good standing under the laws of its
jurisdiction of organization, (2) will have all corporate power and
authority (or the equivalent power and authority in Chile or Peru, as
applicable) to carry on its business as it is described in the Offering
Documents and to own, lease and operate its properties, and (3) will be
duly qualified and in good standing as a foreign corporation or the
equivalent under the laws of Chile or Peru, as applicable, authorized
to do business in each jurisdiction in which the nature of its business
or its ownership or leasing of property requires such qualification
except, with respect to this clause (3), where the failure to be so
qualified or in good standing does not and could not reasonably be
expected to have a Material Adverse Effect.
(c) Each of the Company and its subsidiaries, as
applicable, has all requisite corporate power and authority (or the
equivalent power and authority in Chile or Peru, as applicable) (1) to
execute, deliver and perform its respective obligations under this
Agreement, each other Operative Document, the Iusatel Agreement, the
Settlement Agreement and to consummate the transactions contemplated
hereby and thereby, and (2) to authorize, issue, sell and deliver the
Securities as provided herein and in the other Operative Documents.
(d) The entities listed on Schedule 1 hereto are the only
direct and indirect subsidiaries of the Company. Except as set forth on
Schedule 1 hereto, the Company owns all of the outstanding capital
stock of each of its subsidiaries and all such capital stock has been
duly authorized and validly issued and is fully paid and nonassessable,
free and clear of any security interest, claim, lien, encumbrance or
adverse interest of any nature, except such as are described in the
Offering Memorandum; and all of such capital stock was not issued in
violation of any preemptive or similar rights. Except as disclosed in
the Offering Memorandum, there are no outstanding subscriptions,
rights, warrants, calls, commitments of sale or options to acquire, or
instruments convertible into or exchangeable for, any shares of capital
stock or other equity interest of the Company or any of its
subsidiaries. At June 30, 1997, after giving effect to the issuance and
sale of the Units, the Company had an authorized and outstanding
consolidated capitalization as set forth in the Offering Memorandum
under the caption "Capitalization." Except as set forth on Schedule 1
hereto and as set forth in the Offering Memorandum, after giving effect
to the Iusatel Acquisition, the Company will own all of the outstanding
capital stock of each of its
9
<PAGE> 11
subsidiaries and all such capital stock will be duly authorized and
validly issued and will be fully paid and nonassessable, free and clear
of any security interest, claim, lien, encumbrance or adverse interest
of any nature, except such as are described in the Offering Memorandum
or as would not have a Material Adverse Effect; and all of such capital
stock will not be issued in violation of any preemptive or similar
rights. Except as disclosed in the Offering Memorandum and after giving
effect to the Iusatel Acquisition, there will be no outstanding
subscriptions, rights, warrants, calls, commitments of sale or options
to acquire, or instruments convertible into or exchangeable for, any
such shares of capital stock or other equity interest of the Company or
any of its subsidiaries.
(e) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are full paid
and nonassessable and not the subject of any preemptive or similar
rights.
(f) This Agreement has been duly authorized and validly
executed by each of the Company and its subsidiaries and (assuming the
due execution and delivery hereof by the Initial Purchaser) is the
legally valid and binding agreement of each of the Company and its
subsidiaries, enforceable against each of them in accordance with its
terms, except as the enforceability thereof may be limited (i) by the
effect of bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
or affecting the rights and remedies of creditors, (ii) by the effect
of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before
which any proceeding therefor may be brought and (iii) to the extent
that rights to indemnification and contribution thereunder may be
limited by federal or state securities laws or public policy relating
thereto.
(g) The Company has duly authorized the Indenture and,
when the Company has duly executed and delivered the Indenture
(assuming the due authorization, execution and delivery thereof by the
Trustee), the Indenture will be the legally valid and binding
obligation of the Company, enforceable against it in accordance with
its terms, except as the enforceability thereof may be limited (i) by
the effect of bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies of creditors
and (ii) by the effect of general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefor may be
brought. The description of the Indenture in the Offering Memorandum is
accurate in all material respects. The Indenture is in a form which
would meet, in all material respects, the requirements for
qualification under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
(h) The Company has duly and validly authorized the
Units. The Company has duly authorized the Notes and, when issued and
authenticated in accordance with the terms of the Indenture and
delivered to and paid for by the Initial Purchaser in accordance with
the terms hereof, the Notes will be entitled to the benefits of the
Indenture and will be the legally valid and binding obligations of the
Company, enforceable against it in accordance with their terms, except
as the enforceability thereof may be limited (i) by the effect of
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors and (ii) by the effect
of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before
which any proceeding therefor may be brought. The description of the
Notes in the Offering Memorandum is accurate in all material respects.
10
<PAGE> 12
(i) The Company has duly authorized the issuance of the
New Senior Notes and, when issued and authenticated in accordance with
the terms of the Indenture and delivered to and paid for in accordance
with the terms of the Exchange Offer and the Indenture, the New Senior
Notes will be entitled to the benefits of the Indenture and will be the
legally valid and binding obligations of the Company, enforceable
against it in accordance with their terms, except as the enforceability
thereof may be limited (i) by the effect of bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the rights and
remedies of creditors and (ii) by the effect of general principles of
equity, whether enforcement is considered in a proceeding in equity or
at law, and the discretion of the court before which any proceeding
therefor may be brought. The description of the New Senior Notes in the
Offering Memorandum is accurate in all material respects.
(j) The Company has duly authorized the Registration
Rights Agreement and, when the Company has duly executed and delivered
the Registration Rights Agreement (assuming the due authorization,
execution and delivery thereof by the Initial Purchaser), the
Registration Rights Agreement will be the legally valid and binding
obligation of the Company, enforceable against it in accordance with
its terms, except as the enforceability thereof may be limited (i) by
the effect of bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies of creditors,
(ii) by the effect of general principles of equity, whether enforcement
is considered in a proceeding in equity or at law, and the discretion
of the court before which any proceeding therefor may be brought and
(iii) to the extent that rights to indemnification and contribution
thereunder may be limited by federal or state securities laws or public
policy relating thereto. The description of the Registration Rights
Agreement in the Offering Memorandum is accurate in all material
respects.
(k) The Company has duly authorized the Warrant Agreement
and, when the Company has duly executed and delivered the Warrant
Agreement (assuming the due authorization, execution and delivery
thereof by the Warrant Agent), the Warrant Agreement will be the
legally valid and binding obligation of the Company, enforceable
against it in accordance with its terms, except as the enforceability
thereof may be limited (i) by the effect of bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the rights and
remedies of creditors and (ii) by the effect of general principles of
equity, whether enforcement is considered in a proceeding in equity or
at law, and the discretion of the court before which any proceeding
therefor may be brought. The description of the Warrant Agreement in
the Offering Memorandum is accurate in all material respects.
(l) The Company has duly authorized the Warrants and,
when issued and countersigned in accordance with the terms of the
Warrant Agreement and delivered against payment therefor in accordance
with the terms hereof and thereof, the Warrants will be entitled to the
benefits of the Warrant Agreement and will be the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforceability thereof may
be limited (i) by the effect of bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors and (ii) by the effect of general principles of equity,
whether enforcement is considered in a proceeding in equity or at law,
and the discretion of the court before which any proceeding therefor
may be brought. The description of the Warrants in the Offering
Memorandum is accurate in all material respects.
11
<PAGE> 13
(m) The Warrants are exercisable into Warrant Shares in
accordance with the terms of the Warrant Agreement. The Company has
duly authorized and reserved for issuance the Warrant Shares and, when
issued and paid for upon exercise of the Warrants in accordance with
the terms thereof, the Warrant Shares will be validly issued, fully
paid and nonassessable, free of any preemptive or similar rights.
(n) The Company has duly authorized the Warrant
Registration Rights Agreement and, when the Company has duly executed
and delivered the Warrant Registration Rights Agreement (assuming the
due authorization, execution and delivery thereof by the Initial
Purchaser), the Warrant Registration Rights Agreement will be the
legally valid and binding obligation of the Company, enforceable
against it in accordance with its terms, except as the enforceability
thereof may be limited (i) by the effect of bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the rights and
remedies of creditors, (ii) by the effect of general principles of
equity, whether enforcement is considered in a proceeding in equity or
at law, and the discretion of the court before which any proceeding
therefor may be brought and (iii) to the extent that rights to
indemnification and contribution thereunder may be limited by federal
or state securities laws or public policy relating thereto. The
description of the Warrant Registration Rights Agreement in the
Offering Memorandum is accurate in all material respects.
(o) The Company has duly authorized the Proceeds Pledge
and Escrow Agreement and, when the Company has duly executed and
delivered the Proceeds Pledge and Escrow Agreement (assuming the due
authorization, execution and delivery thereof by the Trustee), the
Proceeds Pledge and Escrow Agreement will be the legally valid and
binding obligation of the Company, enforceable against it in accordance
with its terms, except as the enforceability thereof may be limited (i)
by the effect of bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies of creditors
and (ii) by the effect of general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefor may be
brought. The description of the Proceeds Pledge and Escrow Agreement in
the Offering Memorandum is accurate in all material respects. Upon the
Company's purchase of the Pledged Securities, the Company will be the
sole beneficial owner of the Pledged Securities and no lien will exist
upon the Pledged Securities, the Pledge Account, the Collateral Funds
or the Collateral Account (and no right or option to acquire the same
will exist in favor any other person or entity), except for the pledge
and security interest in favor of the Trustee, for the benefit of the
holders of the Senior Notes, to be created or provided in the Proceeds
Pledge and Escrow Agreement, which pledge and security interest
constitutes a first priority perfected pledge and security interest in
and to all of the Pledged Securities, the Pledge Account, the
Collateral Funds and the Collateral Account.
(p) The Company has duly and validly authorized, executed
and delivered the Iusatel Agreement and the Iusatel Agreement is the
legally valid and binding obligation of the Company, enforceable
against it in accordance with its terms, except as the enforceability
thereof may be limited (i) by the effect of bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the rights and
remedies of creditors, (ii) by the effect of general principles of
equity, whether enforcement is considered in a proceeding in equity or
at law, and the discretion of the court before which any proceeding
therefor may be brought and (iii) to the extent that rights to
indemnification and contribution thereunder may be limited by federal
or state securities laws or public policy relating thereto. The
description of the Iusatel Agreement in the Offering Memorandum is
accurate in all material respects.
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<PAGE> 14
(q) The Company has duly and validly authorized, executed
and delivered the Settlement Agreement and the Settlement Agreement is
the legally valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as the
enforceability thereof may be limited (i) by the effect of bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting the
rights and remedies of creditors, (ii) by the effect of general
principles of equity, whether enforcement is considered in a proceeding
in equity or at law, and the discretion of the court before which any
proceeding therefor may be brought and (iii) to the extent that rights
to indemnification and contribution thereunder may be limited by
federal or state securities laws or public policy relating thereto. The
description of the Settlement Agreement in the Offering Memorandum is
accurate in all material respects.
(r) Except as otherwise set forth in the Offering
Memorandum, neither the Company nor any of its subsidiaries is and,
after giving affect to the Iusatel Acquisition, neither the Company nor
its subsidiaries will be, (A) in violation of its charter or bylaws,
(B) in default in the performance of any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to
which it is a party or by which it is bound or to which any of its
assets or properties is subject or (C) in violation of any law,
statute, rule, regulation, judgment, order or decree of any court or
governmental agency or authority (including, without limitation, the
Communications Act of 1934, as amended by the Telecommunications Act of
1996 (the "Telecommunications Act") and any other applicable domestic
or foreign telecommunications laws, the rules and regulations of the
Federal Communications Commission (the "FCC") and any other applicable
domestic or foreign regulatory agencies and environmental laws,
statutes, ordinances, rules, regulations, judgments or court decrees)
that is applicable to the Company or any of its subsidiaries or their
respective assets or properties (whether owned or leased) other than,
in the case of clauses (B) and (C) above, any default or violation that
could not reasonably be expected to have a Material Adverse Effect.
There exists no condition that, with notice, the passage of time or
otherwise, would constitute such a default under any such document or
instrument that could reasonably be expected to have a Material Adverse
Effect.
(s) The execution, delivery and performance by each of
the Company and its subsidiaries, as applicable, of this Agreement, the
other Operative Documents, the Iusatel Agreement and the Settlement
Agreement, the issuance and sale of the Securities and the consummation
of the transactions described in the Offering Memorandum will not
violate, conflict with or constitute a breach of any of the terms or
provisions of, or a default under (or an event that with notice or the
lapse of time, or both, would constitute a default) or result in the
imposition of a lien or encumbrance on any assets or properties of the
Company or any of its subsidiaries or an acceleration of indebtedness
of the Company or any of its subsidiaries pursuant to, (A) the charter
or bylaws of the Company or any of its subsidiaries, (B) any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which any of them or their respective assets or properties
is bound, (C) any statute, rule or regulation (including, without
limitation, the Telecommunications Act and any other applicable
domestic or foreign telecommunications laws, the rules and regulations
of the FCC and any other applicable domestic or foreign regulatory
agencies and environmental laws, statutes, ordinances, rules or
regulations) that is applicable to the Company or any of its
subsidiaries or any of their respective assets or properties, or (D)
any judgment, order or decree of any court or governmental agency or
authority that has jurisdiction over the Company or any of its
subsidiaries or their respective assets or properties, except in the
case of
13
<PAGE> 15
clauses (B), (C) and (D) insofar as any such violation, conflict,
breach, default, lien, encumbrance or acceleration that would not
reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect.
(t) Other than as described in the Offering Memorandum,
no consent, waiver, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, any domestic
or foreign court or governmental agency, body or administrative agency
or other person is required for the execution, delivery and performance
by each of the Company and each of its subsidiaries of this Agreement,
the other Operative Documents, the Iusatel Agreement and the Settlement
Agreement, the issuance and sale of the Securities and the consummation
of the transactions described in the Offering Memorandum except (i)
such as have been obtained and made (or, in the case of the
Registration Rights Agreement and the Warrant Registration Rights
Agreement, will be obtained and made) and (ii) such as to which the
failure to be obtained or made could not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect.
(u) Except as otherwise set forth in the Offering
Memorandum, there is (A) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic or
foreign, pending or, to the knowledge of the Company, threatened to
which the Company or any of its subsidiaries is or, after giving effect
to the Iusatel Acquisition, will be, a party or to which the business,
assets or property of the Company or any of its subsidiaries are or,
after giving effect to the Iusatel Acquisition, will be, subject, (B)
no statute, rule, regulation or order (including, without limitation,
the Telecommunications Act, any other applicable domestic or foreign
telecommunications laws and the rules and regulations of the FCC and
any other applicable domestic or foreign regulatory agencies) that has
been enacted, adopted or issued by any governmental agency or
governmental body, (C) no injunction, restraining order or order of any
nature that has been issued by a federal or state court or foreign
court of competent jurisdiction to which the Company or any of its
subsidiaries is, or after giving effect to the Iusatel Acquisition,
will be, subject or to which the business, assets or property of the
Company or any of its subsidiaries are, or after giving effect to the
Iusatel Acquisition, will be, subject that would, in the case of
clauses (A), (B) and (C), reasonably be expected, either individually
or in the aggregate, to have a Material Adverse Effect. There is no
legal or administrative proceedings, statutes, contracts or documents
concerning the Company or any of its subsidiaries of a character that
would be required to be described in a registration statement on Form
S-1 under the Securities Act that is not described in the Offering
Documents.
(v) No action has been taken and no local, state or
federal law, statute, ordinance, rule, regulation, requirement,
judgment or court decree has been enacted, adopted or issued by any
governmental agency that prevents the issuance of the Securities or
prevents or suspends the use of the Offering Memorandum; no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction has been issued that prevents the issuance of
the Securities or prevents or suspends the sale of the Securities in
any jurisdiction referred to in Section 6(f) hereof; and every request
of any securities authority or agency of any jurisdiction for
additional information has been complied with in all material respects.
(w) There is and, after giving effect to the Iusatel
Acquisition, will be, (i) no unfair labor practice complaint pending or
threatened against the Company or any of its subsidiaries before any
federal, state or local labor relations board or any foreign labor
relations board, and no significant grievance or significant
arbitration proceeding arising out of or under any collective
bargaining agreement pending or threatened against the Company or any
of its subsidiaries, (ii) no
14
<PAGE> 16
significant strike, labor dispute, slowdown or stoppage pending or
threatened against the Company or any of its subsidiaries and (iii) no
union representation question existing with respect to the employees of
the Company or any of its subsidiaries, that in the case of clauses
(i), (ii) or (iii), could reasonably be expected to result in a
Material Adverse Effect. To the best of the Company's knowledge, no
collective bargaining organizing activities are, or after giving effect
to the Iusatel Acquisition, would be, taking place with respect to the
Company or any of its subsidiaries. None of the Company or any of its
subsidiaries has violated, or after giving effect to the Iusatel
Acquisition, would have violated, (A) any federal, state or local law
or foreign law relating to discrimination in hiring, promotion or pay
of employees, (B) any applicable wage or hour laws or (C) any provision
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules and regulations thereunder, which in the case
of clauses (A), (B) or (C) above could reasonably be expected to result
in a Material Adverse Effect.
(x) None of the Company or any of its subsidiaries has
violated and, after giving effect to the Iusatel Acquisition, will have
violated, any environmental, safety or similar law or regulation
applicable to it or its business or property relating to the protection
of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental
Laws"), lacks and, after giving effect to the Iusatel Acquisition, will
be any permit, license or other approval required of it under
applicable Environmental Laws or is or, after giving effect to the
Iusatel Acquisition, would be violating any term or condition of such
permit, license or approval which could reasonably be expected to,
either individually or in the aggregate, have a Material Adverse
Effect.
(y) Each of the Company and its subsidiaries has and,
after giving effect to the Iusatel Acquisition, will have (i) good and
marketable title to all of the properties and assets described in the
Offering Memorandum as owned by it, free and clear of all liens,
charges, encumbrances and restrictions, except such as are described in
the Offering Memorandum or as could not have, individually or in the
aggregate, a Material Adverse Effect, (ii) peaceful and undisturbed
possession under all leases to which any of them is or, after giving
effect to the Iusatel Acquisition, will be, a party as lessee, (iii)
all licenses, certificates, permits, authorizations, approvals,
franchises and other rights from, and has made all declarations and
filings with, all domestic and foreign federal, state and local
authorities, all self-regulatory authorities and all courts and other
tribunals (each, an "Authorization") necessary to engage in the
business as presently conducted and, after giving effect to the Iusatel
Acquisition, will be conducted, by any of them in the manner described
in the Offering Memorandum, except as described in the Offering
Memorandum or where the failure to hold such Authorizations would not,
individually or in the aggregate, have a Material Adverse Effect and
(iv) no reason to believe that any domestic or foreign governmental
body or agency is considering limiting, suspending or revoking any such
Authorization. Except where the failure to be in full force and effect
would not have a Material Adverse Effect, all such Authorizations are
and, after giving effect to the Iusatel Acquisition, will be, valid and
in full force and effect and each of the Company and its subsidiaries
is and, after giving effect to the Iusatel Acquisition, will be, in
compliance with the terms and conditions of all such Authorizations and
with the rules and regulations of the regulatory authorities having
jurisdiction with respect thereto. All leases to which the Company and
its subsidiaries is and, after giving effect to the Iusatel
Acquisition, will be, a party are valid and binding and no default by
the Company or any of its subsidiaries has occurred and is continuing
thereunder and no defaults by the landlord are and, after giving effect
to the Iusatel Acquisition, will be, existing under any such lease that
could reasonably be expected to result in a Material Adverse Effect.
15
<PAGE> 17
(z) Each of the Company and its subsidiaries owns,
possesses or has and, after giving effect to the Iusatel Acquisition,
will own, possess or have, the right to employ all patents, patent
rights, licenses (including all domestic and foreign, federal, state,
local or other jurisdictional regulatory licenses), inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, software,
systems or procedures), trademarks, service marks and trade names,
inventions, computer programs, technical data and information
(collectively, the "Intellectual Property") employed by the Company or
any of its subsidiaries in connection with the businesses now operated
or proposed to be operated by the Company or any of its subsidiaries
free and clear of and without violating any right, claimed right,
charge, encumbrance, pledge, security interest, restriction or lien of
any kind of any other person and none of the Company or any of its
subsidiaries or Iusatel has received any notice of infringement of or
conflict with asserted rights of others with respect to any of the
foregoing except as could not reasonably be expected to have a Material
Adverse Effect. The use of the Intellectual Property in connection with
the business and operations of the Company and its subsidiaries does
not and, after giving effect to the Iusatel Acquisition, will not,
infringe on the rights of any person, except such as could not have a
Material Adverse Effect.
(aa) None of the Company, any of its subsidiaries or
Iusatel or, to the Company's knowledge, any of their respective
officers, directors, partners, employees, agents or affiliates or any
other person acting on their behalf has, directly or indirectly, given
or agreed to give any money, gift or similar benefit (other than legal
price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier,
official or employee of any governmental agency (domestic or foreign),
instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other
person who was, is or may be in a position to help or hinder the
business of the Company or any of its subsidiaries or Iusatel (or
assist the Company or any of its subsidiaries or Iusatel in connection
with any actual or proposed transaction) which (i) might subject the
Company, any of its subsidiaries or Iusatel, or any other individual or
entity to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign), (ii) if not given in
the past, could reasonably be expected to have had a Material Adverse
Effect on the assets, business or operations of the Company or any of
its subsidiaries or (iii) if not continued in the future, could
reasonably be expected to have a Material Adverse Effect.
(bb) All tax returns required to be filed by the Company,
each of its subsidiaries and Iusatel in all jurisdictions have been so
filed. All taxes, including, but not limited to, withholding taxes,
penalties and interest, assessments, fees and other charges due or
claimed to be due from such entities and that are due and payable have
been paid, other than those being contested in good faith and for which
adequate reserves have been provided or those currently payable without
penalty or interest. There are no proposed additional tax assessments
against the Company, any of its subsidiaries or Iusatel, or the assets
or property of the Company, any of its subsidiaries or Iusatel.
(cc) None of the Company or any of its subsidiaries is or,
after giving effect to the Iusatel Acquisition, will be (i) an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act, or (ii) a
"holding company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Holding Company Act.
(dd) The Company and each of its subsidiaries maintains
insurance covering its properties, operations, personnel and
businesses. Such insurance insures against such losses and
16
<PAGE> 18
risks as are adequate in accordance with customary industry practice to
protect the Company, each of its subsidiaries and their businesses.
Neither the Company or any of its subsidiaries has received notice from
any insurer or agent of such insurer that substantial capital
improvements or other expenditures will have to be made in order to
continue such insurance. All such insurance is outstanding and duly in
force on the date hereof.
(ee) Neither the Company nor any of its subsidiaries (or
any agent thereof acting on the behalf of any of them) has taken, and
none of them will take, any action that might cause this Agreement, the
issuance or sale of the Securities, the application of the proceeds
from the Offering and the consummation of the transactions described in
the Offering Memorandum to violate Regulation G (12 C.F.R. Part 207),
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System, in each case, as in effect now or as the same
may hereafter be in effect on the Closing Date.
(ff) None of the Company, any of its subsidiaries nor any
of their respective affiliates or any person acting on its or their
behalf (other than the Initial Purchaser, as to whom the Company and
its subsidiaries make no representation) has engaged or will engage in
any directed selling efforts within the meaning of Regulation S with
respect to the Units.
(gg) The Units offered and sold in reliance on Regulation
S have been and will be offered and sold only in offshore transactions.
(hh) The sale of the Units pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the
Securities Act.
(ii) The Company, it subsidiaries and their respective
affiliates and all persons acting on their behalf (other than the
Initial Purchaser, as to whom the Company and its subsidiaries make no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the
offering the Units outside the United States and, in connection
therewith, the Offering Memorandum will contain the disclosure required
by Rule 902(h) under the Securities Act.
(jj) The Company is a "reporting issuer," as defined in
Rule 902 under the Securities Act.
(kk) Except as otherwise set forth in this Agreement, the
Registration Rights Agreement, the Warrant Registration Rights
Agreement or the Offering Memorandum, there are no holders of
securities of the Company or any of its subsidiaries, which by reason
of the execution of this Agreement or any other Operative Document and
the consummation of the transactions contemplated hereby or thereby,
have the right to request or demand that the Company or any of its
subsidiaries register any of its securities under the Securities Act.
(ll) When the Securities are issued and delivered pursuant
to this Agreement, none of the Securities will be of the same class
(within the meaning of Rule 144A under the Securities Act) as
securities of the Company that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are
quoted in a United States automated inter-dealer quotation system.
(mm) Each of Price Waterhouse LLP ("Price Waterhouse") and
Langton Clarke Y Cya.
17
<PAGE> 19
Ltda.\Coopers & Lybrand ("C&L") are independent public accountants with
respect to the Company and Iusatel, as applicable, as required by the
Securities Act.
(nn) The historical financial statements, together with
related notes forming part of the Offering Documents (and any amendment
or supplement thereto), comply as to form in all material respects with
the requirements of the Securities Act that are applicable to
registration statements filed on Form S-1 and present fairly the
consolidated financial position, results of operations and cash flows
of the entities covered thereby, at the respective dates or for the
respective periods to which they apply; such historical financial
statements and related notes have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; the pro
forma financial statements, together with related notes forming part of
the Offering Documents (and any amendment or supplement thereto), have
been prepared on a basis consistent with the historical statements,
except for the unaudited pro forma adjustments specified therein, and
give effect to assumptions made on a reasonable basis and present
fairly the historical and proposed transactions contemplated by the
Offering Documents and this Agreement; and the other historical,
financial and statistical information and data set forth in the
Offering Documents (and any amendment or supplement thereto) is, in all
material respects, fairly presented and prepared on a basis consistent
with such financial statements and the books and records of the
entities covered thereby.
(oo) Each of the Company and its subsidiaries (i) makes
and keeps accurate books and records and (ii) maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that: (A) transactions are executed in accordance with management's
general or specific authorizations; (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles and to maintain
accountability for assets; (C) access to assets is permitted only in
accordance with management's general or specific authorization and (D)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect thereto.
(pp) No registration under the Securities Act of the
Units, the Notes or the Warrants is required for the sale of the Units
to the Initial Purchaser as contemplated hereby or for the Exempt
Resales assuming (i) that the purchasers who buy the Units in the
Exempt Resales are either QIBs or Regulation S Purchasers and (ii) the
accuracy of the Initial Purchaser's representations regarding the
absence of general solicitation in connection with the sale of the
Units to the Initial Purchaser and the Exempt Resales contained herein.
No form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) was used by the
Company, any of its affiliates or any of their representatives in
connection with the offer and sale of the Units or in connection with
Exempt Resales, including, but not limited to, articles, notices or
other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or
general advertising. No securities of the same class as the Securities
have been issued and sold by the Company or any of its subsidiaries
within the six-month period immediately prior to the date hereof.
(qq) Set forth on Schedule 2 hereto is a list of each
employee pension or benefit plan with respect to which the Company or
any corporation considered an affiliate of the Company within the
meaning of Section 407(d)(7) of ERISA is a party in interest or
disqualified person. The execution and delivery of this Agreement, the
other Operative Documents and the sale of the Units to be purchased by
the Eligible Purchasers will not involve any prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as
18
<PAGE> 20
amended. The representation made in the preceding sentence is made in
reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the Eligible
Purchasers as set forth in the Offering Documents under the caption
"Notice to Investors."
(rr) None of the Company or any of its subsidiaries has
(i) taken, directly or indirectly, any action designed to, or that
might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Units, the Notes or the Warrants or (ii)
since the date of the Preliminary Offering Memorandum (A) sold, bid
for, purchased or paid any person any compensation for soliciting
purchases of, the Units, the Notes or the Warrants or (B) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(ss) Except pursuant to this Agreement, there are no
contracts, agreements or understandings between the Company or any of
its subsidiaries and any other person that would give rise to a valid
claim against the Company or the Initial Purchaser for a brokerage
commission, finder's fee or like payment in connection with the
issuance, purchase and sale of the Securities.
(tt) Except as disclosed in the Offering Memorandum, there
are no business relationships or related party transactions required to
be disclosed therein pursuant to Item 404 of Regulation S-K of the
Commission (assuming for purposes of this Section 7(at) that Regulation
S-K is applicable to the Offering Memorandum).
(uu) Since the respective dates as of which information is
given in the Offering Documents, except as otherwise stated in the
Offering Documents, (A) neither the Company nor any of its subsidiaries
has or, after giving effect to the Iusatel Acquisition, would have,
sustained 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, (B) there have been no transactions entered into by
the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are or, after giving effect to the
Iusatel Acquisition, could be, material with respect to the Company and
its subsidiaries, taken as a whole, (C) there has not been and, after
giving effect to the Iusatel Acquisition, will not have been, any
material adverse change, or any development involving a prospective
material adverse change, in the capital stock or in the long-term debt
of the Company and its subsidiaries, (D) there has been no dividend or
distribution of any kind declared, paid or made by the Company or any
of its subsidiaries on any class of its capital stock and (E) there are
and, after giving effect to the Iusatel Acquisition, will be, no
liabilities or obligations of the Company or any of its subsidiaries,
direct or indirect, contingent or matured, which, individually or in
the aggregate, are material to the Company and its subsidiaries, taken
as a whole.
(vv) The present fair saleable value of the assets of the
Company and its subsidiaries, taken as a whole, exceeds the amount that
will be required to be paid on or in respect of the existing debts and
other liabilities (including the maximum amount of liability that may
reasonably be expected to result from contingent liabilities) of the
Company and its subsidiaries as they become absolute and matured. The
assets of the Company and its subsidiaries, taken as a whole, do not
constitute unreasonably small capital to carry out their business as
conducted or as proposed to be conducted. The Company does not intend
to, or believe that it will, incur debts beyond its ability to pay such
debts as they mature.
19
<PAGE> 21
The Company does not intend to permit any of its subsidiaries to incur
debts beyond its respective ability to pay such debts as they mature.
Upon consummation of the Offering, the present fair saleable value of
the assets of the Company on a consolidated basis will exceed the
amount that will be required to be paid on or in respect of its
existing debts and other liabilities (including the maximum amount of
liability that may reasonably be expected to result from contingent
liabilities) as they become absolute and matured, the assets of the
Company on a consolidated basis will not constitute unreasonably small
capital to carry out its business as now conducted or as proposed to be
conducted, including the capital needs of the Company and its
subsidiaries, taking into account the projected capital requirements
and capital availability of the Company and its subsidiaries.
(ww) The Company and each of its subsidiaries has, and
after giving effect to the Iusatel Acquisition, will have, complied
with all provisions of Section 517.075, Florida Statutes (Chapter
92-198, Laws of Florida).
(xx) Each certificate signed by any officer of the Company
and delivered to the Initial Purchaser or counsel for the Initial
Purchaser shall be deemed to be a representation and warranty by the
Company to the Initial Purchaser as to the matters covered thereby.
The Company acknowledges that the Initial Purchaser and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 10 hereof, counsel to the Company and counsel to the Initial Purchaser
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
8. Initial Purchaser's Representations and Warranties.
The Initial Purchaser represents and warrants as follows:
(a) The Initial Purchaser is a QIB with such knowledge
and experience in financial and business matters as are necessary in
order to evaluate the merits and risks of an investment in the Units.
(b) The Initial Purchaser (i) is not acquiring the
Units with a view to any distribution thereof or with any present
intention of offering or selling any of the Units in a transaction
that would violate the Securities Act or the securities laws of any
state of the United States or any other applicable jurisdiction and
(ii) will be reoffering and reselling the Units only to (A) QIBs in
reliance on an exemption from the registration requirements of the
Securities Act provided by Rule 144A and (B) in offshore transactions
in reliance upon Regulation S under the Securities Act.
(c) No form of general solicitation or general
advertising has been or will be used by the Initial Purchaser or any of
its representatives in connection with the offer and sale of any of the
Units, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(d) In connection with Exempt Resales, the Initial
Purchaser will solicit offers to buy the Units only from, and will
offer to sell the Units only to, Eligible Purchasers. The Initial
Purchaser further agrees that it will offer to sell the Units only to,
and will solicit offers to buy the Units only from (i) Eligible
Purchasers that the Initial Purchaser reasonably believes are QIBs and
(ii) Regulation S Purchasers, in each case, that agree that (A) the
Units, the Notes and the Warrants purchased by them may be resold,
pledged or otherwise transferred within the time period referred to
under Rule 144(k) (taking into account the provisions of Rule 144(d)
under the
20
<PAGE> 22
Securities Act, if applicable) under the Securities Act, as in effect
on the date of the transfer of such Units, Notes or Warrants, only (I)
to the Company or any of the Subsidiaries, (II) to a person whom the
seller reasonably believes is a QIB purchasing for its own account or
for the account of a QIB in a transaction meeting the requirements of
Rule 144A under the Securities Act, (III) in an offshore transaction
(as defined in Rule 902 under the Securities Act) meeting the
requirements of Rule 904 of the Securities Act, (IV) in a transaction
meeting the requirements of Rule 144 under the Securities Act, (V) to
an institutional "accredited investor," as defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act (each, an
"Accredited Institution") that, prior to such transfer, furnishes the
Trustee a signed letter containing certain representations and
agreements relating to the registration of transfer of such Unit, Note
or Warrant (the form of which is substantially the same as Exhibit C to
the Indenture) and an opinion of counsel acceptable to the Company that
such transfer is in compliance with the Securities Act, (VI) in
accordance with another exemption from the registration requirements of
the Securities Act (and based upon an opinion of counsel acceptable to
the Company) or (VII) pursuant to an effective registration statement
and, in each case, in accordance with the applicable securities laws of
any state of the United States or any other applicable jurisdiction and
(B) they will deliver to each person to whom such Units, Notes or
Warrants or an interest therein is transferred a notice substantially
to the effect of the foregoing.
(e) None of the Initial Purchaser nor any of its
affiliates or any person acting on its or their behalf has engaged or
will engage in any directed selling efforts within the meaning of
Regulation S with respect to the Units.
(f) The Units offered and sold by the Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be
offered and sold only in offshore transactions.
(g) The sale of the Units offered and sold by the Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a
plan or scheme to evade the registration provisions of the Securities
Act.
(h) The Initial Purchaser further represents and agrees
that (1) it has not offered or sold and will not offer or sell any
Units, Notes or Warrants to persons in the United Kingdom prior to the
expiration of the period of six months from the issue date of the
Units, the Notes or the Warrants, except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business
or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995, (ii) it
has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the Units, the Notes and the Warrants in, from or otherwise
involving the United Kingdom and (iii) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document
received by it in connection with the issuance of the Units, the Notes
and the Warrants to a person who is of a kind described in Article
11(3) of the Financial Services Act of 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom the document may
otherwise lawfully be issued or passed on.
(i) The Initial Purchaser agrees that it will not offer,
sell or deliver any of the Units in any jurisdiction outside the United
States except under circumstances that will result in compliance with
the applicable laws thereof, and that it will take at its own expense
whatever action is required to permit its purchase and resale of the
Units in such jurisdictions. The Initial Purchaser understands that no
action has been taken to permit a public offering in any jurisdiction
21
<PAGE> 23
outside the United States where action would be required for such
purpose.
(j) The Initial Purchaser agrees that it has not offered
or sold and will not offer or sell the Units in the United States or
to, or for the benefit or account of, a U.S. Person (other than a
distributor), in each case, as defined in Rule 902 under the Act (i) as
part of its distribution at any time and (ii) otherwise until 40 days
after the later of the commencement of the offering of the Units
pursuant hereto and the Closing Date, other than in accordance with
Regulation S of the Securities Act or another exemption from the
registration requirements of the Securities Act. The Initial Purchaser
agrees that, during such 40-day restricted period, it will not cause
any advertisement with respect to the Notes (including any "tombstone"
advertisement) to be published in any newspaper or periodical or posted
in any public place and will not issue any circular relating to the
Units, except such advertisements as are permitted by and include the
statements required by Regulation S.
(k) The Initial Purchaser agrees that, at or prior to
confirmation of a sale of Units by it to any distributor, dealer or
person receiving a selling concession, fee or other remuneration during
the 40-day restricted period referred to in Rule 903(c)(2) under the
Securities Act, it will send to such distributor, dealer or person
receiving a selling concession, fee or other remuneration a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered and sold within the United
States or to, or for the account or benefit of, U.S. persons
(i) as part of your distribution at any time or (ii) otherwise
until 40 days after the later of the commencement of the
Offering and the Closing Date, except in either case in
accordance with Regulation S under the Securities Act (or Rule
144A in transactions that are exempt from the registration
requirements of the Securities Act), and in connection with
any subsequent sale by you of the Securities covered hereby in
reliance on Regulation S during the period referred to above
to any distributor, dealer or person receiving a selling
concession, fee or other remuneration, you must deliver a
notice to substantially the foregoing effect. Terms used above
have the meanings assigned to them in Regulation S."
The Initial Purchaser understands that the Company and, for purposes of
the opinions to be delivered to the Initial Purchaser pursuant to Section 10
hereof, counsel to the Company and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations and the Initial
Purchaser hereby consents to such reliance.
9. Indemnification. (a) Each of the Company and its
subsidiaries jointly and severally agrees to indemnify and hold harmless (i) the
Initial Purchaser, (ii) each person, if any, who controls the Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act and (iii) the officers, directors, partners, employees,
representatives and agents of the Initial Purchaser or any controlling person
(any person referred to in clause (i), (ii) or (iii) may hereinafter be referred
to as an "Indemnified Person"), from and against any and all losses, claims,
damages, liabilities and judgments caused by any untrue statement or alleged
untrue statement of a material fact contained in the Offering Documents (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in the light of the circumstances under which they were made,
not misleading; provided, however, that none of the Company or its subsidiaries
will be liable in any such case to an Indemnified Person insofar as such losses,
claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or
22
<PAGE> 24
alleged untrue statement or omission based upon information relating to the
Initial Purchaser furnished in writing to the Company by the Initial Purchaser
expressly for use therein; provided, further, that with respect to any untrue
statement or omission made in the Preliminary Offering Memorandum, the indemnity
agreement contained in this Section 9(a) shall not inure to the benefit of any
Indemnified Person to the extent that such losses, claims, damages or
liabilities is a result of the fact that both (i) a copy of the Offering
Memorandum was not sent or given to such person prior to, concurrently with or
promptly following the sale of such Notes to such person, and (ii) the untrue
statement or omission in the Preliminary Offering Memorandum was corrected in
the Offering Memorandum.
(b) In case any action shall be brought against any
Indemnified Person, based upon any Offering Document or any amendment or
supplement thereto and with respect to which indemnity may be sought against the
Company and its subsidiaries, such Indemnified Person shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all fees and expenses. Each Indemnified Person shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the reasonable fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless (i) the employment of such counsel has
been specifically authorized in writing by the Company, (ii) the Company has
failed to assume the defense and employ counsel or (iii) the named parties to
any such action (including any impleaded parties) include such Indemnified
Person and the Company, and such Indemnified Person shall have been advised by
such counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the Company (in which
case the Company shall not have the right to assume the defense of such action
on behalf of such Indemnified Person, it being understood, however, that the
Company shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for such Indemnified Person, which firm shall be designated in writing
by such Indemnified Person, and that all such fees and expenses shall be
reimbursed as they are incurred). The Company shall not be liable for any
settlement of any such action effected without the written consent of the
Company but if settled with the Company's written consent, the Company agrees to
indemnify and hold harmless such Indemnified Person from and against any loss or
liability by reason of such settlement. Notwithstanding the immediately
preceding sentence, if in any case where the fees and expenses of counsel are at
the expense of the indemnifying party and indemnified party shall have requested
the indemnifying party to reimburse the indemnified party for such fees and
expenses of counsel as incurred, such indemnifying party agrees that it shall be
liable for any settlement of any action effected without its written consent if
(i) such settlement is entered into more than forty-five business days after the
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall have failed to reimburse the indemnified party in
accordance with such request for reimbursement prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(c) The Initial Purchaser agrees to indemnify and hold
harmless the Company, its directors and officers, and any person controlling the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act (collectively, the "Company Indemnified Parties"), to the same
extent as the foregoing indemnity from the Company and its subsidiaries to the
Initial Purchaser but only with reference to information relating to the Initial
Purchaser furnished in writing by the Initial Purchaser expressly for use in the
Offering Documents. In case any action shall be brought against any Company
23
<PAGE> 25
Indemnified Party in respect of which indemnity may be sought against the
Initial Purchaser, the Initial Purchaser shall have the rights and duties given
to the Company (except that if the Company shall have assumed the defense
thereof, the Initial Purchaser shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof but the fees and
expenses of such counsel shall be at the expense of the Initial Purchaser), and
the Company Indemnified Parties shall have the rights and duties given to the
Initial Purchaser by Section 9(b) hereof.
(d) If the indemnification provided for in this Section 9
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Initial Purchaser, on the other hand, from the offering of the
Units or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, on the one hand, and the Initial Purchaser, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand, and the Initial Purchaser, on the other hand, shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Units
(before deducting expenses) received by the Company, on the one hand, and the
total discounts and commissions received by the Initial Purchaser, on the other
hand, bear to the total price to investors of the Units, in each case as set
forth in the table on the cover page of the Offering Memorandum. The relative
fault of the Company, on the one hand, and the Initial Purchaser, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company or the Initial
Purchaser and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchaser agree that it would not be just
and equitable if contribution pursuant to this paragraph were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The losses, claims, damages, liabilities or judgments of an
indemnified party referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9, the Initial Purchaser shall not be required to
contribute any amount in excess of the amount by which the discounts and
commissions received by it exceeds the amount of any damages which the Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
10. Conditions of Initial Purchaser's Obligations. The
obligation of the Initial Purchaser to purchase the Units under this Agreement
is subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing
Date. The Company shall have performed or complied with all of the
agreements herein contained and required to be performed or complied
with by it at or prior to the Closing Date.
24
<PAGE> 26
(b) The Offering Memorandum shall have been printed and
copies distributed to the Initial Purchaser not later than 9:00 a.m.,
New York City time, on October 23, 1997, or at such later date and time
as the Initial Purchaser may approve in writing.
(c) No stop order suspending the qualification or
exemption from qualification of the Units, the Notes and the Warrants
for sale in any jurisdiction shall have been issued and no proceeding
for that purpose shall have been commenced or be pending, or, to the
knowledge of the Company, be contemplated.
(d) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the
issuance of any of the Units, the Notes and the Warrants; no action,
suit or proceeding shall be pending or, to the knowledge of the
Company, threatened against, the Company or any of its subsidiaries
before any court or arbitrator or any governmental body, agency or
official that, if adversely determined, would have a Material Adverse
Effect; and no stop order preventing the use of the Offering Documents,
or any amendment or supplement thereto, or any order asserting that any
of the transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act shall have been issued.
(e) Since the dates as of which information is given in
the Offering Memorandum, (i) there shall not have been any material
adverse change, or any development that is reasonably likely to result
in a material adverse change, in the capital stock or the long-term
debt, or material increase in the short-term debt, of the Company or
any of its subsidiaries from that set forth in the Offering Memorandum,
(ii) no dividend or distribution of any kind shall have been declared,
paid or made by the Company or any of its subsidiaries on any class of
its capital stock, (iii) neither the Company nor any of its
subsidiaries shall have incurred any liabilities or obligations, direct
or contingent, that are material, individually or in the aggregate, to
the Company and its subsidiaries, taken as a whole, and that are
required to be disclosed on a balance sheet or notes thereto in
accordance with generally accepted accounting principles and are not
disclosed on the latest balance sheet or notes thereto included in the
Offering Memorandum. Since the date hereof and since the dates as of
which information is given in the Offering Memorandum, there shall not
have occurred any Material Adverse Change.
(f) The Initial Purchaser shall have received
certificates of the Company, dated the Closing Date, signed on behalf
of the Company by (i) the President and (ii) the Chief Financial
Officer of the Company confirming, as of the Closing Date, the matters
set forth in Sections 10(a), (b), (c), (d) and (e).
(g) The Initial Purchaser shall have received on the
Closing Date an opinion, dated the Closing Date (satisfactory to the
Initial Purchaser and counsel for the Initial Purchaser), of Baker &
McKenzie, counsel for the Company, substantially in the form set forth
in Exhibit B hereto. The opinion of Baker & McKenzie described in this
Section 10(g) shall be rendered to the Initial Purchaser at the request
of the Company and shall so state therein.
(h) The Initial Purchaser shall have received on the
Closing Date an opinion, dated the Closing Date, of Latham & Watkins,
counsel for the Initial Purchaser, in form and substance reasonably
satisfactory to the Initial Purchaser.
25
<PAGE> 27
(i) The Initial Purchaser shall have received from Price
Waterhouse, independent public accountants for the Company, and C&L,
independent public accountants for Iusatel, customary comfort letters,
dated as of the date of this Agreement and as of the Closing Date,
addressed to the Initial Purchaser and in form and substance
satisfactory to the Initial Purchaser and counsel to the Initial
Purchaser, with respect to the financial statements and certain
financial information contained in the Offering Documents.
(j) The Initial Purchaser shall have received the opinion
of Price Waterhouse in respect of the Company's audited consolidated
financial statements, which opinion shall be issued without a
qualification as to the Company's ability to continue as a going
concern.
(k) The Initial Purchaser shall have received a list of
each employee pension or benefit plan with respect to which the Company
or any of its subsidiaries or any corporation considered an affiliate
of any of them within the meaning of Section 407(d)(7) of ERISA is a
party in interest or disqualified person.
(l) Counsel to the Initial Purchaser shall have been
furnished with such documents as it may reasonably require for the
purpose of enabling it to review or pass upon the matters referred to
in this Section 10 and in order to evidence the accuracy, completeness
and satisfaction of the representations, warranties and conditions
herein contained.
(m) Prior to the Closing Date, the Company and its
subsidiaries shall have furnished to the Initial Purchaser such further
information, certificates and documents as the Initial Purchaser may
reasonably request.
(n) The Company, the Trustee and the Warrant Agent, as
applicable, shall have entered into each of the Operative Documents,
the Initial Purchaser shall have received counterparts, conformed as
executed, thereof and each Operative Document shall be in full force
and effect.
(o) The Company shall have prepared financing statements
naming the Company as debtor and the Trustee, on behalf and for the
benefit of the holders of the Senior Notes, together with all schedules
thereto, on the appropriate forms and shall have filed such financing
statements with the appropriate filing offices along with the payment
of all related filing fees. Confirmation of such filings and payments
shall be provided to the Initial Purchaser and its counsel.
(p) The Closing (as defined in the Iusatel Agreement)
shall have occurred as set forth in the Iusatel Agreement and as
described in the Offering Memorandum.
(q) The Settlement Agreement shall be in full force and
effect and each of Paul Moore and Philip Magiera shall have resigned
from the Company's Board of Directors pursuant to the terms of the
Settlement Agreement.
(r) All outstanding amounts of indebtedness under the
Debentures, the Bridge Notes and the Credit Line shall have been repaid
in full and the Initial Purchaser shall have received evidence
satisfactory to it of such repayment.
(s) Each officer and director of the Company shall have
furnished to the Initial Purchaser, prior to the Closing Date, a letter
or letters, in form and substance satisfactory to counsel for the
Initial Purchaser, pursuant to which each such person shall agree not
to, directly
26
<PAGE> 28
or indirectly, offer for sale, sell or otherwise dispose of or pledge
(or enter into any transaction or device which is designed to, or could
be expected to, result in the disposition by any person during the
Lock-Up Period of) any common stock of the Company during the Lock-Up
Period, without the prior written consent of the Initial Purchaser.
(t) The Initial Purchaser shall have received the opinion
of Price Waterhouse or another nationally recognized firm of
independent accountants selected by the Company that the amount of
Pledged Securities, upon receipt of scheduled interest and principal
payments of such securities, will be sufficient to provide for payment
in full of the first six scheduled interest payments due on the Senior
Notes.
(u) The Company shall not have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by each of them
at or prior to the Closing Date.
All opinions, certificates, letters and other documents
required to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to the Initial Purchaser. The Company will furnish the Initial Purchaser with
such conformed copies of such opinions, certificates, letters and other
documents as the Initial Purchaser shall reasonably request.
27
<PAGE> 29
11. Effective Date of Agreement and Termination. This
Agreement shall become effective upon the execution hereof.
This Agreement may be terminated at any time prior to the
Closing Date by the Initial Purchaser by written notice to the Company if any of
the following has occurred: (i) since the respective dates as of which
information is given in the Offering Documents, any material adverse change or
development involving a prospective material adverse change in the condition,
financial or otherwise, of the Company or any of its subsidiaries or the
earnings, affairs, or prospects of the Company or any of its subsidiaries,
whether or not arising in the ordinary course of business, which would, in the
Initial Purchaser's sole judgment, make it impracticable to market the Units on
the terms and in the manner contemplated in the Offering Documents, (ii) any
outbreak or escalation of hostilities or other national or international
calamity or crisis or change in economic conditions or in the financial markets
of the United States or elsewhere that, in the Initial Purchaser's sole
judgment, is material and adverse and would, in the Initial Purchaser's sole
judgment, make it impracticable to market the Units on the terms and in the
manner contemplated in the Offering Documents, (iii) the suspension or material
limitation of trading in securities on the New York Stock Exchange or the Nasdaq
National Market or limitation on prices for securities on any such exchange or
national market system, (iv) the enactment, publication, decree or other
promulgation of any federal, state or foreign statute, regulation, rule or order
of any court or other governmental authority which in the Initial Purchaser's
sole opinion materially and adversely affects, or will materially and adversely
affect, the business or operations of the Company or its subsidiaries, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state, local or
foreign government or agency in respect of its monetary or fiscal affairs which
in the Initial Purchaser's sole opinion has a material adverse effect on the
financial markets in the United States.
12. Reimbursement of Fees and Expenses. If this Agreement
shall be terminated because of the failure of any of the conditions set forth in
Section 10(a) or any of Sections 10(e) through 10(t) or if for any reason the
Company shall be unable or unwilling to consummate the Offering, the Company, by
its execution and delivery hereof, agrees to reimburse the Initial Purchaser for
(i) all of the fees and expenses described in Section 6(h) hereof which may have
been paid by the Initial Purchaser and (ii) all out-of-pocket expenses
(including the fees and expenses of counsel to the Initial Purchaser),
notwithstanding anything to the contrary herein, incurred by the Initial
Purchaser in connection herewith.
13. Agreement of the Initial Purchaser. The Initial
Purchaser agrees that, upon receipt of any written notice from the Company of
the existence of any fact or the happening of any event that requires the making
of any additions to or changes in any offering memorandum, registration
statement, prospectus or any amendment or supplement thereto in order that such
document will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances existing as of the date such document was
delivered, not misleading, the Initial Purchaser shall forthwith discontinue
disposition of the applicable securities pursuant to such document until the
Initial Purchaser receives from the Company copies of a supplemented or amended
document that the Company states in writing may be used by the Initial Purchaser
or until the Initial Purchaser is advised in writing by the Company that the use
of such document may be resumed.
14. Notices. Notices given pursuant to any provision of
this Agreement shall be mailed, delivered or telecopied and confirmed in writing
as follows: (a) if to the Company and/or its subsidiaries, to InterAmericas
Communications Corporation, 1221 Brickell Avenue, Suite 900, Miami, Florida
33131, Attention: Patricio Northland, telecopy number: (305) 377-6791, with a
copy to Baker & McKenzie, 701 Brickell Avenue, Suite 1600, Miami, Florida,
33131, Attention: Andrew Hulsh, Esq.,
28
<PAGE> 30
telecopy number: (305) 789-8953, and (b) if to the Initial Purchaser, to UBS
Securities LLC, 299 Park Avenue, New York, NY 10171, telecopy number: (212)
969-7746, with a copy to Latham & Watkins, 885 Third Avenue, Suite 1000, New
York, New York, 10022, Attention: Marc D. Jaffe, Esq., telecopy number: (212)
751-4864, or in any case to such other address or telecopy number as the person
to be notified may have requested in writing.
15. Miscellaneous.
(a) The respective indemnities, contribution agreements,
representations, warranties and other statements set forth in or made pursuant
to this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Units, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any party hereto or any indemnified person, (ii) acceptance of the Units and
payment for them hereunder and (iii) termination of this Agreement.
(b) Except as otherwise provided, this Agreement has been
and is made solely for the benefit of and shall be binding upon the Company, the
Initial Purchaser, any controlling persons referred to herein and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Units from the Initial Purchaser merely because of such
purchase.
(c) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PROVISIONS THEREOF. TIME IS OF THE
ESSENCE IN THIS AGREEMENT.
(d) This Agreement may be signed in various counterparts
which together shall constitute one and the same instrument.
(e) None of the terms or provisions of this Agreement may
be waived, amended, supplemented or otherwise modified except pursuant to a
written instrument executed by the Company and the Initial Purchaser.
(f) The captions included in this Agreement are included
solely for convenience of reference and are not to be considered a part of this
Agreement.
(g) The Company and each of its subsidiaries hereby
irrevocably and unconditionally:
(i) submits itself and its property to any legal
action or proceeding relating to this Agreement and the other Operative
Documents to which it is a party, or for recognition and enforcement of any
judgement in respect of this Agreement or any other Operative Documents, to the
non-exclusive general jurisdiction of the courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts for such state and federal courts;
(b) consents that any such action or proceeding
may be brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
29
<PAGE> 31
(c) agrees that service of process in any such
action or proceeding may be effected by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the Company at its
address set below its signature to this Agreement or at such other address as
the Company shall have notified the Initial Purchaser;
(d) agrees that nothing in this Agreement shall
affect the right to effect service of process in any other manner permitted by
law or shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent permitted by
law, any right it may have to claim or recover any special exemplary, punitive
or consequential damages in any legal proceeding that relates to, or that arises
from, this Agreement, any other Operative Document or any other document made,
delivered or given in connection with this Agreement or any other Operative
Document.
[signatures on following page]
30
<PAGE> 32
Please confirm that the foregoing correctly sets forth the
agreement among the Company, each of its subsidiaries and the Initial Purchaser.
Very truly yours,
INTERAMERICAS COMMUNICATIONS CORPORATION
By:
--------------------------------------
Name:
Title:
HEWSTER CHILE, S.A.
By:
--------------------------------------
Name:
Title:
RED DE SERVICIOS DE TELECOMUNICACIONES, S.A.
By:
--------------------------------------
Name:
Title:
Acknowledged and accepted on the date
first described herein.
UBS SECURITIES LLC
By:
--------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.2
14% SERIES A SENIOR NOTES DUE 2007
No. 003 $0
INTERAMERICAS COMMUNICATIONS CORPORATION
promises to pay to CEDE & CO. or registered assigns the principal sum of ZERO
Dollars on October 27, 2007.
Interest Payment Dates: April 27 and October 27
Record Dates: April 12 and October 12
Dated: October 27, 1997
INTERAMERICAS COMMUNICATIONS CORPORATION
By
------------------------------------
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned Indenture:
State Street Bank and Trust Company, N.A.,
as Trustee
By:
-------------------------------
Authorized Officer
<PAGE> 2
14% SERIES A SENIOR NOTES DUE 2007
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE) OR ITS
NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE
MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF INTERAMERICAS COMMUNICATIONS CORPORATION.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT, (C) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE ACT, (D) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON
ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (E)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE ACT, (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE ACT (IF AVAILABLE) OR (G) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO
EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE PURSUANT TO
CLAUSES (D), (F) AND (G) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS ANY OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO
THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE ACT.
<PAGE> 3
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. InterAmericas Communications Corporation, a Texas
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 14% per annum from October 27, 1997 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on April 27 and October 27 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be April 27, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 12 or October
12 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank
and Trust Company, N.A., the Trustee under the Indenture, will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
<PAGE> 4
4. INDENTURE AND PROCEEDS PLEDGE AND ESCROW AGREEMENT. The
Company issued the Notes under an Indenture dated as of October 27, 1997 (the
"Indenture") between the Company and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the Indenture shall govern and be controlling. The Notes are
secured obligations of the Company limited to $150.0 million in aggregate
principal amount. The Notes are secured by a pledge of Escrow Funds pursuant to
the Proceeds Pledge and Escrow Agreement referred to in the Indenture.
5. OPTIONAL REDEMPTION.
(a) The Company shall not have the option to redeem the Notes
prior to October 27, 2002. Thereafter, the Company shall have the option at any
time to redeem the Notes, in whole or in part, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on October 27 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002...............................................107.000%
2003...............................................104.666%
2004...............................................102.333%
2005 and thereafter................................100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time on or before
October 27, 2000, the Company may on any one or more occasions redeem up to a
maximum of 331/3% of the aggregate principal amount of Note at a redemption
price equal to 114% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net cash proceeds received by the Company after the date of the Indenture
from the issuance and sale of its Qualified Capital Stock to the public in a
registered public offering or to one or more Strategic Equity Investors to the
extent that such net cash proceeds have been, and continue to be, designated as
Designated Equity Proceeds to be used for such purpose as provided in the
definition thereof; provided that at least 662/3% of the original aggregate
principal amount of the Note remain outstanding immediately after the occurrence
of each such redemption; and provided, further, that such redemption shall occur
within 45 days of the date of the closing of any such public offering or sale to
such Strategic Equity Investors.
6. MANDATORY REDEMPTION.
Except as set forth in Section 4.16 of the Indenture, the
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
<PAGE> 5
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 10 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales, within five days of each date on which the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company shall commence an offer to all
Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date fixed for the closing of
such offer in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate principal amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
(c) In the event that on or after October 27, 2000 (the
"Special Offer to Purchase Trigger Date"), Collateral Funds remain in the
Collateral Subaccount, the Company shall make an offer to each Holder of Notes
to purchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes (the "Special Offer to Purchase") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase and Liquidated Damages, if any. Within
10 days following the Special Offer to Purchase Trigger Date, the Company shall
mail a notice to each Holder setting forth the procedures governing the Special
Offer to Purchase as required by the Indenture.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of
<PAGE> 6
Notes may be registered and Notes may be exchanged as provided in the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company need not exchange or register the transfer of any Note or
portion of a Note selected for redemption, except for the unredeemed portion of
any Note being redeemed in part. Also, the Company need not exchange or register
the transfer of any Notes for a period of 15 days before a selection of Notes to
be redeemed or during the period between a record date and the corresponding
Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, or the Notes or the Proceeds Pledge and Escrow
Agreement may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for Notes)
and any existing default or compliance with any provision of the Indenture, the
Notes or the Proceeds Pledge and Escrow Agreement may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes). Without the consent of any Holder of a Note, the Indenture, the
Notes or the Proceeds Pledge and Escrow Agreement may be amended or supplemented
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of the Notes in case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Each of the following constitutes
an Event of Default: (i) default for 30 days in the payment when due of interest
and Liquidated Damages, if any, on the Notes, provided, however, that prior to
October 27, 2000, the failure by the Company to pay interest on the Notes within
five days of an Interest Payment Date will constitute an immediate Event of
Default; (ii) default in payment when due of the principal of or premium, if
any, on the Notes; (iii) failure by the Company to comply with Sections 4.07,
4.09, 4.10, 4.15, 4.16 or 4.17 or Article 5 of the Indenture; (iv) failure by
the Company for 60 days after notice to comply with any of its other agreements
in the Indenture or the Notes; (v) breach by the Company of any material
representation, warranty or agreement set forth in the Proceeds Pledge and
Escrow Agreement, or repudiation by the Company of its obligations under the
Proceeds Pledge and Escrow Agreement or the unenforceability of the Proceeds
Pledge and Escrow Agreement against the Company for any reason; (vi) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted
<PAGE> 7
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (a) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vii) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $5.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; (viii) except as permitted by the Indenture,
any Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Subsidiary shall deny or disaffirm its obligations under its
Subsidiary Guarantee; and (ix) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken together, would constitute a Significant Subsidiary. If
any Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Subsidiary or any group
of Subsidiaries that, taken together, would constitute a Significant Subsidiary,
the foregoing amount shall ipso facto become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest or Liquidated Damages, if any) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of principal or premium, if any, interest or
Liquidated Damages, if any on the Notes. The Company is required to deliver to
the Trustee annually a statement regarding compliance with the Indenture, and
the Company is required upon becoming aware of any Default or Event of Default,
to deliver to the Trustee a statement specifying such Default or Event of
Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note
<PAGE> 8
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of October 27, 1997, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
InterAmericas Communications Corporation
1221 Brickell Avenue, Suite 900
Miami, Florida 33131
Attention: Chief Financial Officer
<PAGE> 9
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
---------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
_______________________________________________________________________________
Date:
------------
Your Signature:
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee.
<PAGE> 10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10, 4.15 or 4.17 of the Indenture, check the box
below:
[ ] Section 4.10 [ ] Section 4.15 [ ] Section 4.17
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10, Section 4.15 or 4.17 of the Indenture,
state the amount you elect to have purchased: $__________
Date: __________ Your Signature:
----------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No:
-----------------------
Signature Guarantee.
<PAGE> 11
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global Note authorized
Principal Amount Principal Amount following such officer of
Date of of this Global of this Global decrease (or Trustee or Note
Exchange Note Note increase) Custodian
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 4.3
- --------------------------------------------------------------------------------
INTERAMERICAS COMMUNICATIONS CORPORATION
14% SENIOR NOTES DUE 2007
---------------------------
INDENTURE
Dated as of October 27, 1997
---------------------------
---------------------------
State Street Bank and Trust Company, N.A.
as Trustee
---------------------------
- -------------------------------------------------------------------------------
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture Act
<TABLE>
<CAPTION>
Act Section Indenture Section
<S> <C>
310(a)(1) .......................................................7.10
(a)(2) ..........................................................7.10
(a)(3)...........................................................N.A.
(a)(4)...........................................................N.A.
(a)(5)...........................................................7.10
(b)..............................................................7.10
(i)(c)...........................................................N.A.
311(a)...........................................................7.11
(ii)(c)..........................................................N.A.
312(a)...........................................................2.05
(b)..............................................................11.03
(iii)(c).........................................................11.03
313(a)...........................................................7.06
(b)(1)...........................................................10.03
(b)(2)...........................................................7.07
7.06
(c)..............................................................7.06;
11.02
(d)..............................................................7.06
314(a)...........................................................4.03;
11.02
(A)(b)...........................................................10.02
(c)(1)...........................................................11.04
(c)(2)...........................................................11.04
(c)(3)...........................................................N.A.
(d)..............................................................10.03,
10.04, 10.05(1)
(iv)(e)..........................................................11.05
(f)..............................................................NA
315(a)...........................................................7.01
(b)..............................................................7.05,
11.02
(A)(c)...........................................................7.01
(d)..............................................................7.01
(e)..............................................................6.11
316(a)(last sentence)............................................2.09
(a)(1)(A)........................................................6.05
(a)(1)(B)........................................................6.04
</TABLE>
- ----------
(1) References to sections of Article 10 are appropriate only if you have a
secured deal.
<PAGE> 3
<TABLE>
<S> <C>
(a)(2)...........................................................N.A.
(b)..............................................................6.07
(B)(c)...........................................................2.12
317(a)(1)........................................................6.08
(a)(2)...........................................................6.09
(b)..............................................................2.04
318(a)...........................................................11.01
(b)..............................................................N.A.
(c)..............................................................11.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
2
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE..............................................................1
Section 1.01 Definitions.................................................................................1
Section 1.02 Other Definitions..........................................................................17
Section 1.03 Terms in the TIA...........................................................................17
Section 1.04 Rules of Construction......................................................................18
ARTICLE 2 THE NOTES..............................................................................................18
Section 2.01 Form and Dating............................................................................18
Section 2.02 Execution and Authentication...............................................................19
Section 2.03 Registrar and Paying Agent.................................................................21
Section 2.04 Paying Agent to Hold Money in Trust........................................................22
Section 2.05 Holder Lists...............................................................................22
Section 2.06 Transfer and Exchange......................................................................22
Section 2.07 Replacement Notes..........................................................................33
Section 2.08 Outstanding Notes..........................................................................34
Section 2.09 Treasury Notes.............................................................................34
Section 2.10 Temporary Notes............................................................................34
Section 2.11 Cancellation...............................................................................35
Section 2.12 Defaulted Interest.........................................................................35
ARTICLE 3 REDEMPTION AND PREPAYMENT..............................................................................35
Section 3.01 Notices to Trustee.........................................................................35
Section 3.02 Selection of Notes to Be Redeemed..........................................................35
Section 3.03 Notice of Redemption.......................................................................36
Section 3.04 Effect of Notice of Redemption.............................................................36
Section 3.05 Deposit of Redemption Price................................................................36
Section 3.06 Notes Redeemed in Part.....................................................................37
Section 3.07 Optional Redemption........................................................................37
Section 3.08 Mandatory Redemption.......................................................................38
Section 3.09 Offer to Purchase by Application of Excess Proceeds........................................38
ARTICLE 4 COVENANTS..............................................................................................39
Section 4.01 Payment of Notes...........................................................................39
Section 4.02 Maintenance of Office or Agency............................................................40
Section 4.03 Reports....................................................................................40
Section 4.04 Compliance Certificate.....................................................................41
Section 4.05 Taxes......................................................................................41
Section 4.06 Stay, Extension and Usury Laws.............................................................41
Section 4.07 Restricted Payments........................................................................42
Section 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries.............................44
Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock.................................44
Section 4.10 Asset Sales................................................................................47
Section 4.11 Transactions with Affiliates...............................................................47
Section 4.12 Liens......................................................................................48
Section 4.13 Line of Business...........................................................................48
Section 4.14 Corporate Existence........................................................................48
Section 4.15 Offer to Repurchase Upon Change of Control.................................................48
Section 4.16 Special Mandatory Redemption...............................................................50
Section 4.17 Special offer to Purchase..................................................................50
Section 4.18 Limitation on Sale and Leaseback Transactions..............................................51
</TABLE>
i
<PAGE> 5
<TABLE>
<S> <C>
Section 4.19 Limitation on Issuances and Sales of Capital Stock of Wholly Owned Subsidiaries............51
Section 4.20 Limitation on Issuances of Guarantees of Indebtedness By Subsidiaries......................51
Section 4.21 Payments for Consent.......................................................................52
Section 4.22 Limitation on Issuances and Sales of Capital Stock of the Company..........................52
ARTICLE 5 SUCCESSORS.............................................................................................53
Section 5.01 Merger, Consolidation, or Sale of Assets...................................................53
Section 5.02 Successor Corporation Substituted..........................................................53
ARTICLE 6 DEFAULTS AND REMEDIES..................................................................................54
Section 6.01 Events of Default..........................................................................54
Section 6.02 Acceleration...............................................................................56
Section 6.03 Other Remedies.............................................................................56
Section 6.04 Waiver of Past Defaults....................................................................57
Section 6.05 Control by Majority........................................................................57
Section 6.06 Limitation on Suits........................................................................57
Section 6.07 Rights of Holders of Notes to Receive Payment..............................................58
Section 6.08 Collection Suit by Trustee.................................................................58
Section 6.09 Trustee May File Proofs of Claim...........................................................58
Section 6.10 Priorities.................................................................................58
Section 6.11 Undertaking for Costs......................................................................59
ARTICLE 7 TRUSTEE................................................................................................59
Section 7.01 Duties of Trustee..........................................................................59
Section 7.02 Rights of Trustee..........................................................................60
Section 7.03 Individual Rights of Trustee...............................................................61
Section 7.04 Trustee's Disclaimer.......................................................................61
Section 7.05 Notice of Defaults.........................................................................61
Section 7.06 Reports by Trustee to Holders of the Notes.................................................61
Section 7.07 Compensation and Indemnity.................................................................61
Section 7.08 Replacement of Trustee.....................................................................62
Section 7.09 Successor Trustee by Merger, etc...........................................................63
Section 7.10 Eligibility; Disqualification..............................................................63
Section 7.11 Preferential Collection of Claims Against Company..........................................63
Section 7.12 Appointment of Trustee.....................................................................64
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE...............................................................64
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance...................................64
Section 8.02 Legal Defeasance and Discharge.............................................................64
Section 8.03 Covenant Defeasance........................................................................65
Section 8.04 Conditions to Legal or Covenant Defeasance.................................................65
Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous
Provisions.................................................................................66
Section 8.06 Repayment to Company.......................................................................67
Section 8.07 Reinstatement..............................................................................67
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER.......................................................................67
Section 9.01 Without Consent of Holders of Notes........................................................67
Section 9.02 With Consent of Holders of Notes...........................................................68
Section 9.03 Compliance with Trust Indenture Act........................................................69
Section 9.04 Revocation and Effect of Consents..........................................................69
Section 9.05 Notation on or Exchange of Notes...........................................................70
Section 9.06 Trustee to Sign Amendments, etc............................................................70
ARTICLE 10 COLLATERAL AND SECURITY...............................................................................71
</TABLE>
ii
<PAGE> 6
<TABLE>
<S> <C>
Section 10.01 Proceeds Pledge and Escrow Agreement.......................................................71
Section 10.02 Recording and Opinions.....................................................................71
Section 10.03 Release of Pledged Securities or Collateral Funds..........................................72
Section 10.04 Certificates of the Company................................................................72
Section 10.05 Authorization of Actions to Be Taken by the Trustee Under the Proceeds Pledge and Escrow
Agreement..................................................................................73
Section 10.06 Authorization of Receipt of Funds by the Trustee Under the Proceeds Pledge and Escrow
Agreement..................................................................................73
Section 10.07 Termination of Security Interest...........................................................73
ARTICLE 11 MISCELLANEOUS.........................................................................................73
Section 11.01 Trust Indenture Act Controls...............................................................73
Section 11.02 Notices....................................................................................73
Section 11.03 Communication by Holders of Notes with Other Holders of Notes..............................75
Section 11.04 Certificate and Opinion as to Conditions Precedent.........................................75
Section 11.05 Statements Required in Certificate or Opinion..............................................75
Section 11.06 Rules by Trustee and Agents................................................................75
Section 11.07 No Personal Liability of Directors, Officers, Employees and Stockholders...................76
Section 11.08 Governing Law..............................................................................76
Section 11.09 No Adverse Interpretation of Other Agreements..............................................76
Section 11.10 Successors.................................................................................76
Section 11.11 Severability...............................................................................76
Section 11.12 Counterpart Originals......................................................................76
Section 11.13 Table of Contents, Headings, etc...........................................................76
</TABLE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF SUPPLEMENTAL INDENTURE
iii
<PAGE> 7
INDENTURE dated as of October 27, 1997 between InterAmericas
Communication Corporation, a Texas corporation (the "Company"), and State Street
Bank and Trust Company, N.A., as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the 14%
Series A Senior Notes due 2007 (the "Series A Notes") and the 14% Series B
Senior Notes due 2007 (the "Series B Notes" and, together with the Series A
Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided, that beneficial ownership of 5% or more of the voting securities of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than in the ordinary course of business (provided that
the sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company and its Subsidiaries taken as a whole will be governed
by Sections 4.15 or 5.01 and not by Section 4.10 hereof, and (ii) the issue or
sale by the Company or any of its Subsidiaries of Equity Interests of any of the
Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $1.0
<PAGE> 8
million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
foregoing: (i) a transfer of assets by the Company to a Wholly Owned Restricted
Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to
another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity Interests
by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly
Owned Restricted Subsidiary, (iii) a Restricted Payment that is permitted by
Section 4.07 hereof, and (iv) sales of property or equipment that has become
worn out, obsolete or damaged or otherwise unsuitable for use in connection with
the business of the Company or any Restricted Subsidiary, as the case may be,
will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company, or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any domestic commercial
bank having capital and surplus in excess of $500 million and a Thompson
Bankwatch, Inc. rating of "B" or better, (iv) repurchase obligations with a term
of not more than seven days for underlying securities of the types described in
clauses (ii) and (iii) above entered into with any financial institution meeting
the qualifications specified in clause (iii) above and (v) commercial paper
having the highest rating obtainable from either Moody's Investors Service, Inc.
or Standard & Poor's Corporation and, in each case, maturing within six months
after the date of acquisition.
"Cedel" means Cedel Bank, SA.
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<PAGE> 9
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries, taken as a whole, to any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act), (ii) the sale, lease, transfer,
conveyance or other disposition (other than to the Company or a Wholly Owned
Restricted Subsidiary of the Company), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries, taken as a whole, that are related or ancillary to the
business conducted by the Company and its Restricted Subsidiaries in Peru to any
"person" (as defined above), (iii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iv) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than the
Principals and their Related Parties, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 35% of the Voting Stock of the
Company (measured by voting power rather than number of shares) or (v) the first
day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors.
"Collateral Funds" has the meaning given to it in the Proceeds
Pledge and Escrow Agreement.
"Collateral Subaccount" has the meaning given to it in the
Proceeds Pledge and Escrow Agreement.
"Company" means InterAmericas Communications Corporation, a
Texas corporation, and any and all successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
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<PAGE> 10
amortization and other non-cash charges of, a Restricted Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior governmental approval (that has not been
obtained), pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Indebtedness" means, with respect to any Person
as of any date of determination, the sum, without duplication, of (i) the total
amount of Indebtedness of such Person and its Restricted Subsidiaries, plus (ii)
the total amount of Indebtedness of any other Person, to the extent that such
Indebtedness has been guaranteed by the referent Person or one or more of its
Restricted Subsidiaries, plus (iii) the aggregate liquidation value of all
Disqualified Stock of such Person and all preferred stock of Restricted
Subsidiaries of such Person, in each case, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of any
Person that is not a Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (which
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Company or one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this
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<PAGE> 11
Indenture or (ii) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Facility" means, with respect to the Company or any of
its Restricted Subsidiaries, one or more debt facilities or commercial paper
facilities with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Current Market Value" means, with respect to any shares of
Qualified Capital Stock, (i) the last reported bid price of such Qualified
Capital Stock on the principal national securities exchange on which such
Qualified Capital Stock is then being traded on the fifth Business Day following
the consummation of the acquisition of the applicable Permitted Business or (ii)
if such Qualified Capital Stock is not then listed or traded on a national
securities exchange, the value as determined in good faith by the board of
directors of the issuer of such Qualified Capital Stock (whose determination
shall be supported by a concurring valuation opinion from a nationally
recognized investment banking firm if such Current Market Value exceeds $5.0
million).
"Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Debt to Cash Flow Ratio" means, as of any date of
determination, the ratio of (a) the Consolidated Indebtedness of the Company as
of such date to (b) the Consolidated Cash Flow of the Company for the four most
recent full fiscal quarters ending immediately prior to such date for which
internal financial statements are available, determined on a pro forma basis
after giving effect to all acquisitions or dispositions of assets made by the
Company and its Restricted Subsidiaries from the beginning of such four-quarter
period through and including such date of determination (including any related
financing transactions) as if such acquisitions and dispositions had occurred at
the beginning of such four-quarter period. In addition, for purposes of
calculating Consolidated Cash Flow for the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the date on which the
event for which the calculation of the Debt to Cash Flow Ratio is made (the
"Calculation Date") shall be deemed to have occurred on the first day of the
four-quarter reference period and Consolidated Cash Flow for such reference
period shall be calculated without giving effect to clause (iii) of the proviso
set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
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<PAGE> 12
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof, in
the form of Exhibit A hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Equity Proceeds" means any net cash proceeds
received by the Company after the date of this Indenture from the issuance and
sale of its Qualified Capital Stock (other than Qualified Capital Stock sold to
a Subsidiary of the Company) providing the basis for (i) a redemption of Notes
in a transaction consummated in compliance with Section 3.07(b) hereof, (ii) an
addition to the cumulative account calculated pursuant to clause (C) of Section
4.07(a) hereof, (iii) the incurrence of additional Indebtedness pursuant to
clause (v) of Section 4.09(b) hereof or (iv) an Investment pursuant to clause
(f) of the definition of "Permitted Investments," in each case, as designated by
a written resolution of the Board of Directors of the Company filed with the
Trustee on or prior to the date on which such net cash proceeds are received by
the Company. In no event shall the same net cash proceeds be treated as
Designated Equity Proceeds for more than one purpose under this Indenture. Once
designated for a particular purpose, such net cash proceeds may not be
redesignated for an alternative purpose. In addition, to the extent that any
such Qualified Capital Stock ceases to be outstanding for any reason, any
Indebtedness, Restricted Payment or Investment that was incurred or made as a
result of the receipt of net cash proceeds from the issuance of such Qualified
Capital Stock shall cease (as of the date on which such Qualified Capital Stock
ceases to be outstanding) to be permitted by virtue of the issuance of such
Qualified Capital Stock.
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the Holder thereof, in whole or in part, on or prior
to the date that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Escrow Account" has the meaning given to it in the Proceeds
Pledge and Escrow Agreement.
"Escrow Funds" has the meaning given to it in the Proceeds
Pledge and Escrow Agreement.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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<PAGE> 13
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Existing Indebtedness" means up to $1.0 million in aggregate
principal amount of (a) Indebtedness of the Company and its Restricted
Subsidiaries in existence on the date of this Indenture and (b) Acquired Debt
incurred by the Company and its Restricted Subsidiaries in connection with the
Iusatel Acquisition, until such amounts are repaid.
"Fair Market Value" means, with respect to assets, Equity
Interests or any other securities having a fair market value (a) of less than
$5.0 million, the fair market value of such assets, Equity Interests or any
other securities determined in good faith by the Board of Directors of the
Company (including a majority of the Independent Directors thereof) and
evidenced by a board resolution and (b) equal to or in excess of $5.0 million,
the fair market value of such assets, Equity Interests or any other securities
as determined by an investment banking firm of national standing; provided that
the fair market value of the assets purchased in an arm's-length transaction by
an Affiliate of the Company (other than a Subsidiary) from a third party that is
not also an Affiliate of the Company or such purchaser and contributed to the
Company within five Business Days of the consummation of the acquisition of such
assets by such Affiliate shall be deemed to be the aggregate consideration paid
by such Affiliate (which may include the fair market value of any non-cash
consideration to the extent that the valuation requirements of this definition
are complied with as to any such non-cash consideration); provided, further,
that the fair market value of Equity Interests issued and sold to the public in
a registered public offering or to one or more Strategic Equity Investors shall
be deemed to be the aggregate cash consideration paid to the Company in such
public offering or by such Strategic Equity Investors.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
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<PAGE> 14
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements and other agreements and
arrangements designed to protect such Person against fluctuations in interest
rates and (ii) foreign exchange swap agreements, foreign exchange option
agreements, foreign exchange futures agreements and other agreements and
arrangements designed to protect such Person against fluctuations in foreign
currency exchange rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the guarantee by such Person of any indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness that does not
require current payments of interest, and (ii) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Purchaser" means UBS Securities LLC.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who are not also QIBs.
"Interest Reserve Funds" has the meaning given to it in the
Proceeds Pledge and Escrow Agreement.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect
8
<PAGE> 15
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in
Section 4.07(d) hereof.
"Iusatel Acquisition" means the acquisition by the Company of
the outstanding capital stock of Iusatel Chile, S.A.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions),
or (b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries, and (ii) any extraordinary or nonrecurring gain
(but not loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness in connection with such Asset Sale, and any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness of an Unrestricted
Subsidiary (i) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including
9
<PAGE> 16
any undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable (as a guarantor or otherwise) or (c)
constitutes the lender; (ii) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Indebtedness (other than the Notes being offered hereby) of
the Company or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and (iii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or assets
of the Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Offering Memorandum" means the final offering memorandum,
dated October 21, 1997, relating to the Company and the Units.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is not unsatisfactory to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means any Telecommunications Business
that operates primarily in Latin American or Caribbean markets or any
Telecommunications Business reasonably related or ancillary thereto.
"Permitted Investments" means (a) any Investment in the
Company or in a Wholly Owned Restricted Subsidiary of the Company that is
engaged in a Permitted Business; (b) any
10
<PAGE> 17
Investment in Cash Equivalents; (c) any Investment by the Company in a Person,
if as a result of such Investment (i) such Person becomes a Wholly Owned
Restricted Subsidiary of the Company that is engaged in a Permitted Business or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Restricted Subsidiary of the Company and that is
engaged in a Permitted Business; (d) any Restricted Investment made as a result
of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with Section 4.10 hereof; (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) Investments (measured as of the time
made and without giving effect to subsequent changes in value) in a Person
engaged in a Permitted Business, having an aggregate fair market value (measured
on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (f) that are at the time outstanding, not to exceed
the sum of (A) $5.0 million plus (B) 100% of the aggregate net cash proceeds
received by the Company after the date of this Indenture from the issuance and
sale of its Qualified Capital Stock to the extent that such net cash proceeds
have been, and continue to be, designated as Designated Equity Proceeds to be
applied to make Investments pursuant to this clause (f) as provided in the
definition thereof; provided that, to be extent that any such Qualified Capital
Stock ceases to be outstanding for any reason, any Investment that was made as a
result of the receipt of net cash proceeds from the issuance of such Qualified
Capital Stock shall cease to be permitted by virtue of this clause (f) as of the
date on which such Qualified Capital Stock ceases to be outstanding; (g) any
Investment in prepaid expenses, negotiable instruments held for collection, and
lease, utility, workers' compensation, performance and other similar deposits;
(h) loans and advances to employees made in the ordinary course of business in
an aggregate amount not to exceed $1.0 million at any one time outstanding; and
(i) Investments made in connection with Hedging Obligations.
"Permitted Liens" means, without duplication, each of the
following:
(i) Liens in favor of the Company or any of its Wholly Owned
Restricted Subsidiaries;
(ii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or such Restricted Subsidiary;
(iii) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the Company, provided
that such Liens were in existence prior to the contemplation of such
acquisition;
(iv) Liens existing on the date of this Indenture;
(v) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business;
(vi) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor;
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<PAGE> 18
(vii) Liens securing Indebtedness of any Restricted
Subsidiary of the Company that does not exceed $5.0 million at any one time
outstanding represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of such Restricted Subsidiary;
(viii) Liens on assets of Unrestricted Subsidiaries that
secure Non-Recourse Debt of Unrestricted Subsidiaries;
(ix) Liens created pursuant to the Proceeds Pledge and
Escrow Agreement;
(x) Liens incurred in the ordinary course of business of
the Company or any Restricted Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Restricted Subsidiary;
(xi) Liens securing the Notes;
(xii) easements, rights-of-way, zoning and similar
restrictions and other similar encumbrances or title defects which, in the
aggregate, are not material in amount, and which do not, in any case, materially
detract from the value of the property subject thereto (as such property is used
by the Company or any of its Restricted Subsidiaries) or interfere with the
ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries;
(xiii) Liens arising by reason of any judgment, decree or
order or any court so long as such Lien is adequately bonded and any appropriate
legal proceedings that may have been initiated for the review of such judgment,
decree or order shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired;
(xiv) any interest or title of a lessor under any Capital
Lease Obligation; and
(xv) any extension, renewal or replacement, in whole or in
part, of any Permitted Lien, provided that any such extension, renewal or
replacement shall be no more restrictive in any material respects that the Lien
so extended, renewed or replaced and shall not extend to any additional property
or assets.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Subsidiaries; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the
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<PAGE> 19
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Pledged Collateral" means the Collateral (as defined in the
Proceeds Pledge and Escrow Agreement) under the Proceeds Pledge and Escrow
Agreement.
"Principals" means Patricio E. Northland, the current
President of the Company, and Douglas G. Geib II, the current Chief Financial
Officer of the Company.
"Proceeds Pledge and Escrow Agreement" means the Proceeds
Pledge and Escrow Agreement, dated as of the date of this Indenture, by and
between the Company and the Trustee governing the disbursement of funds from the
Escrow Account.
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of October 27, 1997, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a global Note bearing the
Private Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"Related Party" with respect to any Principal means (A) any
controlling stockholder, 80% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (B) or trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
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<PAGE> 20
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means any Investment other than a
Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of
the referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Note" has the meaning assigned to it in the preamble
to this Indenture.
"Series B Note" has the meaning assigned to it in the preamble
to this Indenture.
"Separation Date" means the earliest to occur of (i) April 27,
1998; (ii) such earlier date as may be determined by the Initial Purchaser;
(iii) the occurrence of a Change of Control; and (iv) the date of effectiveness
of the Exchange Offer Registration Statement.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
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<PAGE> 21
"Strategic Equity Investor" means a corporation, partnership
or other entity engaged in one or more Telecommunications Businesses that has,
or 80% or more of the voting power of the Capital Stock of which is owned by a
Person that has an equity market capitalization, at the time of its initial
Investment in the Company, in excess of $2.0 billion.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity (x) of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) or (y) which such Person either alone or
together with one or more Restricted Subsidiaries of such Person has the
absolute right, pursuant to law, contract or otherwise, to direct the payment of
dividends or the making of other distributions, loans or advances by such
corporation, association or other business entity 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 of one or more Subsidiaries of such Person (or any combination
thereof).
"Subsidiary Guarantee" means any guarantee of payment of the
Notes by a Subsidiary issued by such Subsidiary pursuant to Section 4.19 hereof.
"Telecommunications Business" means any business that derives
substantially all of its revenue from the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data through
owned or leased transmission facilities, (ii) creating, developing or marketing
communications related network equipment for use in a telecommunications
business or (iii) evaluating, participating in or pursuing any other activity or
opportunity that is primarily related to those identified in (i) or (ii) above;
provided that the determination of what constitutes a Telecommunications
Business shall be made in good faith by the Board of Directors of the Company.
"TIA" means the Trust Indenture Act of 1939, as amended, (15
U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture
is qualified under the TIA.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Units" means the Company's units, each consisting of $1,000
principal amount of Notes and 35 Warrants, each Warrant representing the right
to purchase one share of Common Stock of the Company.
"Unrestricted Global Note" means a permanent global Note in
the form of Exhibit A attached hereto that bears the Global Note Legend and that
has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
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<PAGE> 22
"Unrestricted Subsidiary" means any Subsidiary (other than any
Subsidiary of the Company that owns all or a material portion of the assets (i)
owned by the Company or any Subsidiary of the Company on the date of the
Indenture or (ii) owned by any Person described in the Offering Memorandum under
the caption "The Iusatel Acquisition" on the date of the acquisition by the
Company of such Person) that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent
that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b)
is not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by Section 4.07 hereof. If, at any time,
any Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09 hereof, the Company shall be in
default of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Warrants" means the Company's warrants, issued on the date
hereof as part of the Units.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
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<PAGE> 23
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than (i) directors' qualifying shares
or (ii) shares of non-U.S. Restricted Subsidiaries held by non-U.S. nationals as
required by the laws of the jurisdiction of incorporation of such non-U.S.
Restricted Subsidiary) shall at the time be owned by such Person or by one or
more Wholly Owned Restricted Subsidiaries of such Person; provided, that no
Restricted Subsidiary of such Person, all of the outstanding Capital Stock or
other ownership interests of which are not owned by such Person, shall in any
case be a "Wholly Owned Restricted Subsidiary" under this Indenture unless such
Person either alone or together with one or more Wholly Owned Restricted
Subsidiaries of such Person has the absolute right, pursuant to law, contract or
otherwise, to direct the payment of dividends or the making of other
distributions, loans or advances by such Restricted Subsidiary.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"........................................4.11
"Asset Sale Offer".............................................3.09
"Authentication Order".........................................2.02
"Change of Control Offer"......................................4.15
"Change of Control Payment"....................................4.15
"Change of Control Payment Date" ..............................4.15
"Covenant Defeasance"..........................................8.03
"Event of Default".............................................6.01
"Excess Proceeds"..............................................4.10
"incur"........................................................4.09
"Legal Defeasance" ............................................8.02
"Offer Amount".................................................3.09
"Offer Period".................................................3.09
"Options"......................................................4.22
"Paying Agent".................................................2.03
"Permitted Debt"...............................................4.09
"Purchase Date"................................................3.09
"Registrar"....................................................2.03
"Restricted Payments"..........................................4.07
"Special Mandatory Redemption".................................4.16
"Special Mandatory Redemption Date"............................4.16
"Special Offer to Purchase"....................................4.17(a)
"Special Offer to Purchase Payment"............................4.17(a)
"Special Offer to Purchase Payment Date".......................4.17(a)
"Special Offer to Purchase Trigger Date".......................4.17(a)
"Unit Legend"..................................................2.06(g)(iii)
</TABLE>
SECTION 1.03. TERMS IN THE TIA
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
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<PAGE> 24
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in
the plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute,
replacement of successor sections or rules adopted by the SEC
from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The Notes
may have notations, legends or endorsements required by law, stock exchange rule
or usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
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<PAGE> 25
However, to the extent any provision of any Note conflicts with the express
provisions of this Indenture, the provisions of this Indenture shall govern and
be controlling.
(b) Global Notes. Notes issued in global form shall be
substantially in the form of Exhibit A attached hereto (including the Global
Note Legend thereon and the "Schedule of Exchanges of Interests in the Global
Note" attached thereto). Notes issued in definitive form shall be substantially
in the form of Exhibit A attached hereto (but without the Global Note Legend
thereon and without the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Each Global Note shall represent such of the outstanding
Notes as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Notes from time to time
endorsed thereon and that the aggregate principal amount of outstanding Notes
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Note to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Notes represented thereby shall be made by the
Trustee or the Note Custodian, at the direction of the Trustee, in accordance
with instructions given by the Holder thereof as required by Section 2.06
hereof.
(c) Euroclear and Cedel Procedures Applicable. The provisions
of the "Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and may
be in facsimile form.
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by an Officer (an "Authentication Order"), authenticate Notes for original issue
up to the aggregate principal amount of $150.0 million. The aggregate principal
amount of Notes outstanding at any time may not exceed such amount except as
provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
All Notes issued prior to the separation described below shall
have printed or overprinted thereon the following (the "Warrant Endorsement"):
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<PAGE> 26
"THE NOTES EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE SEPARATELY FROM
THE WARRANTS ATTACHED HERETO ORIGINALLY SOLD AS A UNIT WITH THE NOTES UNTIL THE
EARLIEST OF (I) APRIL 27, 1998; (II) SUCH EARLIER DATE AS MAY BE DETERMINED BY
UBS SECURITIES LLC; (III) THE OCCURRENCE OF A CHANGE OF CONTROL (AS DEFINED IN
THE INDENTURE); AND (IV) THE DATE OF EFFECTIVENESS OF THE EXCHANGE OFFER
REGISTRATION STATEMENT (AS DEFINED IN THE INDENTURE) (SUCH EARLIEST DATE, THE
"SEPARATION DATE"). PRIOR TO SUCH DATE, THE NOTES EVIDENCED BY THIS CERTIFICATE
MAY BE TRANSFERRED ONLY IN INTEGRAL MULTIPLES OF $1,000 PRINCIPAL AMOUNT OF
NOTES AND ONLY WITH THE SIMULTANEOUS TRANSFER TO THE TRANSFEREE OF 35 WARRANTS
FOR EACH $1,000 PRINCIPAL AMOUNT SO TRANSFERRED.
Under the terms of the warrant agreement relating to the Warrants (the "Warrant
Agreement), the holder of this security may at any time on or after the
Separation Date, at its option, by notice to the Trustee elect to separate or
separately transfer the Notes and the Warrants represented hereby, in whole or
in part, and shall thereafter surrender this security to the Trustee for the
exchange of this security, in part, for such Warrant or Warrants and for a Note
or Notes of a like aggregate principal amount and of authorized denominations
not bearing this Warrant Endorsement; provided no delay or failure on the part
of the Trustee or the Warrant Agent to exchange this security for such Warrant
or Warrant and Note or Notes shall affect the separation of such Notes and
Warrants represented hereby or their separate transferability. Until such
separation, the holder of this security is, for each $1,000 principal amount of
Notes, also the record owner of 35 Warrants expiring October 27, 2007, each
Warrant to purchase one share of Common Stock of the Company, par value $.001
per share (subject to adjustment as provided in the Warrant Agreement). The
Company has deposited with the Trustee, as custodian for the Holder of the Notes
bearing this Warrant Endorsement, a certificate or certificates for such
Warrants to purchase an aggregate of 5,250,000 shares of Common Stock (subject
to adjustment as provided in the Warrant Agreement). Prior to the separation of
the Notes and the Warrants as described above, record ownership of such Warrants
is transferable only by the transfer of this Note on the Note register
maintained by the Company pursuant to the Indenture. After such separation,
ownership of a Warrant is transferable only by the transfer of the certificate
representing such Warrant in accordance with the provisions of the Warrant
Agreement.
By accepting a security bearing this Warrant Endorsement, each holder of this
security shall be bound by all of the terms and provisions of the Warrant
Agreement (a copy of which is available on request to the Company or the Warrant
Agent).
Election to Exercise. On or after the Separation Date, the Warrants may be
exercised by obtaining from the Trustee, as custodian for Holders of securities
bearing this Warrant Endorsement, the required forms of election to exercise,
declaration form and instructions for payment of the Exercise Price (as such
term is defined in the Warrant Agreement). Upon receiving the required forms and
payment of such Exercise Price, the Trustee as custodian for the Holder of the
security bearing this Warrant Endorsement, shall exercise such Warrants in
accordance with the provisions of the Warrant Agreement.
Election of Exchange. The undersigned registered holder of the security
represented hereby irrevocably elects to separate its Notes and Warrants and to
exchange this security (representing ownership of
20
<PAGE> 27
___________ Warrants evidenced by Warrant Certificates deposited with the
Trustee) for a new Note in the principal amount hereof and a Warrant Certificate
in the amount of said _________ Warrants.
The undersigned hereby irrevocably instructs the Trustee (A) to issue in the
name of the undersigned registered holder a new Note (CUSIP ________) not
containing the above Warrant Endorsement in the principal amount equal to the
principal amount hereof and (B) to deliver this security to the Warrant Agent
pursuant to the provisions of the Warrant Agreement with instructions to issue
in the name of the undersigned registered holder a Warrant certificate (CUSIP
________) representing the number of Warrants equal to the number of Warrants
represented by this security and to issue a new Warrant Certificate to replace
the Warrant Certificate held on deposit by the Trustee as custodian representing
the number of Warrants equal to the difference between (x) the number of
Warrants represented by the Warrant Certificate so held on deposit and (y) the
number of Warrants represented by this Security.
Dated:
Name of Holder of this security: ______________________
Address: ______________________
______________________
Signature: _____________________
Note: The above signature must correspond with the name as
written upon the face of this security in every particular,
without alteration or enlargement whatever and if the
certificate representing any principal amount at maturity of
this security or the associated Warrants is to be registered
in a name other than that in which this security is
registered."
Until any Note and the Warrant with which it is initially
issued are separated or separately transferred pursuant to the terms of the
Warrant Endorsement, the Trustee shall hold such Warrant as custodian on behalf
of such Note bearing such legends.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
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<PAGE> 28
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, interest, premium or Liquidated Damages, if any, on the
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, by the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. All Global Notes will be exchanged by the
Company for Definitive Notes if (i) the Company delivers to the Trustee notice
from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth
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herein to the extent required by the Securities Act. Transfers of beneficial
interests in the Global Notes also shall require compliance with either
subparagraph (i) or (ii) below, as applicable, as well as one or more of the
other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global
Note. Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in accordance
with the transfer restrictions set forth in the Private Placement
Legend; provided, however, that prior to the expiration of the
Restricted Period, transfers of beneficial interests in the Regulation
S Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than the Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial
Interests in Global Notes. In connection with all transfers and
exchanges of beneficial interests that are not subject to Section
2.06(b)(i) above, the transferor of such beneficial interest must
deliver to the Registrar either (A) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
credit or cause to be credited a beneficial interest in another Global
Note in an amount equal to the beneficial interest to be transferred
or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order
from a Participant or an Indirect Participant given to the Depositary
in accordance with the Applicable Procedures directing the Depositary
to cause to be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2)
instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note
shall be registered to effect the transfer or exchange referred to in
(1) above. Upon consummation of an Exchange Offer by the Company in
accordance with Section 2.06(f) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon
receipt by the Registrar of the instructions contained in the Letter
of Transmittal delivered by the Holder of such beneficial interests in
the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in
Global Notes contained in this Indenture and the Notes or otherwise
applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section
2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof;
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(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Global Note, then
the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2)
thereof; and
(C) if the transferee will take delivery in the form
of a beneficial interest in the IAI Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications and certificates and
Opinion of Counsel required by item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Series B Notes or (3)
a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to exchange such
beneficial interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests or if the
Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer
required in order to maintain compliance with the
Securities Act.
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If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in
a Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B
hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
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(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to
Section 2.06(h) hereof, and the Company shall execute and the
Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the
appropriate principal amount. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.06(c) shall be registered in such
name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in
whose names such Notes are so registered. Any Definitive Note
issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c)(i) shall bear the
Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the
case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating
in the distribution of the Series B Notes or (3) a Person who
is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form of a Definitive
Note that does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit B hereto, including the certifications in item (4)
thereof;
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and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant
to Section 2.06(h) hereof, and the Company shall execute and the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant
to this Section 2.06(c)(iii) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of
such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Notes
to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
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(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (c)
above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Series B Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(c) thereof;
or
(2) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
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and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive
Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance
with the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a
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<PAGE> 36
certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required
by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Series B Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for an Unrestricted
Definitive Note, a certificate from such Holder in the form of Exhibit
C hereto, including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in
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an aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Series B
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Note and each Definitive Note (and all Notes
issued in exchange therefor or substitution thereof) shall
bear the legend in substantially the following form:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE ACT) OR (B) IT IS AN "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE ACT)
(AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL
NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, (C) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (D)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE), (E) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE ACT, (F) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE) OR
(G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE PURSUANT TO
CLAUSES (D), (F) AND (G) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
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CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS ANY OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE
REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE ACT.
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)
to this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE,
(II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE
MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF INTERAMERICAS
COMMUNICATIONS CORPORATION."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Company's order or at the Registrar's
request.
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(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15
and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such registration
of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and ending
at the close of business on the day of selection, (B) to register the
transfer of or to exchange any Note so selected for redemption in whole
or in part, except the unredeemed portion of any Note being redeemed in
part or (c) to register the transfer of or to exchange a Note between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes, and
none of the Trustee, any Agent or the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the Trustee's requirements are met. If required by the Trustee or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may suffer
if a Note is replaced. The Company may charge for its expenses in replacing a
Note.
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Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Note effected
by the Trustee in accordance with the provisions hereof, and those described in
this Section as not outstanding. Except as set forth in Section 2.09 hereof, a
Note does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
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SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects or is required to redeem Notes pursuant
to the redemption provisions of Section 3.07, 4.10, 4.15, 4.16, or 4.17 hereof,
it shall furnish to the Trustee, at least 45 days but not more than 60 days
before a redemption date, an Officers' Certificate setting forth (i) the clause
of this Indenture pursuant to which the redemption shall occur, (ii) the
redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the
redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed at any time,
selection of Notes for redemption will be made by the Trustee in compliance with
the requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. Notices of redemption may not be conditional. If any Note is
to be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof will be issued
in the name of the Holder thereof upon cancellation of the original Note. Notes
called for redemption become due on the date fixed for redemption. On and after
the redemption date, interest ceases to accrue on Notes or portions of them
called for redemption.
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SECTION 3.03. NOTICE OF REDEMPTION
Subject to the provisions of Sections 3.09 and 4.16 hereof, at
least 30 days but not more than 60 days before a redemption date, the Company
shall mail or cause to be mailed, by first class mail, a notice of redemption to
each Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) in the case of an Asset Sale Offer, if any Note is being redeemed
in part, the portion of the principal amount of such Note to be redeemed and
that, after the redemption date upon surrender of such Note, a new Note or Notes
in principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the
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Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon receipt of an Authentication Order, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to October 27, 2002. Thereafter, the Company shall have the option at any
time to redeem the Notes, in whole or in part, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on October 27 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002..................................................107.000%
2003..................................................104.666%
2004..................................................102.333%
2005 and thereafter...................................100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time on or before October 27,
2000, the Company may on any one or more occasions redeem up to a maximum of
33 1/3% of the aggregate principal amount of Note at a redemption price equal to
114% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the redemption date, with the net cash
proceeds received by the Company after the date of this Indenture from the
issuance and sale of its Qualified Capital Stock to the public in a registered
public offering or to one or more Strategic Equity Investors to the extent that
such net cash proceeds have been, and continue to be, designated as Designated
Equity Proceeds to be used for such purpose as provided in the definition
thereof; provided that at least 66 2/3% of the original aggregate principal
amount of the Note remain outstanding immediately after the occurrence of each
such redemption; and provided, further, that such redemption shall occur within
45 days of the date of the closing of any such public offering or sale to such
Strategic Equity Investors.
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(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth in Section 4.16 hereof, the Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to all Holders to purchase Notes
(an "Asset Sale Offer"), it shall follow the procedures specified below.
(a) The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
(b) If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
(c) Upon the commencement of an Asset Sale Offer, the Company, within
five days of such commencement shall send, by first class mail, a notice to the
Trustee and each of the Holders, with a copy to the Trustee. The notice shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be
made to all Holders. The notice, which shall govern the terms of the Asset Sale
Offer, shall state:
(i) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.10 hereof and the length of time the Asset
Sale Offer shall remain open;
(ii) the Offer Amount, the purchase price and the Purchase
Date;
(iii) that any Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
(iv) that, unless the Company defaults in making such
payment, any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrete or accrue interest after the Purchase
Date;
(v) that Holders electing to have a Note purchased pursuant
to an Asset Sale Offer may only elect to have all of such Note
purchased and may not elect to have only a portion of such Note
purchased;
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(vi) that Holders electing to have a Note purchased pursuant
to any Asset Sale Offer shall be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, or transfer by book-entry transfer, to the
Company, a depositary, if appointed by the Company, or a Paying Agent
at the address specified in the notice at least three days before the
Purchase Date;
(vi) that Holders shall be entitled to withdraw their
election if the Company, the depositary or the Paying Agent, as the
case may be, receives, not later than the expiration of the Offer
Period, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Note the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(vii) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall
select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased); and
(viii) that Holders whose Notes were purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered (or transferred by book-entry
transfer).
(d) On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
(e) Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium,
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if any, and interest then due. The Company shall pay all Liquidated Damages, if
any, in the same manner on the dates and in the amounts set forth in the
Registration Rights Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Trustee and
the Holders of Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on Forms 10-Q or, if
the Company is eligible to file such Form, Form 10-QSB and Form 10-K or, if the
Company is eligible to file such Form, Form 10-KSB if the Company were required
to file such Forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the SEC on Form 8-K if the Company were required to file such reports, in each
case, within the time periods set forth in the SEC's rules and regulations. In
addition, commencing after consummation of the Exchange Offer, whether or not
required by the rules and regulations of the SEC, the Company shall file a copy
of all such information and reports with the SEC for public availability within
the time periods specified in the SEC's rules and regulations (unless the SEC
will not accept such a filing) within the time periods set forth in the SEC's
rules and regulations and make such information available to securities analysts
and prospective investors upon request. The Company shall at all times comply
with TIA Section 314(a).
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(b) For so long as any Notes remain outstanding, the Company shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and the Proceeds Pledge and Escrow Agreement,
and further stating, as to each such Officer signing such certificate, that to
the best of his or her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and the Proceeds
Pledge and Escrow Agreement and is not in default in the performance or
observance of any of the terms, provisions and conditions of this Indenture or
the Proceeds Pledge and Escrow Agreement (or, if a Default or Event of Default
shall have occurred, describing all such Defaults or Events of Default of which
he or she may have knowledge and what action the Company is taking or proposes
to take with respect thereto) and that to the best of his or her knowledge no
event has occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Notes is prohibited or
if such event has occurred, a description of the event and what action the
Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay,
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extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each of its Subsidiaries (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company) to
the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or such Restricted Subsidiary or dividends or distributions payable
to the Company or any Wholly Owned Restricted Subsidiary); (ii) purchase, redeem
or otherwise acquire or retire for value (including without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company; (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Notes, except a payment of interest or principal at Stated Maturity; or (iv)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(A) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(B) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness
(other than Permitted Debt) pursuant to the Debt to Cash Flow Ratio
test set forth in Section 4.09(a); and
(C) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments declared or made after the date
of this Indenture (excluding Restricted Payments permitted by clause
(ii), (iii) or (iv) of Section 4.07(b) hereof), shall not exceed, at
the date of determination, the sum of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing after the
date of this Indenture to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available at
the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus
(ii) an amount equal to the net cash proceeds received by the Company
after the date of the Indenture from the issuance and sale of its
Qualified Capital Stock to the extent such net cash proceeds have been,
and continue to be, designated as Designated Equity Proceeds to be
added to the cumulative amount calculated pursuant to this clause (C)as
provided in the definition thereof, plus (iii) an amount equal to the
net cash proceeds received by the Company from the sale of Disqualified
Stock or debt securities of the Company that have been converted into
Equity Interests
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(other than Equity Interests or convertible debt securities sold to a
Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock), plus (iv) to the extent that any Restricted Investment that was
made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (1) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (2) the initial amount of such Restricted
Investment.
(b) The foregoing provisions shall not prohibit the following
Restricted Payments (i) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration such payment would
have complied with the provisions of this Indenture; (ii) the redemption,
repurchase, retirement, defeasance or other acquisition of any subordinated
Indebtedness or Equity Interests of the Company in exchange for, or out of the
net cash proceeds (other than any such net cash proceeds that constitute
Designated Equity Proceeds) of the substantially concurrent sale (other than to
a Subsidiary of the Company) of, other Equity Interests of the Company (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (C)(ii) of Section
4.07(a) hereof; (iii) the defeasance, redemption, repurchase or other
acquisition of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (v) the payment of cash (in lieu of the issuance
of fractional shares of Common Stock) to holders of Warrants at the time of
exercise of such Warrants as required by the terms of the Warrant Agreement (as
defined herein); (vi) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Restricted
Subsidiary of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement, stock option agreement or other similar agreement;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $250,000 in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction; and (vii) any payments
specifically described in the Offering Memorandum under the caption "Use of
Proceeds."
(c) The amount of all Restricted Payments (other than cash) shall be
the Fair Market Value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this Section 4.07 were computed, together with a copy of any
fairness opinion or appraisal required by this Indenture.
(d) The Board of Directors may designate any Restricted Subsidiary
(other than any Subsidiary of the Company that owns all or a material portion of
the assets (i) owned by the Company or any Subsidiary of the Company on the date
of this Indenture or (ii) owned by any Person described in the Offering
Memorandum under the caption "The Iusatel Acquisition" on the date of the
acquisition by the Company of such Person) to be an Unrestricted Subsidiary if
such designation would not cause a Default. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
Section 4.07(a) hereof. All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the fair market value of such
Investments at the time of
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such designation. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits or (b) pay any indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reasons of (a) the terms of
any Permitted Debt permitted to be incurred by any Restricted Subsidiary of the
Company, (b) Existing Indebtedness as in effect on the date hereof or by reason
of any agreement or instrument in effect on the date hereof, (c) this Indenture
and the Notes, (d) applicable law or regulation, (e) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that in the case of
Indebtedness, such Indebtedness was permitted by the terms hereof, (f) by reason
of customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (g) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, or (h) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced, (i) any mortgage or other Lien on
real property acquired or improved by the Company or any Restricted Subsidiary
after the date of this Indenture that prohibit transfers of the type described
in (iii) above with respect to such real property, (j) any such customary
encumbrance or restriction contained in a security document creating a Permitted
Lien to the extent related to the property or assets subject to such Permitted
Lien, and (k) with respect to a Restricted Subsidiary, an agreement that has
been entered into for the sale or disposition of all or substantially all of the
Company's Equity Interests in, or substantially all of the assets of, such
Restricted Subsidiary.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
(a) The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and that the
Company will not issue any Disqualified Stock and will not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness (including Acquired Debt) and the Company may
issue shares of Disqualified Stock if the Company's Debt to Cash Flow Ratio
would have been no greater than 5.5 to 1, in the case of any such incurrence or
issuance on or before December 31, 2000, or no greater than 5.0 to 1, in the
case of any such incurrence or issuance at any time thereafter, in each case,
determined on a pro forma basis (including a pro forma application of the net
proceeds thereof), as if the additional Indebtedness had been
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incurred, or the Disqualified Stock had been issued, as the case may be, at the
beginning of the applicable four full fiscal quarter period. The Company shall
not incur any Indebtedness that is contractually subordinated to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated to the Senior Notes on substantially identical terms; provided,
however, that no Indebtedness of the Company shall be deemed to be contractually
subordinated to any other Indebtedness of the Company solely by virtue of being
unsecured.
(b) The provisions Section 4.09(a) shall not apply to the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company or its Restricted
Subsidiaries of Indebtedness under Credit Facilities; provided that the
aggregate principal amount of all Indebtedness (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of the Company thereunder) outstanding under all Credit
Facilities after giving effect to such incurrence, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any other Indebtedness incurred pursuant to this clause (i),
does not exceed an amount equal to $40.0 million less the aggregate
amount of all Net Proceeds of Asset Sales that have been applied since
the date of this Indenture to repay Indebtedness under Credit
Facilities (or any such Permitted Refinancing Indebtedness) pursuant to
Section 4.10 hereof, provided, further, that the aggregate principal
amount of Indebtedness at any one time outstanding under Credit
Facilities that is incurred by, or secured by the Capital Stock or
assets of, any Restricted Subsidiary that is located, or that derives
substantially all of its revenue from the conduct of business, in Peru
shall not exceed $15.0 million;
(ii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness
represented by the Notes;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of
assets or a new Restricted Subsidiary; provided that such Indebtedness
was incurred by the prior owner of such assets or such Subsidiary prior
to such acquisition by the Company or such Restricted Subsidiary and
was not incurred in connection with, or in contemplation of, such
acquisition by the Company or such Restricted Subsidiary; and provided
further that the principal amount (or accreted value, as applicable) of
such Indebtedness (or accreted value, as applicable), including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any other Indebtedness incurred pursuant to this clause (iv),
does not exceed $5.0 million at any time outstanding;
(v) Indebtedness of the Company not to exceed, at any one
time outstanding, two times the sum of (A) the Current Market Value as
of the date of issue of any Qualified Capital Stock of the Company
issued to the seller(s) of a Permitted Business as consideration for
the acquisition of such business and (B) the net cash proceeds received
by the Company after the date of this Indenture from the issuance and
sale of its Qualified Capital Stock to the extent that such net cash
proceeds have been, and continue to be, designated as Designated Equity
Proceeds to be used for the purpose of incurring additional
Indebtedness pursuant to this clause (v) as provided in the definition
thereof; provided that, to the extent that any such Qualified Capital
Stock ceases to be outstanding for any reason, any Indebtedness that
was incurred as a result of the receipt of
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net cash proceeds from the issuance of such Qualified Capital Stock
shall cease (as of the date on which such Qualified Capital Stock
ceases to be outstanding) to be permitted by virtue of this clause (v);
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness or Indebtedness
pursuant to a Credit Facility) that was permitted by this Indenture to
be incurred;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company
and any of its Wholly Owned Restricted Subsidiaries; provided, however,
that (A) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in
cash of all Obligations with respect to the Senior Notes and (B)(1) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than the Company or a
Wholly Owned Restricted Subsidiary and (2) any sale or other transfer
of any such Indebtedness to a Person that is not either the Company or
a Wholly Owned Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(viii) the guarantee by the Company of Indebtedness of the
Company or a Restricted Subsidiary of the Company that was permitted to
be incurred by another provision of this covenant;
(ix) the incurrence by the Company's Unrestricted
Subsidiaries of Non-Recourse Debt; provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted
Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company;
(x) Indebtedness of the Company or any Restricted
Subsidiary of the Company (A) in respect of statutory obligations,
performance, surety or appeal bonds or other obligations of a like
nature incurred in the ordinary course of business or (B) under Hedging
Obligations; provided that such agreements (1) are designed solely to
protect the Company or its Restricted Subsidiaries against fluctuations
in foreign currency exchange rates or interest rates and (2) do not
increase the Indebtedness of the obligor outstanding at any time other
than as a result of fluctuations in foreign currency exchange rates or
interest rates or by reason of fees, indemnities and compensation
payable thereunder; and
(xi) the incurrence by the Company of additional
Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
other Indebtedness incurred pursuant to this clause (xi), not to exceed
$5.0 million.
(c) For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xi) of Section
4.09(b) hereof or is entitled to be incurred pursuant to Section 4.09(a) hereof,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 and such item of Indebtedness
will be treated as having been incurred pursuant to only one
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of such clauses of Section 4.09(b) hereof or pursuant to Section 4.09(a) hereof.
Accrual of interest and the accretion of accreted value will not be deemed to be
an incurrence of Indebtedness for purposes of this Section 4.09.
SECTION 4.10. ASSET SALES
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 80% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash;
provided that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Senior Notes or any guarantee thereof)
that are assumed by the transferee of any such assets or Equity Interests
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are immediately converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision.
(b) Within 270 days after the Company's or any Restricted Subsidiary's
receipt of any Net Proceeds from an Asset Sale, the Company or such Restricted
Subsidiary may apply such Net Proceeds, at its option, (i) to repay Indebtedness
under a Credit Facility (and to correspondingly reduce commitments with respect
thereto in the case of revolving borrowings) or (ii) to the acquisition of a
Permitted Business or a controlling interest in a Permitted Business or the
making of a capital expenditure or the acquisition of other long-term assets, in
each case, in a Permitted Business. Pending the final application of any such
Net Proceeds, the Company may temporarily reduce Indebtedness under any Credit
Facility or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company shall, within five days of such date,
make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the date of purchase, in accordance with the procedures set forth in
the Indenture. To the extent that the aggregate principal amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate
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Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $250,000,
(1) a resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors or (2) an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $2.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (w) the Iusatel
Acquisition, (x) any employment agreement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business having terms
consistent with industry practice for reasonably similar companies, (y)
transactions between or among the Company and/or its Restricted Subsidiaries and
(z) Restricted Payments that are permitted by Section 4.07 hereof, in each case,
shall not be deemed Affiliate Transactions.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
SECTION 4.13. LINE OF BUSINESS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, engage in any business other than a Permitted
Business.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer
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price in cash (the "Change of Control Payment") equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon, to the date of repurchase.
(b) Within ten days following any Change of Control, the Company will
mail a notice to each Holder stating: (1) that the Change of Control Offer is
being made pursuant to this Section 4.15 and that all Notes tendered will be
accepted for payment; (2) the purchase price and the purchase date, which shall
be no later than 30 business days from the date such notice is mailed (the
"Change of Control Payment Date"); (3) that any Note not tendered will continue
to accrue interest; (4) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of Control
Payment Date; (5) that Holders electing to have any Notes purchased pursuant to
a Change of Control Offer will be required to surrender the Notes, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change of Control
Payment Date; (6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing his election to have the Notes purchased; and (7) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered,
which unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof. The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
(c) On the Change of Control Payment Date, the Company will, to the
extent lawful, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Senior Note equal in principal amount to any unpurchased
portion of the Notes surrendered, if any; provided that each such new Note will
be in a principal amount of $1,000 or an integral multiple thereof. The Company
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
(d) The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
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SECTION 4.16. SPECIAL MANDATORY REDEMPTION
If after the Special Offer to Purchase pursuant to Section
4.17 hereof is consummated at least $20.0 million in aggregate principal amount
of Notes does not remain outstanding, the Company shall redeem all of the Notes
(the "Special Mandatory Redemption") at a redemption price in cash equal to 101%
of the aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereof to the Special Mandatory Redemption Date.
The "Special Mandatory Redemption Date" shall be February 24, 2001 or such
earlier date on which the Special Mandatory Redemption is consummated.
The Company shall cause the amounts necessary for the Special
Mandatory Redemption to be deposited in immediately available funds sufficient
therefor with the Paying Agent on the Special Mandatory Redemption Date. The
Special Mandatory Redemption shall be made by the Trustee in the manner set
forth in Section 3.03 hereof. The Company shall, at least 45 days but not more
than 60 days before the Special Mandatory Redemption Date, provide the Trustee
with an Officer's Certificate stating that it is required to make a Special
Mandatory Redemption.
SECTION 4.17. SPECIAL OFFER TO PURCHASE
(a) In the event that on or after October 27, 2000 (the "Special Offer
to Purchase Trigger Date"), Collateral Funds remain in the Collateral
Subaccount, the Company shall make an offer to each Holder of Notes to purchase
all or any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Notes (the "Special Offer to Purchase") at an offer price in cash (the
Special Offer to Purchase Payment") equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon to the date of purchase
and Liquidated Damages, if any. Within 10 days following the Special Offer to
Purchase Trigger Date, the Company shall mail a notice to each Holder stating:
(1) that the Special Offer to Purchase is being made pursuant to this Section
4.17 and that all Notes tendered will be accepted for payment; (2) the purchase
price and the purchase date, which shall be no later than 30 business days from
the date such notice is mailed (the "Special Offer to Purchase Payment Date");
(3) that any Note not tendered will continue to accrue interest; (4) that,
unless the Company defaults in the payment of the Special Offer to Purchase
Payment, all Notes accepted for payment pursuant to the Special Offer to
Purchase Offer shall cease to accrue interest after the Special Offer to
Purchase Payment Date; (5) that Holders electing to have any Notes purchased
pursuant to a Special Offer to Purchase will be required to surrender the Notes,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Notes completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the Special
Offer to Purchase Payment Date; (6) that Holders will be entitled to withdraw
their election if the Paying Agent receives, not later than the close of
business on the second Business Day preceding the Special Offer to Purchase
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Notes delivered for purchase,
and a statement that such Holder is withdrawing his election to have the Notes
purchased; and (7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof. The Company shall comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of Notes in connection with a
Special Offer to Purchase.
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(b) On the Special Offer to Purchase Payment Date, the Company shall,
to the extent lawful, (1) accept for payment all Notes or portions thereof
properly tendered pursuant to the Special Offer to Purchase, (2) deposit prior
to 10:00 am Eastern Time with the Paying Agent an amount equal to the Special
Offer to Purchase Payment in respect of all Notes or portions thereof so
tendered and (3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to each Holder of Notes so tendered payment in an
amount equal to the purchase price for the Notes, and the Trustee, upon receipt
of an Authentication Order shall promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered by such Holder, if any;
provided, that each such new Note shall be in a principal amount of $1,000 or an
integral multiple thereof. The Company shall publicly announce the results of
the Special Offer to Purchase on or as soon as practicable after the Special
Offer to Purchase Payment Date.
SECTION 4.18. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company may enter into a sale and leaseback transaction if (i)
the Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Debt to Cash Flow Ratio test set forth in Section 4.09(a) hereof and (b)
incurred a Lien to secure such Indebtedness pursuant to the provisions of
Section 4.12 hereof, (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value of the property that is
the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
applies the proceeds of such transaction in compliance with, Section 4.10
hereof.
SECTION 4.19. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Wholly
Owned Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interest of any Wholly Owned Restricted
Subsidiary of the Company to any Person (other than the Company or a Wholly
Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Equity Interest of
such Wholly Owned Restricted Subsidiary owned by the Company or any of its
Subsidiaries and (b) the Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with Section 4.10 hereof
and (ii) will not permit any Wholly Owned Restricted Subsidiary of the Company
to issue any of its Equity Interests (other than, if required by applicable law,
shares of its Capital Stock (y) constituting directors' qualifying shares and
(z) of non-U.S. Restricted Subsidiaries sold to non-U.S. nationals as required
by the laws of the jurisdiction of incorporation of such non-U.S. Restricted
Subsidiary) to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company.
SECTION 4.20. LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS BY
SUBSIDIARIES.
The Company shall not permit any Subsidiary, directly or
indirectly, to guarantee or pledge any assets to secure the payment of any other
Indebtedness of the Company unless such Subsidiary simultaneously executes and
delivers a supplemental indenture to this Indenture providing for
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the guarantee of the payment of the Notes by such Subsidiary, which guarantee
shall be senior to or pari passu with such Subsidiary's guarantee of or pledge
to secure such other Indebtedness. Notwithstanding the foregoing, any such
guarantee by a Subsidiary of the Notes shall provide by its terms that it shall
be automatically and unconditionally released and discharged upon any sale,
exchange or transfer, to any Person not an Affiliate of the Company, of all of
the Company's stock in, or all or substantially all the assets of, such
Subsidiary, which sale, exchange or transfer is made in compliance with the
applicable provisions of this Indenture. The form of such guarantee is attached
as Exhibit E hereto.
SECTION 4.21. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.22. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF THE COMPANY.
The Company shall not transfer, convey, sell, lease or
otherwise dispose of any Equity Interest of the Company to any Person unless the
consideration received therefor is at least equal to the Fair Market Value of
such Equity Interests and all of such consideration is in the form of cash.
The provisions of the first paragraph of this section will not
apply to:
(i) the transfer, conveyance, sale, lease or other
disposition of all or substantially all of the Equity Interests of the
Company; provided that the transfer, conveyance, sale, lease or other
disposition of all or substantially all of the Equity Interest of the
Company will be governed by Section 4.15 and/or Section 5.01 hereof and
not by the provisions of this section;
(ii) the transfer, conveyance, sale, lease or other
disposition of Equity Interests of the Company in exchange for
long-term assets used or useful in a Permitted Business or a
controlling interest in a Permitted Business; provided that the Company
delivers to the Trustee (a) with respect to any such transfer,
conveyance, sale, lease or other disposition or series of related
transfers, conveyances, sales, leases or other dispositions involving
Equity Interests with a fair market value less than $5.0 million, a
resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such transfer, conveyance, sale, lease or
other disposition is fair to the Company's shareholders and (b) with
respect to any such transfer, conveyance, sale, lease or other
disposition or series of related transfers, conveyances, sales, leases
or other dispositions involving Equity Interests with a fair market
value equal to or in excess of $5.0 million, an opinion as to the
fairness to the Company's shareholders of such transfer, conveyance,
sale, lease or other disposition from a financial point of view issued
by the Initial Purchaser or any other investment banking firm of
national standing chosen by the Company; and
(iii) (A) the grant or issuance of options, warrants or other
rights to acquire Capital Stock of the Company ("Options") pursuant to
a stock option plan which (a) shall have been
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approved by the Company's stockholders, (b) shall prohibit the granting
of Options prior to June 30, 1998 (other than to directors or employees
of the Company or any Subsidiary of the Company appointed or hired
subsequent to the date of this Indenture), (c) shall limit the
aggregate number of shares of common stock of the Company issuable in
any fiscal year upon the exercise of Options to 1.0 million (subject to
adjustments for stock splits and other customary events) and (d) shall
provide that any Option must have an exercise price equal to or in
excess of the market price for the underlying common stock of the
Company on the date such Option is granted by the Company and (B) the
issuance of Capital Stock of the Company upon the exercise of any such
Option.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving corporation) or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia, (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and this Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee, (iii) immediately after such
transaction, no Default or Event of Default exists; (iv) such transaction will
not result in the loss or suspension or material impairment of any licenses or
other authorizations that are material to the future prospects of the Company
and its Subsidiaries, taken as a whole; and (v) except in the case of a merger
of the Company with or into a Wholly Owned Subsidiary of the Company or into a
parent corporation the principal purpose of which transaction is to change the
state of incorporation of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Debt to Cash Flow Ratio test set forth in Section 4.09(a) hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right
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and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults for 30 days in the payment when due of
interest and Liquidated Damages, if any, on the Notes, provided, however, that
prior to October 27, 2000, the failure by the Company to pay interest on the
Notes within five days of an Interest Payment Date will constitute an immediate
Event of Default;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes;
(c) the Company fails to comply with any of the provisions of Sections
4.07, 4.09, 4.10, 4.15, 4.16 or 4.17 or Article 5 hereof;
(d) failure by the Company for 60 days after notice to comply with any
of its other agreements in this Indenture or the Notes;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, which default (i) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (ii) results in the acceleration
of such Indebtedness prior to its express maturity and, in each case, the
principal amount of such Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $5.0 million or more;
(f) the Company or any of its Restricted Subsidiaries fail to pay final
judgments for the payment of money entered by a court or courts of competent
jurisdiction against the Company or any of its Restricted Subsidiaries
aggregating in excess of $5.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days;
(g) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
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(iii) consents to the appointment of a custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an involuntary
case;
(ii) appoints a custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
or
(i) the Company breaches any material representation, warranty or
agreement set forth in the Proceeds Pledge and Escrow Agreement, the Company
repudiates any of its obligations under the Proceeds Pledge and Escrow Agreement
or the Proceeds Pledge and Escrow Agreement shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect; and
(j) except as permitted by this Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Subsidiary shall deny or
disaffirm its obligations under its Subsidiary Guarantee.
The term "custodian" as used in this Article 6 means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.
An Event of Default shall not be deemed to have occurred under
clause (c), (e) or (f) until the Trustee shall have received at the Corporate
Trust Office of the Trustee written notice from the Company or any of the
Holders or unless a Responsible Officer shall have actual knowledge of such
event of Default. A Default under clause (e) is not an Event of Default until
the Trustee notifies the Company, or the Holders of at least 25% in principal
amount of the then outstanding Notes notify the Company and the Trustee of the
Default and the Company does not cure the Default within 60 days after receipt
of the notice. The notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default".
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SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Upon any such declaration, the principal of, premium, if any, and accrued and
unpaid interest and Liquidated Damages, if any, on the Notes shall be due and
payable immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (g) or (h) of Section 6.01 hereof occurs with respect to the
Company, any of its Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary, the foregoing
amount ipso facto becomes due and payable immediately without further action or
notice. Holders of the Notes may not enforce this Indenture or the Notes except
as provided in this Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest or Liquidated Damages, if any) if it determines that withholding notice
is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to Section
3.07 hereof, then an equivalent premium shall also become and be immediately due
and payable, to the extent permitted by law, anything in this Indenture or in
the Notes to the contrary notwithstanding. If an Event of Default occurs prior
to October 27, 2002 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to October 27, 2002, an additional
premium shall also become and be immediately due and payable in an amount, for
each of the years beginning on January 1 of the years set forth below, as set
forth below (expressed as a percentage of the amount that would otherwise be due
but for the provisions of this sentence):
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
1997 .................................................... .118.666%
1998 .................................................... .116.333%
1999 .................................................... .114.000%
2000 .................................................... .111.666%
2001 .................................................... .109.333%
</TABLE>
The Company is required to deliver to the Trustee annually a statement
regarding compliance with this Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount
of the then outstanding Notes by notice to the Trustee may on behalf of the
Holders of all of the Notes waive an existing Default or Event of Default and
its consequences hereunder, except a continuing Default or Event of Default in
the payment of the principal of, premium, if any, interest or Liquidated
Damages, if any, on the Notes. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
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SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right
of any Holder of a Note to receive payment of principal, premium, if any,
interest and Liquidated Damages, if any, on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest and Liquidated Damages, if any,
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
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Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, if any, and interest, and Liquidated Damages, if any,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and interest, and Liquidated
Damages, if any, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
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(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c) and (e) of this Section or Section 7.02.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
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SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
of Notes a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA ss. 313(a) (but if no event described in
TIA ss. 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in
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addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by the Trustee arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the Company
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
solely attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need not
pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2)
to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged
from the trust hereby created by so notifying the Company. The Holders of Notes
of a majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
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(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
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SECTION 7.12. APPOINTMENT OF TRUSTEE
Each Holder hereby designates the Trustee as trustee under this
Indenture and trustee under the Proceeds Pledge and Escrow Agreement to act as
herein and therein specified. Each Holder hereby irrevocably authorizes the
Trustee to take such action on its behalf under the provisions of this Indenture
and the Proceeds Pledge and Escrow Agreement and any other instruments and
agreements referred to herein and therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or
required of the Trustee by the terms hereof and thereof and such other powers as
are reasonably incidental thereto. The Trustee shall hold all Escrow Funds (as
defined in the Proceeds Pledge and Escrow Agreement) and proceeds therefrom for
the benefit of itself and the Holders to be distributed as provided in this
Indenture and the Proceeds Pledge and Escrow Agreement. The Trustee may perform
any of its duties hereunder or thereunder by or through its agents or employees.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages, if any, on such Notes when such
payments are due from the trust referred to below, (b) the Company's obligations
with respect to the Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an
office or agency for payment and money for security payments held in trust, (c)
the rights, powers, trusts, duties and immunities of the Trustee, and the
Company's obligations in connection therewith and (d) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
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SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, and 4.22 hereof with
respect to the outstanding Notes on and after the date the conditions set forth
in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the
Notes shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(d) through 6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
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(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default under Sections 6.01(g) or 6.01(h) hereof is concerned, at
any time in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that on the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders over the other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding creditors of the Company
or others; and
(h) the Company shall deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent provided
for or relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
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Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, without the consent
of any Holder of a Note, the Company and the Trustee may amend or supplement
this Indenture or the Notes;
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
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(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes by a successor to the Company pursuant to Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of Notes; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company or a Subsidiary of the
Company, as applicable, in the execution of any amended or supplemental
Indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and
4.15 hereof), the Proceeds Pledge and Escrow Agreement and the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of the principal of, premium, if any, or interest on the
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture, the Proceeds
Pledge and Escrow Agreement or the Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes voting
as a single class (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, the Notes). Without the consent of at
least 75% in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for, or purchase
of, such Notes), no waiver or amendment to Sections 4.16 or 4.17 of this
Indenture or to the provision of the Proceeds Pledge and Escrow Agreement may be
made that adversely affects the rights of any Holder of Notes. Section 2.08
hereof shall determine which Notes are considered to be "outstanding" for
purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
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It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding voting as a
single class may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver under this Section 9.02 may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the Notes
except as provided above with respect to Sections 3.09, 4.10; 4.15; 4.16 or 4.17
hereof; or
(c) reduce the rate of or change the time for payment of interest on
any Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest or Liquidated Damages, if any, on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any or interest or Liquidated Damages, if any, on
the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 3.09, 4.10, 4.15, 4.16 or 4.17 hereof); or
(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall
be set forth in a amended or supplemental Indenture that complies with the TIA
as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note
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or portion of a Note that evidences the same debt as the consenting Holder's
Note, even if notation of the consent is not made on any Note. However, any such
Holder of a Note or subsequent Holder of a Note may revoke the consent as to its
Note if the Trustee receives written notice of revocation before the date the
waiver, supplement or amendment becomes effective. An amendment, supplement or
waiver becomes effective in accordance with its terms and thereafter binds every
Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
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ARTICLE 10.
COLLATERAL AND SECURITY
SECTION 10.01. PROCEEDS PLEDGE AND ESCROW AGREEMENT.
The due and punctual payment of the principal of and interest and
Liquidated Damages, if any, on the Notes when and as the same shall be due and
payable, whether on an interest payment date, at maturity, by acceleration,
repurchase, redemption or otherwise, and interest on the overdue principal of
and interest and Liquidated Damages (to the extent permitted by law), if any, on
the Notes and performance of all other obligations of the Company to the Holders
of Notes or the Trustee under this Indenture and the Notes, according to the
terms hereunder or thereunder, shall be secured as provided in the Proceeds
Pledge and Escrow Agreement which the Company has entered into simultaneously
with the execution of this Indenture and which is attached as Exhibit G hereto.
Each Holder of Notes, by its acceptance thereof, consents and agrees to the
terms of the Proceeds Pledge and Escrow Agreement (including, without
limitation, the provisions providing for foreclosure and release of Collateral
Funds and Interest Reserve Funds) as the same may be in effect or may be amended
from time to time in accordance with its terms and authorizes and directs the
Trustee to enter into the Proceeds Pledge and Escrow Agreement and to perform
its obligations and exercise its rights thereunder in accordance therewith. The
Company shall deliver to the Trustee copies of all documents delivered pursuant
to the Proceeds Pledge and Escrow Agreement, and shall do or cause to be done
all such acts and things as may be necessary or proper, or as may be required by
the provisions of the Proceeds Pledge and Escrow Agreement, to assure and
confirm to the Trustee that the security interest in the Collateral Funds and
Interest Reserve Funds contemplated hereby, by the Proceeds Pledge and Escrow
Agreement or any part thereof, as from time to time constituted, so as to render
the same available for the security and benefit of this Indenture and of the
Notes secured hereby, according to the intent and purposes herein expressed. The
Company shall take, or shall cause its Subsidiaries to take, upon request of the
Trustee, any and all actions reasonably required to cause the Proceeds Pledge
and Escrow Agreement to create and maintain, as security for the Obligations of
the Company hereunder, a valid and enforceable perfected first priority Lien in
and on all the Pledged Collateral, in favor of the Trustee for the benefit of
the Holders of Notes, superior to and prior to the rights of all third Persons
and subject to no other Liens than Permitted Liens.
SECTION 10.02. RECORDING AND OPINIONS.
(a) The Company shall furnish to the Trustee simultaneously with the
execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, financing
statements or other instruments necessary to make effective the Lien intended to
be created by the Proceeds Pledge and Escrow Agreement, and reciting with
respect to the security interests in the Pledged Collateral, the details of such
action, or (ii) stating that, in the opinion of such counsel, no such action is
necessary to make such Lien effective.
(b) The Company shall furnish to the Trustee on October 1 in each year
beginning with October 1, 1998, an Opinion of Counsel, dated as of such date,
either (i) (A) stating that, in the opinion of such counsel, action has been
taken with respect to the recording, registering, filing, re-recording,
re-registering and refiling of all supplemental indentures, financing
statements, continuation statements or other instruments of further assurance as
is necessary to maintain the Lien of the Proceeds Pledge and Escrow Agreement
and reciting with respect to the security interests in the Pledged Collateral
the details of such action or referring to prior Opinions of Counsel in which
such details are given, (B) stating that, based on relevant laws as in effect on
the date of such Opinion of Counsel, all financing statements and
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<PAGE> 78
continuation statements have been executed and filed that are necessary as of
such date and during the succeeding 12 months fully to preserve and protect, to
the extent such protection and preservation are possible by filing, the rights
of the Holders of Notes and the Trustee hereunder and under the Proceeds Pledge
and Escrow Agreement with respect to the security interests in the Pledged
Collateral, or (ii) stating that, in the opinion of such counsel, no such action
is necessary to maintain such Lien and assignment.
(c) The Company shall otherwise comply with the provisions of TIA
ss.314(b).
SECTION 10.03. RELEASE OF PLEDGED SECURITIES OR COLLATERAL FUNDS.
(a) Subject to subsections (b), (c) and (d) of this Section
10.03, Pledged Collateral may be released from the Lien and security
interest created by the Proceeds Pledge and Escrow Agreement at any
time or from time to time in accordance with the provisions of the
Proceeds Pledge and Escrow Agreement.
(b) No Pledged Collateral shall be released from the Lien and security
interest created by the Proceeds Pledge and Escrow Agreement pursuant to the
provisions of the Proceeds Pledge and Escrow Agreement unless there shall have
been delivered to the Trustee the certificate required by this Section 10.03.
(c) At any time when a Default or Event of Default shall have occurred
and be continuing and the maturity of the Notes shall have been accelerated
(whether by declaration or otherwise) and the Trustee has knowledge of such
Default or Event of Default, no release of Pledged Collateral pursuant to the
provisions of the Proceeds Pledge and Escrow Agreement shall be effective as
against the Holders of Notes.
(d) The release of any Pledged Collateral from the terms of this
Indenture and the Proceeds Pledge and Escrow Agreement shall not be deemed to
impair the security under this Indenture in contravention of the provisions
hereof if and to the extent the Pledged Collateral is released pursuant to the
terms of the Proceeds Pledge and Escrow Agreement. To the extent applicable, the
Company shall cause TIA ss. 313(b), relating to reports, and TIA ss. 314(d),
relating to the release of property or securities from the Lien and security
interest of the Proceeds Pledge and Escrow Agreement and relating to the
substitution therefor of any property or securities to be subjected to the Lien
and security interest of the Proceeds Pledge and Escrow Agreement, to be
complied with. Any certificate or opinion required by TIA ss. 314(d) may be made
by an Officer of the Company except in cases where TIA ss. 314(d) requires that
such certificate or opinion be made by an independent Person, which Person shall
be an independent engineer, appraiser or other expert selected or approved by
the Trustee in the exercise of reasonable care.
SECTION 10.04. CERTIFICATES OF THE COMPANY.
(a) The Company shall furnish to the Trustee, prior to each proposed
release of Pledged Collateral pursuant to the Proceeds Pledge and Escrow
Agreement, (i) all documents required by TIA ss. 314(d) and (ii) an Opinion of
Counsel, which may be rendered by internal counsel to the Company, to the effect
that such accompanying documents constitute all documents required by TIA ss.
314(d). The Trustee may, to the extent permitted by Sections 7.01 and 7.02
hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such documents and such
Opinion of Counsel.
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<PAGE> 79
SECTION 10.05. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER
THE PROCEEDS PLEDGE AND ESCROW AGREEMENT.
Subject to the provisions of Section 7.01 and 7.02 hereof, the Trustee
may, in its sole discretion and without the consent of the Holders of Notes,
take, on behalf of the Holders of Notes, all actions it deems necessary or
appropriate in order to (a) enforce any of the terms of the Proceeds Pledge and
Escrow Agreement and (b) collect and receive any and all amounts payable in
respect of the Obligations of the Company hereunder. The Trustee shall have
power to institute and maintain such suits and proceedings as it may deem
expedient to prevent any impairment of the Pledged Collateral by any acts that
may be unlawful or in violation of the Proceeds Pledge and Escrow Agreement or
this Indenture, and such suits and proceedings as the Trustee may deem expedient
to preserve or protect its interests and the interests of the Holders of Notes
in the Pledged Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Holders of Notes or of the Trustee).
SECTION 10.06. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
PROCEEDS PLEDGE AND ESCROW AGREEMENT.
The Trustee is authorized to receive any funds for the benefit of the
Holders of Notes distributed under the Proceeds Pledge and Escrow Agreement, and
to make further distributions of such funds to the Holders of Notes according to
the provisions of the Proceeds Pledge and Escrow Agreement and this Indenture.
SECTION 10.07. TERMINATION OF SECURITY INTEREST.
Upon the payment in full of all Obligations of the Company under this
Indenture and the Notes, or upon Legal Defeasance, the Trustee shall release the
Liens pursuant to this Indenture and the Proceeds Pledge and Escrow Agreement.
ARTICLE 11.
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA ss. 318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee to the others
is duly given if in writing and delivered in Person or mailed by first class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address
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<PAGE> 80
If to the Company:
InterAmericas Communications Corporation
1221 Brickell Avenue, Suite 900
Miami, FL 33131
Telecopier No.: (305) 377-6790
Attention: Chief Financial Officer
With a copy to:
Baker & McKenzie
701 Brickell Avenue, Suite 1600
Miami, FL 33131
Telecopier No. (305) 789-8900
Attention: Andrew Hulsh
If to the Trustee:
State Street Bank and Trust Company, N.A.
61 Broadway,
New York, NY 10006
Telecopier No.: (212) 612-3203
Attention: Corporate Trust Department
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
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<PAGE> 81
SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF
NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA ss. 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
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SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes, the Subsidiary Guarantees, this Indenture or the Proceeds
Pledge and Escrow Agreement or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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<PAGE> 83
SIGNATURES
Dated as of October 27, 1997
INTERAMERICAS COMMUNICATIONS CORPORATION
By:
--------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, N.A.
By:
--------------------------------------
Name:
Title:
Date:
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<PAGE> 84
EXHIBIT A
(Face of Note)
__% [Series A] [Series B] Senior Notes due 2007
CUSIP/CINS_________
No.___ $___________
INTERAMERICAS COMMUNICATIONS CORPORATION
promises to pay to______________________________________ or registered assigns,
the principal sum of ___________________________________
Dollars on October 27, 2007
Interest Payment Dates: April 27 and October 27
Record Dates: April 12 and October 12
Dated: October __, 1997
INTERAMERICAS COMMUNICATIONS CORPORATION
By:
--------------------------------------
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned Indenture:
State Street Bank and Trust Company, N.A.,
as Trustee
By:
------------------------------------
Authorized Officer
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<PAGE> 85
(Back of Note)
14% [Series A][Series B] Senior Notes due 2007
[INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE
INDENTURE]
[INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS
OF THE INDENTURE]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. InterAmericas Communications Corporation, a Texas
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 14% per annum from October 27, 1997 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on April 27 and October 27 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be April 27, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 12 or October
12 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust
Company, N.A., the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
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<PAGE> 86
4. INDENTURE AND PROCEEDS PLEDGE AND ESCROW AGREEMENT. The Company
issued the Notes under an Indenture dated as of October 27, 1997 (the
"Indenture") between the Company and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the Indenture shall govern and be controlling. The Notes are
secured obligations of the Company limited to $150.0 million in aggregate
principal amount. The Notes are secured by a pledge of Escrow Funds pursuant to
the Proceeds Pledge and Escrow Agreement referred to in the Indenture.
5. OPTIONAL REDEMPTION.
(a) The Company shall not have the option to redeem the Notes prior to
October 27, 2002. Thereafter, the Company shall have the option at any time to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on October 27 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 ................................................ 107.000%
2003 ................................................ 104.666%
2004 ................................................ 102.333%
2005 and thereafter ................................. 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time on or before October 27,
2000, the Company may on any one or more occasions redeem up to a maximum of 33
1/3% of the aggregate principal amount of Note at a redemption price equal to
114% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the redemption date, with the net cash
proceeds received by the Company after the date of the Indenture from the
issuance and sale of its Qualified Capital Stock to the public in a registered
public offering or to one or more Strategic Equity Investors to the extent that
such net cash proceeds have been, and continue to be, designated as Designated
Equity Proceeds to be used for such purpose as provided in the definition
thereof; provided that at least 66 2/3% of the original aggregate principal
amount of the Note remain outstanding immediately after the occurrence of each
such redemption; and provided, further, that such redemption shall occur within
45 days of the date of the closing of any such public offering or sale to such
Strategic Equity Investors.
6. MANDATORY REDEMPTION.
Except as set forth in Section 4.16 of the Indenture, the Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple
A-3
<PAGE> 87
thereof) of each Holder's Notes at a purchase price equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase (the "Change of
Control Payment"). Within 10 days following any Change of Control, the Company
shall mail a notice to each Holder setting forth the procedures governing the
Change of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company shall commence an offer to all
Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date fixed for the closing of
such offer in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate principal amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
(c) In the event that on or after October 27, 2000 (the "Special Offer
to Purchase Trigger Date"), Collateral Funds remain in the Collateral
Subaccount, the Company shall make an offer to each Holder of Notes to purchase
all or any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Notes (the "Special Offer to Purchase") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase and Liquidated Damages, if any. Within
10 days following the Special Offer to Purchase Trigger Date, the Company shall
mail a notice to each Holder setting forth the procedures governing the Special
Offer to Purchase as required by the Indenture.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
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<PAGE> 88
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, or the Notes or the Proceeds Pledge and Escrow Agreement may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the then outstanding Notes (including consents obtained
in connection with a tender offer or exchange offer for Notes) and any existing
default or compliance with any provision of the Indenture, the Notes or the
Proceeds Pledge and Escrow Agreement may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes). Without the consent of any Holder of a Note, the Indenture, the
Notes or the Proceeds Pledge and Escrow Agreement may be amended or supplemented
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of the Notes in case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest and
Liquidated Damages, if any, on the Notes, provided, however, that prior to
October 27, 2000, the failure by the Company to pay interest on the Notes within
five days of an Interest Payment Date will constitute an immediate Event of
Default; (ii) default in payment when due of the principal of or premium, if
any, on the Notes; (iii) failure by the Company to comply with Sections 4.07,
4.09, 4.10, 4.15, 4.16 or 4.17 or Article 5 of the Indenture; (iv) failure by
the Company for 60 days after notice to comply with any of its other agreements
in the Indenture or the Notes; (v) breach by the Company of any material
representation, warranty or agreement set forth in the Proceeds Pledge and
Escrow Agreement, or repudiation by the Company of its obligations under the
Proceeds Pledge and Escrow Agreement or the unenforceability of the Proceeds
Pledge and Escrow Agreement against the Company for any reason; (vi) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more; (vii) failure by the Company or
any of its Restricted Subsidiaries to pay final judgments aggregating in excess
of $5.0 million, which judgments are not paid, discharged or stayed for a period
of 60 days; (viii) except as permitted by the Indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Subsidiary shall deny or disaffirm its obligations under its Subsidiary
Guarantee; and (ix) certain events of bankruptcy or insolvency with respect to
the Company or any of its Significant Subsidiaries or any group of Subsidiaries
that, taken together, would constitute a Significant Subsidiary. If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and
A-5
<PAGE> 89
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect to
the Company, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, the foregoing amount shall
ipso facto become due and payable without further action or notice. Holders of
the Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest or Liquidated Damages, if any)
if it determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of principal or
premium, if any, interest or Liquidated Damages, if any on the Notes. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of October 27, 1997, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
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<PAGE> 90
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
InterAmericas Communications Corporation
1221 Brickell Avenue, Suite 900
Miami, Florida 33131
Attention: Chief Financial Officer
A-7
<PAGE> 91
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
-----------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:
------------------
Your Signature:
--------------------------------------
(Sign exactly as your name appears on the face
of this Note)
Signature Guarantee.
A-8
<PAGE> 92
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10, 4.15 or 4.17 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15 [ ] Section 4.17
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10, Section 4.15 or 4.17 of the Indenture, state
the amount you elect to have purchased: $________
Date: Your Signature:
----------------- -------------------------------
(Sign exactly as your name
appears on the Note)
Tax Identification No:
------------------------
Signature Guarantee.
A-9
<PAGE> 93
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1)
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of Amount of this Global Note authorized
decrease in increase in following such officer of
Principal Amount Principal Amount decrease (or Trustee or Note
Date of Exchange of this Global Note of this Global Note increase) Custodian
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------
(1) This should be included only if the Debenture is issued in global form.
A-10
<PAGE> 94
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
InterAmericas Communications Corporation
1221 Brickell Avenue
Miami, FL 33131
State Street Bank and Trust Company, N.A.
61 Broadway
New York, NY 10006
Re: 14% Senior Notes due 2007
Reference is hereby made to the Indenture, dated as of October 27, 1997
(the "Indenture"), between InterAmericas Communications Corporation, as issuer
(the "Company"), and State Street Bank and Trust, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the
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<PAGE> 95
transaction was prearranged with a buyer in the United States, (ii) no directed
selling efforts have been made in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act and/, (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) an Opinion of Counsel provided by the Transferor or the
Transferee (a copy of which the Transferor has attached to this certification),
to the effect that such Transfer is in compliance with the Securities Act. Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the IAI Global Note and/or the Definitive Notes and in the
Indenture and the Securities Act.
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
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<PAGE> 96
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
-------------------------------------------
[Insert Name of Transferor]
By:
----------------------------------------
Name:
Title:
Dated: _________________, ______
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<PAGE> 97
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP______), or
(ii) [ ] Regulation S Global Note (CUSIP_______), or
(iii) [ ] IAI Global Note (CUSIP______); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP______), or
(ii) [ ] Regulation S Global Note (CUSIP_______), or
(iii) [ ] IAI Global Note (CUSIP______); or
(iv) [ ] Unrestricted Global Note (CUSIP_______); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE> 98
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
(CUSIP______________)
InterAmericas Communications Corporation
1221 Brickell Avenue
Miami, FL 33131
State Street Bank and Trust Company, N.A.
61 Broadway
New York, NY 10006
Re: 14% Senior Notes due 2007
Reference is hereby made to the Indenture, dated as of October 27, 1997
(the "Indenture"), between InterAmericas Communications Corporation, as issuer
(the "Company"), and State Street Bank and Trust Company, N.A., as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
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<PAGE> 99
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED
GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] "144A Global Note, "Regulation S Global Note, "IAI Global Note with
an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
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<PAGE> 100
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
-------------------------------------------
[Insert Name of Owner]
By:
----------------------------------------
Name:
Title:
Dated: _________________, ______
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<PAGE> 101
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
InterAmericas Communications Corporation
1221 Brickell Avenue
Miami, FL 33131
State Street Bank and Trust Company, N.A.
61 Broadway
New York, NY 10006
Re: 14% Senior Notes due 2007
Reference is hereby made to the Indenture, dated as of October
27, 1997 (the "Indenture"), between InterAmericas Communications Corporation, as
issuer (the "Company"), and State Street Bank and Trust Company, N.A., as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or
any interest therein is subject to certain restrictions and conditions set forth
in the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and an Opinion
of Counsel in form reasonably acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act, (D) outside the United States
in
D-1
<PAGE> 102
accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant
to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing the Definitive Note or beneficial interest
in a Global Note from us in a transaction meeting the requirements of clauses
(A) through (E) of this paragraph a notice advising such purchaser that resales
thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
-------------------------------------------
[Insert Name of Accredited Investor]
By:
----------------------------------------
Name:
Title:
Dated: _________________, ______
D-2
<PAGE> 103
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE TO BE
DELIVERED BY SUBSIDIARY GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of
____________________, between _____________________ (the "Subsidiary
Guarantor"), a subsidiary of InterAmericas Communications Corporation (or its
successor), a company incorporated under the laws of the State of Texas (the
"Company"), and State Street Bank and Trust Company, N.A.,as trustee under the
indenture referred to below (the "Trustee").
W I T N E S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of October 27, 1997, providing
for the issuance of an aggregate principal amount of $150,000,000 of 14% Senior
Notes due 2007 (the "Notes");
WHEREAS, Section 4.20 of the Indenture provides that, under certain
circumstances, the Company is required to cause the Subsidiary Guarantor to
execute and deliver to the Trustee a Subsidiary Guarantee on the terms and
conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. INDENTURE PROVISION PURSUANT TO WHICH GUARANTEE IS GIVEN. This
Supplemental Indenture is being executed and delivered pursuant to Section 4.20
of the Indenture.
3. AGREEMENTS TO GUARANTEE. The Subsidiary Guarantor hereby agrees as
follows:
(a) The Subsidiary Guarantor, jointly and severally with all other
Subsidiary Guarantors, if any, unconditionally guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, regardless of the validity and enforceability of the
Indenture, the Notes and the obligations of the Company under the Indenture and
the Notes, that:
(i) the principal of, premium, if any, and interest on the Notes
shall be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of, premium, if
any, and interest on the Notes, to the extent
E-1
<PAGE> 104
lawful, and all other obligations of the Company to the Holders or the Trustee
thereunder shall be promptly paid in full, all in accordance with the terms
thereof; and
(ii) in case of any extension of time for payment or renewal of
any Notes or any of such other obligations, that the same shall be promptly paid
in full when due in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise.
Notwithstanding the foregoing, in the event that this Subsidiary
Guarantee would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of the
Subsidiary Guarantor under this Supplemental Indenture and its Subsidiary
Guarantee shall be limited to such amount as will not, after giving effect
thereto, and to all other liabilities of the Subsidiary Guarantor, result in
such amount constituting a fraudulent transfer or conveyance.
4. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.
(a) To evidence its Subsidiary Guarantee set forth in this
Supplemental Indenture, the Subsidiary Guarantor hereby agrees that a notation
of such Subsidiary Guarantee substantially in the form of Annex A hereto shall
be endorsed by an officer of such Subsidiary Guarantor on each Note
authenticated and delivered by the Trustee after the date hereof.
(b) Notwithstanding the foregoing, the Subsidiary Guarantor hereby
agrees that its Subsidiary Guarantee set forth herein shall remain in full force
and effect notwithstanding any failure to endorse on each Note a notation of
such Subsidiary Guarantee.
(c) If an officer whose signature is on this Supplemental Indenture
or on the Subsidiary Guarantee no longer holds that office at the time the
Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
(d) The delivery of the Note by the Trustee, after the
authentication thereof under the Indenture, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Supplemental Indenture on behalf of the
Subsidiary Guarantor.
(e) The Subsidiary Guarantor hereby agrees that its obligations
hereof shall be unconditional, regardless of the validity, regularity or
enforceability of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
(f) The Subsidiary Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenants that its
Subsidiary Guarantee made pursuant to this Supplemental Indenture will not be
discharged except by complete performance of the obligations contained in the
Notes and the Indenture or pursuant to Section 5(b) of this Supplemental
Indenture.
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<PAGE> 105
(g) If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Supplemental Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then, and in every such
case, subject to any determination in such proceeding, the Subsidiary Guarantor,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereof and thereafter all rights and remedies of the
Subsidiary Guarantor, the Trustee and the Holders shall continue as though no
such proceeding had been instituted.
(h) The Subsidiary Guarantor hereby waives and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Subsidiary Guarantor as a result of any payment by such Subsidiary
Guarantor under its Subsidiary Guarantee. The Subsidiary Guarantor further
agrees that, as between the Subsidiary Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand:
(i) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six of the Indenture for the purposes of the
Subsidiary Guarantee made pursuant to this Supplemental Indenture,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby; and
(ii) in the event of any declaration of acceleration of such
obligations as provided in Article Six, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Subsidiary Guarantor for
the purpose of the Subsidiary Guarantee made pursuant to this Supplemental
Indenture.
(i) The Subsidiary Guarantor shall have the right to seek
contribution from any other non-paying Subsidiary Guarantor, if any, so long as
the exercise of such right does not impair the rights of the Holders under the
Subsidiary Guarantee made pursuant to this Supplemental Indenture.
(j) The Subsidiary Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of the Indenture or this Subsidiary
Guarantee; and the Subsidiary Guarantor (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
5. SUBSIDIARY GUARANTOR MAY CONSOLIDATE, ETC. ON
CERTAIN TERMS
(a) Except as set forth in Articles Four and Five of the Indenture,
nothing contained in the Indenture, this Supplemental Indenture or in the Notes
shall prevent any consolidation or merger of the Subsidiary Guarantor with or
into the Company or any other Subsidiary Guarantor or shall prevent any
transfer, sale or conveyance of the property of the Subsidiary Guarantor as an
entirety or substantially as an entirety, to the Company or any other Subsidiary
Guarantor.
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<PAGE> 106
(b) Except as set forth in Article Four and Five of the Indenture,
upon the sale or disposition of all of the assets of any Subsidiary Guarantor,
by way of merger, consolidation or otherwise, or a sale or other disposition of
all of the capital stock of any Subsidiary Guarantor, then such Subsidiary
Guarantor (in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all the capital stock of such Subsidiary
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all of the assets of such Subsidiary Guarantor) will be
released and relieved of any obligation under its Subsidiary Guarantee; provided
that the Net Proceeds of such sale or other disposition are applied in
accordance with Section 4.10 of the Indenture. Except with respect to
transactions set forth in the preceding sentence, the Company and the Subsidiary
Guarantor covenant and agree that upon any such merger, consolidation or sale of
assets, the performance of all covenants and conditions of this Supplemental
Indenture to be performed by such Subsidiary Guarantor shall be expressly
assumed by supplemental indenture satisfactory in form to the Trustee, by the
corporation formed by such consolidation, or into which the Subsidiary Guarantor
shall have merged, or by the corporation which shall have acquired such
property. Upon receipt of an Officers' Certificate of the Company or the
Subsidiary Guarantor, as the case may be, to the effect that the Company or such
Subsidiary Guarantor has complied with the first sentence of this Section 5(b),
the Trustee shall execute any documents reasonably requested by the Company or
the Subsidiary Guarantor, at the cost of the Company or such Subsidiary
Guarantor, as the case may be, in order to evidence the release of such
Subsidiary Guarantor from its obligations under its Guarantee endorsed on the
Notes and under the Indenture and this Supplemental Indenture.
6. RELEASES UPON RELEASE OF GUARANTEE OF GUARANTEED INDEBTEDNESS.
Concurrently with the release or discharge of the Subsidiary Guarantor's
guarantee of the payment of [DESCRIBE INDEBTEDNESS THE GUARANTEE OF WHICH GAVE
RISE TO THE DELIVERY OF THIS SUPPLEMENTAL INDENTURE] ("Guaranteed Debt") (other
than a release or discharge by or as a result of payment under such guarantee of
Guaranteed Indebtedness), the Subsidiary Guarantor shall be automatically and
unconditionally released and relieved of its obligations under this Supplemental
Indenture and its Subsidiary Guarantee made pursuant to Section 4 of this
Supplemental Indenture. Upon delivery by the Company to the Trustee of an
Officer's Certificate to the effect that such release or discharge has occurred,
the Trustee shall execute any documents reasonably required in order to evidence
the release of the Subsidiary Guarantor from its obligations under this
Supplemental Indenture and its Subsidiary Guarantee made pursuant hereto;
provided such documents shall not affect or impair the rights of the Trustee and
Paying Agent under Section 7.07 of the Indenture.
7. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
8. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not effect the construction hereof.
[Signatures on following page]
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<PAGE> 107
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: _______________,_____ [Subsidiary Guarantor]
By:
---------------------------------------
Name:
Title:
Dated: _______________,_____ State Street Bank and Trust Company, N.A.,
as Trustee
By:
---------------------------------------
Name:
Title:
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<PAGE> 108
ANNEX A TO SUPPLEMENTAL INDENTURE
FORM OF NOTATION OF SUBSIDIARY GUARANTEE ON NOTE
Each Subsidiary Guarantor (as defined in the Indenture) has jointly and
severally unconditionally guaranteed (a) the due and punctual payment of the
principal of, premium, if any, and interest on the Notes, whether at stated
maturity or an Interest Payment Date, by acceleration, call for redemption or
otherwise, (b) the due and punctual payment of interest on the overdue principal
and premium of, and interest, to the extent lawful, on the Notes and (c) that in
case of any extension of time of payment or renewal of any Notes or any of such
other obligations, the same will be promptly paid in full when due in accordance
with the terms of the extension of renewal, whether at stated maturity, by
acceleration or otherwise.
Notwithstanding the foregoing, in the event that the Subsidiary
Guarantee would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of the
Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to such
amount as will not, after giving effect thereto, and to all other liabilities of
the Subsidiary Guarantor, result in such amount constituting a fraudulent
transfer or conveyance.
The Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which the
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual or facsimile signature of one of its authorized
officers.
Dated: [Subsidiary Guarantor]
-------------------------
By:
----------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 4.4
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of October 27, 1997
by and among
INTERAMERICAS COMMUNICATIONS CORPORATION
HEWSTER CHILE, S.A.
RED DE SERVICIOS EMPRESARIALES DE TELECOMUNICACIONES, S.A.
and
UBS SECURITIES LLC
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of October 27, 1997 by and among InterAmericas Communications
Corporation, a Texas corporation (the "Company"), Hewster Chile, S.A., Red De
Servicios Empresariales de Telecomunicaciones, S.A. (each, a "Subsidiary" and,
together, the "Subsidiaries"), and UBS Securities LLC (the "Initial Purchaser")
who has agreed to purchase the Company's 14% Senior Notes due 2007 (the "Series
A Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
October 21, 1997 (the "Purchase Agreement"), by and among the Company, the
Subsidiaries and the Initial Purchaser. In order to induce the Initial Purchaser
to purchase the Series A Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchaser set
forth in Section 2 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: A Registered Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Notes, each
Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
Series B Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
<PAGE> 3
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of October 27, 1996, between the
Company and State Street Bank and Trust Company, N.A., as trustee (the
"Trustee") pursuant to which the Notes are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the terms thereof.
Initial Purchaser: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date relating to
the Notes, each Person who is a Holder of Notes on the record date with respect
to the Interest Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, which is filed pursuant to the provisions of
this Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Series B Notes: The Company's 14% Series B Senior Subordinated Notes
due 2007 to be issued pursuant to the Indenture in the Exchange Offer.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
<PAGE> 4
Transfer Restricted Securities: Each Note, until the earliest to
occur of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Act, (b) the date on which such Note
has been effectively registered under the Act and disposed of in accordance with
a Shelf Registration Statement and (c) the date on which such Note is
distributed to the public pursuant to Rule 144 under the Act or by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein).
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with), the Company shall (i) cause to be filed
with the Commission as soon as practicable after the Closing Date, but in no
event later than 45 days after the Closing Date, a Registration Statement under
the Act relating to the Series B Notes and the Exchange Offer, (ii) use its
reasonable best efforts to cause such Registration Statement to become effective
at the earliest possible time, but in no event later than 120 days after the
Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective
amendments to such Registration Statement as may be necessary in order to cause
such Registration Statement to become effective, (B) if applicable, a
post-effective amendment to such Registration Statement pursuant to Rule 430A
under the Act and (C) cause all necessary filings in connection with the
registration and qualification of the Series B Notes to be made under the Blue
Sky laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer; provided that the Company shall not be obligated to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified or to
file a general consent to service of process in any jurisdiction, and (iv) upon
the effectiveness of such Registration Statement, commence the Exchange Offer.
The Exchange Offer shall be on the appropriate form permitting registration of
the Series B Notes to be offered in exchange for the Transfer Restricted
Securities and to permit resales of Notes held by Broker-Dealers as contemplated
by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement
to be effective continuously and shall keep the Exchange Offer open for a period
of not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the Notes shall be included in the Exchange Offer
Registration Statement. The Company shall use its reasonable best efforts to
cause the Exchange Offer to be Consummated on the earliest practicable date
after the Exchange Offer Registration Statement has become effective, but in no
event later than 30
<PAGE> 5
business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Series A Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company or an affiliate of the
Company), may exchange such Series A Notes pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with any resales of the Series B Notes
received by such Broker-Dealer in the Exchange Offer, which prospectus delivery
requirement may be satisfied by the delivery by such Broker-Dealer of the
Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of
Distribution" section shall also contain all other information with respect to
such resales by Broker-Dealers that the Commission may require in order to
permit such resales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of 180 days from the
date on which the Exchange Offer Registration Statement is declared effective.
The Company shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during such
one-year period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 days of the Consummation of the Exchange Offer (A) that such
Holder is prohibited by applicable law or Commission policy from participating
in the Exchange Offer, or (B) that such Holder may not resell the Series B Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder, or
(C) that such Holder is a Broker-Dealer and holds Series A Notes acquired
directly from the Company or one of its affiliates, then the Company shall:
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration
Statement") on or prior to the earliest to occur of (1) the 45th day after
the date on which the Company determines that it is not required to file
the Exchange Offer Registration Statement, (2) the 45th day after the date
on which the Company receives notice from a Holder of Transfer Restricted
Securities as contemplated by clause (ii) above, and (3) the 60th day
after the Closing Date (such earliest date being the "Shelf Filing
Deadline"), which
<PAGE> 6
Shelf Registration Statement shall provide for resales of all Transfer
Restricted Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof; and
(y) use its best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the
120th day after the Shelf Filing Deadline.
The Company shall use its reasonable best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Notes by the Holders of
Transfer Restricted Securities entitled to the benefit of this Section 4(a), and
to ensure that it conforms with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of at least three years following the Closing Date or such
shorter period that will terminate when all Transfer Restricted Securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 10 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein or any matter ancillary thereto. No Holder of
Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant
to Section 5 hereof unless and until such Holder shall have used its best
efforts to provide in writing all such reasonably requested information. Each
Holder as to which any Shelf Registration Statement is being effected agrees to
furnish promptly in writing to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
<PAGE> 7
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose during the period required by this Agreement to
remain effective without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself immediately declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default"), the Company hereby agrees to pay
liquidated damages to each Holder of Transfer Restricted Securities with respect
to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 principal
amount of Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.50 per week per $1,000 principal
amount of Transfer Restricted Securities. All accrued liquidated damages shall
be paid to Record Holders by the Company by wire transfer of immediately
available funds or by federal funds check on each Damages Payment Date, as
provided in the Indenture. Following the cure of all Registration Defaults
relating to any particular Transfer Restricted Securities, the accrual of
liquidated damages with respect to such Transfer Restricted Securities will
cease.
All obligations of the Company set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Security shall have
been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and each of the Subsidiary shall comply with all of
the provisions of Section 6(c) below, shall use their best efforts to effect
such exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company there
is a question as to whether the Exchange Offer is permitted by applicable
law, the Company hereby agrees to seek a no-action letter or other
favorable decision from the Commission allowing the Company to Consummate
an Exchange Offer for such Series A Notes. The Company agrees to pursue
the issuance of such a decision to the Commission staff level but shall
not be required to take commercially unreasonable action to effect a
change of Commission policy. The Company agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to
the Commission staff an analysis prepared by counsel to the Company
setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursue a resolution (which need not be favorable) by the
Commission staff of such submission.
<PAGE> 8
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the Company
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary
course of business. In addition, all such Holders of Transfer Restricted
Securities shall otherwise cooperate in the Company's preparations for the
Exchange Offer. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer to participate
in a distribution of the securities to be acquired in the Exchange Offer
(1) could not under Commission policy as in effect on the date of this
Agreement rely on the position of the Commission enunciated in Morgan
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the Commission's
letter to Shearman & Sterling dated July 2, 1993, and similar no-action
letters (including any no-action letter obtained pursuant to clause (i)
above), and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction should be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K
if the resales are of Series B Notes obtained by such Holder in exchange
for Series A Notes acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley and Co.,
Inc. (available June 5, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above and (B) including a representation
that neither the Company nor the Subsidiaries has entered into any
arrangement or understanding with any Person to distribute the Series B
Notes to be received in the Exchange Offer and that, to the best of the
Company's information and belief, each Holder participating in the
Exchange Offer is acquiring the Series B Notes in its ordinary course of
business and has no arrangement or understanding with any Person to
participate in the distribution of the Series B Notes received in the
Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Subsidiaries shall comply with all
the provisions of Section 6(c) below and shall use their reasonable best efforts
to effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company will as expeditiously as
possible prepare and file with the Commission a Registration Statement relating
to the registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Notes by
Broker-Dealers), the Company shall:
<PAGE> 9
(i) use its reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements (including, if required by the Act or any regulation
thereunder, financial statements of each of the Subsidiaries) for the
period specified in Section 3 or 4 of this Agreement, as applicable; upon
the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for resale
of Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to
such Registration Statement, in the case of clause (A), correcting any
such misstatement or omission, and, in the case of either clause (A) or
(B), use its reasonable best efforts to cause such amendment to be
declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter. Notwithstanding the foregoing, if the Board of
Directors of the Company determines in good faith that it is in the best
interests of the Company not to disclose the existence of or facts
surrounding any proposed or pending material corporate transaction
involving the Company or any of the Subsidiaries, the Company may allow
the Shelf Registration Statement or the Exchange Offer Registration
Statement to fail to be effective and usable as a result of such
nondisclosure for up to 120 days during the three year period required by
Section 4 hereof, but in on event (x) for any period in excess of 45
consecutive days or (y) for more than 60 days in any calendar year,
provided, that if the Exchange Offer is Consummated, the Company shall not
allow the Exchange Offer Registration Statement to fail to be effective
for a period in excess of 30 days during the one year period of
effectiveness required by Section 3 hereof;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as applicable, or such shorter
period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky
<PAGE> 10
laws, the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, upon written request therefrom, before filing with
the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus (including all documents incorporated by reference
after the initial filing of such Registration Statement), which documents
will be subject to the review of such Holders and underwriter(s), if any,
for a period of at least three business days, and the Company will not
file any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including all
such documents incorporated by reference) to which a selling Holder of
Transfer Restricted Securities covered by such Registration Statement or
the underwriter(s), if any, shall reasonably object within three business
days after the receipt thereof. A selling Holder or underwriter, if any,
shall be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement or
omission;
(v) promptly prior to the filing of any document that is to
be incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s), if any, make the Company's representatives (and
representatives of the Subsidiaries) available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such selling
Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney or accountant retained by
such selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and
the Subsidiaries and cause the Company's and the Subsidiaries' officers,
directors and employees to supply all information reasonably requested by
any such Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof and prior to
its effectiveness;
(vii) if requested by any selling Holders or the under-
writer(s), if any, promptly incorporate in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and underwriter(s), if
any, may reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the principal
amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other terms
of the offering of the Transfer Restricted Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies,
if so requested by the Holders of a majority in aggregate principal amount
of Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
<PAGE> 11
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company and the
Subsidiaries hereby consent to the use of the Prospectus and any amendment
or supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) enter into, and cause the Subsidiaries to enter into, such
agreements (including an underwriting agreement), and make, and cause the
Subsidiaries to make, such representations and warranties, and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities pursuant
to any Registration Statement contemplated by this Agreement, all to such
extent as may be requested by the Initial Purchaser or by any Holder of
Transfer Restricted Securities or underwriter in connection with any sale
or resale pursuant to any Registration Statement contemplated by this
Agreement; and whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration, the
Company and the Subsidiaries shall:
(A) upon request, furnish to the Initial Purchaser, each
selling Holder and each underwriter, if any, in such substance and
scope as they may request and as are customarily made by issuers to
underwriters in primary underwritten offerings, upon the date of the
Consummation of the Exchange Offer and, if applicable, the
effectiveness of the Shelf Registration Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
President or any Vice President and (z) a principal financial or
accounting officer of the Company, confirming, as of the date
thereof, the matters set forth in paragraph (f) of Section 10 of
the Purchase Agreement and such other matters as such parties
may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Subsidiaries, covering the matters set forth in
paragraph (f) of Section 7 of the Purchase Agreement and such
other matter as such parties may reasonably request, and in any
event including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants for the Company, the Initial
Purchaser's representatives and the Initial Purchaser's counsel
in connection with the preparation of such Registration
Statement and the related Prospectus and have considered the
matters required to be stated therein and the statements
contained therein, although such counsel has not independently
verified the accuracy, completeness or fairness of such
statements; and that such counsel advises that, on the basis of
the foregoing (relying as to materiality to a large extent upon
facts provided to such counsel by officers and other
representatives of the Company and the Subsidiaries and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that the
applicable Registration
<PAGE> 12
Statement (except as to (a) financial statements, including the
notes thereto, (b) statistical data and (c) other financial and
accounting data (without limitation, the pro forma financial
information), in each case, included or omitted therefrom, as to
which no belief need be expressed), at the time such Registration
Statement or any post-effective amendment thereto became
effective, and, in the case of the Exchange Offer Registration
Statement, as of the date of Consummation, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus (except as to (a)
financial statements, including the notes thereto, (b)
statistical data and (c) other financial and accounting data
(without limitation, the pro forma financial information), in
each case, included or omitted therefrom, as to which no belief
need be expressed) contained in such Registration Statement as of
its date and, in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements,
notes and schedules and other financial data included in any
Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, from
the Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary underwritten
offerings;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company
pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company
and the Subsidiaries contemplated in clause (A)(1) above cease to be
true and correct, the Company or the Subsidiaries shall so advise the
Initial Purchaser and the underwriter(s), if any, and each selling
Holder promptly and if requested by such Persons, shall confirm such
advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with, and cause the Subsidiaries to cooperate with,
the selling Holders, the underwriter(s), if any, and their respective
counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s) may reasonably
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided, however,
that neither the Company nor the Subsidiaries shall be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to
<PAGE> 13
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of Series A
Notes covered by the Shelf Registration Statement, Series B Notes, having
an aggregate principal amount equal to the aggregate principal amount of
Series A Notes surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such Series B Notes to be
registered in the name of such Holder or in the name of the purchaser(s)
of such Notes, as the case may be; in return, the Series A Notes held by
such Holder shall be surrendered to the Company for cancellation;
(xiv) cooperate with, and cause the Subsidiaries to cooperate
with, the selling Holders and the underwriter(s), if any, to facilitate
the timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive legends;
and enable such Transfer Restricted Securities to be in such denominations
and registered in such names as the Holders or the underwriter(s), if any,
may request at least two business days prior to any sale of Transfer
Restricted Securities made by such underwriter(s);
(xv) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (viii)
above;
(xvi) subject to the provisions of Section 6(C)(i) above, if
any fact or event contemplated by clause (c)(iii)(D) above shall exist or
have occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of Transfer Restricted Securities,
the Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein
not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
and provide the Trustee under the Indenture with printed certificates for
the Transfer Restricted Securities which are in a form eligible for
deposit with the Depositary Trust Company;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter" that is
required to be retained in accordance with the rules and regulations of
the NASD, and use its reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies
or authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xix) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if not
sold to underwriters in such an offering, beginning with the first month
of the
<PAGE> 14
Company's first fiscal quarter commencing after the effective date of the
Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate, with the
Trustee and the Holders of Notes to effect such changes to the Indenture
as may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute, and use its reasonable best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents required
to be filed with the Commission to enable such Indenture to be so
qualified in a timely manner;
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed if requested by
the Holders of a majority in aggregate principal amount of Series A Notes
or the managing underwriter(s), if any; and
(xxii) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section
13 and Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
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 that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or the Subsidiaries'
performance of or compliance with this Agreement will be borne by the Company or
the Subsidiaries, regardless of whether a Registration Statement becomes
effective, including without limitation: (i) all registration and filing fees
and expenses (including filings made by the Initial Purchaser or Holder with the
NASD (and, if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel that may be required by the rules and regulations
of the NASD)); (ii) all fees and expenses of compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Series B Notes to be issued in the Exchange Offer
and printing of Prospectuses), messenger and delivery services and telephone;
(iv) all fees and disbursements of counsel for the Company, the Subsidiaries
and, subject to Section 7(b) below, the Holders of Transfer Restricted
Securities; (v) all application and filing fees in connection with listing the
Notes on a national securities exchange or automated quotation system pursuant
to the requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Subsidiaries (including the
expenses of any special audit and comfort letters required by or incident to
such performance) but specifically excluding (a) fees and expenses of counsel to
the underwriter(s), if any (other than fees and expenses set forth in clauses
(i) and (ii) above, (b) underwriting discounts and commissions and (c) transfer
fees and taxes, if any, relating to the sale and disposition of Transfer
Restricted Securities by a selling Holder.
<PAGE> 15
The Company will, in any event, bear its and the Subsidiaries'
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, as may be chosen
by the Holders of a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Registration Statement is being prepared
provided that such fees and disbursements shall not exceed $25,000.
SECTION 8. INDEMNIFICATION
(a) Each of the Company and the Subsidiaries jointly and severally agrees
to indemnify and hold harmless (i) each Holder, (ii) each person, if any, who
controls each Holder within the meaning of Section 15 of the Act or Section 20
of the Exchange Act and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any controlling person
(any person referred to in clause (i), (ii) or (iii) may hereinafter be referred
to as an "Indemnified Holder"), from and against any and all losses, claims,
damages, liabilities and judgments caused by any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
none of the Company or its subsidiaries will be liable in any such case to an
Indemnified Holder insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to such Indemnified Holder
furnished in writing to the Company by such Indemnified Holder expressly for use
therein.
<PAGE> 16
(b) In case any action shall be brought against any Indemnified Holder,
based upon any Registration Statement or Prospectus or any amendment or
supplement thereto and with respect to which indemnity may be sought against the
Company and the Subsidiaries, such Indemnified Holder shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Holder and
payment of all fees and expenses. Each Indemnified Holder shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the reasonable fees and expenses of such counsel shall be at the
expense of such Indemnified Holder unless (i) the employment of such counsel has
been specifically authorized in writing by the Company, (ii) the Company has
failed to assume the defense and employ counsel or (iii) the named parties to
any such action (including any impleaded parties) include both such Indemnified
Holder and the Company, and such Indemnified Holder shall have been advised by
such counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the Company (in which
case the Company shall not have the right to assume the defense of such action
on behalf of such Indemnified Holder, it being understood, however, that the
Company shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for such Indemnified Holder, which firm shall be designated in writing
by such Indemnified Holder, and that all such fees and expenses shall be
reimbursed as they are incurred). The Company shall not be liable for any
settlement of any such action effected without the written consent of the
Company but if settled with the Company's written consent, the Company agrees to
indemnify and hold harmless such Indemnified Holder from and against any loss or
liability by reason of such settlement. Notwithstanding the immediately
preceding sentence, if in any case where the fees and expenses of counsel are at
the expense of the indemnifying party and indemnified party shall have requested
the indemnifying party to reimburse the indemnified party for such fees and
expenses of counsel as incurred, such indemnifying party agrees that it shall be
liable for any settlement of any action effected without its written consent if
(i) such settlement is entered into more than forty-five business days after the
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall have failed to reimburse the indemnified party in
accordance with such request for reimbursement prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(c) Each Holder of Transfer Restricted Securities agrees to indemnify and
hold harmless the Company, its directors and officers, and any person
controlling the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act (collectively, the "Company Indemnified Parties"), to the
same extent as the foregoing indemnity from the Company and the Subsidiaries to
the Indemnified Holders but only with reference to information relating to such
Holder furnished in writing by such Holder expressly for use in any Registration
Statement. In case any action shall be brought against any Company Indemnified
Party in respect of which indemnity may be sought against a Holder of Transfer
Restricted Securities, such Holder shall have the rights and duties given to the
Company (except that if the Company shall have assumed the defense thereof, such
Holder shall not be required to do so, but may employ separate counsel therein
and participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such Holder), and the Company Indemnified Parties
shall have the rights and duties given to the Indemnified Holders by Section
8(b) hereof. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the proceeds
<PAGE> 17
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(d) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party in respect of any losses, claims, damages, liabilities
or judgments referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company, on the one hand, and the Holder,
on the other hand, from their sale of Transfer Restricted Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, on
the one hand, and Indemnified Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and the
Indemnified Holder, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the Company or the Indemnified Holder and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and each Holder of Transfer Restricted Securities agree that
it would not be just and equitable if contribution pursuant to this paragraph
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The losses, claims, damages, liabilities or
judgments of an indemnified party referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, none of the Holders (and its
related Indemnified Holders) shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the dollar amount of proceeds
received by such Holder upon sale of Transfer Restricted Securities, if any,
exceeds the sum of (A) the amount paid by such Holder for such Transfer
Restricted Securities and (B) the amount of any damages which such Holder has
otherwise been required to pay be reason of such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Holders' obligations to
contribute as provided in this Section 8(d) are several in proportion to their
principal amount of Series A Notes held by each of the Holders hereunder and not
joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.
<PAGE> 18
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company and the Subsidiaries agree that monetary
damages (including the liquidated damages contemplated hereby) would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agree to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, and will cause
the Subsidiaries not to, on or after the date of this Agreement enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. None the Company nor the Subsidiaries has previously entered
into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any agreement in effect on the date
hereof.
(c) Adjustments Affecting the Notes. The Company will not take any
action, or permit any change to occur, with respect to the Notes that would
materially and adversely affect the ability of the Holders to Consummate any
Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
<PAGE> 19
(i) if to a Holder, at the address set forth on the records
of the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
InterAmericas Communications Corporation
1221 Brickell Avenue, Suite 900
Miami, Florida 33131
Telecopier No.: (305) 337-6791
Attention: Chief Financial Officer
With a copy to:
Baker & McKenzie
701 Brickell Avenue, Suite 1600
Miami, Florida 33131
Telecopier No.: (305) 789-8900
Attention: Andrew Hulsh, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and
<PAGE> 20
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
[SIGNATURE PAGES FOLLOW]
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
INTERAMERICAS COMMUNICATIONS CORPORATION
By:
-------------------------------------
Name:
Title:
HEWSTER CHILE, S.A.
By:
-------------------------------------
Name:
Title:
RED DE SERVICIOS EMPRESARIALES DE
TELECOMUNICACIONES, S.A.
By:
------------------------------------
Name:
Title:
UBS SECURITIES LLC
By:
--------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.5
EXECUTION COPY
================================================================================
INTERAMERICAS COMMUNICATIONS CORPORATION
150,000 Units Consisting of $150,000,000 Aggregate Principal Amount of
14% Senior Notes due 2007 and 5,250,000 Warrants to Purchase
5,250,000 Shares of Common Stock
and
2,250,000 Warrants to Purchase 2,250,000 shares of CommonStock
WARRANT AGREEMENT
Dated as of October 27, 1997
STATE STREET BANK AND TRUST COMPANY, N.A.
Warrant Agent
<PAGE> 2
WARRANT AGREEMENT ("Agreement"), dated as of October 27, 1997, by and
between INTERAMERICAS COMMUNICATIONS CORPORATION, a Texas corporation (together
with any successor thereto, the "Company"), and State Street Bank and Trust
Company, N.A. not in its individual capacity but solely as warrant agent (with
any successor Warrant Agent, the "Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement (the
"Purchase Agreement") dated October 21, 1997 with UBS Securities LLC (the
"Initial Purchaser") in which the Company has agreed to sell to the Initial
Purchaser 150,000 units (the "Units") consisting in the aggregate of (i)
$150,000,000 in aggregate principal amount of 14% Senior Notes due 2007 (the
"Notes") of the Company to be issued under an indenture, dated as of the date
hereof (the "Indenture"), by and between the Company and State Street Bank and
Trust Company, N.A., as trustee (in such capacity, the "Trustee"), and (ii)
5,250,000 Warrants (the "Unit Warrants"), each representing the right to
purchase initially one share of Common Stock, par value $.001 per share, of the
Company (the "Common Stock");
WHEREAS, pursuant to (i) that certain letter agreement dated September
22, 1997 by and between the Company and the Initial Purchaser (the "Engagement
Letter"), the Company has agreed to issue Warrants to the Initial Purchaser (the
"UBS Warrants" and, together with the Unit Warrants, the "Warrants" and the
certificates evidencing the Warrants being hereinafter referred to as "Warrant
Certificates") to purchase an aggregate of 2,250,000 shares of Common Stock and
(ii) the Purchase Agreement, the Company has agreed to issue 2,250,000 UBS
Warrants, each representing the right to purchase initially one share of Common
Stock;
WHEREAS, the Company desires the Warrant Agent to assist the Company in
connection with the issuance, exchange, cancellation, replacement and exercise
of the Warrants, and in this Agreement wishes to set forth, among other things,
the terms and conditions on which the Warrants may be issued, exchanged,
canceled, replaced and exercised;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 2. Warrant Certificates. The Warrant Certificates shall be in
registered form only and shall be substantially in the form set forth in Exhibit
A attached hereto and shall, prior to the Separation Date (as defined herein),
bear the legend set forth in Exhibit B attached hereto.
The Unit Warrants initially will be issued in global form (the "Global
Warrants"), substantially in the form of Exhibit A attached hereto (including
the text referred to in footnotes 1 and 2 thereto). The UBS Warrants will be
issued initially in definitive form, substantially in the form of Exhibit A
attached hereto (but without the text referred to in footnotes 1 and 2 thereto),
but, at any time after the Separation Date, at the Initial Purchaser's option
may be exchanged for interests in the Global Warrant.
The Global Warrant shall represent such of the outstanding Warrants as
shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Warrants from time to time endorsed thereon and
that the aggregate amount of outstanding Warrants represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges and
exercises. Any endorsement of the Global Warrant to reflect the amount of any
increase or decrease in the amount of
<PAGE> 3
outstanding Warrants represented thereby shall be made by the Warrant Agent or
the depositary with respect to the Global Warrants (the "Depositary") in
accordance with instructions given by the holder thereof. The Company initially
appoints The Depository Trust Company ("DTC") to act as Depositary with respect
to the Warrants in global form.
Each Global Warrant shall bear the following legend on the
face thereof:
"Unless and until it is exchanged in whole or in part for
Warrants in definitive form, this Warrant may not be
transferred except as a whole by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. The Depository Trust
Company shall act as the Depositary until a successor shall be
appointed by the Company. Unless this certificate is presented
by an authorized representative of The Depository Trust
Company (55 Water Street, New York, New York) ("DTC"), to the
Company or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name
of Cede & Co. or such other name as may be requested by an
authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as may be requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein."
Beneficial owners of interests in a Global Warrant may receive Warrants
in definitive form (the "Definitive Warrants"), substantially in the form of
Exhibit A attached hereto (but without the text referred to in footnotes 1 and 2
thereto) in the name of such beneficial owners in accordance with the procedures
of the Warrant Agent and the Depositary. In connection with the execution and
delivery of such Definitive Warrants, the Warrant Agent shall reflect on its
books and records a decrease in the principal amount of the relevant Global
Warrant equal to the amount of such Definitive Warrants and the Company shall
execute and the Warrant Agent shall countersign and deliver one or more
Definitive Warrants in an equal aggregate amount.
SECTION 3. Execution of Warrant Certificates. (a) Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board, Chief
Executive Officer, its President or a Vice President and by its Secretary or an
Assistant Secretary. Each such signature upon the Warrant Certificates may be in
the form of a facsimile signature of the present or any future Chairman of the
Board, Chief Executive Officer, President, Vice President, Secretary or
Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, Chief
Executive Officer, President, Vice President, Secretary or Assistant Secretary,
notwithstanding the fact that at the time the Warrant Certificates shall be
countersigned and delivered or disposed of he shall have ceased to hold such
office. The seal of the Company may be in the form of a facsimile thereof and
may be impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates.
(b) In case any officer of the Company who shall have signed
any of the Warrant Certificates shall cease to be such officer before the
Warrant Certificates so signed shall have been countersigned by the Warrant
Agent, or disposed of by the Company, such Warrant Certificates nevertheless may
be countersigned and delivered or disposed of as though such person had not
ceased to
2
<PAGE> 4
be such officer of the Company; and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Warrant
Agreement any such person was not such officer.
(c) Warrant Certificates shall be dated the date of
countersignature by the Warrant Agent.
SECTION 4. Registration and Countersignature. (a) The Warrant Agent, on
behalf of the Company, shall number and register the Warrant Certificates in a
register as they are issued by the Company.
(b) Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. The Warrant Agent shall, upon written instructions of the
Chairman of the Board, the Chief Executive Officer, the President, a Vice
President, the Treasurer or the Controller of the Company, initially
countersign, issue and deliver Warrant Certificates entitling the holders
thereof to purchase not more than the number of Warrant Shares referred to above
in the first recital hereof and shall countersign and deliver Warrant
Certificates as otherwise provided in this Agreement.
(c) The Company and the Warrant Agent may deem and treat the
registered holder(s) of the Warrant Certificates as the absolute owner(s)
thereof (notwithstanding any notation of ownership or other writing thereon made
by anyone) for all purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary.
SECTION 5. Registration of Transfers and Exchanges. (a) Transfer and
Exchange of Global Warrants. A Global Warrant may not be transferred as a whole
except by the Depositary to a nominee of the Depositary, by a nominee of the
Depositary to the Depositary or to another nominee of the Depositary, by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. All Global Warrants will be exchanged by the Company for
Definitive Warrants if (i) the Company delivers to the Warrant Agent notice from
the Depositary that it is unwilling or unable to continue to act as Depositary
or that it is no longer a clearing agency registered under the Securities
Exchange Act of 1934, as amended, and, in either case, a successor Depositary is
not appointed by the Company within 120 days after the date of such notice from
the Depositary or (ii) the Company in its sole discretion determines that the
Global Warrants (in whole but not in part) should be exchanged for Definitive
Warrants and delivers a written notice to such effect to the Warrant Agent. Upon
the occurrence of either of the preceding events in (i) or (ii) above,
Definitive Warrants shall be issued in such names as the Depositary shall
instruct the Warrant Agent. Global Warrants also may be exchanged or replaced,
in whole or in part. Every Warrant authenticated and delivered in exchange for,
or in lieu of, a Global Warrant or any portion thereof, pursuant to this Section
5, shall be authenticated and delivered in the form of, and shall be, a Global
Warrant. A Global Warrant may not be exchanged for another Warrant other than as
provided in this Section 5(a); however, beneficial interests in a Global Warrant
may be transferred and exchanged as provided in Section 5(b) or (c) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Warrants. The transfer and exchange of beneficial interests in the Global
Warrants shall be effected through the Depositary, in accordance with the
provisions of this Warrant Agreement and the rules and procedures of the
Depositary, Morgan Guaranty Trust Company of New York, Brussels office, as
operator of the Euroclear system ("Euroclear"), and Cedel Bank, SA ("Cedel")
that apply to such transfer or exchange
3
<PAGE> 5
(the "Applicable Procedures"). Beneficial interests in a Global Warrant bearing
the Private Placement Legend (as defined herein) (a "Restricted Global Warrant")
shall be subject to restrictions on transfer comparable to those set forth
herein to the extent required by the Securities Act. Transfers of beneficial
interests in the Global Warrants also shall require compliance with either
subparagraph (i) or (ii) below, as applicable, as well as one or more of the
other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global
Warrant. Beneficial interests in any Restricted
Global Warrant may be transferred to persons who take
delivery thereof in the form of a beneficial interest
in the same Restricted Global Warrant in accordance
with the transfer restrictions set forth in the
legend set forth in Section 5(f) hereof (the "Private
Placement Legend"); provided, however, that prior to
the expiration of the 40-day restricted period as
defined in Regulation S under the Securities Act (the
"Restricted Period"), transfers of beneficial
interests in the Global Note bearing the Private
Placement Legend and deposited with or on behalf of
the Depositary and registered in the name of the
Depositary or its nominee, issued in an amount equal
to the outstanding Warrants initially sold in
reliance on Rule 903 of Regulation S (the "Regulation
S Global Warrant") may not be made to a U.S. person
(as defined in Rule 902(o) under the Securities Act)
or for the account or benefit of a U.S. person (other
than the Initial Purchaser). Beneficial interests in
any Unrestricted Global Warrant (defined for purposes
hereof as any Global Warrant in the form of Exhibit A
hereto that bears the legend set forth in Section 2
hereof and that has the "Schedule of Exchanges of
Global Warrants" attached thereto, and that is
deposited with or on behalf of the Depositary,
representing Warrants that do not bear the Private
Placement Legend) may be transferred to persons who
take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Warrant. No
written orders or instructions shall be required to
be delivered to the Warrant Agent to effect the
transfers described in this Section 5(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial
Interests in Global Warrant. In connection with all
transfers and exchanges of beneficial interests that
are not subject to Section 5(b)(i) above, the
transferor of such beneficial interest must deliver
to the Warrant Agent either (A)(1) a written order
from a person who has an account with the Depositary,
Euroclear or Cedel (a "Participant") or with a person
who has an account with a Participant (an "Indirect
Participant") given to the Depositary in accordance
with the Applicable Procedures directing the
Depositary to credit or cause to be credited a
beneficial interest in another Global Warrant in an
amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given
in accordance with the Applicable Procedures
containing information regarding the Participant
account to be credited with such increase or (B)(1) a
written order from a Participant or an Indirect
Participant given to the Depositary in accordance
with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Warrant
in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given
by the Depositary to the Warrant Agent containing
information regarding the person in whose name such
Definitive Warrant shall be registered to effect the
transfer or exchange referred to in (1) above. Upon
satisfaction of all of the requirements for transfer
or exchange of beneficial interests in Global
Warrants contained in this Warrant Agreement or
otherwise
4
<PAGE> 6
applicable under the Securities Act, the Warrant
Agent shall adjust the amount of the relevant Global
Warrant(s) pursuant to Section 5(g) hereof.
(iii) Transfer of Beneficial Interests to Another
Restricted Global Warrant. A beneficial interest in
any Restricted Global Warrant may be transferred to a
person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global
Warrant if the transfer complies with the
requirements of Section 5(b)(ii) above and the
Warrant Agent receives the following:
(A) if the transferee will take delivery in the
form of a beneficial interest in the 144A
Global Warrant (defined for purposes hereof as
any Global Warrant in the form of Exhibit A
hereto that bears the Private Placement Legend
and the legend set forth in Section 2 hereof
and that is deposited with or on behalf of,
and registered in the name of, the Depositary
or its nominee that will be issued in an
amount equal to the amount of Warrants sold in
reliance on Rule 144A under the Securities
Act), then the transferor must deliver a
certificate in the form of Exhibit C hereto,
including the certifications in item (1)
thereof;
(B) if the transferee will take delivery in the
form of a beneficial interest in the Regulation
S Global Warrant, then the transferor must
deliver a certificate in the form of Exhibit C
hereto, including the certifications in item (2)
thereof; and
(C) if the transferee will take delivery in the
form of a beneficial interest in the IAI Global
Warrant (defined for purposes hereof as any
Global Warrant in the form of Exhibit A hereto
that bears the Private Placement Legend and the
legend set forth in Section 2 hereof and that is
deposited with or on behalf of, and registered
in the name of, the Depositary or its nominee
that will be issued in an amount equal to the
amount of Warrants sold to institutional
"accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) ("Institutional Accredited
Investors")), then the transferor must deliver a
certificate in the form of Exhibit C hereto,
including the certifications and certificates
and Opinion of Counsel required by item (3)
thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Warrant for Beneficial Interests in
the Unrestricted Global Warrant. A beneficial
interest in any Restricted Global Warrant may be
exchanged by any holder thereof for a beneficial
interest in an Unrestricted Global Warrant or
transferred to a person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted
Global Warrant if the exchange or transfer complies
with the requirements of Section 5(b)(ii) above and:
(A) such transfer is effected pursuant to a
Registration Statement in accordance with the
Warrant Registration Rights Agreement; or
(B) the Warrant Agent receives the following:
5
<PAGE> 7
(1) if the holder of such beneficial
interest in a Restricted Global
Warrant proposes to exchange such
beneficial interest for a beneficial
interest in an Unrestricted Global
Warrant, a certificate from such
holder in the form of Exhibit D
hereto, including the certifications
in item (l)(a) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global
Warrant proposes to transfer such
beneficial interest to a person who
shall take delivery thereof in the
form of a beneficial interest in an
Unrestricted Global Warrant, a
certificate from such holder in the
form of Exhibit C hereto, including
the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (B),
if the Warrant Agent so requests or if the Applicable
Procedures so require, an opinion of counsel from legal
counsel reasonably acceptable to the Warrant Agent in form
reasonably acceptable to the Warrant Agent (an "Opinion of
Counsel") to the effect that such exchange or transfer is
in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph
(B) above at a time when an Unrestricted Global Warrant
has not yet been issued, the Company shall issue and the
Warrant Agent shall countersign one or more Unrestricted
Global Warrants in an aggregate amount equal to the
aggregate amount of beneficial interests transferred
pursuant to subparagraph (B) above.
Beneficial interests in an Unrestricted Global Warrant
cannot be exchanged for, or transferred to persons who
take delivery thereof in the form of, a beneficial
interest in a Restricted Global Warrant.
(c) Transfer or Exchange of Beneficial Interests for
Definitive Warrants.
(i) Beneficial Interests in Restricted Global Warrants to
Restricted Definitive Warrants. If any holder of a
beneficial interest in a Restricted Global Warrant
proposes to exchange such beneficial interest for a
Restricted Definitive Warrant or to transfer such
beneficial interest to a person who takes delivery
thereof in the form of a Restricted Definitive
Warrant, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in
a Restricted Global Warrant proposes to
exchange such beneficial interest for a
Restricted Definitive Warrant, a certificate
from such holder in the form of Exhibit D
hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being
transferred to a "qualified institutional
buyer" as defined in Rule 144A under the
Securities Act (a "QIB") in accordance with
Rule 144A under the Securities Act, a
certificate to the
6
<PAGE> 8
effect set forth in Exhibit C hereto,
including the certifications in item (1)
thereof;
(C) if such beneficial interest is being
transferred to a person who is not a U.S.
person (a "Non-U.S. Person") in an offshore
transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a
certificate to the effect set forth in
Exhibit C hereto, including the
certifications in item (2) thereof;
(D) if such beneficial interest is being
transferred pursuant to an exemption from
the registration requirements of the
Securities Act in accordance with Rule 144
under the Securities Act, a certificate to
the effect set forth in Exhibit C hereto,
including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being
transferred to an Institutional Accredited
Investor in reliance on an exemption from
the registration requirements of the
Securities Act other than those listed in
subparagraphs (B) through (D) above, a
certificate to the effect set forth in
Exhibit C hereto, including the
certifications, certificates and Opinion of
Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being
transferred to the Company or any of its
subsidiaries, a certificate to the effect
set forth in Exhibit C hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being
transferred pursuant to an effective
registration statement under the Securities
Act, a certificate to the effect set forth
in Exhibit C hereto, including the
certifications in item (3)(c) thereof,
the Warrant Agent shall cause the aggregate amount of
the applicable Global Warrant to be reduced
accordingly pursuant to Section 5(g) hereof, and the
Company shall execute and the Warrant Agent shall
authenticate and deliver to the person designated in
the instructions a Definitive Warrant in the
appropriate amount. Any Definitive Warrant issued in
exchange for a beneficial interest in a Restricted
Global Warrant pursuant to this Section 5(c) shall be
registered in such name or names and in such
authorized denomination or denominations as the
holder of such beneficial interest shall instruct the
Warrant Agent through instructions from the
Depositary and the Participant or Indirect
Participant. The Warrant Agent shall deliver such
Definitive Warrants to the persons in whose names
such Warrants are so registered. Any Definitive
Warrant issued in exchange for a beneficial interest
in a Restricted Global Warrant pursuant to this
Section 5(c)(i) shall bear the Private Placement
Legend and shall be subject to all restrictions on
transfer contained therein.
(ii) Beneficial Interests in Restricted Global Warrants to
Unrestricted Definitive Warrants. A holder of a
beneficial interest in a Restricted Global Warrant
may exchange such beneficial interest for an
Unrestricted Definitive Warrant or may
7
<PAGE> 9
transfer such beneficial interest to a person who
takes delivery thereof in the form of an
Unrestricted Definitive Warrant only if:
(A) such transfer is effected pursuant to a
Registration Statement in accordance
with the Warrant Registration Rights
Agreement; or
(B) the Warrant Agent receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global
Warrant proposes to exchange such
beneficial interest for a Definitive
Warrant that does not bear the
Private Placement Legend, a
certificate from such holder in the
form of Exhibit D hereto, including
the certifications in item (l)(b)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global
Warrant proposes to transfer such
beneficial interest to a person who
shall take delivery thereof in the
form of a Definitive Warrant that
does not bear the Private Placement
Legend, a certificate from such
holder in the form of Exhibit C
hereto, including the certifications
in item (4) thereof;
and, in each such case set forth in this subparagraph
(B), if the Warrant Agent so requests or if the
Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Warrant
Agent to the effect that such exchange or transfer is
in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Warrants
to Unrestricted Definitive Warrants. If any holder of
a beneficial interest in an Unrestricted Global
Warrant proposes to exchange such beneficial interest
for a Definitive Warrant or to transfer such
beneficial interest to a person who takes delivery
thereof in the form of a Definitive Warrant, then,
upon satisfaction of the conditions set forth in
Section 5(b)(ii) hereof, the Warrant Agent shall
cause the aggregate principal amount of the
applicable Global Warrant to be reduced accordingly
pursuant to Section 5(g) hereof, and the Company
shall execute and the Warrant Agent shall countersign
and deliver to the person designated in the
instructions a Definitive Warrant in the appropriate
amount. Any Definitive Warrant issued in exchange for
a beneficial interest pursuant to this Section
5(c)(iii) shall be registered in such name or names
and in such authorized denomination or denominations
as the holder of such beneficial interest shall
instruct the Warrant Agent through instructions from
the Depositary and the Participant or Indirect
Participant. The Warrant Agent shall deliver such
Definitive Warrants to the persons in whose names
such Warrants are so registered. Any Definitive
Warrant issued in exchange for a beneficial interest
pursuant to this Section 5(c)(iii) shall not bear the
Private Placement Legend.
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<PAGE> 10
(d) Transfer and Exchange of Definitive Warrants for
Beneficial Interests.
(i) Restricted Definitive Warrants to Beneficial
Interests in Restricted Global Warrants. If any
holder of a Restricted Definitive Warrant proposes to
exchange such Warrant for a beneficial interest in a
Restricted Global Warrant or to transfer such
Restricted Definitive Warrants to a person who takes
delivery thereof in the form of a beneficial interest
in a Restricted Global Warrant, then, upon receipt by
the Warrant Agent of the following documentation:
(A) if the holder of such Restricted Definitive
Warrant proposes to exchange such Warrant
for a beneficial interest in a Restricted
Global Warrant, a certificate from such
holder in the form of Exhibit D hereto,
including the certifications in item (2)(b)
thereof;
(B) if such Restricted Definitive Warrant is
being transferred to a QIB in accordance
with Rule 144A under the Securities Act, a
certificate to the effect set forth in
Exhibit C hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Warrant is
being transferred to a Non-U.S. person in an
offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in
Exhibit C hereto, including the
certifications in item (2) thereof;
(D) if such Restricted Definitive Warrant is
being transferred pursuant to an exemption
from the registration requirements of the
Securities Act in accordance with Rule 144
under the Securities Act, a certificate to
the effect set forth in Exhibit C hereto,
including the certifications in item (3)(a)
thereof;
(E) if such Restricted Definitive Warrant is
being transferred to an Institutional
Accredited Investor in reliance on an
exemption from the registration requirements
of the Securities Act other than those
listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth
in Exhibit C hereto, including the
certifications, certificates and Opinion of
Counsel required by item (3) thereof, if
applicable;
(F) if such Restricted Definitive Warrant is
being transferred to the Company or any of
its subsidiaries, a certificate to the
effect set forth in Exhibit C hereto,
including the certifications in item (3)(b)
thereof; or
(G) if such Restricted Definitive Warrant is
being transferred pursuant to an effective
registration statement under the Securities
Act, a certificate to the effect set forth
in Exhibit C hereto, including the
certifications in item (3)(c) thereof,
the Warrant Agent shall cancel the Restricted
Definitive Warrant, increase or cause to be increased
the aggregate amount of, in the case of clause (A)
above, the appropriate Restricted Global Warrant, in
the case of clause (B) above, the
9
<PAGE> 11
144A Global Warrant, in the case of clause (C) above,
the Regulation S Global Warrant, and in all other
cases, the IAI Global Warrant.
(ii) Restricted Definitive Warrants to Beneficial
Interests in Unrestricted Global Warrants. A holder
of a Restricted Definitive Warrant may exchange such
Warrant for a beneficial interest in an Unrestricted
Global Warrant or transfer such Restricted Definitive
Warrant to a person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted
Global Warrant only if:
(A) such transfer is effected pursuant to a
Registration Statement in accordance with
the Warrant Registration Rights Agreement;
or
(B) the Warrant Agent receives the following:
(1) if the holder of such Definitive
Warrants proposes to exchange such
Warrants for a beneficial interest
in the Unrestricted Global Warrant,
a certificate from such holder in
the form of Exhibit D hereto,
including the certifications in item
(l)(c) thereof; or
(2) if the holder of such Definitive
Warrants proposes to transfer such
Warrants to a person who shall take
delivery thereof in the form of a
beneficial interest in the
Unrestricted Global Warrant, a
certificate from such holder in the
form of Exhibit C hereto, including
the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph
(B), if the Warrant Agent so requests or if the
Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Warrant
Agent to the effect that such exchange or transfer is
in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 5(d)(ii), the Warrant
Agent shall cancel the Definitive Warrants and
increase or cause to be increased the aggregate
amount of the Unrestricted Global Warrant.
(iii) Unrestricted Definitive Warrants to Beneficial
Interests in Unrestricted Global Warrants. A holder
of an Unrestricted Definitive Warrant may exchange
such Warrant for a beneficial interest in an
Unrestricted Global Warrant or transfer such
Definitive Warrants to a person who takes delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Warrant at any time. Upon receipt
of a request for such an exchange or transfer, the
Warrant Agent shall cancel the applicable
Unrestricted Definitive Warrant and increase or cause
to be increased the aggregate amount of one of the
Unrestricted Global Warrants.
If any such exchange or transfer from a Definitive
Warrant to a beneficial interest is effected pursuant
to subparagraphs (ii) or (iii) above at a time when
an Unrestricted Global Warrant has not yet been
issued, the Company shall issue and the Warrant Agent
shall authenticate one or more Unrestricted Global
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<PAGE> 12
Warrants in an aggregate amount equal to the amount
of Definitive Warrants so transferred.
(e) Transfer and Exchange of Definitive Warrants for
Definitive Warrants. Upon request by a holder of Definitive Warrants and such
holder's compliance with the provisions of this Section 5(e), the Warrant Agent
shall register the transfer or exchange of Definitive Warrants. Prior to such
registration of transfer or exchange, the requesting holder shall present or
surrender to the Warrant Agent the Definitive Warrants duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Warrant Agent duly executed by such holder or by his attorney, duly authorized
in writing. In addition, the requesting holder shall provide any additional
certifications, documents and information, as applicable, required pursuant to
the following provisions of this Section 5(e).
(i) Restricted Definitive Warrants to Restricted
Definitive Warrants. Any Restricted Definitive
Warrant may be transferred to and registered in the
name of persons who take delivery thereof in the form
of a Restricted Definitive Warrant if the Warrant
Agent receives the following:
(A) if the transfer will be made pursuant to
Rule 144A under the Securities Act, then the
transferor must deliver a certificate in the
form of Exhibit C hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to
Rule 903 or Rule 904, then the transferor
must deliver a certificate in the form of
Exhibit C hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration
requirements of the Securities Act, then the
transferor must deliver a certificate in the
form of Exhibit C hereto, including the
certifications, certificates and Opinion of
Counsel required by item (3) thereof, if
applicable.
(ii) Restricted Definitive Warrants to Unrestricted
Definitive Warrants. Any Restricted Definitive
Warrant may be exchanged by the holder thereof for an
Unrestricted Definitive Warrant or transferred to a
person or persons who take delivery thereof in the
form of an Unrestricted Definitive Warrant if:
(A) any such transfer is effected pursuant to a
Registration Statement in accordance with
the Warrant Registration Rights Agreement;
or
(B) the Warrant Agent receives the following:
(1) if the holder of such Restricted
Definitive Warrants proposes to exchange
such Warrants for an Unrestricted Definitive
Warrant, a certificate from such holder in
the form of Exhibit D hereto, including the
certifications in item (l)(d) thereof; or
(2) if the holder of such Restricted
Definitive Warrants proposes to transfer
such Warrants to a person who shall take
delivery thereof in the form of an
Unrestricted Definitive Warrant, a
certificate from such
11
<PAGE> 13
holder in the form of Exhibit C hereto,
including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph
(B), if the Warrant Agent so requests, an Opinion of
Counsel in form reasonably acceptable to the Company
to the effect that such exchange or transfer is in
compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Warrants to Unrestricted
Definitive Warrants. A holder of Unrestricted
Definitive Warrants may transfer such Warrants to a
person who takes delivery thereof in the form of an
Unrestricted Definitive Warrant.
Upon receipt of a request to register such a
transfer, the Warrant Agent shall register the
Unrestricted Definitive Warrants pursuant to the
instructions from the holder thereof.
(f) Legends. The following legend shall appear on the face of
all Global Warrants and Definitive Warrants issued under this Warrant Agreement
unless specifically stated otherwise in the applicable provisions of this
Warrant Agreement.
(i) Except as permitted by subparagraph (B) below, each
Global Warrant and each Definitive Warrant (and all
Warrants issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the
following form:
"THIS SECURITY EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES
ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO
12
<PAGE> 14
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (1) ABOVE.
(ii) Notwithstanding the foregoing, any Global Warrant or
Definitive Warrant issued pursuant to subparagraphs
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii),
(e)(ii) or (e)(iii) to this Section 5 and all
Warrants issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(g) Cancellation and/or Adjustment of Global Warrants. At such
time as all beneficial interests in a particular Global Warrant have been
exchanged for Definitive Warrants or a particular Global Warrant has been
redeemed, repurchased or canceled in whole and not in part, each such Global
Warrant shall be returned to or retained and canceled by the Warrant Agent in
accordance with Section 5(k). At any time prior to such cancellation, if any
beneficial interest in a Global Warrant is exchanged for or transferred to a
person who will take delivery thereof in the form of a beneficial interest in
another Global Warrant or for Definitive Warrants, the principal amount of
Warrants represented by such Global Warrant shall be reduced accordingly and an
endorsement shall be made on such Global Warrant by the Warrant Agent or by the
Depositary at the direction of the Warrant Agent to reflect such reduction; and
if the beneficial interest is being exchanged for or transferred to a person who
will take delivery thereof in the form of a beneficial interest in another
Global Warrant, such other Global Warrant shall be increased accordingly and an
endorsement shall be made on such Global Warrant by the Warrant Agent or by the
Depositary at the direction of the Warrant Agent to reflect such increase.
(h) Indemnification. Each holder of a Warrant Certificate
agrees to indemnify the Company and the Warrant Agent against any liability that
may result from the transfer, exchange or assignment of such holder's Warrant
Certificate in violation of any provision of this Agreement and/or applicable
U.S. Federal or state securities law.
(i) Depositary. Members of, or participants in, the Depositary
("Agent Members") shall have no rights under this Agreement with respect to the
Global Warrants, as the case may be, held on their behalf by the Depositary or
the Warrant Agent as its custodian, and the Depositary may be treated by the
Company, the Warrant Agent and any agent of the Company or the Warrant Agent as
the absolute owner of such Global Warrant for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Warrant Agent or any agent of the Company or the Warrant Agent, from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
holder of any Warrants.
(j) Notices. The Warrant Agent shall retain copies of all
letters, notices and other written communications received pursuant to this
Section 5. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Warrant Agent.
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<PAGE> 15
(k) Cancellation of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented thereby shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates surrendered or so
delivered to the Warrant Agent shall be promptly canceled by the Warrant Agent
and shall not be reissued by the Company and, except as provided in this Section
5 in case of an exchange, Section 6 hereof in case of the exercise of less than
all the Warrants represented thereby or Section 8 hereof in case of a mutilated
Warrant Certificate, no Warrant Certificate shall be issued hereunder in lieu
thereof. The Warrant Agent shall deliver to the Company from time to time or
otherwise dispose of such canceled Warrant Certificates as the Company may
direct.
(l) Countersignature of New Certificates. The Warrant Agent
is hereby authorized to countersign, in accordance with the provisions of this
Section 5 and of Section 4 hereof, the new Warrant Certificates required
pursuant to the provisions of this Section 5.
(m) Charges. No service charge shall be made for registration
of transfer or exchange upon surrender of any Warrant Certificate at the office
of the Warrant Agent maintained for that purpose. The Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration, transfer or exchange of
Warrant Certificates.
(n) Warrant Endorsement. Notwithstanding the foregoing
provisions of this Section 5, until Separated (as defined herein) each Unit
Warrant will be held by the Trustee, as custodian for the registered holders of
each Note or Note in global form, and will be registered in the name of the
registered holder of such Note initially in the amount specified to the Warrant
Agent by the Company. Such holder may, at any time, on or after the Separation
Date (as defined herein), at its option, by notice to the Trustee elect to
separate and/or separately transfer the Notes and the Unit Warrants represented
by such Note or Note in global form containing a Warrant Endorsement (as defined
in the Indenture), in whole or in part, for a definitive Warrant Certificate or
Warrant Certificates or a beneficial interest in a Global Warrant evidencing the
underlying Unit Warrants and for a Note or Notes or a beneficial interest in a
global Note of a like aggregate principal amount at maturity of authorized
denominations and not containing a Warrant Endorsement in accordance with the
Indenture (such surrender and exchange being referred to herein as a
"Separation" and the related Warrants being referred to as "Separated");
provided that no delay or failure on the part of the Trustee or the Warrant
Agent to exchange such Warrant Certificate and Note or Notes shall affect the
Separation of the Notes and the Warrants or their separate transferability.
Prior to Separation, record ownership of the Unit Warrants will be evidenced by
the certificates for Notes or a global Note registered in the names of the
holders of the Notes or global Notes, which certificates or global Note will
bear thereon a Warrant Endorsement substantially in the form set forth in the
Indenture, and the right to receive or exercise Warrants will be transferable
only in connection with the transfer of such Notes or a beneficial interest in a
global Note.
All Notes and global Notes containing a Warrant
Endorsement presented for Separation shall be duly endorsed by the registered
holder or holders thereof or by the duly appointed legal representative thereof
or by a duly authorized attorney, and in the case of transfer, which signature
shall be medallion guaranteed by an institution which is a member of a
Securities Transfer Association recognized signature guarantee program. Upon
notice from the Trustee of a Separation, the Warrant Agent shall, with respect
to Definitive Warrants, deliver (or cause to be delivered) the Warrant
Certificate or Warrant Certificates executed by the Company and countersigned by
the Warrant Agent in the name of such registered holder or holders or such
transferee or transferees or shall, with respect to (i) 144A Global Warrants,
deliver (or cause to be delivered) a 144A Global Warrant (CUSIP __________),
(ii) Regulation S Global Warrants, deliver (or cause to be delivered) a
Regulation S Global Warrant (CUSIP __________)
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<PAGE> 16
and (iii) IAI Global Warrants, deliver (or cause to be delivered) an IAI Global
Warrant (CUSIP __________), in each case, executed by the Company and
countersigned by the Warrant Agent in the name of the Depositary or its nominee
for such aggregate amount of Warrants (or, with respect to a Global Warrant,
increasing the amount of Warrants represented thereby in such amount) as shall
equal thirty-five Warrants for each $1,000 principal amount at maturity of Notes
so exchanged for Separation, bearing numbers or other distinguishing symbols not
contemporaneously outstanding, to the person or persons entitled thereto. Upon
registration of transfer or exchange of a Warrant Certificate, the Warrant Agent
shall countersign and deliver by certified mail a new Warrant Certificate to the
persons entitled thereto.
SECTION 6. Separation, Terms and Exercise of Warrants. (a) The Notes
and Unit Warrants will not be separately transferable until the close of
business on the earliest to occur of (i) April 27, 1998, (ii) such earlier date
as the Initial Purchaser may determine, (iii) the occurrence of a Change of
Control (as defined in the Indenture) and (iv) the date of effectiveness of the
Exchange Offer Registration Statement (as defined in the Indenture) (the
earliest of such dates, the "Separation Date"), at which time such Unit Warrants
shall become separately transferable. Subject to the terms of this Agreement,
each Warrant holder shall have the right, which may be exercised during the
period commencing at the opening of business on the Separation Date and until
5:00 p.m., New York City time on October 27, 2007 (the "Exercise Period"), to
receive from the Company the number of fully paid and nonassessable Warrant
Shares which the holder may at the time be entitled to receive on exercise of
such Warrants and payment of the exercise price (the "Exercise Price") then in
effect for such Warrant Shares; provided that the Exercise Period in respect of
UBS Warrants shall commence on the date hereof; provided further that holders
shall be able to exercise their Warrants only if a registration statement
relating to the Warrant Shares is then in effect, or the exercise of such
Warrants is exempt from the registration requirements of the Securities Act, and
such securities are qualified for sale or exempt from qualification under the
applicable securities laws of the states in which the various holders of the
Warrants or other persons to whom it is proposed that the Warrant Shares be
issued on exercise of the Warrants reside. It is the intention of the Company
that all exercises of Warrants will be exempt from the registration requirements
of the Securities Act by virtue of Section 3(a)(9) thereof. Each holder shall
exercise its right, during the Exercise Period, to receive Warrant Shares
without the exchange of any funds as follows: (a) the holder tenders Notes
having an aggregate principal amount at maturity, plus accrued and unpaid
interest, if any thereon, to the date of exercise equal to the Exercise Price of
the Warrants being exercised by such holder, (b) the holder tenders Warrants
having a fair market value (as determined in good faith by the Company's Board
of Directors) equal to the Exercise Price or (c) by a combination of Notes and
Warrants, all at the option of the holder electing to exercise. Each Warrant not
exercised prior to 5:00 p.m., New York City time, on October 27, 2007 (the
"Expiration Date") shall become void and all rights thereunder and all rights in
respect thereof under this agreement shall cease as of such time. No adjustments
as to dividends will be made upon exercise of the Warrants. The Company will
give notice of expiration not less than 90 and not more than 120 days prior to
the Expiration Date to the registered holders of the then outstanding Warrants.
If the Company fails to give such notice, the Warrants will not expire until 90
days after the Company gives notice. In no event will holders of Warrants be
entitled to any damages or other remedy for the Company's failure to give such
notice other than any such extension.
(b) In order to exercise all or any of the Warrants
represented by a Warrant Certificate, (i) in the case of Definitive Warrants,
the holder thereof must surrender for exercise the Warrant Certificate to
Company at the office of the Warrant Agent at its corporate trust office set
forth in Section 19 hereof, (ii) in the case of a book-entry interest in a
Global Warrant, the exercising Agent Member whose name appears on a securities
position listing of the Depositary as the holder of such book-entry interest
must comply with the Depositary's procedures relating to the exercise of such
15
<PAGE> 17
book-entry interest in such Global Warrant and (iii) in the case of both Global
Warrants and Definitive Warrants, the holder thereof or the Agent Member, as
applicable, must deliver to the Company at the office of the Warrant Agent the
form of election to purchase on the reverse thereof duly filled in and signed,
which signature shall be medallion guaranteed by an institution which is a
member of a Securities Transfer Association recognized signature guarantee
program, and upon payment to the Warrant Agent for the account of the Company of
the Exercise Price, which is set forth in the form of Warrant Certificate
attached hereto as Exhibit A, as adjusted as herein provided, for the number of
Warrant Shares in respect of which such Warrants are then exercised. Payment of
the aggregate Exercise Price shall be made on a net basis in the manner provided
in Section 6(a) hereof.
(c) Subject to the provisions of Section 7 hereof, upon
compliance with clause (b) above, the Company shall deliver or cause to be
delivered with all reasonable dispatch, to or upon the written order of the
holder and in such name or names as the Warrant holder or Agent Member may
designate, a certificate or certificates for the number of whole Warrant Shares
issuable upon the exercise of such Warrants or other securities or property to
which such holder is entitled hereunder, together with cash as provided in
Section 12 hereof; provided that if any consolidation, merger or lease or sale
of assets is proposed to be effected by the Company as described in Section
11(m) hereof, or a tender offer or an exchange offer for shares of Common Stock
shall be made, upon such surrender of Warrants and payment of the Exercise Price
as aforesaid, the Company shall, as soon as possible, but in any event not later
than two business days thereafter, deliver or cause to be delivered the full
number of Warrant Shares issuable upon the exercise of such Warrants in the
manner described in this sentence or other securities or property to which such
holder is entitled hereunder, together with cash as provided in Section 12
hereof. Such certificate or certificates shall be deemed to have been issued and
any person so designated to be named therein shall be deemed to have become a
holder of record of such Warrant Shares as of the date of the surrender of such
Warrants and payment of the Exercise Price.
(d) The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part. If less than all
the Warrants represented by a Definitive Warrant are exercised, such Definitive
Warrant shall be surrendered and a new Definitive Warrant of the same tenor and
for the number of Warrants which were not exercised shall be executed by the
Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Definitive Warrant, registered in such name or names as may
be directed in writing by the holder, and shall deliver the new Definitive
Warrant to the person or persons entitled to receive the same. The Warrant Agent
shall make such notations on Schedule A to each Global Warrant as are required
to reflect any change in the number of Warrants represented by such Global
Warrant resulting from any exercise in accordance with the terms hereof.
(e) All Warrant Certificates surrendered upon exercise of
Warrants shall be canceled by the Warrant Agent. Such canceled Warrant
Certificates shall then be disposed of by the Warrant Agent in a manner
satisfactory to the Company. The Warrant Agent shall account promptly to the
Company with respect to Warrants exercised and concurrently pay to the Company
all monies received by the Warrant Agent for the purchase of the Warrant Shares
through the exercise of such Warrants.
(f) The Warrant Agent shall keep copies of this Agreement and
any notices given or received hereunder available for inspection by the holders
during normal business hours at its office. The Company shall supply the Warrant
Agent from time to time with such numbers of copies of this Agreement as the
Warrant Agent may request.
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<PAGE> 18
SECTION 7. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for Warrant Shares in a
name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
SECTION 8. Mutilated or Missing Warrant Certificates. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue and the Warrant Agent may countersign, in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate and indemnity, if requested, also satisfactory to them.
Applicants for such substitute Warrant Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company or the Warrant Agent may prescribe.
SECTION 9. Reservation of Warrant Shares. (a) The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
(b) The Company or, if appointed, the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Company will furnish such Transfer Agent a copy
of all notices of adjustments, and certificates related thereto, transmitted to
each holder pursuant to Section 14 hereof.
(c) Before taking any action which would cause an adjustment
pursuant to Section 11 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take any corporate action
which may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
(d) The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof.
SECTION 10. Obtaining Stock Exchange Listings. The Company will from
time to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the principal securities exchanges and markets within the United States of
America, if any, on which other shares of Common Stock are then listed, if any.
17
<PAGE> 19
SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The Exercise Price and the number of Warrant Shares issuable upon the
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 11. For purposes of this
Section 11, "Common Stock" means shares now or hereafter authorized of any class
of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
(a) Adjustment for Change in Capital Stock. If the Company (i)
pays a dividend or makes a distribution on its Common Stock in shares of its
Common Stock, (ii) subdivides its outstanding shares of Common Stock into a
greater number of shares, (iii) combines its outstanding shares of Common Stock
into a smaller number of shares, (iv) makes a distribution on its Common Stock
in shares of its capital stock other than Common Stock or (v) issues by
reclassification of its Common Stock any shares of its capital stock; then the
Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise of it may receive
shares of two or more classes of capital stock of the Company, the Company shall
determine the allocation of the adjusted Exercise Price between the classes of
capital stock. After such allocation, the exercise privilege and the Exercise
Price of each class of capital stock shall thereafter be subject to adjustment
on terms comparable to those applicable to Common Stock in this Section 11. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) Adjustment for Rights Issue. If the Company distributes
any rights, options or warrants to all holders of its Common Stock entitling
them for a period expiring within 45 days after the record date mentioned below
to purchase shares of Common Stock at a price per share less than the less than
the Fair Value (as defined herein) per share on that record date, the Exercise
Price shall be adjusted in accordance with the formula:
O + N x P
---------
E' = E x M
---------------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
18
<PAGE> 20
M = the Fair Value per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
(c) Adjustment for Other Distributions. If the Company
distributes to all holders of its Common Stock any of its assets (including,
without limitation, cash) or debt securities or any rights or warrants to
purchase debt securities, assets or other securities of the Company, the
Exercise Price shall be adjusted in accordance with the formula:
E' = E x M - F
-----
M
where:
E'= the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants to be distributed in respect of
one share of Common Stock as determined in good faith by the
Board of Directors of the Company (the "Board of Directors").
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This Section 1l(c) does not apply to cash dividends or cash
distributions paid out of consolidated current or retained earnings as shown on
the books of the Company prepared in accordance with generally accepted
accounting principles. Also, this Section 11(c) does not apply to rights,
options or warrants referred to in Section 1l(b) hereof.
(d) Adjustment for Common Stock Issue. If the Company issues
shares of Common Stock for a consideration per share less than the Fair Value
per share on the date the Company fixes the offering price of such additional
shares, the Exercise Price shall be adjusted in accordance with the formula:
P
-
E' = E x O + M
----------
A
where:
19
<PAGE> 21
E'= the adjusted Exercise Price.
E = the then current Exercise Price.
0 = the number of shares outstanding immediately prior to the issuance
of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the Fair Value per share on the date of issuance of such additional
shares.
A = the number of shares outstanding immediately after the issuance of
such additional shares.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (b) and (c)
of this Section 11,
(2) the exercise of Warrants, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock,
(3) Common Stock issued in a bona fide public offering pursuant to
a firm commitment underwriting managed by a nationally recognized firm, or
(4) Common Stock issued to the Company's employees under bona fide
employee benefit plans adopted by the Board of Directors and approved by the
holders of Common Stock when required by law, if such Common Stock would
otherwise be covered by this subsection (d) (but only to the extent that the
aggregate number of shares excluded hereby and issued after the date of this
Warrant Agreement shall not exceed 5% of the Common Stock outstanding at the
time of the adoption of each such plan, exclusive of antidilution adjustments
thereunder),
(5) Common Stock issued upon the exercise of rights or warrants
issued to the holders of Common Stock, or
(6) Common Stock issued to shareholders of any person which merges
into the Company in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger.
(e) Adjustment for Convertible Securities Issue. If the
Company issues any securities convertible into or exchangeable for Common Stock
(other than securities issued in transactions described in subsections (b) and
(c) of this Section 11) for a consideration per share of Common Stock initially
deliverable upon conversion or exchange of such securities less than the Fair
Value per share on the date of issuance of such securities, the Exercise Price
shall be adjusted in accordance with this formula:
P
-
E' = E x O + M
----------
O + D
20
<PAGE> 22
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
0 = the number of shares outstanding immediately prior to the issuance
of such securities.
P = the aggregate consideration received for the issuance of such
securities.
M = the Fair Value per share on the date of issuance of such
securities.
D = the maximum number of shares deliverable upon conversion or in
exchange for such securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such securities have not been issued when such securities are no longer
outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to:
(1) convertible securities issued to shareholders of any person which
merges into the Company, or with a subsidiary of the Company, in proportion to
their stock holdings of such person immediately prior to such merger, upon such
merger,
(2) convertible securities issued in a bona fide public offering
pursuant to a firm commitment underwriting managed by a nationally recognized
firm, or
(3) convertible securities issued in a bona fide private placement
through a placement agent which is a member firm of the National Association of
Securities Dealers, Inc. (except to the extent that any discount from the
current market price attributable to restrictions on transferability of Common
Stock issuable upon conversion, as determined in good faith by the Board of
Directors and described in a Board resolution which shall be filed with the
Warrant Agent, shall exceed 20% of the then current market price).
(f) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsections (d) and (e) of this
Section 11, the following shall apply:
(1) in the case of the issuance of shares of Common Stock for cash, the
consideration shall be the amount of such cash, provided that in no case shall
any deduction be made for any commissions, discounts or other expenses incurred
by the Company for any underwriting of the issue or otherwise in connection
therewith;
21
<PAGE> 23
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined in good
faith by the Board of Directors (irrespective of the accounting treatment
thereof), whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the Warrant Agent;
(3) in the case of the issuance of securities convertible into or
exchangeable for shares, the aggregate consideration received therefor shall be
deemed to be the consideration received by the Company for the issuance of such
securities plus the additional consideration, if any, to be received by the
Company upon the conversion or exchange thereof (the consideration in each case
to be determined in the same manner as provided in clauses (1) and (2) of this
subsection); and
(4) in the case of the issuance of shares of Common Stock pursuant to
rights, options or warrants which rights, options or warrants were originally
issued together with one or more other securities as part of a unit, the
consideration shall be deemed to be (i) the fair value of such rights, options
or warrants at the time of issuance thereof as determined in good faith by the
Board of Directors whose determination shall be conclusive and described in a
Board resolution which shall be filed with the Warrant Agent plus (ii) the
additional consideration, if any, to be received by the Company upon the
exercise, conversion or exchange thereof (as determined in the same manner as
provided in clause (1) and (2) of this subsection).
(g) Fair Value. In Sections 11(b), (c), (d) and (e) hereof,
the "Fair Value" per security at any date of determination shall be (1) in
connection with a sale by the Company to a party that is not an Affiliate of the
Company in an arm's-length transaction (a "Non-Affiliate Sale"), the price per
security at which such security is sold and (2) in connection with any sale by
the Company to an Affiliate of the Company, (a) the last price per security at
which such security was sold in a Non-Affiliate Sale within the three-month
period preceding such date of determination or (b) if clause (a) is not
applicable, the fair market value of such security determined in good faith by a
nationally recognized investment banking, appraisal or valuation firm, which is
not an Affiliate of the Company, in each case, taking into account, among all
other factors deemed relevant by such investment banking, appraisal or valuation
firm, the trading price and volume of such security on any national securities
exchange or automated quotation system on which such security is traded.
Notwithstanding the foregoing, any sale to the Initial Purchaser (or any
successor thereto) pursuant to an underwritten public offering registered under
the Securities Act shall be deemed to be and treated as a Non-Affiliate Sale.
For purposes of this Section 11(g), "Affiliate" of any specified
person means (A) any other person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified
person and (B) any director, officer or employee of such specified person. For
purposes of this definition "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with") as
used with respect to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such person, whether through the ownership of voting securities, by
agreement or otherwise.
(h) When De Minimis Adjustment May Be Deferred. No adjustment in
the Exercise Price need be made unless the adjustment would require an increase
or decrease of at least 1% in the Exercise Price. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest 1/l00th of a share, as the case may be.
22
<PAGE> 24
(i) When No Adjustment Required. No adjustment need be made for
a transaction referred to Section 11(a), (b), (c), (d), (e) or (r) hereof, if
Warrant holders are to participate in the transaction on a basis and with notice
that the Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in the
transaction. No adjustment need be made for (i) rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest or (ii) a
change in the par value or no par value of the Common Stock. To the extent the
Warrants become convertible into cash, no adjustment need be made thereafter as
to the cash. Interest will not accrue on the cash.
(j) Notice of Adjustment. Whenever the Exercise Price is
adjusted, the Company shall provide the notices required by Section 13 hereof.
(k) Voluntary Reduction. The Company from time to time may
reduce the Exercise Price by any amount for any period of time, if the period is
at least 20 days and if the reduction is irrevocable during the period; provided
that in no event may the Exercise Price be less than the par value of a share of
Common Stock. Whenever the Exercise Price is reduced, the Company shall mail to
Warrant holders a notice of the reduction. The Company shall mail the notice at
least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period in which it will be
in effect. A reduction of the Exercise Price does not change or adjust the
Exercise Price otherwise in effect for purposes of Sections 11(a), (b), (c), (d)
and (e) hereof.
(1) Notice of Certain Transactions. If (i) the Company takes
any action that would require an adjustment in the Exercise Price pursuant to
Section 1l(a), (b), (c), (d), (e) or (r) hereof and if the Company does not
arrange for Warrant holders to participate pursuant to Section 11(i) hereof,
(ii) the Company takes any action that would require a supplemental Warrant
Agreement pursuant to Section 11(m) hereof or (iii) there is a liquidation or
dissolution of the Company, then the Company shall mail to Warrant holders a
notice stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution. The Company
shall mail the notice at least 15 days before such date. Failure to mail the
notice or any defect in it shall not affect the validity of the transaction.
(m) Reorganization of Company. Immediately after the Effective
Time, if the Company consolidates or merges with or into, or transfers or leases
all or substantially all its assets to, any person, upon consummation of such
transaction the Warrants shall automatically become exercisable for the kind and
amount of securities, cash or other assets which the holder of a Warrant would
have owned immediately after the consolidation, merger, transfer or lease if the
holder had exercised the Warrant immediately before the effective date of the
transaction. Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if other
than the Company, or the person to which such sale or conveyance shall have been
made, shall enter into a supplemental Warrant Agreement so providing and further
providing for adjustments which shall be as nearly equivalent as may be
practical to the adjustments provided for in this Section 11(m). The successor
Company shall mail to Warrant holders a notice describing the supplemental
Warrant Agreement. If the issuer of securities deliverable upon exercise of
Warrants under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement. If this Section 11(m) applies, Sections 1l(a),
(b), (c), (d) and (e) hereof do not apply.
23
<PAGE> 25
(n) Company Determination Final. Any determination that the
Company or the Board of Directors must make pursuant to Section 1l(a), (c), (d),
(e), (f), (g), (h) or (r) hereof is conclusive.
(o) Warrant Agent's Disclaimer. The Warrant Agent has no duty
to determine when an adjustment under this Section 11 should be made, how it
should be made or what it should be. The Warrant Agent has no duty to determine
whether any provisions of a supplemental Warrant Agreement under Section 1l(m)
hereof are correct. The Warrant Agent makes no representation as to the validity
or value of any securities or assets issued upon exercise of Warrants. The
Warrant Agent shall not be responsible for the Company's failure to comply with
this Section 11.
(p) When Issuance or Payment May Be Deferred. In any case in
which this Section 11 shall require that an adjustment in the Exercise Price be
made effective as of a record date for a specified event, the Company may elect
to defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such record date the Warrant Shares and other capital
stock of the Company, if any, issuable upon such exercise over and above the
Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise on the basis of the Exercise Price and (ii) paying to such holder
any amount in cash in lieu of a fractional share pursuant to Section 12 hereof;
provided that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
Warrant Shares, other capital stock and cash upon the occurrence of the event
requiring such adjustment.
(q) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to this Section 11, each Warrant outstanding prior to
the making of the adjustment in the Exercise Price shall thereafter evidence the
right to receive upon payment of the adjusted Exercise Price that number of
shares of Common Stock (calculated to the nearest hundredth) obtained from the
following formula:
N' = N x E
-----
E'
where:
N' = the adjusted number of Warrant Shares issuable upon exercise of
a Warrant by payment of the adjusted Exercise Price.
N = the number or Warrant Shares previously issuable upon exercise of
a Warrant by payment of the Exercise Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(r) Additional Adjustments. In addition, in the event that any
other transaction or event occurs (including, without limiting the generality of
the foregoing, the issuance by the Company of shares of Common Stock, or
securities convertible into or exchangeable for Common Stock, for a
consideration per share less than the Exercise Price per share on the date the
Compnay fixes the offering price for such additional shares) as to which the
foregoing adjustment provisions are not strictly applicable but the failure to
make any adjustment would adversely affect the rights represented by the
Warrants in accordance with the essential intent and principles of such
provisions, then, in each such
24
<PAGE> 26
case, either (i) the Company shall appoint an investment banking firm of
recognized national standing, or any other financial expert that does not (or
whose directors, officers, employees, affiliates or stockholders do not) have a
direct or material indirect financial interest in the Company or any of its
subsidiaries, who has not been, and, at the time it is called upon to give
independent financial advice to the Company, is not (and none of its directors,
officers, employees, affiliates or stockholders are) a promoter, director or
officer of the Company or any of its subsidiaries, which will give their opinion
upon or (ii) the Board of Directors shall determine, consistent with the Board
of Directors' fiduciary duties to the Company's stockholders, the adjustment, if
any, on a basis consistent with the essential intent and principles established
in the foregoing adjustment provisions, necessary to preserve, without dilution,
the rights represented by the Warrants. Upon receipt of such opinion or
determination, the Company shall promptly mail a copy thereof to the holders of
the Warrants and will make the adjustments described therein.
(s) Form of Warrants. Irrespective of any adjustments in the
Exercise Price or the number or kind of shares purchasable upon the exercise of
the Warrants, Warrants theretofore or thereafter issued may continue to express
the same price and number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.
SECTION 12. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 12,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the Fair Value per Warrant Share,
as determined on the day immediately preceding the date the Warrant is presented
for exercise, multiplied by such fraction, computed to the nearest whole U.S.
cent.
SECTION 13. Notices to Warrant Holders. (a) Upon any adjustment of the
Exercise Price pursuant to Section 11 hereof, the Company shall promptly
thereafter (i) cause to be filed with the Warrant Agent a certificate of a firm
of independent public accountants of recognized standing selected by the Board
of Directors of the Company (who may be the regular auditors of the Company)
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) cause to be given to each of the registered holders of
Warrants at the address appearing on the Warrant register for each such
registered holder written notice of such adjustments by first-class mail,
postage prepaid. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 13.
25
<PAGE> 27
(b) In case:
(i) the Company shall authorize the issuance to all
holders of shares of Common Stock of rights, options or warrants to subscribe
for or purchase shares of Common Stock or of any other subscription rights or
warrants;
(ii) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in shares of Common Stock or
distributions referred to in Section 1l(a) hereof);
(iii) of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the conveyance or transfer of the properties and assets of the
Company substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock;
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(v) the Company proposes to take any action (other than
actions of the character described in Section 1l(a) hereof) which would require
an adjustment of the Exercise Price pursuant to Section 11 hereof;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of Warrants at his address
appearing on the Warrant register, at least 20 days (or 10 days in any case
specified in clauses (i) or (ii) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (x)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, (y) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (z) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 13 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
(c) Nothing contained in this Agreement or in any of the
Warrant Certificates shall be construed as conferring upon the holders of
Warrants the right to vote or to consent or to receive notice as stockholders in
respect of the meetings of stockholders or the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
SECTION 14. Merger, Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any
26
<PAGE> 28
corporation succeeding to the business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor warrant agent
under the provisions of Section 16 hereof. In case at the time such successor to
the Warrant Agent shall succeed to the agency created by this Agreement, and in
case at that time any of the Warrant Certificates shall have been countersigned
but not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of
the Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
SECTION 15. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Warrants, by their acceptance
thereof, shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company and the Warrant Agent
assumes no responsibility for the correctness of any of the same except as such
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant Certificate in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant Certificate for
any action taken in reliance on any Warrant Certificate, certificate of shares,
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent.
27
<PAGE> 29
The Company shall indemnify the Warrant Agent against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Warrant Agreement,
including the costs and expenses of enforcing this Warrant Agreement against the
Company (including this Section 15) and defending itself against any claim
(whether asserted by the Company or any holder or any other person) or liability
in connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Warrant Agent shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Warrant Agent to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Warrant Agent
shall cooperate in the defense. The Warrant Agent may have separate counsel and
the Company shall pay the reasonable fees and expenses of such counsel. The
Company need not pay for any settlement made without its consent, which consent
shall not be unreasonably withheld.
(f) No provision of this Warrant Agreement shall require the
Warrant Agent to expend or risk its own funds or incur any liability. The
Warrant Agent shall be under no obligation to institute any action, suit or
legal proceeding or to take any other action likely to involve expense unless
the Company or one or more registered holders of Warrants shall furnish the
Warrant Agent with reasonable security and indemnity for any costs and expenses
which may be incurred, but this provision shall not affect the power of the
Warrant Agent to take such action as it may consider proper, whether with or
without any such security or indemnity. All rights of action under this
Agreement or under any of the Warrants may be enforced by the Warrant Agent
without the possession of any of the Warrant Certificates or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit or proceeding instituted by the Warrant Agent shall be brought in its name
as Warrant Agent and any recovery of judgment shall be for the ratable benefit
of the registered holders of the Warrants, as their respective rights or
interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer
or employee of it, may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant Agent
under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for
the Company, and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own gross negligence
or bad faith.
(i) The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of any Warrant Certificate to make or cause to
be made any adjustment of the Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent shall not
be accountable with respect to the validity or value or the kind or amount of
any Warrant Shares or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or with respect to whether
any such Warrant Shares or other securities will when issued be validly issued
and fully paid and nonassessable, and makes no representation with respect
thereto.
28
<PAGE> 30
(j) The Warrant Agent shall exercise such of the rights and
powers vested in it by this Warrant Agreement, and use the same degree of care
and skill in its exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs. The duties of the Warrant Agent
shall be determined solely by the express provisions of this Warrant Agreement
and the Warrant Agent need perform only those duties that are specifically set
forth in this Warrant Agreement and no others, and no implied covenants or
obligations shall be read into this Warrant Agreement against the Warrant Agent.
In the absence of bad faith on its part, the Warrant Agent may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Warrant Agent
and conforming to the requirements of this Warrant Agreement. However, the
Warrant Agent shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Warrant Agreement.
(k) The Warrant Agent may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
person. The Warrant Agent need not investigate any fact or matter stated in the
document.
(l) Before the Warrant Agent acts or refrains from acting, it
may require an officers' certificate or an opinion of counsel or both. The
Warrant Agent shall not be liable for any action it takes or omits to take in
good faith in reliance on such officers' certificate or opinion of counsel
reasonably acceptable to the Warrant Agent. The Warrant Agent may consult with
counsel and the written advice of such counsel or any opinion of counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(m) The Warrant Agent may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(n) The Warrant Agent shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized or within
the rights or powers conferred upon it by this Warrant Agreement.
(o) Unless otherwise specifically provided in this Warrant
Agreement, any demand, request, direction or notice from the Company shall be
sufficient if signed by an officer of the Company.
SECTION 16. Change of Warrant Agent. If the Warrant Agent shall become
incapable of acting as Warrant Agent, the Company shall appoint a successor to
such Warrant Agent. If the Company shall fail to make such appointment within a
period of 30 days after it has been notified in writing of such incapacity by
the Warrant Agent or by the registered holder of a Warrant Certificate, then the
registered holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to such Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company. The holders of a majority of the unexercised Warrants shall be entitled
at any time to remove the Warrant Agent and appoint a successor to such Warrant
Agent. Such successor to the Warrant Agent need not be approved by the Company
or the former Warrant Agent. After appointment the successor to the Warrant
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Warrant Agent without further act or deed;
provided that the former Warrant Agent shall deliver and transfer to the
successor to the Warrant Agent any property at the time held by it hereunder and
execute and deliver any further assurance, conveyance, act or deed necessary for
the
29
<PAGE> 31
purpose. Failure to give any notice provided for in this Section 16,
however, or any defect therein, shall not affect the legality or validity of the
appointment of a successor to the Warrant Agent.
SECTION 17. Registration. The Initial Purchaser as initial holder of
the UBS Warrants and as initial purchaser of the Unit Warrants and each
subsequent holder of Warrants shall be able to exercise their Warrants only if a
registration statement relating to the Warrant Shares is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act, and such securities are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
various holders of the Warrants or other persons to whom it is proposed that the
Warrant Shares be issued on exercise of the Warrants reside. The Initial
Purchaser as initial holder of the UBS Warrants and as initial purchaser of the
Unit Warrants and each subsequent holder of Warrants shall have the registration
rights set forth in the Warrant Registration Rights Agreement, dated as of the
date hereof, by and between the Company and the Initial Purchaser (the "Warrant
Registration Rights Agreement").
SECTION 18. Reports. (a) Whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Warrants or Warrant Shares are outstanding, the Company shall
furnish to the Warrant Agent and the holders of Warrants (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Form 10-Q or, if the Company is eligible to file such
Form, FORM 10-QSB and 10-K or, if the Company is eligible to file such Form,
Form 10-KSB if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Company were required to file such reports. In addition, whether or not required
by the rules and regulations of the Commission, the Company shall file a copy of
all such information and reports with the Commission for public availability
(unless the Commission shall not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, for so long as any Warrants or Warrant Shares remain outstanding, the
Company shall furnish to the holders of Warrants and Warrant Shares and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
(b) The Company shall provide the Warrant Agent with a
sufficient number of copies of all such reports that the Warrant Agent may be
required to deliver to the holders of the Warrants under this Section 18.
SECTION 19. Notices to Company and Warrant Agent. Any notice or demand
authorized by this Agreement to be given or made by the Warrant Agent or by the
registered holder of any Warrant to or on the Company shall be sufficiently
given or made when and if deposited in the mail, first class or registered,
postage prepaid, addressed (until another address is filed in writing by the
Company with the Warrant Agent) as follows:
InterAmericas Communications Corporation
1221 Brickell Avenue
Miami, Florida 33131
Telephone: (305) 377-6790
Attention: Douglas Geib
30
<PAGE> 32
With a copy to:
Baker & McKenzie
701 Brickell Avenue, Suite 1600
Miami, Florida 33131
Attn: Andrew Hulsh, Esq.
In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or by
the registered holder(s) of any Warrant to the Warrant Agent shall be
sufficiently given when and if deposited in the mail, first-class or registered,
postage prepaid, addressed (until another address is filed in writing by the
Warrant Agent with the Company) to the Warrant Agent as follows:
State Street Bank and Trust Company, N.A.
61 Broadway
New York, NY 10006
Attention: Corporate Trust Department
Facsimile: (212) 612-3203
SECTION 20. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Warrants in order to cure any ambiguity or to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
adversely affect the interests of the holders of Warrants. Any amendment or
supplement to this Agreement that has a material adverse effect on the interests
of the holders of Warrants shall require the written consent of the holders of a
majority of the then outstanding Warrants (excluding Warrants held by the
Company or any of its affiliates). The consent of each holder of Warrants
affected shall be required for any amendment pursuant to which the Exercise
Price would be increased or the number of Warrant Shares purchasable upon
exercise of Warrants would be decreased (other than pursuant to adjustments
provided in this Agreement.
SECTION 21. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder,
whether so expressed or not.
SECTION 22. Termination. This Agreement shall terminate at 5:00 p.m.,
New York City time on October 27, 2007. Notwithstanding the foregoing, this
Agreement will terminate on any earlier date if all Warrants have been
exercised. The provisions of Section 15 shall survive such termination.
SECTION 23. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF SAID STATE.
31
<PAGE> 33
SECTION 24. Benefits of This Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of Warrants.
SECTION 25. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
[Signature Page Follows]
32
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
INTERAMERICAS COMMUNICATIONS CORPORATION
By:
-----------------------------------------
Name: Patricio E. Northland
Title: President and Chief Executive Officer
Attest:
-----------------------------------------
Name: Douglas Geib
Title: Chief Financial Officer
STATE STREET BANK AND TRUST COMPANY, N.A.
as Warrant Agent
By:
-----------------------------------------
Name:
Title:
33
<PAGE> 35
EXHIBIT A
[FORM OF WARRANT]
[FACE OF WARRANT CERTIFICATE]
[Unless and until it is exchanged in whole or in part for
Warrants in certificated form, this Warrant may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.](1)
THIS SECURITY EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY
RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (l)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS),
(2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
- ------------------------
(1) This paragraph is to be included only if the Warrant is in global form.
A-1
<PAGE> 36
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (1) ABOVE.
EXERCISABLE ON OR AFTER THE SEPARATION DATE
No. [ ] [ ] Warrants
CUSIP #[ ]
WARRANT CERTIFICATE
INTERAMERICAS COMMUNICATIONS CORPORATION
This Warrant Certificate certifies that [ ], or registered assigns,
is the registered holder of [ ] Warrants (the "Warrants") to purchase shares of
Common Stock, par value $.001 per share (the "Common Stock"), of INTERAMERICAS
COMMUNICATIONS CORPORATION, a Texas corporation (the "Company"). Each Warrant
entitles the holder upon exercise to receive from the Company commencing on the
Separation Date (as defined in the Warrant Agreement) until 5:00 p.m. New York
City Time on October 27, 2007, the number of fully paid and nonassessable
Warrant Shares as set forth in the Warrant Agreement, subject to adjustment as
set forth in Section 11 of the Warrant Agreement, at the initial exercise price
(the "Exercise Price") of $4.40 per share payable without the exchange of funds
pursuant to the net exercise provisions of Section 6 of the Warrant Agreement
upon surrender of this Warrant Certificate and payment of the Exercise Price at
the office or agency of the Warrant Agent, but only subject to the conditions
set forth herein and in the Warrant Agreement referred to on the reverse hereof.
The Exercise Price and number of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement. Subject to the provisions of the Warrant
Agreement, no Warrant may be exercised after 5:00 p.m., New York City Time on
October 27, 2007, and to the extent not exercised by such time such Warrants
shall become void. Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place. This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement. This Warrant
Certificate shall be governed and construed in accordance with the internal laws
of the State of New York.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
Terms used and not otherwise defined in this Warrant Certificate shall
have the meanings given them in the Warrant Agreement.
A-2
<PAGE> 37
IN WITNESS WHEREOF, InterAmericas Communications Corporation has caused
this Warrant Certificate to be signed by its President and Chief Executive
Officer and by its Chief Financial Officer and may cause its corporate seal to
be affixed hereunto or imprinted hereon.
Dated:
--------------------
INTERAMERICAS COMMUNICATIONS CORPORATION
By:
--------------------------------------------
Name:
Title:
By:
--------------------------------------------
Name:
Title:
Countersigned:
STATE STREET BANK AND TRUST COMPANY, N.A.
as Warrant Agent
By:
------------------------------------
Name:
Title:
A-3
<PAGE> 38
[FORM OF WARRANT]
[REVERSE OF WARRANT CERTIFICATE]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring October 27, 2007 entitling the holder on
exercise to receive shares of Common Stock, and are issued or to be issued
pursuant to a Warrant Agreement dated as of October 27, 1997 (the "Warrant
Agreement"), duly executed and delivered by the Company to State Street Bank and
Trust Company, N.A., as warrant agent (the "Warrant Agent"), which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Warrant Agent,
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written request to the
Company.
Warrants may be exercised at any time on or after the Separation Date
and on or before October 27, 2007; provided that holders shall be able to
exercise their Warrants only if a registration statement relating to the Warrant
Shares is then in effect, or the exercise of such Warrants is exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and such securities are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
various holders of the Warrants or other persons to whom it is proposed that the
Warrant Shares be issued on exercise of the Warrants reside. In order to
exercise all or any of the Warrants represented by this Warrant Certificate, (i)
in the case of Definitive Warrants, the holder must surrender for exercise this
Warrant Certificate to the Warrant Agent at its corporate trust office set forth
in Section 19 of the Warrant Agreement, (ii) in the case of a book-entry
interest in a Global Warrant, the exercising Agent Member whose name appears on
a securities position listing of the Depositary as the holder of such book-entry
interest must comply with the Depositary's procedures relating to the exercise
of such book-entry interest in such Global Warrant and (iii) in the case of both
Global Warrants and Definitive Warrants, the holder thereof or the Agent Member,
as applicable, must deliver to the Warrant Agent the form of election to
purchase on the reverse hereof duly filled in and signed, which signature shall
be medallion guaranteed by an institution which is a member of a Securities
Transfer Association recognized signature guarantee program, and upon payment to
the Warrant Agent for the account of the Company of the Exercise Price, as
adjusted as provided in the Warrant Agreement, for the number of Warrant Shares
in respect of which such Warrants are then exercised. No adjustment shall be
made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The holders of the Warrants shall have the registration rights set
forth in the Warrant Registration Rights Agreement, dated as of the date hereof,
by and between the Company and the Initial Purchaser.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without
A-4
<PAGE> 39
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-5
<PAGE> 40
(FORM OF ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive [ ] shares of Common
Stock and herewith tenders payment for such shares to the order of the Company
in the amount of $[ ] in accordance with the net exercise provisions of
Section 6 of the Warrant Agreement. The undersigned requests that a certificate
for such shares be registered in the name of [ ], whose address is
[ ] and that such shares be delivered to [ ] whose address is
[ ]. If said number of shares is less than all of the shares of Common
Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of [ ], whose address is [ ], and that such Warrant
Certificate be delivered to [ ], whose address is [ ].
Date:
-------------------------------------
(Signature)
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
-------------------------------------
(Signature Guaranteed)
Tax Identification or
Social Security Number:
Address:
A-6
<PAGE> 41
FORM OF ASSIGNMENT
For value received [ ] hereby sells, assigns and transfers unto
[ ] the within Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint [ ]
attorney, to transfer said Warrant Certificate on the books of the within-named
Company, with full power of substitution in the premises.
Dated:
Signature:
------------------------------------------------------------
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement
or any change whatever.
Signature Guaranteed:
-------------------------------------------------
A-7
<PAGE> 42
SCHEDULE OF EXCHANGES OF GLOBAL WARRANTS (2)
The following exchanges of a part of this Global Warrant for
certificated Warrants have been made:
<TABLE>
<CAPTION>
Number of
Amount of decrease Amount of increase Warrants of this Signature of
in Number of in Number of Global Warrant authorized
Warrants of this Warrant of this following such signatory of
Date of Exchange Global Warrant Global Warrant decrease (or increase) Warrant Agent
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- -----------------
(2) This is to be included only if the Warrant is in global form.
A-8
<PAGE> 43
EXHIBIT B
Each Certificate evidencing Warrants originally issued as part of a
Unit of Notes and Warrants issued by the Company (and each Certificate
evidencing Warrants issued on registration of transfer thereof or in exchange or
substitution therefor prior to the close of business on the Separation Date (as
defined)) shall bear a legend, which may be affixed by stamp or sticker, in
substantially the following form:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE
SEPARATELY FROM THE NOTES ORIGINALLY SOLD AS A UNIT WITH THE WARRANTS
UNTIL THE EARLIEST TO OCCUR OF (I) APRIL 27, 1998, (II) SUCH EARLIER
DATE AS UBS SECURITIES LLC MAY DETERMINE, (III) THE OCCURRENCE OF A
CHANGE IN CONTROL (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES)
AND (IV) THE EFFECTIVENESS OF THE EXCHANGE OFFER REGISTRATION STATEMENT
(AS DEFINED IN THE INDENTURE RELATING TO THE NOTES). PRIOR TO SUCH
DATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY WITH THE SIMULTANEOUS TRANSFER TO THE TRANSFEREE OF $1,000
PRINCIPAL AMOUNT OF NOTES FOR EACH WARRANT SO TRANSFERRED.
B-1
<PAGE> 44
EXHIBIT C
FORM OF CERTIFICATE OF TRANSFER
InterAmericas Communications Corporation
1221 Brickell Avenue
Miami, Florida 33131
Telephone: (305) 377-6790
State Street Bank and Trust Company, N.A.
61 Broadway
New York, NY 10006
Attention: Corporate Trust Department
Re: Warrants to Purchase Common Stock of InterAmericas Communications
Corporation
Reference is hereby made to the Warrant Agreement, dated as of October
27, 1997 (the "Warrant Agreement"), between InterAmericas Communications
Corporation (the "Company"), and State Street Bank and Trust Company, N.A., as
warrant agent. Capitalized terms used but not defined herein shall have the
meanings given to them in the Warrant Agreement.
[ ], (the "Transferor") owns and proposes to
transfer the Warrant[s] or interest in such Warrant[s] specified in Annex A
hereto, in the amount of [ ] Warrants in such Note[s] or interests
(the "Transfer"), to [ ] (the "Transferee"), as further specified in
Annex A hereto. In connection with the Transfer, the Transferor hereby certifies
that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL WARRANT OR A DEFINITIVE WARRANT PURSUANT TO RULE 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Warrant is being transferred to a person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Warrant for its own account, or for one or more accounts
with respect to which such person exercises sole investment discretion, and such
person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
such Transfer is in compliance with any applicable blue sky securities laws of
any state of the United States. Upon consummation of the proposed Transfer in
accordance with the terms of the Warrant Agreement, the transferred beneficial
interest or Definitive Warrant will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the 144A Global Warrant
and/or the Definitive Warrant and in the Warrant Agreement and the Securities
Act.
C-1
<PAGE> 45
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE REGULATION S GLOBAL WARRANT OR A DEFINITIVE WARRANT PURSUANT TO REGULATION
S. The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and, accordingly, the Transferor hereby
further certifies that (i) the Transfer is not being made to a person in the
United States and (x) at the time the buy order was originated, the Transferee
was outside the United States or such Transferor and any person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither such
Transferor nor any person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Upon consummation of the proposed transfer in accordance with the
terms of the Warrant Agreement, the transferred beneficial interest or
Definitive Warrant will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note and/or the
Definitive Note and in the Warrant Agreement and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL WARRANT OR A DEFINITIVE WARRANT PURSUANT TO ANY
PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Warrants and Restricted
Definitive Warrants and pursuant to and in accordance with the Securities Act
and any applicable blue sky securities laws of any state of the United States,
and accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or
a subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Warrant or Restricted Definitive
Warrants and the requirements of the exemption claimed, which certification is
C-2
<PAGE> 46
supported by (1) a certificate executed by the Transferee in the form of Exhibit
E to the Warrant Agreement and (2) an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Warrant Agreement, the transferred beneficial interest or
Definitive Warrant will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the IAI Global Warrant and/or the
Definitive Warrants and in the Warrant Agreement and the Securities Act.
4. [ ] Check if Transferee will take delivery of a beneficial interest
in an Unrestricted Global Warrant or of an Unrestricted Definitive Warrant.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Warrant Agreement and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the Warrant
Agreement and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Warrants, on Restricted Definitive Warrants and in the
Warrant Agreement.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Warrant Agreement and any applicable blue sky securities laws
of any state of the United States and (ii) the restrictions on transfer
contained in the Warrant Agreement and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Warrant Agreement, the transferred beneficial interest or Definitive Warrant
will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Warrants, on
Restricted Definitive Warrants and in the Warrant Agreement.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions contained
in the Warrant Agreement and any applicable blue sky securities laws of any
State of the United States and (ii) the restrictions on transfer contained in
the Warrant Agreement and the Private Placement Legend are not required in order
to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Warrant Agreement, the
transferred beneficial interest or Definitive Warrant will not be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Warrants or Restricted Definitive Warrants and in the
Warrant Agreement.
C-3
<PAGE> 47
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
------------------------------------
[Insert Name of Transferor]
By:
----------------------------------
Name:
Title:
Dated:
C-4
<PAGE> 48
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Warrant (CUSIP ), or
(ii) [ ] Regulation S Global Warrant
(CUSIP), or
(iii) [ ] IAI Global Warrant (CUSIP); or
(b) [ ] a Restricted Definitive Warrant.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Warrant (CUSIP ), or
(ii) [ ] Regulation S Global Warrant (CUSIP)' or
(iii) [ ] IAI Global Warrant (CUSIP ); or
(iv) [ ] Unrestricted Global Warrant (CUSIP); or
(b) [ ] a Restricted Definitive Warrant; or
(c) [ ] an Unrestricted Definitive Warrant,
in accordance with the terms of the Warrant Agreement.
C-5
<PAGE> 49
EXHIBIT D
FORM OF CERTIFICATE OF EXCHANGE
InterAmericas Communications Corporation
1221 Brickell Avenue
Miami, Florida 33131
Telephone: (305) 377-6790
State Street Bank and Trust Company, N.A.
61 Broadway
New York, NY 10006
Attention: Corporate Trust Department
Re: Warrants to Purchase Common Stock of InterAmericas Communications
Corporation
Reference is hereby made to the Warrant Agreement, dated as of
October 27, 1997 (the "Warrant Agreement"), between InterAmericas Communications
Corporation, as issuer (the "Company"), and State Street Bank and Trust Company,
N.A., as warrant agent. Capitalized terms used but not defined herein shall have
the meanings given to them in the Warrant Agreement.
[ ], (the "Owner") owns and proposes to exchange the
Warrant[s] or interest in such Warrant[s] specified herein, in the amount of
[ ] Warrant[s] or interests (the "Exchange"). In connection with the
Exchange, the Owner hereby certifies that:
1. [ ] EXCHANGE OF RESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL
INTERESTS IN A RESTRICTED GLOBAL WARRANT FOR UNRESTRICTED DEFINITIVE WARRANTS OR
BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL WARRANT
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL WARRANT TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL
WARRANT. In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Warrant for a beneficial interest in an Unrestricted Global
Warrant in an equal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Warrants and pursuant to and in accordance with the
United States Securities Act of 1933, as amended (the "Securities Act"), (iii)
the restrictions on transfer contained in the Warrant Agreement and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global
Warrant is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
[b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL WARRANT TO UNRESTRICTED DEFINITIVE WARRANT. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Warrant
for an Unrestricted Definitive Warrant, the Owner hereby certifies (i) the
Definitive Warrant is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Warrants and pursuant to and in
accordance with the Securities Act,
D-1
<PAGE> 50
restrictions on transfer contained in the Warrant Agreement and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Definitive Warrant is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
WARRANT TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL WARRANT. In connection
with the Owner's Exchange of a Restricted Definitive Warrant for a beneficial
interest in an Unrestricted Global Warrant, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Definitive Warrants and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer contained
in the Warrant Agreement and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
WARRANT TO UNRESTRICTED DEFINITIVE WARRANT. In connection with the Owner's
Exchange of a Restricted Definitive Warrant for an Unrestricted Definitive
Warrant, the Owner hereby certifies (i) the Unrestricted Definitive Warrant is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Warrants and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Warrant
Agreement and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive Warrant
is being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
2. [ ] EXCHANGE OF RESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL WARRANTS FOR RESTRICTED DEFINITIVE WARRANTS OR
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL WARRANTS
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL WARRANT TO RESTRICTED DEFINITIVE WARRANT. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Warrant
for a Restricted Definitive Warrant with an equal amount, the Owner hereby
certifies that the Restricted Definitive Warrant is being acquired for the
Owner's own account without transfer. Upon consummation of the proposed Exchange
in accordance with the terms of the Warrant Agreement, the Restricted Definitive
Warrant issued will continue to be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Definitive
Warrant and in the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
WARRANT TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL WARRANT. In connection
with the Exchange of the Owner's Restricted Definitive Warrant for a beneficial
interest in the [CHECK ONE] O 144A Global Warrant, O Regulation S Global
Warrant, O IAI Global Warrant with an equal amount, the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Warrants and pursuant
to and in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Warrant Agreement, the beneficial interest issued will be subject to the
restrictions on transfer enumerated in the Private
D-2
<PAGE> 51
Placement Legend printed on the relevant Restricted Global
Warrant and in the Warrant Agreement and the Securities Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
------------------------------
[Insert Name of Owner]
By:
---------------------------------
Name:
Title:
Dated:
D-3
<PAGE> 52
EXHIBIT E
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
InterAmericas Communications Corporation
1221 Brickell Avenue
Miami, Florida 33131
Telephone: (305) 377-6790
State Street Bank and Trust Company, N.A.
61 Broadway
New York, NY 10006
Attention: Corporate Trust Department
Re: Warrants to Purchase Common Stock of InterAmericas Communications
Corporation
Reference is hereby made to the Warrant Agreement, dated as of
October 27, 1997 (the "Warrant Agreement"), between InterAmericas Communications
Corporation, as issuer (the "Company"), and State Street Bank and Trust Company,
N.A., as warrant agent. Capitalized terms used but not defined herein shall have
the meanings given to them in the Warrant Agreement.
In connection with our proposed purchase of [ ] number of:
(a) [ ] a beneficial interest in a Global Warrant,
or
(b) [ ] a Definitive Warrant,
we confirm that:
1. We understand that any subsequent transfer of the Warrants
or any interest therein is subject to certain restrictions and conditions set
forth in the Warrant Agreement and the undersigned agrees to be bound by, and
not to resell, pledge or otherwise transfer the Warrants or any interest therein
except in compliance with, such restrictions and conditions and the United
States Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Warrants have
not been registered under the Securities Act, and that the Warrants and any
interest therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Warrants or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this
E-1
<PAGE> 53
letter and an Opinion of Counsel in form reasonably acceptable to the Company to
the effect that such transfer is in compliance with the Securities Act, (D)
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the provisions of Rule 144(k) under the
Securities Act or (F) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person purchasing the
Definitive Warrant or beneficial interest in a Global Warrant from us in a
transaction meeting the requirements of clauses (A) through (E) of this
paragraph a notice advising such purchaser that resales thereof are restricted
as stated herein.
3. We understand that, on any proposed resale of the Warrants
or beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Warrants purchased by
us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Warrants,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Warrants or beneficial interest
therein purchased by us for our own account or for one or more accounts (each of
which is an institutional "accredited investor") as to each of which we exercise
sole investment discretion.
You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
-------------------------------------
[Insert Name of Accredited Investor]
By:
----------------------------------
Name:
Title:
Dated:
E-2
<PAGE> 54
Unless and until it is exchanged in whole or in part for Warrants in
certificated form, this Warrant may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the issuer
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein.
THIS SECURITY EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY
RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (l)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (1)
ABOVE.
EXERCISABLE ON OR AFTER THE SEPARATION DATE
No. 003 0 Warrants
CUSIP #458419124
Warrant Certificate
INTERAMERICAS COMMUNICATIONS CORPORATION
This Warrant Certificate certifies that CEDE & CO., or
registered assigns, is the registered holder of zero (0) Warrants (the
"Warrants") to purchase shares of Common Stock, par value $.001 per share (the
"Common Stock"), of INTERAMERICAS COMMUNICATIONS CORPORATION, a Texas
corporation (the "Company"). Each Warrant entitles the holder upon exercise
<PAGE> 55
to receive from the Company commencing on the Separation Date (as defined in the
Warrant Agreement) until 5:00 p.m. New York City Time on October 27, 2007, the
number of fully paid and nonassessable Warrant Shares as set forth in the
Warrant Agreement, subject to adjustment as set forth in Section 11 of the
Warrant Agreement, at the initial exercise price (the "Exercise Price") of $4.40
per share payable without the exchange of funds pursuant to the net exercise
provisions of Section 6 of the Warrant Agreement upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or agency of the
Warrant Agent, but only subject to the conditions set forth herein and in the
Warrant Agreement referred to on the reverse hereof. The Exercise Price and
number of Warrant Shares issuable upon exercise of the Warrants are subject to
adjustment upon the occurrence of certain events set forth in the Warrant
Agreement. Subject to the provisions of the Warrant Agreement, no Warrant may be
exercised after 5:00 p.m., New York City Time on October 27, 2007, and to the
extent not exercised by such time such Warrants shall become void. Reference is
hereby made to the further provisions of this Warrant Certificate set forth on
the reverse hereof and such further provisions shall for all purposes have the
same effect as though fully set forth at this place. This Warrant Certificate
shall not be valid unless countersigned by the Warrant Agent, as such term is
used in the Warrant Agreement. This Warrant Certificate shall be governed and
construed in accordance with the internal laws of the State of New York.
Reference is hereby made to the further provisions on the
reverse hereof which provisions shall for all purposes have the same effect as
though fully set forth at this place.
Terms used and not otherwise defined in this Warrant
Certificate shall have the meanings given them in the Warrant Agreement.
<PAGE> 56
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring October 27, 2007 entitling the
holder on exercise to receive shares of Common Stock, and are issued or to be
issued pursuant to a Warrant Agreement dated as of October 27, 1997 (the
"Warrant Agreement"), duly executed and delivered by the Company to State Street
Bank and Trust Company, N.A., as warrant agent (the " Warrant Agent"), which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Warrant Agent,
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written request to the
Company.
Warrants may be exercised at any time on or after the
Separation Date and on or before October 27, 2007; provided that holders shall
be able to exercise their Warrants only if a registration statement relating to
the Warrant Shares is then in effect, or the exercise of such Warrants is exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and such securities are qualified for sale or exempt
from qualification under the applicable securities laws of the states in which
the various holders of the Warrants or other persons to whom it is proposed that
the Warrant Shares be issued on exercise of the Warrants reside. In order to
exercise all or any of the Warrants represented by this Warrant Certificate, (i)
in the case of Definitive Warrants, the holder must surrender for exercise this
Warrant Certificate to the Warrant Agent at its corporate trust office set forth
in Section 19 of the Warrant Agreement, (ii) in the case of a book-entry
interest in a Global Warrant, the exercising Agent Member whose name appears on
a securities position listing of the Depositary as the holder of such book-entry
interest must comply with the Depositary's procedures relating to the exercise
of such book-entry interest in such Global Warrant and (iii) in the case of both
Global Warrants and Definitive Warrants, the holder thereof or the Agent Member,
as applicable, must deliver to the Warrant Agent the form of election to
purchase on the reverse hereof duly filled in and signed, which signature shall
be medallion guaranteed by an institution which is a member of a Securities
Transfer Association recognized signature guarantee program, and upon payment to
the Warrant Agent for the account of the Company of the Exercise Price, as
adjusted as provided in the Warrant Agreement, for the number of Warrant Shares
in respect of which such Warrants are then exercised. No adjustment shall be
made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The holders of the Warrants shall have the registration rights
set forth in the Warrant Registration Rights Agreement, dated as of the date
hereof, by and between the Company and the Initial Purchaser.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
<PAGE> 57
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
<PAGE> 58
IN WITNESS WHEREOF, InterAmericas Communications Corporation
has caused this Warrant Certificate to be signed by its President and Chief
Executive Officer and by its Chief Financial Officer and may cause its corporate
seal to be affixed hereunto or imprinted hereon.
Dated: October 27, 1997
INTERAMERICAS COMMUNICATIONS CORPORATION
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Countersigned:
STATE STREET BANK AND TRUST COMPANY, N. A.,
as Warrant Agent
By:
--------------------------------
Name:
Title:
<PAGE> 59
SCHEDULE OF EXCHANGES OF GLOBAL WARRANTS
The following exchanges of a part of this Global Warrant for
certificated Warrants have been made:
<TABLE>
<CAPTION>
Number of
Amount of Amount of Warrants of this
decrease in increase in Global Warrant Signature of
Number of Number of following such authorized
Warrants of this Warrant of this decrease (or signatory of
Date of Exchange Global Warrant Global Warrant increase) Warrant Agent
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 60
FORM OF ELECTION TO EXERCISE
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive [ ] shares of Common
Stock and herewith tenders payment for such shares to the order of the Company
in the amount of $[ ] in accordance with the net exercise provisions of Section
6 of the Warrant Agreement. The undersigned requests that a certificate for such
shares be registered in the name of [ ], whose address is [ ] and that such
shares be delivered to [ ] whose address is [ ]. If said number of shares is
less than all of the shares of Common Stock purchasable hereunder, the
undersigned requests that a new Warrant Certificate representing the remaining
balance of such shares be registered in the name of [ ], whose address is [ ],
and that such Warrant Certificate be delivered to [ ], whose address is [ ].
Date:
-----------------------------------------
(Signature)
Note: The above signature must correspond
with the name as written upon the face of
this Warrant Certificate in every
particular, without alteration or
enlargement or any change whatever.
-----------------------------------------
(Signature Guaranteed)
Tax Identification or
Social Security Number:
Address:
<PAGE> 61
FORM OF ASSIGNMENT
For value received [ ] hereby sells, assigns and transfers
unto [ ] the within Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint [ ]
attorney, to transfer said Warrant Certificate on the books of the within-named
Company, with full power of substitution in the premises.
Dated:
Signature:
-----------------------------------
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement
or any change whatever.
Signature
Guaranteed:
----------------------------------
<PAGE> 1
EXHIBIT 4.6
================================================================================
EXECUTION COPY
WARRANT REGISTRATION RIGHTS AGREEMENT
Dated as of October 27, 1997
By and Between
INTERAMERICAS COMMUNICATIONS CORPORATION
and
UBS SECURITIES LLC
================================================================================
<PAGE> 2
WARRANT REGISTRATION RIGHTS AGREEMENT
THIS WARRANT REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of October 27, 1997, by and between INTERAMERICAS
COMMUNICATIONS CORPORATION, a Texas corporation (the "Company"), and UBS
SECURITIES LLC (the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement dated October
21, 1997, between the Company and the Initial Purchaser (the "Purchase
Agreement"), relating to, among other things, the sale by the Company to the
Initial Purchaser of an aggregate of 150,000 Units, consisting in the aggregate
of (i) $150,000,000 principal amount at maturity of 14% Senior Notes due 2007
(the "Notes") and (ii) 5,250,00 Warrants (the "Unit Warrants"), each
representing the right to purchase initially one share of Common Stock, par
value $.001 per share, of the Company (the "Common Stock"). In addition,
pursuant to (i) that certain letter agreement dated September 22, 1997 by and
between the Company and the Initial Purchaser (the "Engagement Letter"), the
Company has agreed to issue warrants to the Initial Purchaser (the "UBS
Warrants" and, together with the Unit Warrants, the "Warrants") to purchase an
aggregate of 2,250,000 shares of Common Stock and (ii) the Purchase Agreement,
the Company has agreed to issue 2,250,000 UBS Warrants, each representing the
right to purchase initially one share of Common Stock. The Warrants have been
issued pursuant to the Warrant Agreement dated as of the date hereof between the
Company and State Street Bank and Trust Company, N.A., as warrant agent (the
"Warrant Agreement"). In order to induce the Initial Purchaser to enter into the
Purchase Agreement, the Company has agreed to provide to the Initial Purchaser
and the Holders (as defined herein), among other things, the registration rights
for the Warrant Shares (as defined herein) set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the obligations of
the Initial Purchaser under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
As used in this agreement, the following defined terms shall have the
following meanings:
"Advice" has the meaning ascribed to such term in the last paragraph of
Section 4 hereof.
"Affiliate" means, when used with reference to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, the referent Person or such other Person, as the
case may be. For the purposes of this definition, the term "control" when used
with respect to any specified Person means the power to direct or cause the
direction of management or policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative of the foregoing. Neither the Initial Purchaser nor any of its
Affiliates shall be deemed to be an Affiliate of the Company or of any of its
subsidiaries or Affiliates.
<PAGE> 3
"Anniversary Date" has the meaning ascribed to such term in Section
2.1(a) hereof.
"Black Out Period" has the meaning ascribed to such term in Section
2.4(b) hereof.
"Business Day" shall mean a day that is not a Legal Holiday.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations, or other equivalents of or
interests (however designated) of corporate stock of the Company, including each
class of common stock and preferred stock of the Company, together with any
warrants, rights, or options to purchase or acquire any of the foregoing.
"Common Stock" has the meaning ascribed to such term in the preamble
hereof.
"Company" shall have the meaning ascribed to that term in the preamble
hereof and shall also include the Company's permitted successors and assigns.
"Demand Registration" has the meaning ascribed to such term in Section
2.2(a) hereof.
"Disqualified Capital Stock" has the meaning ascribed to such term in
the Warrant Agreement.
"DTC" has the meaning ascribed to such term in Section 4(i) hereof.
"Equity Interests" has the meaning ascribed to such term in the Warrant
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Expiration Date" has the meaning ascribed to such term in the Warrant
Agreement.
"Holder" shall mean the Initial Purchaser, for so long as it owns any
Warrants or Warrant Shares, and each of its successors, assigns and direct and
indirect transferees who become registered owners of such Warrants or Warrant
Shares.
"Included Securities" has the meaning ascribed to such term in Section
2.2(a) hereof.
"indemnified party" has the meaning ascribed to such term in Section
5(c) hereof.
"indemnifying party" has the meaning ascribed to such term in Section
5(c) hereof.
"Indenture" means the Indenture, of even date herewith, between the
Company and State Street Bank and Trust Company, N.A., as Trustee, pursuant to
which the Notes are issued.
"Initial Purchaser" has the meaning ascribed to such term in the
preamble hereof.
"Inspectors" has the meaning ascribed to such term in Section 4(n)
hereof.
2
<PAGE> 4
"Legal Holiday" shall mean a Saturday, a Sunday or a day on which
banking institutions in New York, New York are required by law, regulation or
executive order to remain closed.
"Notes" has the meaning ascribed to such term in the preamble hereof.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Piggy-Back Registration" has the meaning ascribed to such term in
Section 2.3 hereof.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Purchase Agreement" has the meaning ascribed to such term in the
preamble hereof.
"Registrable Securities" means any of (i) the Warrant Shares and (ii)
any other securities issued or issuable with respect to any Warrant Shares by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise, unless, in each case, such Warrant Shares and securities, if any,
have been offered and sold to the Holder pursuant to an effective Registration
Statement under the Securities Act declared effective prior to the
exercisability of the Warrants or such Warrant Shares and securities, if any,
may be sold to the public pursuant to Rule 144 without any restriction on the
amount of securities which may be sold by such Holder or the satisfaction of any
condition. As to any particular Registrable Securities held by a Holder, such
securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to the exercise or offering of such securities by the
Holder thereof shall have been declared effective under the Securities Act and
such securities shall have been exercised and/or disposed of by such Holder
pursuant to such Registration Statement, (ii) such securities may at the time of
determination be sold to the public pursuant to Rule 144 without any restriction
on the amount of securities which may be sold by such Holder (or any similar
provision then in force, but not Rule 144A) promulgated under the Securities Act
without the lapse of any further time or the satisfaction of any condition,
(iii) such securities shall have been otherwise transferred by such Holder and
new certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by the Company or its transfer agent and
subsequent disposition of such securities shall not require registration or
qualification under the Securities Act or any similar state law then in force or
(iv) such securities shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all SEC and stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without limitation,
3
<PAGE> 5
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities in an amount not to
exceed $20,000), printing expenses, messenger, telephone and delivery expenses,
fees and disbursements of counsel for the Company and all independent certified
public accountants, the fees and disbursements of underwriters customarily paid
by issuers or sellers of securities (but not including any underwriting
discounts or commissions or transfer taxes, if any, attributable to the sale of
Registrable Securities by Holders of such Registrable Securities) and other
reasonable out-of-pocket expenses of Holders (it being understood that the
Registration Expenses shall not include, as to the fees and expenses of counsel,
the fees and expenses of more than one counsel for the Holders).
"Registration Statement" shall mean any appropriate registration
statement of the Company filed with the SEC pursuant to the Securities Act which
covers any of the Registrable Securities pursuant to the provisions of this
Agreement and all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Requisite Securities" shall mean a number of Registrable Securities
equal to not less than 25% of the Registrable Securities held in the aggregate
by all Holders; provided, however, that with respect to any action to be taken
at the request of the Holders of the Registrable Securities prior to such time
as the Warrants have expired pursuant to the terms thereof and of the Warrant
Agreement, each Warrant outstanding shall be deemed to represent that number of
Registrable Securities for which such Warrant would be then exercisable (without
giving effect to the cashless (net) exercise feature referred to in the Warrant
Agreement).
"Rule 144" shall mean Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"Rule 144A" shall mean Rule 144A promulgated under the Securities Act,
as such Rule may be amended from time to time, or any similar rule (other than
Rule 144) or regulation hereafter adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Selling Holder" shall mean a Holder who is selling Registrable
Securities in accordance with the provisions of Section 2.1, 2.2 or 2.3 hereof.
"Shelf Registration" has the meaning ascribed to such term in Section
2.1(a) hereof.
4
<PAGE> 6
"Shelf Registration Statement" has the meaning ascribed to such term in
Section 2.1(a) hereof.
"Warrants" has the meaning ascribed to such term in the preamble
hereof.
"Warrant Agent" means State Street Bank and Trust Company, N.A. and
any successor Warrant Agent for the Warrants pursuant to the Warrant Agreement.
"Warrant Agreement" has the meaning ascribed to such term in the
preamble hereof.
"Warrant Share Prospectus" means the prospectus included in any Warrant
Share Registration Statement (including, without limitation, any prospectus
subject to completion and a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration statement
in reliance upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, and all other amendments and
supplements to the Warrant Share Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Warrant Share Prospectus.
"Warrant Share Registration Statement" has the meaning ascribed to that
term in Section 5(a) hereof.
"Warrant Shares" means the shares of Common Stock delivered or
deliverable upon exercise of the Warrants.
SECTION 2. REGISTRATION RIGHTS
SECTION 2.1. SHELF REGISTRATION. If after the date of this
Agreement, in the reasonable opinion of counsel to the Company or counsel to the
Initial Purchaser, the exercise of any Warrants is not exempt from the
registration requirements of the Securities Act by virtue of Section 3(a)(9)
thereof, the Company shall:
(a) prepare and, on the first anniversary of the date
of the Warrant Agreement (the "Anniversary Date"), cause to be filed with the
Commission pursuant to Rule 415 under the Securities Act a shelf registration
statement (the "Shelf Registration Statement") on the appropriate form relating
to the offer and sale by the Company of the Warrant Shares to the Holders of
Warrants upon exercise of the Warrants (if such issuance is permitted to be
registered by applicable rule or policy of the SEC) and resales of the Warrant
Shares by the holders thereof;
(b) use its reasonable best efforts to cause such
Shelf Registration Statement to be declared effective by the Commission by 60
days from the Anniversary Date; and
5
<PAGE> 7
(c) use its best efforts to keep the Shelf
Registration Statement continuously effective under the Securities Act in order
to permit the Prospectus included therein to be lawfully delivered by the
Company to the Holders exercising the Warrants until the Expiration Date or such
shorter period that will terminate when all the Warrants have been exercised.
Except as provided in Section 2.4(b) below with respect to any Black Out Period,
the Company shall be deemed not to have used its reasonable best efforts to keep
a Shelf Registration Statement effective during the requisite period if it
voluntarily takes any action that would result in it not being able to offer and
sell the Warrant Shares upon exercise of the Warrants during that period, unless
such action is required by applicable law.
SECTION 2.2. DEMAND REGISTRATION
(a) At any time and from time to time after the first
anniversary of the date of the Warrant Agreement, Holders owning, individually
or in the aggregate, not less than the Requisite Securities may make a written
request, on two occasions (each, a "Demand Registration"), that the Company
register the issuance of the Warrant Shares by the Company upon exercise, or if
such issuance is not then permitted to be registered by applicable rule or
policy of the SEC, the resale of the Warrant Shares, under the Securities Act.
The Company shall file with the SEC and use its best efforts to cause to become
effective under the Securities Act a Registration Statement with respect to such
Registrable Securities within (i) 60 days of receipt of such written request for
a Demand Registration if the Company is then eligible to register an offering
pursuant to Form S-3 under the Securities Act; (ii) 90 days of receipt of such
written request for a Demand Registration if the Company is not then eligible to
register an offering pursuant to Form S-3 under the Securities Act but is then
qualified as a reporting company under the Exchange Act; or (iii) 180 days of
receipt of such written request for a Demand Registration in any other case. Any
such request will specify the number of Registrable Securities proposed to be
sold and will also specify the intended method of disposition thereof. The
Company shall give written notice of such registration request to all other
Holders of Registrable Securities within 15 business days after the receipt
thereof. Within 10 days after receipt by any Holder of Registrable Securities of
such notice from the Company, such Holder may request in writing that such
Holder's Registrable Securities be included in such Registration Statement and
the Company shall include in such Registration Statement the Registrable
Securities of any such Holder requested to be so included (the "Included
Securities"). Each such request by such other Holders shall specify the number
of Included Securities proposed to be sold and the intended method of
disposition thereof. Subject to Sections 2.2(b) and 2.2(e) hereof, the Company
shall be required to register Registrable Securities pursuant to this Section
2.2(a) on a maximum of two separate occasions.
Subject to Section 2.2(e) hereof, no other securities of the Company
except (i) Registrable Securities held by any Holder, (ii) equity securities to
be offered and sold for the account of the Company and (iii) any equity
securities of the Company held by any Person having "piggy-back" registration
rights pursuant to any contractual obligation of the Company shall be included
in a Demand Registration. The inclusion of any such securities for the account
of the Company or any other Person shall be on the same terms as that of the
Registrable Securities.
6
<PAGE> 8
(b) Effective Registration. A Registration Statement
will not be deemed to have been effected as a Demand Registration unless it has
been declared effective by the SEC and the Company has complied in all material
respects with all of its obligations under this Agreement with respect thereto;
provided, however, that if, after such Registration Statement has become
effective, the offering of Registrable Securities pursuant to such Registration
Statement is or becomes the subject of any stop order, injunction or other order
or requirement of the SEC or any other governmental or administrative agency or
court that prevents, restrains or otherwise limits the sale of Registrable
Securities pursuant to such Registration Statement for any reason not
attributable to any Holder participating in such registration and such
Registration Statement has not become effective within a reasonable time period
thereafter (not to exceed 30 days), such Registration Statement will be deemed
not to have been effected. If (i) a registration requested pursuant to this
Section 2.2 is deemed not to have been effected or (ii) a Demand Registration
does not remain effective under the Securities Act until at least the earlier of
(A) an aggregate of 90 days after the effective date thereof or (B) the
consummation of the distribution by the Holders of all of the Registrable
Securities covered thereby, then such registration shall not count towards
determining if the Company has satisfied its obligation to effect two Demand
Registrations pursuant to this Section 2.2. For purposes of calculating the
90-day period referred to in the preceding sentence, any period of time during
which such Registration Statement was not in effect shall be excluded. The
Holders of Registrable Securities shall be permitted to withdraw all or any part
of the Registrable Securities from a Demand Registration at any time prior to
the effective date of such Demand Registration; provided, however, that should
the Holders of Registrable Securities remaining after such withdrawal own,
individually or in the aggregate, less than the Requisite Securities, the
Company shall have the right to terminate or withdraw any registration initiated
by it under Section 2.2 prior to the effectiveness of such registration.
(c) Restrictions on Sale by Holders. Each Holder of
Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to Section 2.1 or 2.2 and are to be sold
by the Holder thereunder agrees, if and to the extent reasonably requested by
the managing underwriter or underwriters in an underwritten offering of common
stock or common equivalents the gross proceeds of which equal at least $10.0
million, not to effect any public sale or distribution of Registrable Securities
of the Company of the same class as any securities included in such Registration
Statement, including a sale pursuant to Rule 144 (except as part of such
underwritten offering), during the 10 day period prior to, and during the 180
day period beginning on, the closing date of each underwritten offering made
pursuant to such Registration Statement, to the extent timely notified in
writing by the Company or such managing underwriter or underwriters.
The foregoing provisions of Section 2.2(c) shall not apply to any
Holder of Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided, however,
that any such Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of any
Registrable Securities commencing on the date of sale of such Registrable
Securities unless it has provided 45 days' prior written notice of such sale or
distribution to the underwriter or underwriters.
7
<PAGE> 9
(d) Underwritten Registrations. If any of the
Registrable Securities covered by a Demand Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will manage the offering will be selected by the Company and
will be reasonably acceptable to the Holders of not less than a majority of the
Registrable Securities to be sold thereunder.
No Holder of Registrable Securities may participate in any underwritten
registration pursuant to a Registration Statement filed under this Agreement
unless such Holder (a) agrees to (i) sell such Holder's Registrable Securities
on the basis provided in and in compliance with any underwriting arrangements
approved by the Holders of not less than a majority of the Registrable
Securities to be sold thereunder and (ii) comply with Rules 10b-6 and 10b-7
under the Exchange Act and (b) completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
(e) Priority in Demand Registration. In a
registration pursuant to Section 2.2 hereof involving an underwritten offering,
if the managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Selling Holders who have requested
such Demand Registration or who have sought inclusion therein that in such
underwriter's or underwriters' opinion the total number of securities which the
Selling Holders and any other Person desiring to participate in such
registration intend to include in such offering is such as to adversely affect
the success of such offering, including the price at which such securities can
be sold, then the Company will be required to include in such registration only
the amount of securities which it is so advised should be included in such
registration. In such event, securities shall be registered in such registration
in the following order of priority: (i) first, the securities which have been
requested to be included in such registration by the Holders of Registrable
Securities, (ii) second, provided that no securities sought to be included by
the Holders have been excluded from such registration, the securities of other
Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments of the Company (pro rata based on the amount of
securities held by such Persons) and (iii) third, provided that no securities of
any other Person sought to be included therein have been excluded from such
registration, securities to be offered and sold for the account of the Company.
If 25% or more of the Registrable Securities which the Holders have
requested to be included in a registration statement pursuant to Section 2.2
hereof have been excluded from such registration statement pursuant to the
provisions of the foregoing paragraph, then such registration shall not count
towards determining whether the Company has satisfied its obligation to effect
two Demand Registrations pursuant to Section 2.2 hereof.
SECTION 2.3. PIGGY-BACK REGISTRATION
(a) If at any time the Company proposes to file a
Registration Statement under the Securities Act with respect to an offering by
the Company for its own account or for the account of any of its security
holders of any class of its common equity
8
<PAGE> 10
securities (other than (i) a Registration Statement on Form S-4 or S-8 (or any
substitute form that may be adopted by the SEC or other form of limited purpose)
or (ii) a Registration Statement filed in connection with an exchange offer or
offering of securities solely to the Company's existing security holders), then
the Company shall give written notice of such proposed filing to the Holders of
Registrable Securities as soon as practicable (but in no event fewer than 15
days before the anticipated filing date or 10 days if the Company is subject to
filing reports under the Exchange Act and able to use Form S-3 under the
Securities Act), and such notice shall offer such Holders the opportunity to
register such number of shares of Registrable Securities as each such Holder may
request in writing not later than 5 days prior to the anticipated filing date of
the Registration Statement after receipt of such written notice from the Company
(which request shall specify the Registrable Securities intended to be disposed
of by such Selling Holder and the intended method of distribution thereof) (a
"Piggy-Back Registration"). The Company shall use its best efforts to keep such
Piggy-Back Registration continuously effective under the Securities Act until at
least the earlier of (A) 90 days after the effective date thereof or (B) the
consummation of the distribution by the Holders of all of the Registrable
Securities covered thereby. The Company shall use its commercially reasonable
efforts to cause the managing underwriter or underwriters, if any, of such
proposed offering to permit the Registrable Securities requested to be included
in a Piggy-Back Registration to be included on the same terms and conditions as
any similar securities of the Company or any other security holder included
therein, subject to the restrictions set forth in Section 2.3(b), and to permit
the sale or other disposition of such Registrable Securities in accordance with
the intended method of distribution thereof. Any Selling Holder shall have the
right to withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.3 by giving timely written
notice to the Company of its request to withdraw. The Company may withdraw a
Piggy-Back Registration at any time prior to the time it becomes effective or
the Company may elect to delay the registration; provided, however, that the
Company shall give prompt written notice thereof to participating Selling
Holders. The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 2.3,
and each Holder of Registrable Securities shall pay all underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or disposition
of such Holder's Registrable Securities pursuant to a Registration Statement
effected pursuant to this Section 2.3.
No registration effected under this Section 2.3, and no failure to
effect a registration under this Section 2.3, shall relieve the Company of its
obligation to effect a registration pursuant to Section 2.1 or 2.2 hereof, and
no failure to effect a registration under this Section 2.3 and to complete the
sale of securities registered thereunder in connection therewith shall relieve
the Company of any other obligation under this Agreement.
(b) Priority in Piggy-Back Registration. In a
registration pursuant to Section 2.3 hereof involving an underwritten offering,
if the managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Selling Holders requesting inclusion
in such offering that in such underwriter's or underwriters' opinion the total
number of securities which the Company, the Selling Holders and any other
Persons desiring to participate in such registration intend to include in such
offering is such as to adversely affect the success of such offering, including
the price at which such securities can be
9
<PAGE> 11
sold, then the Company will be required to include in such registration only the
amount of securities which it is so advised should be included in such
registration. In such event: (x) in cases only involving the registration for
sale of securities for the Company's own account (other than pursuant to the
exercise of piggyback rights herein and in other contractual commitments of the
Company), securities shall be registered in such offering in the following order
of priority: (i) first, the securities which the Company proposes to register,
(ii) second, provided that no securities sought to be included by the Company
have been excluded from such registration, the securities which have been
requested to be included in such registration by the Holders of Registrable
Securities, and (iii) third, provided that no securities sought to be included
by the Company or the Holders have been excluded from such registration, the
securities of other Persons entitled to exercise "piggy-back" registration
rights pursuant to contractual commitments of the Company (pro rata based on the
amount of securities held by such Persons); and (y) in cases not involving the
registration for sale of securities for the Company's own account only,
securities shall be registered in such offering in the following order of
priority: (i) first, the securities of any Person whose exercise of a "demand"
registration right pursuant to a contractual commitment of the Company is the
basis for the registration (provided that if such Person is a Holder of
Registrable Securities, as among Holders of Registrable Securities there shall
be no priority and Registrable Securities sought to be included by Holders of
Registrable Securities shall be included pro rata based on the amount of
securities held by such Persons), (ii) second, provided that no securities of
such Person referred to in the immediately preceding clause (i) have been
excluded from such registration, the securities which have been requested to be
included in such registration by the Holders of Registrable Securities, and
(iii) third, provided that no securities of such Person referred to in the
immediately preceding clause (i) or of the Holders have been excluded from such
registration, securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments (pro rata based on the
amount of securities held by such Persons) and (iv) fourth, provided that no
securities of any other Person have been excluded from such registration, the
securities which the Company proposes to register.
If, as a result of the provisions of this Section 2.3(b), any Selling
Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Selling Holder has requested to be included,
such Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration.
SECTION 2.4. LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO
OBLIGATIONS UNDER REGISTRATION COVENANTS
The obligations of the Company set forth in Sections 2.1, 2.2 and 2.3
hereof are subject to each of the following limitations, conditions and
qualifications:
(a) Subject to the next sentence of this paragraph,
the Company shall be entitled to postpone, for a reasonable period of time, the
filing or effectiveness of, or suspend the rights of any Holders to make sales
pursuant to, any Registration Statement otherwise required to be prepared, filed
and made and kept effective by it pursuant to Section 2.2 or 2.3 thereunder;
provided, however, that the duration of such postponement or suspension may not
exceed the earlier to occur of (A) 15 days after the cessation of the
circumstances described in
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the next sentence of this paragraph on which such postponement or suspension is
based or (B) 90 days after the date of the determination of the Board of
Directors referred to in the next sentence, and the duration of such
postponement or suspension shall be excluded from the calculation of the 90-day
period described in Section 2.2(b). Such postponement or suspension may be
effected only if the Board of Directors of the Company determines reasonably and
in good faith that the filing or effectiveness of, or sales pursuant to, such
Registration Statement would materially impede, delay or interfere with any
material financing, offer or sale of securities, acquisition, corporate
reorganization or other significant transaction involving the Company or any of
its Subsidiaries which material financing, offer or sale of securities,
acquisition, corporate reorganization or other significant transaction is under
active consideration at the time of such postponement or suspension; provided,
however, that the Company shall not be entitled to such postponement or
suspension more than twice in any twelve-month period. If the Company shall so
postpone the filing of a Registration Statement it shall, as promptly as
possible, deliver a certificate signed by the Chief Executive Officer or
President of the Company to the Selling Holders as to such determination, and
the Selling Holders shall (y) have the right, in the case of a postponement of
the filing or effectiveness of a Registration Statement, upon the affirmative
vote of the Holders of not less than a majority of the Registrable Securities to
be included in such Registration Statement, to withdraw the request for
registration by giving written notice to the Company within 10 days after
receipt of such notice or (z) in the case of a suspension of the right to make
sales, receive an extension of the registration period equal to the number of
days of the suspension. Any Demand Registration as to which the withdrawal
election referred to in the preceding sentence has been effected shall not be
counted for purposes of the two Demand Registrations the Company is required to
effect pursuant to Section 2.2 hereof;
(b) The Company shall not be required to amend or
supplement the any Registration Statement filed pursuant to Section 2.1 of this
Agreement, any related prospectus or any document incorporated therein by
reference, for a period (a "Black Out Period") not to exceed, for so long as
this Agreement is in effect, an aggregate of 60 days in any calendar year, in
the event that (i) the Board of Directors of the Company determines reasonably
and in good faith that sales pursuant to such Registration Statement would
materially impede, delay or interfere with any material financing, offer or sale
of securities, acquisition, corporate reorganization or other significant
transaction involving the Company or any of its Subsidiaries which material
financing, offer or sale of securities, acquisition, corporate reorganization or
other significant transaction is under active consideration at the time of such
postponement or suspension, (ii) an event occurs and is continuing as a result
of which the Shelf Registration Statement, any related prospectus or any
document incorporated therein by reference as then amended or supplemented
would, in the Company's good faith judgment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or (iii) the disclosure otherwise relates to a material
business transaction which has not yet been publicly disclosed; provided that no
Black Out Period may be in effect during the three months prior to the
Expiration Date.
(c) The Company shall not be required by this
Agreement to file a registration statement with respect to a Demand Registration
during the period starting with the
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date of filing of, and within 120 days immediately following, the effective date
of any registration statement under the Securities Act pertaining to a firmly
underwritten offering of equity securities of the Company for its own account;
provided that this clause (c) shall not apply from and after October 27, 2005.
(d) The Company shall not be required by this
Agreement to file a registration statement with respect to a Demand Registration
during the period starting with the date of filing of, and within 90 days
immediately following, the effective date of any registration statement
pertaining to a firmly underwritten offering of Common Stock of the Company for
the account of any security holder of the Company; provided, however, that the
Company shall not be entitled to invoke this clause (d) more than once during
any 12-month period.
(e) The Company's obligations shall be subject to the
obligations of the Selling Holders, which the Selling Holders acknowledge, to
furnish all information and materials required of such Selling Holders and to
take any and all actions required of such Selling Holders as may be required
under applicable federal and state securities laws and regulations to permit the
Company to comply with all applicable requirements of the SEC and to obtain any
acceleration of the effective date of such Registration Statement; and
(f) The Company shall not be obligated to cause any
special audit to be undertaken in connection with any registration pursuant to
this Agreement unless such audit is required by the SEC or requested by the
underwriters with respect to such registration.
SECTION 2.5. RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS
The Company covenants and agrees that (i) it shall not, and that it
shall not cause or permit any of its subsidiaries to, effect any public sale or
distribution of any securities of the same class as any of the Registrable
Securities or any securities convertible into or exchangeable or exercisable for
such securities (or any option or other right for such securities), other than
any Common Stock and/or options, warrants or other Common Stock purchase rights,
and the Common Stock issued pursuant to such option, warrants or other rights,
to employees, officers or directors of, or consultants or advisors to the
Company or any subsidiary pursuant to stock purchase or stock option plans or
other arrangements that are approved by the Board of Directors of the Company,
during the 10-day period prior to, and during the 180-day period beginning on,
the commencement of any underwritten offering of Registrable Securities pursuant
to a Demand Registration which has been requested pursuant to this Agreement,
prior to the Company or any of its subsidiaries publicly announcing its
intention to effect any such public sale or distribution; (ii) the Company will
not, and the Company will not cause or permit any subsidiary of the Company to,
after the date hereof, enter into any agreement or contract that conflicts with
or limits or prohibits the full and timely exercise by the Holders of
Registrable Securities of the rights herein to request a Shelf Registration or
Demand Registration or to join in any Piggy-Back Registration subject to the
other terms and provisions hereof; and (iii) that it shall use its reasonable
best efforts to secure the written agreement of each of its officers and
directors to not effect any public sale or distribution of any securities of the
same class as the Registrable Securities (or any securities convertible into or
exchangeable or exercisable for any such
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securities), or any option or right for such securities during the period
described in clause (i) of this Section 2.5.
SECTION 2.6. RULE 144 AND RULE 144A
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder or beneficial owner of Registrable Securities, make available such
information necessary to permit sales pursuant to Rule 144A under the Securities
Act. The Company further covenants that it will take such further action as any
Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act,
as such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC (it being expressly understood that the
foregoing shall not create any obligation on the part of the Company to file
periodic reports or other reports under the Exchange Act at any time that it is
not then required to file such reports pursuant to the Exchange Act). Upon the
request of any Holder of Registrable Securities, the Company will in a timely
manner deliver to such Holder a written statement as to whether it has complied
with such information requirements.
SECTION 3. "MARKET STAND-OFF" AGREEMENT
(a) Each Holder hereby agrees that it shall not, to
the extent requested by a managing underwriter of common stock or common
equivalents of the Company, sell or otherwise transfer or dispose of any
Registrable Securities of the Company then owned by such Holder (other than to
donees or partners of the Holder who agree to be similarly bound) for up to 180
days following the date of the final Prospectus in connection with the
Registration Statement of the Company filed under the Securities Act; provided,
however, that such agreement (i) shall not be applicable to Registrable
Securities sold pursuant to such registration, and (ii) shall only be applicable
if the managing underwriters request such agreement from each Holder.
(b) In order to enforce the foregoing covenant, the
Company shall have the right to impose stop transfer instructions with respect
to the Registrable Securities (and the Registrable Securities of every other
person subject to the foregoing restriction) until the end of such period. The
provisions of this Section 3 shall be binding upon any transferee of any
Registrable Securities.
SECTION 4. REGISTRATION PROCEDURES. In connection with the
obligations of the Company with respect to any Registration Statement pursuant
to Sections 2.1, 2.2, 2.3 and 2.6 hereof, the Company shall, except as otherwise
provided:
(a) Prepare and file with the SEC as soon as
practicable each such Registration Statement (but in any event on or prior to
the date of filing thereof required under
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this Agreement) and cause such Registration Statement to become effective and
remain effective as provided herein; provided, however, that before filing any
such Registration Statement or any Prospectus (for registrations pursuant to
Sections 2.1, 2.2 and 2.3 hereof) or any amendments or supplements thereto (only
for registrations pursuant to Section 2.1 and 2.2 hereof) (including documents
that would be incorporated or deemed to be incorporated therein by reference,
including such documents filed under the Exchange Act that would be incorporated
therein by reference), the Company shall afford promptly to the Holders of the
Registrable Securities covered by such Registration Statement, their counsel and
the managing underwriter or underwriters, if any, upon their written request, an
opportunity to review copies of all such documents proposed to be filed a
reasonable time prior to the proposed filing thereof. The Company shall not file
any Registration Statement or Prospectus (for registrations pursuant to Sections
2.1, 2.2 and 2.3 hereof) or any amendments or supplements thereto (only for
registrations pursuant to Section 2.1 and 2.2 hereof) if the Holders of a
majority of the Registrable Securities covered by such Registration Statement,
their counsel, or the managing underwriter or underwriters, if any, shall
reasonably object in writing to any information contained therein or omitted
therefrom unless failure to file any such amendment or supplement would likely
result, in the Company's reasonable judgment based on the advice of counsel, in
a violation of the Securities Act or other applicable law.
(b) Prepare and file with the SEC such amendments
and post-effective amendments to the Registration Statement as may be
necessary to keep such Registration Statement continuously effective for the
time periods prescribed hereby; cause the related Prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; and comply with the provisions of the Securities Act,
the Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to it with respect to the disposition of all securities
covered by such Registration Statement as so amended or in such prospectus as
so supplemented.
(c) Notify the Holders of Registrable Securities,
their counsel and the managing underwriter or underwriters, if any, promptly
(but in any event within two (2) Business Days), and 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 (including in such
notice a written statement that any Holder may, upon request, obtain, without
charge, one conformed copy of such Registration Statement or post-effective
amendment including financial statements and schedules and exhibits), (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of such
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation or threatening of any proceedings for
that purpose, (iii) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Securities the representations and warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated by Section 4(m)
below, to the knowledge of the Company, cease to be true and correct in any
material respect, (iv) of the receipt by the Company of any notification with
respect to (A) the suspension of the qualification or exemption from
qualification of the Registration Statement or
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any of the Registrable Securities covered thereby for offer or sale in any
jurisdiction, or (B) the initiation of any proceeding for such purpose, (v) of
the happening of any event, the existence of any condition or information
becoming known that requires the making of any changes in such Registration
Statement, Prospectus or documents so that, in the case of such Registration
Statement, it will conform in all material respects with the requirements of the
Securities Act and it will not 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, and that in the case of the
Prospectus, it will conform in all material respects with the requirements of
the Securities Act and it will not 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, in light of the circumstances under
which they were made, not misleading, and (vi) of the Company's reasonable
determination that a post-effective amendment to such Registration Statement
would be appropriate.
(d) Use commercially reasonable efforts to prevent
the issuance of any order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any of the
Registrable Securities covered thereby for sale in any jurisdiction, and, if any
such order is issued, to obtain the withdrawal of any such order at the earliest
practicable moment.
(e) If requested by the managing underwriter or
underwriters, if any, or the Holders of a majority of the Registrable Securities
being sold in connection with an underwriting offering (only for registrations
pursuant to Section 2.1 and 2.2 hereof), (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters, if any, or such Holders reasonably request
to be included therein to comply with applicable law, (ii) make all required
filings of such prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post- effective amendment, and
(iii) supplement or make amendments to such Registration Statement.
(f) Furnish to each Holder of Registrable Securities
who so requests and to counsel for the Holders of Registrable Securities and
each managing underwriter, if any, without charge, upon request, one conformed
copy of the Registration Statement and each post-effective amendment thereto,
including financial statements and schedules, and of all documents incorporated
or deemed to be incorporated therein by reference and all exhibits (including
exhibits incorporated by reference).
(g) Deliver to each Holder of Registrable Securities,
their counsel and each underwriter, if any, without charge, as many copies of
each Prospectus (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and, subject to the
last paragraph of this Section 4, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the Holders of
Registrable Securities and the underwriter or underwriters or agents, if any, in
connection with
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the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities,
to register or qualify, and cooperate with the Holders of Registrable
Securities, the underwriter or underwriters, if any, and their respective
counsel in connection with the registration or qualification (or exemption from
such registration or qualification) of, such Registrable Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions within the
United States as the managing underwriter or underwriters reasonably request in
writing, or, in the event of a non-underwritten offering, as the Holders of a
majority of the Registrable Securities may request; provided, however, that
where Registrable Securities are offered other than through an underwritten
offering, the Company agrees to cause its counsel to perform Blue Sky
investigations and file registrations and qualifications required to be filed
pursuant to this Section 4(h); keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the securities covered thereby; provided, however, that
the Company will not be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or (C) become subject to taxation in any jurisdiction where
it is not then so subject.
(i) Cooperate with the Holders of Registrable
Securities and the managing underwriter or underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any restrictive legends
whatsoever and shall be in a form eligible for deposit with The Depository Trust
Company ("DTC"); and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request at least two business
days prior to any sale of Registrable Securities in a firm commitment
underwritten public offering.
(j) Pay all Registration Expenses in connection with
the registrations requested pursuant to Sections 2.1, 2.2 and 2.3 hereof. Each
Holder of Registrable Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a Registration Statement
requested pursuant to Section 2.1 or 2.2.
(k) Upon the occurrence of any event contemplated by
Section 4(c)(v) or 4(c)(vi) above, as promptly as practicable prepare a
supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and, subject to Section 4(a) hereof, file
such with the SEC so that, as thereafter delivered to the purchasers of
Registrable Securities being sold thereunder, such Prospectus will not contain
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, in light of
the circumstances under which they were made, not misleading.
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(l) Prior to the effective date of a Registration
Statement, (i) provide the registrar for the Registrable Securities with
certificates for such securities in a form eligible for deposit with DTC and
(ii) provide a CUSIP number for such securities.
(m) Enter into an underwriting agreement in form,
scope and substance as is customary in underwritten offerings and take all such
other actions as are reasonably requested by the managing underwriter or
underwriters in order to expedite or facilitate the registration or disposition
of such Registrable Securities in any underwritten offering to be made of the
Registrable Securities in accordance with this Agreement, and in such
connection, (i) make such representations and warranties to the underwriter or
underwriters, with respect to the business of the Company and the subsidiaries
of the Company, and the Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) use reasonable efforts to obtain opinion of counsel to the
Company, addressed to the underwriter or underwriters covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by underwriters; (iii) use
reasonable efforts to obtain "cold comfort" letters from the independent
certified public accountants of the Company (and, if applicable, the
subsidiaries of the Company) and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement, addressed to each of the
underwriters, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by the
managing underwriter or underwriters and as permitted by the Statement of
Auditing Standards No. 72; and (iv) if an underwriting agreement is entered
into, the same shall contain customary indemnification provisions and procedures
with respect to all parties to be indemnified pursuant to said Section. The
above shall be done at each closing under such underwriting agreement, or as and
to the extent required thereunder.
(n) Make available for inspection by a representative
of the Holders of Registrable Securities being sold, any underwriter
participating in any such disposition of Registrable Securities, if any, and any
attorney or accountant retained by such representative of the Holders or
underwriter (collectively, the "Inspectors"), at the offices where normally
kept, during reasonable business hours, at the Inspector's expense, all
financial and other records, pertinent corporate documents and properties of the
Company and the subsidiaries of the Company, and cause the officers, directors
and employees of the Company and the subsidiaries of the Company to supply all
information in each case reasonably requested by any such Inspector in
connection with such Registration Statement; provided, however, that all
material non-public information shall be kept confidential by such Inspector and
shall not be used for any purpose other than as contemplated hereby, except to
the extent that (i) the disclosure of such information is necessary or advisable
to avoid or correct a misstatement or omission in the Registration Statement or
in any Prospectus; provided, however, that prior notice is given to the Company,
and the Company's legal counsel and such Holder's legal counsel concur that
disclosure is required, (ii) the release of such information is ordered pursuant
to a subpoena or
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other order from a court of competent jurisdiction, (iii) disclosure of such
information is necessary or advisable in connection with any action, claim, suit
or proceeding, directly or indirectly, involving or potentially involving such
Inspector and arising out of, based upon, relating to or involving this
Agreement or any of the transactions contemplated hereby or arising thereunder;
provided, however, that prior notice shall be provided as soon as practicable to
the Company of the potential disclosure of any information by such Inspector
pursuant to clauses (ii) or (iii) of this sentence to permit the Company to
obtain a protective order (or waive the provisions of this paragraph (n)) and
that such Inspector shall take all actions as are reasonably necessary to
protect the confidentiality of such information (if practicable) to the extent
such action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any Inspector, or (iv)
such information has been made generally available to the public.
(o) Comply with all applicable rules and regulations
of the SEC and make generally available to its security holders earnings
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the Securities Act)
no later than forty-five (45) days after the end of any 12 month period (or
ninety (90) days after the end of any 12 month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to an underwriter or to underwriters in a firm commitment or
best efforts underwritten offering and (ii) if not sold to an underwriter or to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of the relevant
Registration Statement, which statements shall cover said 12 month periods.
(p) Use its best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on each
securities exchange, if any, on which similar securities issued by the Company
are then listed.
(q) Cooperate with the Selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends and registered in such names as the Selling Holders may reasonably
request at least two business days prior to the closing of any sale of
Registrable Securities.
Each seller of Registrable Securities as to which any registration is
being effected agrees, as a condition to the registration obligations with
respect to such seller provided herein, to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Securities as the Company may, from time to time, reasonably request in writing
to comply with the Securities Act and other applicable law. The Company may
exclude from such registration the Registrable Securities of any seller for so
long as such seller fails to furnish such information within a reasonable time
after receiving such request. If the identity of a seller of Registrable
Securities is to be disclosed in the Registration Statement, such seller shall
be permitted to include all information regarding such seller as it shall
reasonably request.
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Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iv),
4(c)(v), or 4(c)(vi) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by the Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(k) hereof), or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
prospectus may be resumed, and has received copies of any amendments or
supplements thereto, and, if so directed by the Company, such Holder will, at
the Company's expense, deliver to the Company all copies, other than permanent
file copies, then in such Holder's actual possession of the Prospectus covering
such Registrable Securities current at the time of receipt of such notice;
provided, however, that nothing herein shall create any obligation on the part
of any Holder to undertake unreasonable efforts to retrieve or return any such
Prospectus not within the actual possession or control of such Holder. In the
event the Company shall give any such notice, the period of time for which a
Registration Statement is required thereunder to be effective shall be extended
by the number of days during such periods from and including the date of the
giving of such notice to and including the date when each seller of Registrable
Securities covered by such Registration Statement shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 4(k)
hereof or (y) the Advice.
SECTION 5. INDEMNIFICATION AND CONTRIBUTION
(a) The Company agrees to indemnify and hold harmless
each Holder and each Person, if any, who controls such Holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act, or
is under common control with, or is controlled by, such Holder, from and against
all losses, claims, damages and liabilities (including, without limitation, and
subject to clause (c) of this Section 5 below, the reasonable legal fees and
other reasonable out-of-pocket expenses actually incurred by any Holder or any
such controlling or affiliated Person in connection with any suit, action or
proceeding or any claim asserted), caused by, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, or caused by any omission
or alleged omission to state in any such Registration Statement a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or caused by any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or Prospectus (as amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state in
any such preliminary prospectus or Prospectus a material fact required to be
stated in any such preliminary prospectus or Prospectus or necessary to make the
statements in any such preliminary prospectus or Prospectus in light of the
circumstances under which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Holder furnished to the Company in
writing by such Holder expressly for use in any such Registration Statement or
Prospectus; provided, however, that the Company shall not be required to
indemnify any such
19
<PAGE> 21
Person if such untrue statement or omission or alleged untrue statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus, or any amendment or supplement thereto and the Prospectus does
not contain any other untrue statement or omission or alleged untrue statement
or omission of a material fact that was the subject matter of the related
proceeding and any such loss, liability, claim, damage or expense suffered or
incurred by such indemnified Person resulted from any action, claim or suit by
an Person who purchased Registrable Securities which are the subject thereof
from such indemnified Person and it is established in the related proceeding
that such indemnified Person failed to deliver or provide a copy of the
Prospectus (as amended or supplemented) to such Person with or prior to the
confirmation of the sale of such Registrable Securities sold to such Person if
required by applicable law, unless such failure to deliver or provide a copy of
the Prospectus (as amended or supplemented) was a result of noncompliance by the
Company with Section 4 hereof or as a result of the failure of the Company to
provide such Prospectus.
(b) Each Holder agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors, its officers who sign
any Registration Statement, and each Person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to such Holder, but only with reference to information relating to such Holder
furnished to the Company in writing by such Holder expressly for use in any
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto). The liability of any Holder under this
paragraph shall in no event exceed the proceeds received by such Holder from
sales of Registrable Securities giving rise to such obligations.
(c) In case any suit, action, proceeding (including
any governmental or regulatory investigation), claim or demand shall be
instituted involving any Person in respect of which indemnity may be sought
pursuant to either paragraph (a) or (b) above, such Person (the "indemnified
party") shall promptly notify the Person against which such indemnity may be
sought (the "indemnifying party") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may reasonably designate in such proceeding and shall pay the
reasonable fees and expenses actually incurred of such counsel relating to such
proceeding; provided, however, that the failure to so notify the indemnifying
party shall not relieve it of any obligation or liability which it may have
thereunder or otherwise. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
contrary, (ii) the indemnifying party shall have failed to retain within a
reasonable period of time counsel reasonably satisfactory to such indemnified
party or parties or (iii) the named parties to any such proceeding (including
any impleaded parties) include both such indemnified party or parties and the
indemnifying parties or an affiliate of the indemnifying parties or such
indemnified parties and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between the
indemnifying party or parties and the indemnified party or parties. It is
understood that the indemnifying parties shall not, in connection with any one
such proceeding or separate but substantially similar or related
20
<PAGE> 22
proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such indemnified party or parties and that all such fees and expenses
shall be reimbursed within reasonable time of the request after the incurrence
thereof. Any such separate firm for the Holders and such control Persons of the
Holders shall be designated in writing by Holders who sold a majority in
interest of Registrable Securities sold by all such Holders and shall be
reasonably acceptable to the Company and any such separate firm for the Company,
its directors, its officers and such control Persons of the Company shall be
designated in writing by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its prior written consent
(which consent shall not be unreasonably withheld or delayed) but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify and hold harmless the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement or compliance of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party, or indemnity could
have been sought thereunder by such indemnified party, unless such settlement or
compliance involves only the payment of money damages that are actually paid by
the indemnifying party or includes an unconditional written release of such
indemnified party in form and substance reasonably satisfactory to such
indemnified party of such indemnified party from all liability or claims that
are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 5 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder and in order to provide for just
and equitable contribution, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Company on the one hand and the Holders on the other
hand from the offering of such Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, not only such
relative benefits but also the relative fault of the Company on the one hand and
the Holders on the other hand in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Holders on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of discounts and
commissions but before deducting expenses) of the Warrants sold pursuant to the
Purchase Agreement received by the Company bears to the total proceeds received
by such Holder from the sale of Registrable Securities, as the case may be. The
relative fault of the Company on the one hand and the Holders on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Holders and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
21
<PAGE> 23
(e) The Company and each Holder agree that it would
not be just or equitable if contribution pursuant to this Section 5 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in Section 5(d)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in Section 5(d) above shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, in no event shall a Holder be
required to contribute any amount in excess of the amount by which proceeds
received by such Holder from sales of Registrable Securities exceeds the amount
of any damages that such Holder has otherwise been required to pay or has paid
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 5 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified party at law or
in equity.
(f) Any losses, claims, damages, liabilities or
expenses for which an indemnified party is entitled to indemnification or
contribution under this Section 5 shall be paid by the indemnifying party to the
indemnified party as such losses, claims, damages, liabilities or expenses are
incurred. The indemnity and contribution agreements contained in this Section 5
and the representations and warranties of the Company set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of any Holder or any person who controls
a Holder, the Company, their respective directors or officers or any person
controlling the Company and (ii) any termination of this Agreement.
SECTION 6. MISCELLANEOUS
(a) No Inconsistent Agreements. The Company
represents and warrants to the Holders that it has not entered into nor will the
Company on or after the date of this Agreement enter into, or cause or permit
any of its subsidiaries to enter into, any agreement which is inconsistent with
the rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders thereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities, if any, under any such agreements.
(b) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the Company has
obtained the prior written consent of Holders of not less than a majority in
number of the then outstanding Warrants for the purpose of adding any provision
to or changing in any manner or eliminating any of the provisions of this
Agreement or modifying in any manner the rights of the holders of the
outstanding Warrants; provided, however, that Section 5 hereof and this Section
6(b) may not be amended, modified or
22
<PAGE> 24
supplemented without the prior written consent of each Holder (including any
Person who was a Holder of Registrable Securities disposed of pursuant to any
Registration Statement) affected by such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Securities may be
given by the Holders of not less than a majority of the Registrable Securities
proposed to be sold by such Holders pursuant to such Registration Statement.
(c) Notices. All notices and other communications
provided for or permitted thereunder shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder, at the most current address of Holder as
set forth in the register for the Warrants or the Warrant Shares, which address
initially is, with respect to the Initial Purchaser, the address set forth in
the Purchase Agreement; and (ii) if to the Company, initially at the address set
forth below the Company's name on the signature pages hereto and thereafter at
such other address, notice of which is given in accordance with the provisions
of this Section 6(c), and thereafter at such other address notice of which is
given in accordance with the provisions of this Section 6(c).
A copy of all notices and other communications under this Section 6(c)
shall be delivered to Baker & McKenzie, 701 Brickell Avenue, Suite 1600, Miami,
Florida, 33131, Attention: Andrew Hulsh, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
(d) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors, assigns and
transferees of each of the parties, including, without limitation and without
the need for an express assignment, subsequent Holders. If any transferee of any
Holder shall acquire Warrants and/or Registrable Securities, in any manner,
whether by operation of law or otherwise, such Warrants and/or Registrable
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Warrants and/or Registrable Securities such Person shall
be conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof.
(e) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
23
<PAGE> 25
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) GOVERNING LAW; JURISDICTION. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
Each of the parties hereto hereby irrevocably and
unconditionally: (i) submits itself and its property in any legal action or
proceeding relating to this Warrant Registration Rights Agreement or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive jurisdiction of the courts of the State of New York and the courts
of the United States of America for the Southern District of New York, and
appellate courts thereof, and consents and agrees to such action or proceeding
being brought in such courts; and (ii) waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in any inconvenient court and
agrees not to plead or claim the same.
(h) Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(i) Entire Agreement. This Agreement, together with
the Purchase Agreement and the Warrant Agreement is intended by the parties as a
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. This Agreement, the
Purchase Agreement and the Warrant Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
(j) Attorneys' Fees. As between the parties to this
Agreement, in any action or proceeding brought to enforce any provision of this
Agreement, or where any provision hereof is validly asserted as a defense, the
successful party shall be entitled to recover reasonable attorneys' fees in
addition to its costs and expenses and any other available remedy.
(k) Securities Held by the Company or Its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities or Warrants is required thereunder, Registrable
Securities or Warrants held by the Company or by any of its affiliates (as such
term is defined in Rule 405 under the Securities Act) shall not be counted (in
24
<PAGE> 26
either the numerator or the denominator) in determining whether such consent or
approval was given by the Holders of such required percentage.
(l) Remedies. In the event of a breach by the
Company of any of its obligations under this Agreement, each Holder, in addition
to being entitled to exercise all rights provided herein, in the Purchase
Agreement or granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this Agreement.
[signature page follows]
25
<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INTERAMERICAS COMMUNICATIONS CORPORATION
By:
---------------------------------------------------
Name: Patricio E. Northland
Title: President and Chief Executive Officer
Address for Notices:
1221 Brickell Avenue
Miami, FL 33131
UBS SECURITIES LLC
By:
---------------------------------------------------
Name:
Title:
Address for Notices:
299 Park Avenue
New York, New York 10171
26
<PAGE> 1
EXHIBIT 4.7
14% SERIES A SENIOR NOTES DUE 2007
No. 003 $0
INTERAMERICAS COMMUNICATIONS CORPORATION
promises to pay to CEDE & CO. or registered assigns the principal sum of ZERO
Dollars on October 27, 2007.
Interest Payment Dates: April 27 and October 27
Record Dates: April 12 and October 12
Dated: October 27, 1997
INTERAMERICAS COMMUNICATIONS CORPORATION
By
------------------------------------
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned Indenture:
State Street Bank and Trust Company, N.A.,
as Trustee
By:
-------------------------------
Authorized Officer
<PAGE> 2
14% SERIES A SENIOR NOTES DUE 2007
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE) OR ITS
NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE
MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF INTERAMERICAS COMMUNICATIONS CORPORATION.
<PAGE> 3
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. InterAmericas Communications Corporation, a Texas
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 14% per annum from October 27, 1997 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on April 27 and October 27 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be April 27, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 12 or October
12 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank
and Trust Company, N.A., the Trustee under the Indenture, will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
<PAGE> 4
4. INDENTURE AND PROCEEDS PLEDGE AND ESCROW AGREEMENT. The
Company issued the Notes under an Indenture dated as of October 27, 1997 (the
"Indenture") between the Company and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the Indenture shall govern and be controlling. The Notes are
secured obligations of the Company limited to $150.0 million in aggregate
principal amount. The Notes are secured by a pledge of Escrow Funds pursuant to
the Proceeds Pledge and Escrow Agreement referred to in the Indenture.
5. OPTIONAL REDEMPTION.
(a) The Company shall not have the option to redeem the Notes
prior to October 27, 2002. Thereafter, the Company shall have the option at any
time to redeem the Notes, in whole or in part, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on October 27 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002...............................................107.000%
2003...............................................104.666%
2004...............................................102.333%
2005 and thereafter................................100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time on or before
October 27, 2000, the Company may on any one or more occasions redeem up to a
maximum of 331/3% of the aggregate principal amount of Note at a redemption
price equal to 114% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net cash proceeds received by the Company after the date of the Indenture
from the issuance and sale of its Qualified Capital Stock to the public in a
registered public offering or to one or more Strategic Equity Investors to the
extent that such net cash proceeds have been, and continue to be, designated as
Designated Equity Proceeds to be used for such purpose as provided in the
definition thereof; provided that at least 662/3% of the original aggregate
principal amount of the Note remain outstanding immediately after the occurrence
of each such redemption; and provided, further, that such redemption shall occur
within 45 days of the date of the closing of any such public offering or sale to
such Strategic Equity Investors.
6. MANDATORY REDEMPTION.
Except as set forth in Section 4.16 of the Indenture, the
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
<PAGE> 5
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 10 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales, within five days of each date on which the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company shall commence an offer to all
Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date fixed for the closing of
such offer in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate principal amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
(c) In the event that on or after October 27, 2000 (the
"Special Offer to Purchase Trigger Date"), Collateral Funds remain in the
Collateral Subaccount, the Company shall make an offer to each Holder of Notes
to purchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes (the "Special Offer to Purchase") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase and Liquidated Damages, if any. Within
10 days following the Special Offer to Purchase Trigger Date, the Company shall
mail a notice to each Holder setting forth the procedures governing the Special
Offer to Purchase as required by the Indenture.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of
<PAGE> 6
Notes may be registered and Notes may be exchanged as provided in the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company need not exchange or register the transfer of any Note or
portion of a Note selected for redemption, except for the unredeemed portion of
any Note being redeemed in part. Also, the Company need not exchange or register
the transfer of any Notes for a period of 15 days before a selection of Notes to
be redeemed or during the period between a record date and the corresponding
Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, or the Notes or the Proceeds Pledge and Escrow
Agreement may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for Notes)
and any existing default or compliance with any provision of the Indenture, the
Notes or the Proceeds Pledge and Escrow Agreement may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes). Without the consent of any Holder of a Note, the Indenture, the
Notes or the Proceeds Pledge and Escrow Agreement may be amended or supplemented
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of the Notes in case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Each of the following constitutes
an Event of Default: (i) default for 30 days in the payment when due of interest
and Liquidated Damages, if any, on the Notes, provided, however, that prior to
October 27, 2000, the failure by the Company to pay interest on the Notes within
five days of an Interest Payment Date will constitute an immediate Event of
Default; (ii) default in payment when due of the principal of or premium, if
any, on the Notes; (iii) failure by the Company to comply with Sections 4.07,
4.09, 4.10, 4.15, 4.16 or 4.17 or Article 5 of the Indenture; (iv) failure by
the Company for 60 days after notice to comply with any of its other agreements
in the Indenture or the Notes; (v) breach by the Company of any material
representation, warranty or agreement set forth in the Proceeds Pledge and
Escrow Agreement, or repudiation by the Company of its obligations under the
Proceeds Pledge and Escrow Agreement or the unenforceability of the Proceeds
Pledge and Escrow Agreement against the Company for any reason; (vi) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted
<PAGE> 7
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (a) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vii) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $5.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; (viii) except as permitted by the Indenture,
any Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Subsidiary shall deny or disaffirm its obligations under its
Subsidiary Guarantee; and (ix) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken together, would constitute a Significant Subsidiary. If
any Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Subsidiary or any group
of Subsidiaries that, taken together, would constitute a Significant Subsidiary,
the foregoing amount shall ipso facto become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest or Liquidated Damages, if any) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of principal or premium, if any, interest or
Liquidated Damages, if any on the Notes. The Company is required to deliver to
the Trustee annually a statement regarding compliance with the Indenture, and
the Company is required upon becoming aware of any Default or Event of Default,
to deliver to the Trustee a statement specifying such Default or Event of
Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note
<PAGE> 8
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of October 27, 1997, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
InterAmericas Communications Corporation
1221 Brickell Avenue, Suite 900
Miami, Florida 33131
Attention: Chief Financial Officer
<PAGE> 9
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
---------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
_______________________________________________________________________________
Date:
------------
Your Signature:
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee.
<PAGE> 10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10, 4.15 or 4.17 of the Indenture, check the box
below:
[ ] Section 4.10 [ ] Section 4.15 [ ] Section 4.17
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10, Section 4.15 or 4.17 of the Indenture,
state the amount you elect to have purchased: $__________
Date: __________ Your Signature:
----------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No:
-----------------------
Signature Guarantee.
<PAGE> 11
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global Note authorized
Principal Amount Principal Amount following such officer of
Date of of this Global of this Global decrease (or Trustee or Note
Exchange Note Note increase) Custodian
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 4.8
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROCEEDS PLEDGE AND ESCROW AGREEMENT
by and between
INTERAMERICAS COMMUNICATIONS CORPORATION
and
STATE STREET BANK AND TRUST COMPANY, N.A.
as Trustee
<PAGE> 2
Dated: October 27, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
<PAGE> 3
PROCEEDS PLEDGE AND ESCROW AGREEMENT
THIS PROCEEDS PLEDGE AND ESCROW AGREEMENT (this "Agreement"),
dated as of October 27, 1997, is by and between INTERAMERICAS COMMUNICATIONS
CORPORATION (the "Company") and State Street Bank and Trust Company, N.A., as
trustee under the Indenture referred to below (the "Trustee").
RECITALS
A. The Notes. Pursuant to that certain Indenture (the "Indenture"),
dated as of October 27, 1997, by and between the Company and the Trustee, the
Company will issue $150,000,000 in aggregate principal amount of 14% Series A
Senior Notes due 2007 (collectively, the "Series A Notes"). Pursuant to a
Registration Rights Agreement (the "Registration Rights Agreement"), dated as of
October 27, 1997, by and between the Company and UBS Securities LLC, the Company
will file with the Securities and Exchange Commission under the circumstances
set forth therein a registration statement under the Securities Act of 1933, as
amended, relating to the Company's 14% Series B Senior Notes due 2007 (the
"Series B Notes" and, together with the Series A Notes, the "Notes").
Immediately after receipt of payment for the Series A Notes (the "Deposit
Time"), the Company will deposit from the net proceeds from the sale of the
Series A Notes (i) $57,213,000.00 (the "Interest Reserve Funds") and (ii)
$69,300,000 (the "Collateral Funds" and, together with the Interest Reserve
Funds, the "Escrow Funds"), into a segregated cash collateral trust account with
the Trustee at its office at 61 Broadway, New York, New York, in the name of
State Street Bank and Trust Company, N.A., as Trustee, "Interest Reserve and
Collateral Account for InterAmericas Communications Corporation" (such account,
including the Interest Reserve Subaccount and the Collateral Subaccount referred
to below, is herein referred to as the "Escrow Account"). The Trustee shall
place the Interest Reserve Funds into a subaccount of the Escrow Account (the
"Interest Reserve Subaccount") and the Collateral Funds into a separate
subaccount of the Escrow Account (the "Collateral Subaccount"). The Escrow
Account (including the Interest Reserve Subaccount and the Collateral
Subaccount) and all balances and investments from time to time therein shall be
under the sole control and dominion of the Trustee, for the benefit of the
Trustee and the ratable benefit of the Holders of the Notes.
B. Purpose. The parties hereto desire to set forth their agreement with
regard to the administration of the Escrow Account, the creation of a security
interest in the Collateral (as defined herein) and the conditions upon which
funds will be released from the Escrow Account.
C. Definitions. Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Indenture.
1
<PAGE> 4
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Security Interest.
(a) Pledge and Assignment of Collateral. The Company hereby
irrevocably pledges, assigns and sets over to the Trustee, and grants to the
Trustee, for the benefit of the Trustee and the ratable benefit of the Holders
of the Notes, a first priority continuing security interest in all of the
Company's right, title and interest in and to all of the following, whether now
owned or existing or hereafter acquired or created (collectively, the
"Collateral"):
(i) the Escrow Account, which consists of two subaccounts:
the Interest Reserve Subaccount and the Collateral Subaccount;
(ii) all funds from time to time held in the Escrow Account,
including, without limitation, the Escrow Funds and all certificates
and instruments, if any, from time to time representing or evidencing
the Escrow Account or the Escrow Funds;
(iii) all investments of funds in the Escrow Account
(including, without limitation, all Allowable Investments (as defined
herein)), whether the same shall constitute Government Securities (as
defined herein), certificated securities, uncertificated securities,
security entitlements, investment property, instruments, general
intangibles or otherwise and whether held by or registered in the name
of the Trustee or otherwise and all certificates and instruments, if
any, from time to time representing or evidencing such investments;
(iv) all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time hereafter delivered to
or otherwise possessed by the Trustee, for or on behalf of the Company,
in substitution for or in addition to any or all of the then existing
Collateral;
(v) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Collateral; and
(vi) all proceeds of any of the foregoing, including, without
limitation, cash proceeds.
(b) Secured Obligations. This Agreement secures the due and
punctual payment and performance of all Obligations and other obligations and
indebtedness of the Company, whether now or hereafter existing, under the Notes
and the Indenture including, without limitation, interest, premium and
Liquidated Damages, if any, accrued on the Notes after the commencement of a
bankruptcy, reorganization or similar proceeding involving the Company
2
<PAGE> 5
to the extent permitted by applicable law (collectively, the "Secured
Obligations").
(c) Delivery of Collateral. All certificates or instruments,
if any, representing or evidencing the Collateral shall be held by or on behalf
of the Trustee pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignments in blank, all in form and substance reasonably satisfactory to the
Trustee. All securities in uncertificated or book-entry form and all security
entitlements, if any, in each case representing or evidencing the Collateral
shall be registered in the name of the Trustee (or any of its nominees) as the
registered owner thereof by book-entry or as otherwise appropriate so as to
properly identify the interest of the Trustee therein. In addition, the Trustee
shall have the right, at any time following the occurrence of an Event of
Default, to transfer to or to register in the name of the Trustee or any of its
nominees any or all other Collateral. Except as otherwise provided herein, all
Collateral shall be deposited and held in the Escrow Account. The Trustee shall
have the right at any time to exchange certificates or instruments representing
or evidencing all or any portion of the Collateral for certificates or
instruments of smaller or larger denominations in the same aggregate amount.
(d) Further Assurances. Prior to, contemporaneously herewith,
and at any time and from time to time hereafter, the Company will, at the
Company's expense, execute and deliver to the Trustee such other instruments and
documents, and take all further action as it deems necessary or advisable or as
the Trustee may reasonably request including an Opinion of Counsel, upon which
the Trustee may conclusively rely, to confirm or perfect the security interest
of the Trustee granted or purported to be granted hereby or to enable the
Trustee to exercise and enforce its rights and remedies hereunder with respect
to any Collateral and the Company will take all necessary action to preserve and
protect the security interest created hereby as a first priority, perfected Lien
and encumbrance upon the Collateral. The Company will pay all costs incurred in
connection with any of the foregoing.
(e) Establishing and Maintaining Accounts. So long as this
Agreement is in full force and effect:
(i) the Company shall establish and maintain the Escrow
Account with the Trustee in New York, New York. The Collateral shall at
all times be subject to the sole dominion and control of the Trustee,
which shall hold the Collateral and administer the Escrow Account
subject to the terms and conditions of this Agreement. The Company
shall have no right of withdrawal from the Escrow Account nor any other
right or power with respect to the Collateral, except as expressly
provided herein; and
(ii) it shall be a term and condition of the Escrow Account,
notwithstanding any term or condition to the contrary in any other
agreement relating to the Escrow Account and except as otherwise
provided by the provisions of Articles 3 and 4 of this Agreement, that
no amount in the Escrow Account (including, without limitation,
interest on or other proceeds of the Escrow Account or on any Allowable
Investments held therein) shall be paid or released to or for the
account of, or withdrawn by or for the account of, the Company or any
3
<PAGE> 6
other person or entity other than the Trustee or its designated agent.
(f) Transfers and Other Liens. Until termination of this
Agreement pursuant to Section 9, the Company agrees that it will not (i) sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Collateral or (ii) create or permit to exist
any Lien upon or with respect to any of the Collateral, except for the security
interest under this Agreement.
(g) Trustee Appointed Attorney-in-Fact. In addition to all of
the powers granted to the Trustee pursuant to Article 6 of the Indenture, the
Company hereby irrevocably appoints the Trustee as the Company's
attorney-in-fact, coupled with an interest, with full authority in the place and
stead of the Company and in the name of the Company or otherwise, from time to
time in the Trustee's discretion to take any action and to execute any
instrument which the Trustee may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to receive, endorse
and collect all instruments made payable to the Company representing any
interest payment, dividend or other distribution in respect of the Collateral or
any part thereof and to give full discharge for the same, and the expenses of
the Trustee incurred in connection therewith shall be payable by the Company.
(h) Trustee May Perform. Without limiting the authority
granted under Section 1(g) and except with respect to the failure of the Company
to deliver investment instructions, which shall be governed by Section 2(c)
hereof, if the Company fails to perform any agreement contained herein, the
Trustee may, but shall not be obligated to, itself perform, or cause performance
of, such agreement, and the expenses of the Trustee incurred in connection
therewith shall be payable by the Company. In the event that the Trustee
performs pursuant to this Section 1(h), the Company shall indemnify the Trustee
in the manner provided in Section 7.07 of the Indenture.
2. Investment and Liquidation of Funds in Escrow Account. Funds
deposited in the Escrow Account shall be invested and reinvested by the Trustee
on the following terms and conditions:
(a) Interest Reserve Subaccount. The Company shall immediately
deposit the Interest Reserve Funds into the Interest Reserve Subaccount. Funds
deposited in the Interest Reserve Subaccount may, subject to the provisions of
Articles 2, 3 and 4 of this Agreement, be invested and reinvested by the
Trustee, at the written direction of the Company, in direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged ("Government Securities"); provided, however, that the
maturity dates of the Government Securities in which the Interest Reserve Funds
are invested and reinvested shall be structured so as to ensure sufficient funds
are available to make the payments of interest on the Notes which the Interest
Reserve Funds and related Government Securities have been pledged to secure. For
the avoidance of doubt, all Government Securities in which the Interest Reserve
Funds are invested and reinvested shall be held by the Trustee in the Interest
Reserve Subaccount of the Escrow Account as part of the Collateral hereunder.
4
<PAGE> 7
(b) Collateral Subaccount. The Company shall immediately
deposit the Collateral Funds into the Collateral Subaccount. Funds deposited in
the Collateral Subaccount may, subject to the provisions of Articles 2, 3 and 4
of this Agreement, be invested and reinvested by the Trustee, at the written
direction of the Company, in (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Thompson Bankwatch, Inc.
rating of AB@ or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition (the investments set forth in clauses (i), (ii), (iii) and (iv) of
this Section 2(b) are collectively referred to herein as "Cash Equivalents" and
the investments allowed under Sections 2(a) and 2(b) of this Agreement are
referred to herein as "Allowable Investments"). For the avoidance of doubt, all
Cash Equivalents in which the Collateral Funds are invested and reinvested shall
be held by the Trustee in the Collateral Subaccount of the Escrow Account as
part of the Collateral hereunder.
All Allowable Investments made pursuant to this Section 2(b)
shall mature on or prior to the Special Offer to Purchase Payment Date.
(c) Investment Instructions.
(i) If the Company fails to give written investment
instructions to the Trustee by 12:00 noon (New York time) on any
Business Day on which there is uninvested cash and/or maturing
Government Securities in the Interest Reserve Subaccount, the Trustee
is hereby unconditionally instructed and authorized and directed to
invest any such cash or the proceeds of any maturing Government
Securities in the Interest Reserve Subaccount in Government Securities
maturing on the next Business Day. The Company's failure to give such
investment instructions shall not constitute a default or an event of
default hereunder.
(ii) If the Company fails to give written investment
instructions to the Trustee by 12:00 noon (New York time) on any
Business Day on which there is uninvested cash and/or maturing Cash
Equivalents in the Collateral Subaccount, the Trustee is hereby
unconditionally instructed and authorized and directed to invest any
such cash or the proceeds of any maturing Cash Equivalents in the
Collateral Subaccount in Cash Equivalents maturing on the next Business
Day. The Company's failure to give such investment instructions shall
not constitute a default or an event of default hereunder.
(d) Interest. All interest earned on funds invested in
Allowable Investments shall be held in the applicable subaccount of the Escrow
Account and reinvested in accordance with the terms hereof and will be subject
to the security interest granted hereunder to the Trustee.
5
<PAGE> 8
(e) Limitation of Trustee's Liability. In no event shall the
Trustee have any liability to the Company or any other Person for investing the
funds from time to time in the Escrow Account in accordance with the provisions
of this Article 2, regardless of whether greater income or a higher yield could
have been obtained had the Trustee invested such funds in different Allowable
Investments, or for any loss (including breakage costs or loss of principal)
associated with the sale or liquidation of Allowable Investments in accordance
with the terms of this Agreement, in each case other than with respect to gross
negligence or willful misconduct of the Trustee.
(f) Liquidation of Funds. In liquidating any Allowable
Investments in accordance with Articles 3 and 4 of this Agreement, the Company
shall direct the Trustee as to which Allowable Investments shall be liquidated.
3. Interest Payments. Pursuant to Section 1 of the Notes, the Company
is obligated to make payments of interest on the Notes on the dates and at the
rates specified in the Notes. Payment of the first six (6) scheduled interest
payments due on the Notes may be made (i) from amounts held in the Interest
Reserve Subaccount in accordance with the procedures set forth in subsection (a)
below or (ii) from other sources of funds available to the Company, as
anticipated in subsection (b) below, or from any combination of (i) and (ii)
above; provided that nothing herein shall be construed as limiting the Company's
obligation to make all interest payments due on the Notes at the times and in
the amounts required by the Notes, which obligation shall be absolute and
unconditional.
(a) Payment of Interest. Not later than five (5) Business Days
prior to the date of any of the first six (6) scheduled interest payments due on
the Notes, the Company shall, pursuant to a duly completed and executed
Certificate of Release in the form of Exhibit A hereto, direct the Trustee to
transfer from the Interest Reserve Subaccount to the Paying Agent funds
necessary to provide for payment in full (or, if the Company intends to make a
portion of such interest payment with funds in the Interest Reserve Account and
the remainder of such interest payment with funds other than those in the
Interest Reserve Subaccount, such portion) of the next scheduled interest
payment on the Notes. If the Company does not intend to utilize the funds in the
Interest Reserve Subaccount to make any such interest payment in full, then the
Company shall comply with Section 3(b) below. Upon receipt of such Certificate
of Release, the Trustee will transfer to the Paying Agent for payment to the
Holders of Notes the amount set forth in the applicable Certificate of Release.
(b) Release of Funds to the Company Due to Direct Payment of
Interest by the Company. If the Company makes any of the first six (6) scheduled
interest payments on the Notes or a portion of any such scheduled interest
payment on the Notes from a source of funds other than the Interest Reserve
Subaccount ("Company Funds"), the Company may, after payment in full of such
scheduled interest payment, direct the Trustee, pursuant to a duly completed and
executed Certificate of Release in the form of Exhibit B hereto, to release to
the Company or at the direction of the Company an amount of funds from the
Interest Reserve Subaccount less than or equal to the amount of Company Funds so
expended. Upon receipt of such Certificate of Release, the Trustee shall pay
over to the Company the requested amount.
6
<PAGE> 9
(c) Release of Funds to Company Due to Overfunding. If at any
time the amount of Collateral in the Interest Reserve Subaccount exceeds 125% of
the amount sufficient, in the written opinion of a nationally recognized firm of
independent public accountants selected by the Company and furnished to the
Trustee, to provide for payment in full of the first six (6) scheduled interest
payments due on the Notes (or, in the event an interest payment or payments have
been made in full, an amount sufficient to provide for payment in full of any
then remaining interest payment, up to and including the sixth scheduled
interest payment), the Company may, pursuant to a duly completed and executed
Certificate of Release in the form of Exhibit B hereto, direct the Trustee to
release any such overfunding to it.
(d) No Duplicate Payments. With respect to the conditions
permitting the release to the Company of any funds in the Interest Proceeds
Subaccount pursuant to Sections 3(b) or 3(c) above, the Company shall not
request, and the Trustee shall not make, any full or partial duplicate payment
thereunder.
(e) Termination of Security Interest. Upon payment in full of
the first six (6) scheduled interest payments on the Notes, the security
interest evidenced by this Agreement in any Collateral remaining in the Interest
Reserve Subaccount will terminate and be of no further force and effect.
Furthermore, upon the release of any Collateral from the Interest Reserve
Subaccount in accordance with the terms of this Agreement, whether upon release
of such Collateral to Holders as payment of interest on the Notes, to the
Company pursuant to Sections 3(b) or 3(c) or otherwise, the security interest
evidenced by this Agreement in such Collateral so released will terminate and be
of no further force and effect.
4. Disposition of Collateral in Collateral Subaccount Upon Certain
Events.
(a) Release of Collateral Funds for Permitted Expenditures. If
the Company delivers to the Trustee a duly completed and executed Permitted
Expenditures Certificate substantially in the form of Exhibit C hereto, the
Trustee shall, within five (5) Business Days after its receipt of such Permitted
Expenditures Certificate, liquidate such amount of Allowable Investments in the
Collateral Subaccount as may be necessary to obtain in cash the amount requested
in such Permitted Expenditures Certificate. The Permitted Expenditures
Certificate shall be accompanied by a supporting budget or other supporting
documentation reasonably satisfactory to the Trustee detailing the Company's
expected Permitted Expenditures (as defined herein) for the immediately
succeeding three (3) months. Upon receipt of the foregoing, unless a Trust
Officer of the Trustee has actual knowledge that any statement in such Permitted
Expenditures Certificate is untrue (and provided that, after application of the
funds requested in the applicable Permitted Expenditures Certificate, the
Company will be in compliance with Section 6(d) hereof), the Trustee shall
transfer the amount set forth in such Permitted Expenditures Certificate in
immediately available funds in accordance with the terms of such Permitted
Expenditures Certificate.
(b) Special Offer to Purchase. In the event the Company makes
a Special Offer to Purchase pursuant to the terms of the Indenture, the Company
shall, at least five Business Days prior to the Special Offer to Purchase
Payment Date, provide a duly completed
7
<PAGE> 10
and executed certificate in the form of Exhibit D hereto (the "Special Offer to
Purchase Certificate") to the Trustee which certificate shall set forth the
Holders and the aggregate principal amount of Notes held by such Holders that
have accepted the Special Offer to Purchase and the amount of Collateral in the
Collateral Subaccount required by the Company to make the payment in connection
with such Special Offer to Purchase (the "Special Offer to Purchase Amount"),
whereupon the Trustee shall, unless a Trust Officer of the Trustee has actual
knowledge that any statement in such Special Offer to Purchase Certificate is
untrue, promptly liquidate an amount of Allowable Investments in the Collateral
Subaccount at least equal to the Special Offer to Purchase Amount by not later
than 12:00 noon (New York time) on the Special Offer to Purchase Payment Date.
The Special Offer to Purchase Amount shall be used (together with other funds of
the Company, if necessary) to purchase the Notes in accordance with the terms
and procedures set forth in Section 4.17 of the Indenture.
(c) Special Mandatory Redemption. In the event the Company is
required to make a Special Mandatory Redemption pursuant to the terms of the
Indenture, the Company shall, at least five Business Days prior to the Special
Mandatory Redemption Date, provide a duly completed and executed certificate in
the form of Exhibit E hereto (the "Special Mandatory Redemption Certificate") to
the Trustee, whereupon the Trustee shall promptly liquidate all Allowable
Investments in the Collateral Subaccount by not later than 12:00 noon (New York
time) on the Special Mandatory Redemption Date. On the Special Mandatory
Redemption Date, the Trustee shall, unless a Trust Officer of the Trustee has
actual knowledge that any statement in such Special Mandatory Redemption
Certificate is untrue, transfer the funds in the Collateral Subaccount necessary
to make such Special Mandatory Redemption (the "Special Mandatory Redemption
Funds") to the Paying Agent for distribution to the Holders of the Notes in
accordance with the terms of the Indenture. Immediately following such transfer,
the Trustee shall transfer all funds and other assets remaining in the
Collateral Subaccount directly to the Company. The Special Mandatory Redemption
Funds shall be used (together with other funds of the Company, if necessary) to
redeem the Notes in accordance with the terms and procedures set forth in
Section 4.16 of the Indenture.
(d) Change of Control Offer. In the event the Company makes a
Change of Control Offer pursuant to the terms of the Indenture, the Company
shall, within five Business Days prior to the Change of Control Payment Date,
provide a duly completed and executed certificate in the form of Exhibit F
hereto (the "Change of Control Offer Certificate") to the Trustee which
certificate shall set forth the Holders and the aggregate principal amount of
Notes held by such Holders that have accepted the Change of Control Offer and
the amount of Collateral in the Collateral Subaccount required by the Company to
make the payment in connection with such Change of Control Offer (the "Change of
Control Offer Amount"), whereupon the Trustee shall, unless a Trust Officer of
the Trustee has actual knowledge that any statement in such Special Mandatory
Redemption Certificate is untrue, promptly liquidate an amount of Allowable
Investments in the Collateral Subaccount necessary to pay such Change of Control
Offer Amount by not later than 12:00 noon (New York time) on the Change of
Control Payment Date. The Change of Control Offer Amount shall be used (together
with other funds of the Company, if necessary) to purchase the Notes in
accordance with the terms and procedures set forth in Section 4.15 of the
Indenture.
8
<PAGE> 11
(e) Remaining Collateral Funds. In the event that the
Indenture does not require the Company to make a Special Mandatory Redemption
after the consummation of a Special Offer to Purchase, funds will be released
from the Collateral Subaccount in accordance with this Section 4(e). If the
Company delivers to the Trustee a duly completed and executed Release
Certificate substantially in the form of Exhibit G hereto, the Trustee shall
within five (5) Business Days after its receipt of such Release Certificate,
liquidate such amount of Allowable Investments in the Collateral Subaccount as
may be necessary to obtain in cash the amount requested in such Release
Certificate. Upon receipt of the foregoing, unless a Trust Officer of the
Trustee has actual knowledge that any statement in such Release Certificate is
untrue, the Trustee shall transfer the amount set forth in such Release
Certificate in immediately available funds in accordance with the terms of such
Release Certificate.
(f) Termination of Security Interest. Upon transfer by the
Trustee of the Special Mandatory Redemption Funds to the Paying Agent as set
forth in Section 4(c), the security interest evidenced by this Agreement in the
Collateral in the Collateral Subaccount will terminate and be of no further
force and effect. Furthermore, upon any other release of any Collateral from the
Collateral Subaccount in accordance with the terms of this Agreement, the
security interest evidenced by this Agreement in such Collateral so released
will terminate and be of no further force and effect.
5. Representations and Warranties. The Company hereby represents and
warrants to the Trustee and the Holders of the Notes that:
(a) The execution, delivery and performance by the Company of
this Agreement are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation of the Company or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Company or result
in the creation or imposition of any Lien on any assets of the Company, except
for the security interests granted under this Agreement.
(b) The Company is the record and beneficial owner of the
Collateral, free and clear of any Lien or claims of any person or entity (except
for the security interests granted under this Agreement). No financing statement
covering the Collateral is on file in any public office other than the financing
statements filed pursuant to this Agreement.
(c) This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or general principles of equity and commercial
reasonableness.
(d) The pledge of the Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in and to the
Collateral, securing the payment of the Secured Obligations for the benefit of
the Trustee and the ratable benefit of the Holders of Notes, enforceable as such
against all creditors of the Company and any persons purporting to purchase
9
<PAGE> 12
any of the Collateral from the Company other than as permitted by the Indenture.
(e) Except as set forth in Section 5(d) above, no consent of
any other Person and no consent, authorization, approval, or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required either (1) for the pledge by the Company of the Collateral pursuant
to this Agreement or for the execution, delivery or performance of this
Agreement by the Company or (2) for the exercise by the Trustee of the rights
provided for in this Agreement or the remedies in respect of the Collateral
pursuant to this Agreement.
(f) No litigation, investigation or proceeding of or before
any arbitrator or governmental authority is pending or, to the knowledge of the
Company, threatened by or against the Company with respect to this Agreement or
any of the transactions contemplated hereby.
(g) The pledge of the Collateral pursuant to this Agreement is
not prohibited by any applicable law or governmental regulation, release,
interpretation or opinion of the Board of Governors of the Federal Reserve
System or other regulatory agency (including, without limitation, Regulations G,
T, U and X of the Board of Governors of the Federal Reserve System).
6. Covenants. The Company covenants and agrees with the Trustee and the
Holders of Notes from and after the date of this Agreement until the Termination
Date as follows:
(a) The Company (i) will not (A) sell or otherwise dispose of,
or grant any option or warrant with respect to, any of the Collateral or (B)
create or permit to exist any Lien upon or with respect to any of the Collateral
(except for the Lien created pursuant to this Agreement) and (ii) except as
otherwise provided in this Agreement, at all times will be the sole beneficial
owner of the Collateral.
(b) The Company will not (a) enter into any agreement or
understanding that purports to or may restrict or inhibit the Trustee's rights
or remedies hereunder, including, without limitation, the Trustee's right to
sell or otherwise dispose of the Collateral in accordance with the terms of this
Agreement or (b) fail to pay or discharge any tax, assessment or levy of any
nature not later than five days prior to the date of any proposed sale under any
judgement, writ or warrant of attachment with regard to the Collateral.
(c) The Company will use the Collateral Funds released
hereunder only for (i) Permitted Expenditures, (ii) in the event of a Change of
Control, the Change of Control Payment, (iii) in the event of a Special Offer to
Purchase or a Special Mandatory Redemption, the payment of the purchase or
redemption price in connection therewith and (iv) as provided in Section 6(e)
below with respect to Collateral Funds remaining in the Collateral Subaccount
after the consummation of a Special Offer to Purchase when no Special Mandatory
Redemption is required under the Indenture. As used in this Agreement,
"Permitted Expenditures" means (i)(A) the purchase price and related expenses of
any acquisition of (1) long-term assets used or useful in a Permitted Business
or (2) a controlling interest in a Permitted Business (collectively,
"Acquisition Costs") or (B) expenditures by the Company or any Restricted
Subsidiary of the Company directly related to the engineering, design,
construction, installation or development of
10
<PAGE> 13
assets and systems used or useful in a Permitted Business ("Systems Costs"), in
each of clauses (A) and (B), in connection with Telecommunications Businesses in
Chile or Peru; (ii) the repayment of Indebtedness of any Restricted Subsidiary;
provided that the commitments with respect thereto in the case of revolving
borrowings are correspondingly reduced and (iii) other general corporate
purposes in an amount not to exceed $20.0 million.
(d) At least 60% of the aggregate amount of Collateral Funds
released from the Collateral Subaccount for Permitted Expenditures shall be used
for the payment of Acquisition Costs or Systems Costs directly related to
Telecommunications Businesses in Peru.
(e) Notwithstanding anything to the contrary in this
Agreement, in the event that the Indenture does not require the Company to make
a Special Mandatory Redemption after the consummation of the Special Offer to
Purchase, the Company shall apply all funds then held in the Collateral
Subaccount and subsequently released to it hereunder, at its option, to the
acquisition of a controlling interest in a Permitted Business, the making of a
capital expenditure or the acquisition of other assets, in each case, in a
Permitted Business or to the reduction of senior Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary of the Company.
7. Remedies upon Default. If any Event of Default shall have occurred
and be continuing:
(a) The Trustee may, without notice to the Company except as
required by law and at any time or from time to time, liquidate all Allowable
Investments and transfer all funds in the Escrow Account to the Paying Agent to
apply such funds in accordance with Section 3.03 of the Indenture.
(b) The Trustee may also exercise in respect of the
Collateral, in addition to the other rights and remedies provided for herein or
in the Indenture or otherwise available to it, all the rights and remedies of a
secured party after a default under the Uniform Commercial Code in effect at
that time in the State of New York (the "Code") (whether or not the Code applies
to the affected Collateral), and may also, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Trustee's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Trustee may deem
commercially reasonable. The Company agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to the Company of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Trustee shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Trustee may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(c) Any cash held by the Trustee as Collateral and all net
cash proceeds received by the Trustee in respect of any sale or liquidation of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Trustee, be held by the Trustee as collateral for,
and/or then or at any time thereafter be applied (after payment of
11
<PAGE> 14
any costs and expenses incurred in connection with any sale, liquidation or
disposition of or realization upon the Collateral and the payment of any amounts
payable to the Trustee) in whole or in part by the Trustee for the ratable
benefit of the Holders of the Notes against all or any part of the Secured
Obligations in such order as the Trustee shall elect. Any surplus of such cash
or cash proceeds held by the Trustee and remaining after payment in full of all
the Secured Obligations and the costs and expenses incurred by and amounts
payable to the Trustee hereunder or under the Indenture shall be paid over to
the Company or to whomsoever shall be lawfully entitled to receive such surplus.
For the avoidance of doubt, if any Event of Default shall have
occurred and be continuing, the Trustee shall not release any Collateral to, or
at the direction of, the Company.
8. Indemnity and Authority of the Trustee.
The Company shall indemnify the Trustee against any and all
loses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance of administration of its duties under this Agreement,
including the costs and expenses of enforcing this Agreement against the Company
(including this Section 8) and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its gross negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need not
pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Company under this Section 8 shall
survive the satisfaction and discharge of this Agreement.
To secure the Company's payment obligations under this
Section, the Trustee shall have a Lien prior to the Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Agreement.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) of the Indenture occurs,
the expenses and compensation for the services (including the fees and expenses
of its agent and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
The Trustee may conclusively rely upon any Officer's
Certificate or Opinion of Counsel it receives pursuant to Section 7.02 of the
Indenture.
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<PAGE> 15
9. Termination.
(a) This Agreement shall create a continuing security interest
in and to the Collateral and such security interest shall, unless otherwise
provided in the Indenture or in this Agreement, remain in full force and effect
until the earlier of (A) the date on which all funds in the Escrow Account have
been distributed in accordance with the terms of this Agreement or (B) the date
of payment in full in cash of all (such earlier date, the "Termination Date").
This Agreement shall be binding upon the Company, its successors and assigns,
and shall inure, together with the rights and remedies of the Trustee hereunder,
to the benefit of the Trustee, the Holders of Notes and their respective
successors, transferees and assigns.
(b) Subject to the provisions of Section 10(c) hereof, this
Agreement shall terminate upon the Termination Date. At such time, the Trustee
shall, at the written request of the Company, reassign and redeliver to the
Company all of the Collateral hereunder that has not been sold, disposed of,
retained or applied by the Trustee in accordance with the terms of this
Agreement and the Indenture. Such reassignment and redelivery shall be without
warranty (either express or implied) by or recourse to the Trustee, except as to
the absence of any prior assignments by or encumbrances created by the Trustee
on its interest in the Collateral, and shall be at the expense of the Company.
10. Miscellaneous.
(a) Waiver. Either party hereto may specifically waive any
breach of this Agreement by any other party, but no such waiver shall be deemed
to have been given unless such waiver is in writing, signed by the waiving
party, and specifically designates the breach waived, nor shall any such waiver
constitute a continuing waiver of similar or other breaches.
(b) Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(c) Survival of Provisions. All representations, warranties
and covenants of the Company contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the termination of
this Agreement; provided, however that the Company's obligations pursuant to
Section 8 hereof shall survive the termination of this Agreement (including any
termination under applicable bankruptcy laws) or the resignation or removal of
the Trustee.
(d) Assignment. This Agreement shall inure to and be binding
upon the parties and their respective successors and permitted assigns;
provided, however, that the Company may not assign its rights or obligations
hereunder without the express prior written consent of the Trustee, acting at
the direction of the Holders as provided in the Indenture.
(e) Entire Agreement; Amendments. This Agreement and the
Indenture contain the entire agreement among the parties with respect to the
subject matter hereof and supersede any and all prior agreements, understandings
and commitments with respect thereto, whether oral or written; provided,
however, that this Agreement is executed and accepted by the Trustee subject to
all terms and conditions of its acceptance of the trust under the Indenture, as
13
<PAGE> 16
fully as if said terms and conditions were set forth at length herein. This
Agreement may be amended only by a writing signed by duly authorized
representatives of both parties. The Trustee may execute an amendment to this
Agreement only if the requisite consent of the Holders of the Notes required by
Section 9.02 of the Indenture has been obtained, unless no such consent is
required by such Section 9.02 of the Indenture.
(f) Notices. Any notice or communication by the Company or the
Trustee to the others is duly given if in writing and delivered in person or
mailed by first class mail (registered or certified return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address:
If to the Company:
InterAmericas Communications Corporation
1221 Brickell Avenue
Miami, Florida 33131
Attention: Chief Financial Officer
Facsimile number:(305) 377-6791
Telephone number:(305) 377-6790
With a copy to:
Andrew Hulsh, Esq.
Baker & McKenzie
701 Brickell Avenue, Suite 1600
Miami, Florida 33131
Facsimile number:(305) 789-8953
Telephone number:(305) 789-8900
If to the Trustee:
State Street Bank and Trust Company, N.A.
61 Broadway, 15th floor
New York, New York
Attention: Corporate Trust Department
Facsimile number: (212) 612-3203
Telephone number: (212) 612-3442
The Company or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other that those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
14
<PAGE> 17
(g) Expenses. The Company shall pay to the Trustee from time
to time such compensation for its acceptance of this Agreement and services
hereunder as the Company and the Trustee have separately agreed. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee promptly upon request for
all reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
(h) Security Interest Absolute. All rights of the Trustee and
the Holders of Notes and security interests hereunder, and all obligations of
the Company hereunder, shall be absolute and unconditional irrespective of (a)
any lack of validity or enforceability of the Indenture or any other agreement
or instrument relating thereto; (b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Secured Obligations, or
any other amendment or waiver of or any consent to any departure from the
Indenture; (c) any exchange, surrender, release or non-perfection of any Liens
on any other collateral for all or any of the Secured Obligations; or (d) to the
extent permitted by applicable law, any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Company in respect of
the Secured Obligations or of this Agreement.
(i) Counterpart Originals. The parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
represent the same agreement.
(j) Limitation by Law. All rights, remedies and powers
provided herein may be exercised only to the extent that they will not render
this Agreement not entitled to be recorded, registered or filed under provisions
of any applicable law.
(k) Rights of Holders of Notes. No Holder of Notes shall have
any independent rights hereunder other than those rights granted to individual
Holders of Notes pursuant to Section 6.06 of the Indenture; provided that
nothing in this subsection shall limit any rights granted to the Trustee under
the Notes or the Indenture.
(l) GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
DAMAGES.
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY, THE TRUSTEE AND THE
HOLDERS OF NOTES IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING
IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE
WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS)
AND DECISIONS OF THE STATE OF NEW YORK.
(ii) THE COMPANY AGREES THAT THE TRUSTEE SHALL, IN
ITS CAPACITY AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY
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<PAGE> 18
HOLDER OF NOTES, HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TO PROCEED AGAINST THE COMPANY OR ITS PROPERTY IN A COURT IN ANY
LOCATION REASONABLY SELECTED IN GOOD FAITH (AND HAVING PERSONAL OR IN
REM JURISDICTION OVER THE COMPANY OR ITS PROPERTY, AS THE CASE MAY BE)
TO ENABLE THE TRUSTEE TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE
COMPANY AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR
CROSS CLAIMS IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON
SUCH PROPERTY OR TO ENFORCE A JUDGEMENT OR OTHER COURT ORDER IN FAVOR
OF THE TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS
WHICH, IF NOT ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE
BROUGHT OR ASSERTED. THE COMPANY WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT IN WHICH THE TRUSTEE HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS.
(iii) THE COMPANY AND THE TRUSTEE EACH WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED
WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED
IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
(iv) THE COMPANY AGREES THAT NEITHER THE TRUSTEE NOR
ANY HOLDER OF NOTES SHALL HAVE ANY LIABILITY TO THE COMPANY (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
COMPANY IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO,
THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION
THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
JUDGMENT OF A COURT THAT IS BINDING ON THE TRUSTEE OR SUCH HOLDER OF
NOTES, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR
OMISSIONS ON THE PART OF THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE
CASE MAY BE, CONSTITUTING BAD FAITH, GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
(v) TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND
EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, THE COMPANY WAIVES ALL
RIGHTS OF NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE
TRUSTEE OR ANY HOLDER OF NOTES OF ITS
16
<PAGE> 19
RIGHTS DURING THE CONTINUANCE OF AN EVENT OF DEFAULT TO REPOSSESS THE
COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE
COLLATERAL OR OTHER SECURITY FOR THE SECURED OBLIGATIONS. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE COMPANY WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES IN CONNECTION
WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF,
REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL OR OTHER SECURITY FOR THE
SECURED OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF NOTES, OR TO ENFORCE
BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR
PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT
BETWEEN THE COMPANY ON THE ONE HAND AND THE TRUSTEE AND/OR THE HOLDERS
OF NOTES ON THE OTHER HAND.
[SIGNATURE PAGE FOLLOWS]
17
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Proceed Pledge and Escrow Agreement as of the day first written
above.
COMPANY: INTERAMERICAS COMMUNICATIONS CORPORATION
By:
-----------------------------------
Name:
Title:
TRUSTEE: STATE STREET BANK AND TRUST COMPANY, N.A.
By:
-----------------------------------
Name:
Title:
<PAGE> 21
EXHIBIT A
[Form of]
Certificate of Release of Funds in Interest Reserve Subaccount to Paying Agent
INTERAMERICAS COMMUNICATIONS CORPORATION
Date:
-------------
The undersigned officer of InterAmericas Communications
Corporation, a Texas corporation (the "Company"), hereby certifies, pursuant to
Section 3(a) of the Proceeds Pledge and Escrow Agreement, dated as of October
27, 1997 (the "Escrow Agreement"), by and between the Company and State Street
Bank and Trust Company, N.A., as trustee (the "Trustee"), under the Indenture
dated as of October 27, 1997 (the "Indenture"), between the Company and the
Trustee, that:
1. This request for release of funds has been duly authorized by
all necessary corporate action and does not contravene, or
constitute a default under, any provision of applicable law or
regulation or the certificate of incorporation of the Company
or of the Escrow Agreement, the Indenture or any other
agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or result in the creation
or imposition of any Lien on any assets of the Company; and
2. The funds released pursuant hereto shall be applied by the
Paying Agent toward payment of interest due on the Notes on
________, ____ and for no other purpose.
The Company hereby requests the Trustee to liquidate
$_________ worth of Allowable Investments in the Interest Reserve Subaccount by
not later than 12:00 noon (New York time) on _________ __, _____ and to transfer
$________ in immediately available funds to the Paying Agent.
Capitalized terms used herein without definition shall have
the meanings set forth in the Indenture.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
A-1
<PAGE> 22
EXHIBIT B
[Form of]
Certificate of Release of Funds in Interest Reserve Subaccount to Company
INTERAMERICAS COMMUNICATIONS CORPORATION
Date:
-------------
The undersigned officer of InterAmericas Communications
Corporation, a Texas corporation (the "Company"), hereby certifies, pursuant to
Section [3(b)][3(c)] of the Proceeds Pledge and Escrow Agreement, dated as of
October 27, 1997 (the "Escrow Agreement"), by and between the Company and State
Street Bank and Trust Company, N.A., as trustee (the "Trustee"), under the
Indenture dated as of October 27, 1997 (the "Indenture"), between the Company
and the Trustee, that:
1. This request for release of funds has been duly authorized by
all necessary corporate action and does not contravene, or
constitute a default under, any provision of applicable law or
regulation or the certificate of incorporation of the Company
or of the Escrow Agreement, the Indenture or any other
agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or result in the creation
or imposition of any Lien on any assets of the Company; and
2. [The amount of funds requested to be released pursuant hereto
is no greater than the amount of funds previously used by the
Company from sources other than the Interest Proceeds
Subaccount to make the payment of interest due on the Notes on
________ (and not previously released to the Company from the
Interest Proceeds Subaccount), which interest payment has been
paid in full.][After giving effect to the release of funds
from the Interest Reserve Subaccount as provided below, the
amount of funds and Allowable Investments remaining in the
Interest Proceeds Subaccount will be at least 125% of the
amount sufficient to pay in full the remainder of the first
six (6) scheduled interest payments on the Notes not already
paid in full, as confirmed in the attached written opinion of
__________, a nationally recognized firm of independent public
accountants.]
The Company hereby requests the Trustee to liquidate
$_________ worth of Allowable Investments in the Interest Reserve Subaccount by
not later than 12:00 noon (New York time) on _________, and to transfer
$________ in immediately available funds to the Company.
B-1
<PAGE> 23
Capitalized terms used herein without definition shall have
the meanings set forth in the Indenture.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
B-2
<PAGE> 24
EXHIBIT C
[Form of]
Permitted Expenditures Certificate
INTERAMERICAS COMMUNICATIONS CORPORATION
Date:
------------------
The undersigned officer of InterAmericas Communications
Corporation, a Texas corporation (the "Company"), hereby certifies, pursuant to
Section 4(a) of the Proceeds Pledge and Escrow Agreement, dated as of October
27, 1997 (the "Escrow Agreement"), by and between the Company and State Street
Bank and Trust Company, N.A., as trustee (the "Trustee"), under the Indenture
dated as of October 27, 1997 (the "Indenture"), between the Company and the
Trustee, that:
1. This request for release of funds has been duly authorized by
all necessary corporate action and does not contravene, or
constitute a default under, any provision of applicable law or
regulation or the certificate of incorporation of the Company
or of the Escrow Agreement, the Indenture or any other
agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or result in the creation
or imposition of any Lien on any assets of the Company;
2. The Company will use the Necessary Funds (as defined below)
for the following Permitted Expenditures (as defined in the
Escrow Agreement):
3. Attached hereto is supporting documentation detailing the
Company's expected Permitted Expenditures for the immediately
succeeding three (3) months; and
4. To date, the Company has received $____________ from the
Collateral Subaccount, (A) ____% of which has been used in
connection with Acquisition Costs or Systems Costs directly
related to Telecommunications Businesses in Peru and (B)
$______________ of which has been used for general corporate
purposes.
The Company hereby requests the Trustee to liquidate
$_________ worth of Allowable Investments in the Collateral Subaccount by not
later than 12:00 noon (New York time) on _________ __, _____ and to transfer
$________ (the "Necessary Funds") in immediately available funds to _________ at
_________..
C-1
<PAGE> 25
Capitalized terms used herein without definition shall have
the meanings set forth in the Indenture.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
C-2
<PAGE> 26
EXHIBIT D
[Form of]
Special Offer to Purchase Certificate
INTERAMERICAS COMMUNICATIONS CORPORATION
Date:
-----------------
The undersigned officer of InterAmericas Communications
Corporation, a Texas corporation (the "Company"), hereby certifies, pursuant to
Section 4(b) of the Proceeds Pledge and Escrow Agreement, dated as of October
27, 1997 (the "Escrow Agreement"), by and between the Company and State Street
Bank and Trust Company, N.A., as trustee (the "Trustee"), under the Indenture
dated as of October 27, 1997 (the "Indenture"), between the Company and the
Trustee, that:
1. This request for release of funds has been duly authorized by
all necessary corporate action and does not contravene, or
constitute a default under, any provision of applicable law or
regulation or the certificate of incorporation of the Company
or of the Escrow Agreement, the Indenture or any other
agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or result in the creation
or imposition of any Lien on any assets of the Company; and
2. Attached hereto is a list of Holders and the aggregate
principal amount of Notes held by such Holders that have
accepted the Special Offer to Purchase.
The Company hereby directs the Trustee to liquidate $_________
worth of Allowable Investments in the Collateral Subaccount by not later than
12:00 noon (New York time) on the Special Offer to Purchase Payment Date
(__________, _____) and to pay the Special Offer to Purchase Amount in
immediately available funds to the Paying Agent for payment to the Holders of
Notes on the Special Offer to Purchase Payment Date.
Capitalized terms used herein without definition shall have
the meanings set forth in the Indenture.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
D-1
<PAGE> 27
EXHIBIT E
[Form of]
Special Mandatory Redemption Certificate
INTERAMERICAS COMMUNICATIONS CORPORATION
Date: ________________
The undersigned officer of InterAmericas Communications
Corporation, a Texas corporation (the "Company"), hereby certifies, pursuant to
Section 4(c) of the Proceeds Pledge and Escrow Agreement, dated as of October
27, 1997 (the "Escrow Agreement"), by and between the Company and State Street
Bank and Trust Company, N.A., as trustee (the "Trustee"), under the Indenture
dated as of October 27, 1997 (the "Indenture"), between the Company and the
Trustee, that:
1. This request for release of funds has been duly authorized by
all necessary corporate action and does not contravene, or
constitute a default under, any provision of applicable law or
regulation or the certificate of incorporation of the Company
or of the Escrow Agreement, the Indenture or any other
agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or result in the creation
or imposition of any Lien on any assets of the Company; and
2. The Company is required by the terms of the Indenture to
redeem all of the Notes pursuant to a Special Mandatory
Redemption.
The Company hereby directs the Trustee to liquidate all of the
Allowable Investments in the Collateral Subaccount by not later than 12:00 noon
(New York time) on the Special Mandatory Redemption Date (____________, _______)
and to transfer the Special Mandatory Redemption Funds in immediately available
funds to the Paying Agent for payment to the Holders of Notes on the Special
Mandatory Redemption Date. The Company further directs the Trustee to release to
the Company all funds, if any, remaining in the Collateral Subaccount after
payment of the Special Mandatory Redemption Funds to the Paying Agent by
depositing such funds in account number __________ at ____________.
E-1
<PAGE> 28
Capitalized terms used herein without definition shall have
the meanings set forth in the Indenture.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
E-2
<PAGE> 29
EXHIBIT F
[Form of]
[Form of Change of Control Offer Certificate]
INTERAMERICAS COMMUNICATIONS CORPORATION
Date:
-----------------
The undersigned officer of InterAmericas Communications
Corporation, a Texas corporation (the "Company"), hereby certifies, pursuant to
Section 4(d) of the Proceeds Pledge and Escrow Agreement, dated as of October
27, 1997 (the "Escrow Agreement"), by and between the Company and State Street
Bank and Trust Company, N.A., as trustee (the "Trustee"), under the Indenture
dated as of October 27, 1997 (the "Indenture"), between the Company and the
Trustee, that:
1. This request for release of funds has been duly authorized by
all necessary corporate action and does not contravene, or
constitute a default under, any provision of applicable law or
regulation or the certificate of incorporation of the Company
or of the Escrow Agreement, the Indenture or any other
agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or result in the creation
or imposition of any Lien on any assets of the Company; and
2. Attached hereto is a list of Holders and the aggregate
principal amount of Notes held by such Holders that have
accepted the Change of Control Offer.
The Company hereby directs the Trustee to liquidate $_________
worth of Allowable Investments in the Collateral Subaccount by not later than
12:00 noon (New York time) on the Change of Control Payment Date (________,
_____) and to transfer the Change of Control Offer Amount in immediately
available funds to the Paying Agent for payment to the Holders of Notes on the
Change of Control Payment Date.
Capitalized terms used herein without definition shall have
the meanings set forth in the Indenture.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
F-1
<PAGE> 30
EXHIBIT G
[Form of]
Release Certificate
INTERAMERICAS COMMUNICATIONS CORPORATION
Date:
-------------
The undersigned officer of InterAmericas Communications
Corporation, a Texas corporation (the "Company"), hereby certifies, pursuant to
Section 4(e) of the Proceeds Pledge and Escrow Agreement, dated as of October
27, 1997 (the "Escrow Agreement"), by and between the Company and State Street
Bank and Trust Company, N.A., as trustee (the "Trustee"), under the Indenture
dated as of October 27, 1997 (the "Indenture"), between the Company and the
Trustee, that:
1. This request for release of funds has been duly authorized by
all necessary corporation action and does not contravene, or
constitute a default under, any provision of applicable law or
regulation or the certificate of incorporation of the Company
or of the Escrow Agreement, the Indenture or any other
agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or result in the creation
or imposition of any Lien on any assets of the Company; and
2. The funds so released shall be applied by the Paying Agent
toward _______________________, each of which is a permitted
use under Section 6(e) of the Escrow Agreement.
The Company hereby requests the Trustee to liquidate
$_________ worth of Allowable Investments in the Collateral Subaccount by not
later than 12:00 noon (New York time) on _________ __, _____ and to transfer
such funds in immediately available funds to the Company.
Capitalized terms used herein without definition shall have
the meanings set forth in the Indenture.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
G-1
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Hewster Servicios Intermedios, S.A. (Chile)
Red Servicios Empresariales de Telecomunicaciones, S.A. (Peru)
VISAT, S.A. (Chile)
Hewster, S.A. (Chile)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of InterAmericas Communications Corporation
of our report dated April 11, 1997 (except for Note 15, for which the date is
October 27, 1997) relating to the financial statements of InterAmericas
Communications Corporation, which appears in such Prospectus. We also consent to
the references to us under the headings "Experts", "Summary Condensed
Consolidated Historical and Pro Forma Combined Financial Data" and "Selected
Historical Financial Data" in such Prospectus. However, it should be noted that
Price Waterhouse LLP has not prepared or certified such "Summary Condensed
Consolidated Historical and Pro Forma Combined Financial Data" and "Selected
Historical Financial Data."
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Miami, Florida
December 9, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
our report dated February 7, 1997 (except for Notes 27 and 28 for which the date
is August 11, 1997) on our audits of the financial statements of Iusatel Chile
S.A. at December 31, 1995 and 1996 and for the two years in the period ended
December 31, 1996. We also consent to the reference to our firm under the
caption "Experts."
/s/ JUAN PABLO HESS
- ------------------------------------------------------
Santiago Chile, December 9, 1997
LANGTON CLARKE
COOPERS & LYBRAND
<PAGE> 1
EXHIBIT 25.1
Securities and Exchange Commission
Washington, DC 20549
FORM T-1
--------------------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a
Trustee Pursuant to Section 305(b)(2) X
-----
STATE STREET BANK AND TRUST COMPANY, N.A.
(Exact name of trustee as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
UNITED STATES 13-3191724
(Jurisdiction of incorporation or organization (IRS Employer Identification No.)
if not a U.S. national bank)
61 BROADWAY, NEW YORK, NEW YORK 10006
(Address of principal executive offices) (Zip Code)
</TABLE>
STATE STREET BANK AND TRUST COMPANY, N.A.
61 BROADWAY, 15TH FLOOR, NEW YORK, NY 10006
(212) 612-3000
(Name address and telephone number of agent for service)
----------------------------
INTERAMERICAS COMMUNICATIONS CORPORATION
(Exact name of obligor as specified in its charter)
TEXAS 87-0464860
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1221 BRICKELL AVENUE, MIAMI, FLORIDA 33131
(Address of principal executive offices) (Zip Code)
14% SENIOR NOTES DUE 2007
(Title of indenture securities)
1
<PAGE> 2
Item 1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
OFFICE OF THE COMPTROLLER OF THE CURRENCY, WASHINGTON, D.C.
FEDERAL DEPOSIT INSURANCE CORPORATION, WASHINGTON, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
TRUSTEE IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
THE OBLIGOR IS NOT AN AFFILIATE OF THE TRUSTEE OR ITS
PARENT, STATE STREET BANK AND TRUST COMPANY. (See Notes
below)
Item 3. through Item 15. NOT APPLICABLE
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of
eligibility and attached thereto.
1. COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT FILED AS EXHIBIT A.
2. COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF INCORPORATION
FILED AS EXHIBIT B.
3. COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE
DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2) ABOVE, FILED AS
EXHIBIT C.
4. COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE FILED AS EXHIBIT D.
5. THE CONSENT OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT FILED AS EXHIBIT E.
6. COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE FILED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY FILED AS EXHIBIT F.
NOTES
In answering any item in this statement of eligibility which relates
to matters peculiarly within the knowledge of the obligor or any underwriter
for the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
<PAGE> 3
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, State Street Bank and Trust Company, N.A., a corporation organized and
existing under the laws of the United States of America has caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City and State of New York, on the 21st
day of November, 1997.
STATE STREET BANK AND TRUST COMPANY, N.A.
BY: /s/ James E. Murphy
-------------------
James E. Murphy
Vice President
<PAGE> 4
EXHIBIT A
Comptroller of the Currency
Northeastern District
Date 10-3-83
ARTICLES OF ASSOCIATION
OF
STATE STREET BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
For the purpose of organizing an Association to carry on the business of a
limited purpose trust company under the laws of the United States, the
undersigned do enter into the following Articles of Association:
FIRST. The title of this Association shall be State Street Bank and Trust
Company, National Association.
SECOND. The Main Office of the Association shall be in the City of New
York, County of New York, State of New York. The general business of the
Association shall be conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five shareholders, the exact number to be
fixed and determined from time to time by resolution of a majority of the full
Board of Directors or by resolution of the shareholders at any annual or
special meeting thereof. Each Director, during the full term of his
directorship, shall own a minimum of $1,000 par value of stock of this
Association or an equivalent interest in the bank holding company controlling
this Association. Any vacancy in the Board of Directors may be filled by
action of the Board of Directors.
FOURTH. There shall be an annual meeting of the shareholders, the purpose
of which shall be the election of Directors and the transaction of whatever
other business may be brought before said meeting. It shall be held at the
main office or other convenient place as the Board of Directors may designate,
on the day of each year specified therefore in the Bylaws, but if no election
is held on that day, it may be held on any subsequent day according to such
lawful rules as may be prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association shall
be 1,000,000 shares of common stock of the par value of one dollar ($1) each;
but said capital stock may be
<PAGE> 5
increased or decreased from time to time, in accordance with the provisions of
the laws of the United States.
No holder of shares of the capital stock of any class of this Association
shall have any pre-emptive or preferential right of subscription to any shares
of any class of stock of this Association, whether now or hereafter authorized,
or to any obligations convertible into stock of this Association, issued, or
sold, nor any right of subscription to any thereof other than such, if any, as
the Board of Directors, in its discretion may from time to time determine and
at such price as the Board of Directors may from time to time fix.
This Association, at any time and from time to time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of
the shareholders.
SIXTH. The Board of Directors shall appoint one of its members President
of this Association, who shall be Chairperson of the Board, unless the Board
appoints another director to be the Chairperson. The Board of Directors shall
have the power to appoint one or more Vice Presidents; and to appoint a Cashier
and such other officers and employees as may be required to transact the
business of this Association.
The Board of Directors shall have the power to define the duties of the
officers and employees of this Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them to fix the penalty thereof;
to regulate the manner in which any increase of the capital of this Association
shall be made; to manage and administer the business and affairs of this
Association; to make all By laws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the City of
New York, without the approval of the shareholders, upon prior written notice
to the Comptroller of the Currency; and shall have the power to establish or
change the location of any branch or branches of this Association to any other
location, without the approval of the shareholders but subject to the approval
of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
- 2 -
<PAGE> 6
NINTH. The Board of Directors of this Association, or any shareholder
owning, in the aggregate, not less than ten percent of the stock of this
Association, may call a special meeting of shareholders at any time. Unless
otherwise provided by the laws of the United States, a notice of the time,
place, and purpose of every annual and special meeting of the shareholders
shall be given by first-class mail, postage prepaid, mailed at least ten days
prior to the date of such meeting to each shareholder of record at his address
as shown upon the books of this association.
TENTH. This Association shall indemnify each person who is or was a
director, officer, employee or other agent of this Association, and each person
who is or was serving at the request of this Association as a director,
trustee, officer, employee or other agent of another organization in which it
directly or indirectly owns shares or of which it is directly or indirectly a
creditor, against all liabilities, costs and expenses, including but not
limited to amount paid in satisfaction of judgments, in settlements or as fines
and penalties, and counsel fees and disbursements, reasonably incurred by such
person in connection with the defense or disposition of or otherwise in
connection with or resulting from any action, suit or other proceeding, whether
civil, criminal, administrative or investigative, before any court or
administrative or legislative or investigative body, in which such person may
be or may have been involved as a party or otherwise or with which he may be or
may have been threatened, while in office or thereafter, by reason of his being
or having been such a director, officer, employee, agent or trustee, or by
reason of any action taken or not taken in any such capacity, except with
respect to any matter as to which he shall have been finally adjudicated by a
court of competent jurisdiction not to have acted in good faith in the
reasonable belief that his action was in the best interests of this
Association. Expenses, including but not limited to counsel fees and
disbursements, so incurred by any such person in defending any such action,
suit or proceeding, may be paid from time to time by this Association in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the person indemnified to repay
the amount so paid if it shall ultimately be determined that indemnification of
such expenses is not authorized hereunder.
As to any matter disposed of by settlement by any such person, pursuant to
a consent decree or otherwise, no such indemnification either for the amount of
such settlement or for any other expenses shall be provided unless such
settlement shall be approved as in the best interests of this Association,
after notice that it involves such indemnification, (a) by vote of a majority
of the disinterested directors then in office (even though the disinterested
directors be less then a quorum), or (b) by any disinterested person or persons
to whom the question may
- 3 -
<PAGE> 7
be referred by vote of a majority of such disinterested directors, or (c) by
vote of the holders of a majority of the outstanding stock at the time entitled
to vote for directors, voting as a single class, exclusive of any stock owned by
any interested person, or (d) by any disinterested person or persons to whom the
question may be referred by vote of the holders of a majority of such stock. No
such approval shall prevent the recovery from any such officer, director,
employee, agent or trustee of any amounts paid to such person or on his or her
behalf as indemnification in accordance with the preceding sentence if such
person is subsequently adjudicated by a court of competent jurisdiction not to
have acted in good faith in the reasonable belief that his action was in the
best interests of this Association.
The right of indemnification hereby provided shall not be exclusive of or
affect any other rights to which any director, officer, employee, agent or
trustee may be entitled or which may lawfully be granted to such person. As
used herein, the terms "director," "officer," "employee," "agent" and "trustee"
include their respective executors, administrators and other legal
representatives, an "interested" person is one against whom the action, suit or
other proceeding in question or another action, suit or other proceeding on the
same or similar grounds is then or had been pending or threatened, and a
"disinterested" person is a person against whom no such action, suit or other
proceeding is then or had been pending or threatened.
By action of the Board of Directors, notwithstanding any interest of the
directors in such action, this Association may purchase and maintain insurance,
in such amounts as the Board of Directors may from time to time deem
appropriate, on behalf of any person who is or was a director, officer,
employee or other agent of this Association, or is or was serving at the
request of this Association as a director, trustee, officer, employee or other
agent of another organization in which it directly or indirectly owns shares or
of which it is directly or indirectly a creditor, against any liability
incurred by such person in any such capacity, or arising out of his or her
status as such, whether or not this Association would have the power to
indemnify such person against such liability.
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
TWELFTH. This Association may be a partner in any business or enterprise
which this Association would have power to conduct by itself.
- 4 -
<PAGE> 8
IN WITNESS WHEREOF, we have hereunto set our hands this 27th day of
September, 1983.
/s/ William S. Edgerly
---------------------------------------
William S. Edgerly
/s/ Peter E. Madden
---------------------------------------
Peter E. Madden
/s/ Peter S. Maher
---------------------------------------
Peter S. Maher
/s/ David A. Spina
---------------------------------------
David A. Spina
/s/ Bradford S. Tripp
---------------------------------------
Bradford S. Tripp
/s/ Ronald A. Golz
---------------------------------------
Ronald A. Golz
- 5 -
<PAGE> 9
ARTICLES OF AMENDMENT
OF
ARTICLES OF ASSOCIATION
OF
STATE STREET BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
I, Robert J. Malley, Secretary of State Street Bank and Trust
Company, National Association, a limited purpose trust company organized under
the laws of the United States of America, do hereby certify that a meeting of
the shareholders of the Association was duly called and held on the 8th day of
May, 1987, and that at said meeting, at which a quorum was present and voting
throughout, the following resolution upon motion duly made and seconded, was
duly adopted:
RESOLVED: That Article Tenth of the Articles of Association with respect to
indemnification of directors, officers and others be amended and
restated as follows:
TENTH. This Association shall to the fullest extent legally permissible
indemnify each person who is or was a director, officer, employee or other agent
of this Association and each person who is or was serving at the request of this
Association as a director, trustee, officer, employee or other agent of another
organization or of any partnership, joint venture, trust, employee benefit plan
or other enterprise or organization against all liabilities, costs and expenses,
including but not limited to amounts paid in satisfaction of judgments, in
settlement or as fines and penalties, and counsel fees and disbursements,
reasonably incurred by him in connection with the defense or disposition of or
otherwise in connection with or resulting from any action, suit or other
proceeding, whether civil, criminal, administrative or investigative, before any
court or administrative or legislative or investigative body, in which he may be
or may have been involved as a party -or otherwise or with which he may be or
have been threatened, while in office or thereafter, by reason of his being or
having been such a director, officer, employee, agent or trustee, or by reason
of
<PAGE> 10
any action taken or not taken in any such capacity, except with respect to any
matter as to which he shall have been finally adjudicated by a court of
competent jurisdiction not to have acted in good faith in the reasonable
belief that his action was in the best interests of the corporation (any person
serving another organization in one or more of the indicated capacities at the
request of this Association who shall not have been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interest of such other organization shall be deemed so
to have acted in good faith with respect to the National Trust Company) or to
the extent that such matter relates to service with respect to an employee
benefit plan, in the best interest of the participants or beneficiaries of such
employee benefit plan. Expenses, including but not limited to counsel fees and
disbursements, so incurred by any such person in defending any such action,
suit or proceeding, shall be paid from time to time by this Association in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the person indemnified to repay
the amounts so paid if it shall ultimately be determined that indemnification
of such expenses is not authorized hereunder.
As to any matter disposed of by settlement by any such person, pursuant to
a consent decree or otherwise, no such indemnification either for the amount of
such settlement or for any other expenses shall be provided unless such
settlement shall be approved as in the best interests of the National Trust
Company, after notice that it involves such indemnification, (a) by vote of a
majority of the disinterested directors then in office (even though the
disinterested directors be less than a quorum), or (b) by any disinterested
person or persons to whom the question may be referred by vote of a majority of
such disinterested directors, or (c) by vote of the holders of a majority of
the outstanding stock at the time entitled to vote for directors, voting as a
single class, exclusive of any stock owned by any interested person, or (d) by
any disinterested person or persons to whom the question may be referred by
vote of the holders of a majority of such stock. No such approval shall
prevent the recovery from any such director, officer, employee, agent or
trustee of any amounts paid to him or on his behalf as indemnification in
accordance with the preceding sentence if such person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good
faith in the reasonable belief that his action was in the best interests of
this Association.
The right of indemnification hereby provided shall not be exclusive of or
affect any other rights to which any director, officer, employee, agent or
trustee may be entitled or which may lawfully be granted to him. As used
herein, the terms "director", "officer", "employee", "agent" and "trustee"
include their respective executors, administrators and other legal
representatives, an "interested" person is one against whom the
<PAGE> 11
action, suit or other proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or had been pending or
threatened, and a "disinterested" person is a person against whom no such
action, suit or other proceeding is then or had been pending or threatened.
By action of the board of directors, notwithstanding any interest of the
directors in such action, this Association may purchase and maintain insurance,
in such amounts as the board of directors may from time to time deem
appropriate, on behalf of any person who is or was a director, officer, employee
or other agent of this Association, or is or was a director, officer, employee
or other agent of this Association, or is or was serving at the request of this
Association as a director, trustee, officer, employee or other agent of another
organization or of any partnership, joint venture, trust, employee benefit plan
or other enterprise or organization against any liability incurred by him in any
such capacity, or arising out of his status as such, whether or not this
Association would have the power to indemnify him against such liability.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of said
Association this 15th day of May, 1987.
/s/ R. J. Malley
----------------
Secretary
(SEAL)
Commonwealth of Massachusetts)
County of Suffolk )
Before the undersigned, a Notary Public of Suffolk County, personally
appeared Robert J. Malley, to me well known, who acknowledged that he executed
the foregoing certificate for the purposes therein mentioned.
Witness my hand and seal of
office this 15th day of
May, 1987.
/s/ June F. Phillips
-----------------------------------
JUNE F. PHILLIPS, Notary Public
My Commission Expires July 23, 1987
(Official Seal of Officer)
<PAGE> 12
EXHIBIT B
Comptroller of the Currency
[TREASURY DEPARTMENT LOGO]
TREASURY DEPARTMENT OF THE UNITED STATES
Washington, D. C.
WHEREAS, satisfactory evidence has been presented to the Comptroller of
the Currency that "STATE STREET BANK AND TRUST COMPANY, NATIONAL ASSOCIATION",
located in New York, State of New York, has complied with all provisions of the
statutes of the United States required to be complied with before being
authorized to commence the business of banking as a National Banking
Association:
NOW, THEREFORE, I hereby certify that the above-named association is
authorized to commence the business of banking as a National Banking
Association.
IN TESTIMONY WHEREOF, witness my signature and
seal of office this 1st day of January, 1984.
/s/ C. T. Conover
---------------------------
Charter No. 19045 Comptroller of the Currency
<PAGE> 13
EXHIBIT C
COMPTROLLER OF THE CURRENCY
TREASURY DEPARTMENT [LOGO] OF THE UNITED STATES
WASHINGTON, D.C.
WHEREAS, STATE STREET BANK AND TRUST COMPANY, N.A., LOCATED IN NEW YORK,
STATE OF NEW YORK, BEING A NATIONAL BANKING ASSOCIATION, ORGANIZED UNDER THE
STATUTES OF THE UNITED STATES, HAS MADE APPLICATION FOR AUTHORITY TO ACT AS
FIDUCIARY
AND WHEREAS, APPLICABLE PROVISIONS OF THE STATUTES OF THE UNITED STATES
AUTHORIZE THE GRANT OF SUCH AUTHORITY;
NOW THEREFORE, I HEREBY CERTIFY THAT THE NECESSARY APPROVAL HAS BEEN GIVEN
AND THAT THE SAID ASSOCIATION IS AUTHORIZED TO ACT IN ALL FIDUCIARY CAPACITIES
PERMITTED BY SUCH STATUTES.
IN TESTIMONY WHEREOF, WITNESS
MY SIGNATURE AND SEAL OF
OFFICE THIS THIRD DAY OF
JANUARY, 1984.
[SEAL] /s/ C. T. Conover
-----------------------------
COMPTROLLER OF THE CURRENCY
CHARTER NO. 18045
<PAGE> 14
EXHIBIT D
STATE STREET BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
AMENDED AND RESTATED
BYLAWS
ARTICLE I
Meetings of Shareholders
Section 1.1. Annual Meeting. The regular annual meeting of the
shareholders to elect directors and transact whatever other business may
properly come before the meeting, shall be held at the Main Office of the
National Trust Company, 61 Broadway, in the City of New York, State of New York
or such other places as the Board of Directors may designate, at 10 o'clock, on
the fourth Wednesday of April of each year. Notice of such meeting shall be
mailed, postage prepaid, at least ten days prior to the date hereof, addressed
to each shareholder at his address appearing on the books of the National Trust
Company. If, from any cause, an election of directors is not made on the said
day, the Board of Directors shall order the election to be held on some
subsequent day, as soon thereafter as practicable, according to the provisions
of law; and notice thereof shall be given in the manner herein provided for the
annual meeting.
Section 1.2. Special Meetings. Except as otherwise specifically provided
by statute, special meetings of the shareholders may be called for any purpose
at any time by the Board of Directors or by any shareholder owning, in the
aggregate, not less than 10 percent of the stock of the National Trust Company.
Every such special meeting, unless otherwise provided by law, shall be called
by mailing, postage prepaid, not less than ten days prior to the date fixed for
such meeting, to each shareholder at his address appearing on the books of the
National Trust Company a notice stating the purpose of the meeting.
Section 1.3. Nominations for Director. Nominations for election to the
Board of Directors may be made by the Board of Directors or by any shareholder
of any outstanding class of capital stock of the National Trust Company
entitled to vote for the election of directors. Nominations, other than those
made by or on behalf of the existing management of the National Trust Company,
shall be made in writing and shall be delivered or mailed to the President of
the National Trust Company and to the Comptroller of the Currency, Washington,
D.C., not less than 14 days nor more than 50 days prior to any meeting of
shareholders called for the election of directors, provided however, that if
less than 21 days' notice of the meeting is given to shareholders, such
nomination shall be mailed or delivered to the President of the National Trust
Company and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting
was mailed. Such notification shall contain the following information to the
extent known to the notifying shareholder:
(a) the name and address of each proposed nominee; (b) the principal
occupation of each proposed nominee; (c) the total number of shares of capital
stock of the National Trust Company
1
<PAGE> 15
that will be voted for each proposed nominee; (d) the name and residence
address of the notifying shareholder; and (e) the number of shares of capital
stock of the National Trust Company owned by the notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the Chairperson of the meeting, and upon his/her instructions,
the vote tellers may disregard all votes cast for each such nominee.
Section 1.4. Proxies. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this National Trust Company shall act as proxy. Proxies shall be valid for
only one meeting, to be specified therein, and any adjournments of such
meeting. Proxies shall be dated and shall be filed with the records of the
meeting.
Section 1.5. Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
ARTICLE II
Directors
Section 2.1. Board of Directors. The Board of Directors shall have power
to manage and administer the business and affairs of the National Trust
Company. Except as expressly limited by law, all corporate powers of the
National Trust Company shall be vested in and may be exercised by the Board of
Directors.
Section 2.2. Number. The Board of Directors shall consist of not less than
five nor more than twenty-five shareholders, the exact number within such
minimum and maximum limits to be fixed and determined from time to time by
resolution of a majority of the full Board or by resolution of the shareholders
at any meeting thereof; provided, however, that a majority of the full Board of
Directors may not increase the number of directors to a number which (i)
exceeds by more than two the number of directors last elected by shareholders
where such number was fifteen or less; and (ii) to a number which exceeds by
more than four the number of directors last elected by shareholders where such
number was sixteen or more, but in no event shall the number of directors
exceed twenty-five.
Section 2.3. Organization Meeting. The Cashier, upon receiving the results
of any election, shall notify the directors-elect of their election and of the
time at which they are required to meet at the Main Office of the National
Trust Company for the purpose of organizing the new Board and electing and
appointing officers of the National Trust Company for the succeeding year. Such
meeting shall be held on the day of the election or as soon thereafter as
practicable, and, in any event, within thirty days thereof. If, at the time
fixed for such meeting,
2
<PAGE> 16
there shall not be a quorum present, the Directors present may adjourn the
meeting, from time to time, until a quorum is obtained.
Section 2.4. Regular Meetings. Regular Meetings of the Board of
Directors shall be held, without notice, at least once in each quarter on such
days and at such hours as the Directors may from time to time determine. When
any regular meeting of the Board falls upon a holiday, the meeting shall be
held on the next banking business day unless the Board shall designate some
other day.
Section 2.5. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board of the National Trust
Company, or at the request of three or more directors. Each member of the
Board of Directors shall be given notice stating the time and place, by
telegram, letter, or in person, of each such special meeting.
Section 2.6. Quorum. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but a less number
may adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice.
Section 2.7. Vacancies. When any vacancy occurs among the directors, the
remaining members of the Board, in accordance with the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the Board, or at a special meeting called for that purpose.
ARTICLE III
Committees of the Board
Section 3.1. Investment Committee. There shall be an Investment
Committee composed of not less than two Directors, appointed by the Board
annually or more often. The Investment Committee shall have the power to
insure adherence to Investment Policy, to recommend amendments thereto, to
purchase and sell securities, to exercise authority regarding investments and
to exercise, when the Board is not in session, all other powers of the Board
regarding investment securities that may be lawfully delegated. The Investment
Committee shall keep minutes of its meetings, and such minutes shall be
submitted at the next regular meeting of the Board of Directors at which a
quorum is present, and any action taken by the Board with respect thereto shall
be entered in the minutes of the Board.
Section 3.2. Examining Committee. There shall be an Examining Committee
composed of not less than two directors, exclusive of any active officers,
appointed by the Board annually or more often, whose duty it shall be to make
an examination at least once during each calendar year into the affairs of the
National Trust Company or cause suitable examinations to be made by auditors
responsible only to the Board of Directors and to report the result of such
examination in writing to the Board at the next regular meeting thereafter.
3
<PAGE> 17
Section 3.3. Other Committees. The Board of Directors may appoint, from
time to time, from its own members, other committees of one or more persons,
for such purposes and with such powers as the Board may determine.
ARTICLE IV
Officers and Employees
Section 4.1. Chairperson of the Board. The Board of Directors shall
appoint one of its members to be Chairperson of the Board to serve at the
pleasure of the Board. Such person shall preside at all meetings of the Board
of Directors. The Chairperson of the Board shall supervise the carrying out of
the policies adopted or approved by the Board; shall have general executive
powers, as well as the specific powers conferred by these Bylaws; and shall
also have and may exercise such further powers and duties as from time to time
may be conferred upon, or assigned by the Board of Directors.
Section 4.2. President. The Board of Directors shall appoint one of its
members to be President of the National Trust Company. In the absence of the
Chairperson, the President shall preside at any meeting of the Board. The
President shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulations, or practice,
to the Office of President, or imposed by these Bylaws. The President shall
also have and may exercise such further powers and duties as from time to time
may be conferred, or assigned by the Board of Directors.
Section 4.3. Vice President. The Board of Directors may appoint one or
more Vice Presidents. Each Vice President shall have such powers and duties as
may be assigned by the Board of Directors. One Vice President shall be
designated by the Board of Directors, in the absence of the President, to
perform all the duties of the President.
Section 4.4. Secretary. The Board of Directors shall appoint a
Secretary, Cashier, or other designated officer who shall be Secretary of the
Board and of the National Trust Company, and shall keep accurate minutes of all
meetings. The Secretary shall attend to the giving of all notices required by
these Bylaws to be given; shall be custodian of the corporate seal, records,
documents and papers of the National Trust Company; shall provide for the
keeping of proper records of all transactions of the National Trust Company;
shall have and may exercise any and all other powers and duties pertaining by
law, regulation or practice, to the Office of Cashier, or imposed by these
Bylaws; and shall also perform such other duties as may be assigned from time
to time, by the Board of Directors.
Section 4.5. Other Officers. The Board of Directors may appoint one or
more Assistant Vice Presidents, one of more Assistant Secretaries, one or more
Assistant Cashiers, one or more Managers and Assistant Managers of Branches and
such other officers and Attorneys-in-fact as from time to time may appear to
the Board of Directors to be required or desirable to transact the business of
the National Trust Company. Such officers shall respectively exercise such
powers
4
<PAGE> 18
and perform such duties as pertain to the several offices, or as may be
conferred upon, or assigned to, them by the Board of Directors, the Chairperson
of the Board, or the President.
Section 4.6. Tenure of Office. The President and all other officers
shall hold office for the current year for which the Board was elected, unless
they shall resign, become disqualified, or be removed; and any vacancy
occurring in the Office of President shall be filled promptly by the Board of
Directors.
ARTICLE V
Stock and Stock Certificates
Section 5.1. Transfers. Shares of stock shall be transferable on the
books of the National Trust Company, and a transfer book shall be kept in which
all transfers of stock shall be recorded. Every person becoming a shareholder
by such transfer shall, in proportion to his shares, succeed to all rights of
the prior holder of such shares.
Section 5.2. Stock Certificates. Certificates of stock shall bear the
signature of the President (which may be engraved, printed or impressed), and
shall be signed manually or by facsimile process by the Secretary, Assistant
Secretary, Cashier, Assistant Cashier, or any other officer appointed by the
Board of Directors for that purpose, to be known as an Authorized Officer, and
the seal of the National Trust Company shall be engraven thereon. Each
certificate shall recite on its face that the stock represented thereby is
transferable only upon the books of the National Trust Company properly
endorsed.
ARTICLE VI
Corporate Seal
The President, the Cashier, the Secretary or any Assistant Cashier or
Assistant Secretary, or other officer thereunto designated by the Board of
Directors, shall have authority to affix the corporate seal to any document
requiring such seal, and to attest the same. Such seal shall be substantially
in the following form:
ARTICLE VII
Miscellaneous Provisions
Section 7.1. Fiscal Year. The Fiscal Year of the National Trust Company
shall be the calendar year.
5.
<PAGE> 19
Section 7.2. Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or
accepted in behalf of the National Trust Company by the Chairperson of the
Board, or the President, or any Vice President, or the Secretary, or the
Cashier. Any such instruments may also be executed, acknowledged, verified,
delivered or accepted in behalf of the National Trust Company in such manner
and by such other officers as the Board of Directors may from time to time
direct. The provisions of this Section 7.2. are supplementary to any other
provision of these Bylaws.
Section 7.3. Records. The Articles of Association, the Bylaws and the
proceedings of all meetings of the shareholders, the Board of Directors, and
standing committees of the Board, shall be recorded in appropriate minute books
provided for the purpose. The minutes of each meeting shall be signed by the
Secretary, Cashier or other Officer appointed to act as Secretary of the
meeting.
ARTICLE VIII
Bylaws
Section 8.1. Inspection. A copy of the Bylaws, with all amendments
thereto, shall at all times be kept in a convenient place at the Main Office of
the National Trust Company, and shall be open for inspection to all
shareholders, during bank hours.
Section 8.2. Amendments. The Bylaws may be amended, altered or repealed,
at any regular meeting of the Board of Directors, by a vote of a majority of
the total number of the Directors.
6
<PAGE> 20
EXHIBIT E
State Street Bank and Trust Company
Corporate Trust
51 Broadway
New York, NY 10006
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, we hereby consent that reports of examination by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
STATE STREET BAND AND TRUST COMPANY, N.A.
BY:/s/ James E. Murphy
--------------------------------------
JAMES E. MURPHY
VICE PRESIDENT
Dated: November 21, 1997
<PAGE> 21
<TABLE>
<S> <C> <C>
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Board of Governors of the Federal Reserve Systems
- -------------------------------------------------- OMB Number: 7100-0036
Federal Deposit Insurance Corporation
[LOGO] OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 2000
Please refer to page 1, Table of Contents
for the required disclosure of estimated
burden [ 1 ]
- -----------------------------------------------------------------------------------------------------------------------------------
Consolidated Report of Condition and Income for
A Bank With Domestic Offices Only and
Total Assets of Less Than $100 Million - FFIEC 034
(970930)
--------
Report at the close of business September 30, 1997
This report is required by law: 12 U.S.C. Sec. 324 (State This report form is to be filed by banks with domestic offices
member banks); 12 U.S.C. Sec. 1817 (State nonmember banks); only. Banks with foreign offices (as defined in the
and 12. U.S.C. Sec. 161 (National banks). instructions) must file FFIEC 031.
- -----------------------------------------------------------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed The Reports of Condition and Income are to be prepared in
by an authorized officer and the Report of Condition must be accordance with Federal regulatory authority instructions.
attested to by not less than two directors (trustees) for State
nonmember banks and three directors for State member and We, the undersigned directors (trustees), attest to the
National banks. correctness of the Report of Condition (including the
supporting schedules) for this report date and declare that it
I, Samir N. Zaki, Vice President, Comptroller has been examined by us and to the best of our knowledge
- ---------------------------------------------------------------- and belief has been prepared in conformation with the
Name and Title of Officer Authorized to Sign Report instructions issued by the appropriate Federal regulatory
authority and is true and correct.
of the named banks do hereby declare that the Reports of
Condition and Income (including the supporting schedules)
for this report data have been prepared in conformance with
the instructions issued by the appropriate Federal regulatory
authority and are true to the best of my knowledge and /s/
belief. ---------------------------------------------------------------
Director (Trustee)
/s/ /s/
- --------------------------------------------------------------- ----------------------------------------------------------------
Signature of Officer Authorized to Sign Report Director (Trustee)
10/30/97 /s/
- --------------------------------------------------------------- ----------------------------------------------------------------
Date of Signature Director (Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Submission of Reports
Each bank that had $50 million or more in total assets as of submit hard-copy forms directly to the appropriate banking
June 30, 1996, must prepare its Reports of Condition and agency. State member banks should return the original and
Income either: one copy to the appropriate Federal Reserve District Bank.
National and state nonmember banks should return the
(a) in automated form and then file the computer data file original only north special return address envelope provided.
directly with he banking agencies' collection agent, If an overnight delivery system is used in lieu of the special
Electronic Data Systems Corporation (EDS), by modem or return address envelope, return the original only to the FDIC,
on computer diskette; or c/o Quality Data Systems, 2127 Espey Court, Suite 204
Crofton, MD 21114.
(b) in hardcopy (paper) form and arrange for another party
to convert the paper report to automated form. That To fulfill the signature and attestation requirement for the
party (if other than EDS) must transmit the bank's Reports of Condition and Income for this report date, banks
computer data file to EDS. whose reports are filed in automated form with EDS should
attach this signature page to the hardcopy record of the
For this report date only all other banks (i.e. banks not completed report that the bank places in its files.
required to file reports in automated form) are permitted to
- ------------------------------------------------------------------------------------------------------------------------------------
FDIC Certificate Number 24938 Call No. 199 34 09-30-97
----- STBK: 36-5426 00305 ST Cert 36-24938
State Street Bank and Trust Company, N.A.
----------------------------------------------------------------
Legal Title of Bank
61 Broadway, Manhattan
----------------------------------------------------------------
City,
New York, New York 1006
----------------------------------------------------------------
State Abbrev. (Txt) Zip code
</TABLE>
Board of Governors of the Rederal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE> 22
<TABLE>
<S> <C>
Legal Title of Bank: State Street Bank and Trust Company, N.A. Call Date: 9/30/97 ST-BK 36-5426 FFIEC ???
Address: 61 Broadway Page RC?
City, State, Zip: New York, NY 10006
FDIC Certificate No.: 2 4 9 3 8
---------
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for September 30, 1997
All schedules are to be reported in thousands of dollars. Unless
otherwise indicated, report the amount outstanding as of the last
business day of the quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
-----
C100
---- -----
Dollar Amount in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets //////////////
1. Cash and balances due from depository institutions: //////////////
a. Noninterest-bearing balances and currency and coin (1), (2)......................... 0081 16,586 1.a.
b. Interest-bearing balances(3)........................................................ 0071 0 1.b.
2. Securities: //////////////
a. Held-to-maturity securities (from Schedule RC-B, column A).......................... 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........................ 1773 75 2.b.
3. Federal funds sold (4) and securities purchased under agreements to resell.............. 1350 0 3.
4. Loans and lease financing receivables: ----------------- //////////////
a. Loans and leases, net of unearned income (from Schedule RC-C).... RCON 2122 0 ////////////// 4.a.
b. LESS: Allowance for loan and lease losses....................... RCON 3123 0 ////////////// 4.b.
c. LESS: Allocated transfer risk reserve........................... RCON 3128 0 ////////////// 4.c.
-----------------
d. Loans and leases, net of unearned income, allowance and reserve (item 4.a //////////////
minus 4.b and 4.c) ................................................................ 2125 0 4.d.
5. Trading assets.......................................................................... 3545 0 5.
6. Premises and fixed assets (including capitalized leases)................................ 2145 335 6.
7. Other real estate owned (from Schedule RC-M)............................................ 2150 0 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule
RC-M).............................................................................. 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding............................ 2155 0 9.
10. Intangible assets (from Schedule RC-M).................................................. 2143 0 10.
11. other assets (from Schedule RC-F)....................................................... 2160 531 11.
12. a. Total assets (sum of items 1 through 11)............................................ 2170 17,527 12.a.
b. Losses deferred pursuant to 12 U.S.C. 1823(j)....................................... 0306 0 12.b.
c. Total assets and losses deferred pursuant to 12 U.S.C. 1823(j) (sum of items 12.a .. 0307 17,527 12.c.
and 12.b) --------------
</TABLE>
- -----------------
(1) Includes cash items in process of collection and unposted debits.
(2) The amount reported in this item must be greater than or equal to the sum
of Schedule RC-M, itesm 3.a. and 3.b.
(3) Includes time certificates of deposit not held for trading.
(4) Report "term federal funds sold" in Schedule RC, item 4.a, "Loans and
leases, net of unearned income," and in Schedule RC-F part I.
3
<PAGE> 23
<TABLE>
<S> <C> <C>
Legal Title of Bank: State Street Bank and Trust Company, N.A. Call Date: 9/30/97 ST-BK. 36-5426
Address: 61 Broadway Page
City, State Zip: New York, NY 10006
FDIC Certificate No.: 24938
Schedule RC--Continued
</TABLE>
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Mil Thou
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E)............... 2200 0 13.a
(1) Noninterest-bearing(1) ............................................ RCON 6631 0 13.a
(2) Interest-bearing .................................................. RCOM 6636 0 13.a
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs ..........................
(1) Noninterest-bearing ................................................................
(2) Interest-bearing ...................................................................
14. Federal funds purchased(2) and securities sold under agreements to repurchase .............. 2840 0 14.
15. a. Demand notes issued to the U.S. Treasury ............................................... 2840 0 15.a
b. Trading liabilities .................................................................... 3548 0 15.b
16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases):
a. With a remaining maturity of one year or less .......................................... 2332 0 16.a
b. With a remaining maturity of more than one year through three years .................... A547 0 16.b
c. With a remaining maturity of more than three years ..................................... A548 0 16.c
17. Not applicable
18. Bank's liability on acceptances executed and outstanding ................................... 2920 0 18.
19. Subordinated notes and debentures(3) ....................................................... 3200 0 19.
20. Other liabilities (from Schedule RC-G) ..................................................... 2930 6,156 20.
21. Total liabilities (sum of items 13 through 20) ............................................. 2948 6,156 21.
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus .............................................. 3838 0 23.
24. Common stock ............................................................................... 3230 500 24.
25. Surplus (exclude all surplus related to preferred stock) ................................... 3839 2,000 25.
26. a. Undivided profits and capital reserves ................................................. 3632 8,871 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities ................. 8434 0 26.b
27. Cumulative foreign currency translation adjustments ........................................
28. a. Total equity capital (sum of items 23 through 27) ........................................ 3210 11,371 28.a.
b. Losses deferred pursuant to 12 U.S.C. 1823(j) ........................................... 0306 0 28.b.
c. Total equity captial and losses deferred pursuant to 12 U.S.C. 1823(j) (sum of items 28.a
and 28.b) ............................................................................... 3559 11,371 28.c.
29. Total liabilitieds, equity caital, and losses deferred pursuant to 12 U.S.C. 1823(j)
(sum of items 21 and 28.c) ................................................................. 2257 17,527 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most Number
comprehensive level of auditing work performed for the bank by independent external auditors ------------------
as of any date during 1996 .................................................................. RCON 6724 N/A M.1.
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted audit- auditors
ing standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accor- 8 = No external audit work
dance with generally accepted auditing sandards by a
certified public accounting firm (may be required by state
chartering authority)
</TABLE>
- -----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Report "term federal funds purchased" in Schedule RC, item 16, "Other
borrowed money."
(3) Includes limited-life preferred stock and related surplus.
4
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
14% SENIOR NOTES DUE 2007
OF
INTERAMERICAS COMMUNICATIONS CORPORATION
PURSUANT TO THE PROSPECTUS
DATED , 1997
INTERAMERICAS COMMUNICATIONS CORPORATION WILL ACCEPT ALL EXISTING NOTES (AS
HEREINAFTER DEFINED) TENDERED AND NOT WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON
THE EXPIRATION DATE.
The Exchange Agent is:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<C> <C> <C>
By Hand Delivery: By Mail: By Facsimile:
State Street Bank & Trust Company State Street Bank & Trust Company State Street Bank & Trust Company
Corporate Trust Department Corporate Trust Department (617) 664-5232
4th Floor P.O. Box 778
Two International Place Boston, Massachusetts 02102-0078 Confirm by Telephone:
Boston, Massachusetts 02110 Attention: Sandra Szczsponik (617) 664-5314
Attention: Sandra Szczsponik
</TABLE>
By Overnight Delivery:
State Street Bank & Trust Company
Corporate Trust Department
4th Floor
Two International Place
Attention: Sandra Szczsponik
The Information Agent is:
KISSELL BLAKE, INC.
110 Wall Street
New York, New York 10005
Call Toll Free (800) 554-7733
Brokers and Banks Call (212) 344-6733
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
<PAGE> 2
The undersigned acknowledges receipt of the Prospectus dated November ,
1997 (the "Prospectus"), of InterAmericas Communications Corporation ("ICCA"),
and this Letter of Transmittal (the "Letter of Transmittal"), which together
with the Prospectus constitutes ICCA's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 14% Senior Notes due 2007, (the "New Notes") for
each $1,000 principal amount of its outstanding 14% Senior Notes due 2007, (the
"Existing Notes"). Recipients of the Prospectus should read the requirements
described in such Prospectus with respect to eligibility to participate in the
Exchange Offer. Capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
The undersigned hereby tenders the Existing Notes described in the box
entitled "Description of Existing Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Existing Notes and the
undersigned represents that it has received from each beneficial owner of
Existing Notes ("Beneficial Owners") a duly completed and executed form of
"Instruction to Registered Holder from Beneficial Owner" accompanying this
Letter of Transmittal, instructing the undersigned to take the action described
in this Letter of Transmittal.
This Letter of Transmittal is to be used only by a holder of Existing Notes
(i) if certificates representing Existing Notes are to be forwarded herewith or
(ii) if delivery of Existing Notes is to be made by book-entry transfer to the
Exchange Agent's account at The Depository Trust Company ("Depositary"),
pursuant to the procedures set forth in the section of the Prospectus entitled
"The Exchange Offer -- Procedures for Tendering." If delivery of the Existing
Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at the Depositary, this Letter of Transmittal need not be
manually executed; provided, however, that tenders of the Existing Notes must be
effected in accordance with the procedures mandated by the Depositary's
Automated Tender Offer Program and the procedures set forth in the Prospectus
under the caption "The Exchange Offer -- Book-Entry Transfer."
The undersigned hereby represents and warrants that the information set
forth in the box entitled "Beneficial Owner(s)" is true and correct.
Any beneficial owner whose Existing Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder of Existing Notes promptly and
instruct such registered holder of Existing Notes to tender on behalf of the
beneficial owner. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, prior to completing and executing this Letter of
Transmittal and delivering its Existing Notes, either make appropriate
arrangements to register ownership of the Existing Notes in such beneficial
owner's name or obtain a properly completed bond power from the registered
holder of Existing Notes. The transfer of record ownership may take considerable
time.
In order to properly complete this Letter of Transmittal, a holder of
Existing Notes must (i) complete the box entitled "Description of Existing
Notes," (ii) if appropriate, check and complete the boxes relating to book-entry
transfer, guaranteed delivery, Special Issuance Instructions and Special
Delivery Instructions, (iii) sign the Letter of Transmittal by completing the
box entitled "Sign Here" and (iv) complete the Substitute Form W-9. Each holder
of Existing Notes should carefully read the detailed instructions below prior to
completing the Letter of Transmittal.
Holders of Existing Notes who desire to tender their Existing Notes for
exchange and (i) whose Existing Notes are not immediately available, (ii) who
cannot deliver their Existing Notes and all other documents required hereby to
the Exchange Agent on or prior to the Expiration Date or (iii) who are unable to
complete the procedure for book-entry transfer on a timely basis, must tender
the Existing Notes pursuant to the guaranteed delivery procedures set forth in
the section of the Prospectus entitled "The Exchange Offer -- Guaranteed
Delivery Procedures." See Instruction 2.
2
<PAGE> 3
Holders of Existing Notes who wish to tender their Existing Notes for
exchange must, at a minimum, complete columns (1) through (3) in the box below
entitled "Description of Existing Notes" and sign the box below entitled "Sign
Here." If only those columns are completed, such holder of Existing Notes will
have tendered for exchange all Existing Notes listed in column (3) below. If the
holder of Existing Notes wishes to tender for exchange less than all of such
Existing Notes, column (4) must be completed in full. In such case, such holder
of Existing Notes should refer to Instruction 5.
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF EXISTING NOTES
- ---------------------------------------------------------------------------------------------------------------------------
(4)
PRINCIPAL AMOUNT
TENDERED
FOR EXCHANGE
(ONLY IF
(2) DIFFERENT AMOUNT
EXISTING FROM
(1) NOTE COLUMN(3))
NAME(S) AND ADDRESS(ES) OF REGISTERED NUMBER(S)1 (3) (MUST BE IN
HOLDER(S) OF EXISTING NOTES(S), EXACTLY AS NAME(S) (ATTACH AGGREGATE INTEGRAL
APPEAR(S) ON SERIES A NOTE CERTIFICATE(S) SIGNED LIST PRINCIPAL MULTIPLES
(PLEASE FILL IN, IF BLANK) IF NECESSARY) AMOUNT OF $1,000)2
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
1 Column (2) need not be completed by holders of Existing Notes tendering Existing Notes for exchange by book-entry
transfer. Please check the appropriate box below and provide the requested information.
2 Column (4) need not be completed by holders of Existing Notes who wish to tender for exchange the principal amount of
Existing Notes listed in Column (3). Completion of Column (4) will indicate that the holder of Existing Notes wishes to
tender for exchange only the principal amount of Existing Notes indicated in Column (4).
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITARY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS
HEREINAFTER DEFINED) ONLY):
Name of Tendering Institution
-----------------------------------------------
Account Number
--------------------------------------------------------------
Transaction Code Number
------------------------------------------------------
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Existing Note(s)
-------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------
Window Ticket Number (if available)
-----------------------------------------
Name of Eligible Institution which Guaranteed Delivery
----------------------
Aggregate Principal Amount of Existing Notes Held:
--------------------------
Number of Copies Requested:
-------------------------------------------------
If Delivered by Book-Entry Transfer:
----------------------------------------
Name of Tendering Institution
---------------------------------------------
Book-Entry Account Number
-------------------------------------------------
Transaction Code Number
---------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name
------------------------------------------------------------------------
Address
---------------------------------------------------------------------
---------------------------------------------------------------------
4
<PAGE> 5
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY (i) if the New Notes issued in exchange for Existing
Notes, certificates for Existing Notes in a principal amount not exchanged for
New Notes or Existing Notes (if any) not tendered for exchange, are to be issued
in the name of someone other than the undersigned, or (ii) if Existing Notes
tendered by book-entry transfer which are not exchanged are to be returned by
credit to an account maintained at the Depositary.
Issue to:
Name
---------------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
Credit Existing Notes not exchanged and delivered by book-entry transfer to
the Depositary account set forth below:
------------------------------------------------------
(ACCOUNT NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY (i) if the New Notes issued in exchange for Existing
Notes, certificates for Existing Notes in a principal amount not exchanged for
New Notes or Existing Notes (if any) not tendered for exchange, are to be mailed
or delivered to someone other than the undersigned, or to the undersigned at an
address other than the address shown below the undersigned's signature.
Mail or delivered to:
Name
---------------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
5
<PAGE> 6
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
BENEFICIAL OWNER(S)
- -------------------------------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF EXISTING NOTES
BENEFICIAL OWNER OF EXISTING NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER(S)
- -------------------------------------------------------------------------------------------------------
<S> <C>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
=======================================================================================================
</TABLE>
If delivery of Existing Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at the Depositary, then tenders of
Existing Notes must be effected in accordance with the procedures mandated by
the Depositary's Automated Tender Offer Program and the procedures set forth in
the Prospectus under the caption "The Exchange Offer -- Book-Entry Transfer."
6
<PAGE> 7
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Pursuant to the offer by InterAmericas Communications Corporation ("ICCA"),
upon the terms and subject to the conditions set forth in the Prospectus dated
, 1997 (the "Prospectus") and this Letter of Transmittal (the
"Letter of Transmittal"), which together with the Prospectus constitutes ICCA's
offer (the "Exchange Offer") to exchange $1,000 principal amount of its 14%
Senior Notes Due 2007 (the "New Notes") for each $1,000 principal amount of its
outstanding 14% Senior Notes Due 2007 (the "Existing Notes"). The undersigned
hereby tenders to ICCA for exchange the Existing Notes indicated above.
By executing this Letter of Transmittal and subject to and effective upon
acceptance for exchange of the Existing Notes tendered for exchange herewith,
the undersigned will have irrevocably sold, assigned, transferred and exchanged,
to ICCA, all right, title and interest in, to and under all of the Existing
Notes tendered for exchange hereby, and hereby appoints the Exchange Agent as
the true and lawful agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as agent of ICCA) of such holder of Existing Notes with
respect to such Existing Notes, with full power of substitution to (i) deliver
certificates representing such Existing Notes, or transfer ownership of such
Existing Notes on the account books maintained by the Depositary (together, in
any such case, with all accompanying evidences of transfer and authenticity), to
ICCA, (ii) present and deliver such Existing Notes for transfer on the books of
ICCA and (iii) receive all benefits and otherwise exercise all rights and
incidents of beneficial ownership with respect to such Existing Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that (i) the undersigned is
the owner; (ii) has a net long position within the meaning of Rule 14e-4 under
the Securities Exchange Act as amended ("Rule 14e-4") equal to or greater than
the principal amount of Existing Notes tendered hereby; (iii) the tender of such
Existing Notes complies with Rule 14e-4 (to the extent that Rule 14e-4 is
applicable to such exchange); (iv) the undersigned has full power and authority
to tender, exchange, assign and transfer the Existing Notes and (v) that when
such Existing Notes are accepted for exchange by ICCA, ICCA will acquire good
and marketable title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claims. The undersigned will,
upon receipt, execute and deliver any additional documents deemed by the
Exchange Agent or ICCA to be necessary or desirable to complete the exchange,
assignment and transfer of the Existing Notes tendered for exchange hereby.
The undersigned hereby further represents to ICCA that (i) the New Notes to
be acquired by the undersigned in exchange for the Existing Notes tendered
hereby and any beneficial owner(s) of such Existing Notes in connection with the
Exchange Offer will be acquired by the undersigned and such beneficial owner(s)
in the ordinary course of business of the undersigned, (ii) the undersigned (if
not a broker-dealer referred to in the last sentence of this paragraph) are not
participating and do not intend to participate in the distribution of the New
Notes, (iii) the undersigned have no arrangement or understanding with any
person to participate in the distribution of the New Notes, (iv) the undersigned
and each beneficial owner acknowledge and agree that any person participating in
the Exchange Offer for the purpose of distributing the New Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction described in clause (iv) above
should be covered by an effective registration statement containing the selling
security holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the SEC and (vi) neither the undersigned nor any beneficial
owner is an "affiliate" of ICCA, as defined under Rule 405 under the Securities
Act. If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Existing Notes that were acquired as a result
7
<PAGE> 8
of market making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes received in respect of such
Existing Notes pursuant to the Exchange Offer; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For purposes of the Exchange Offer, ICCA will be deemed to have accepted
for exchange, and to have exchanged, validly tendered Existing Notes, if, as and
when ICCA gives oral or written notice thereof to the Exchange Agent. Tenders of
Existing Notes for exchange may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. See "The Exchange Offer -- Withdrawal of
Tenders" in the Prospectus. Any Existing Notes tendered by the undersigned and
not accepted for exchange will be returned to the undersigned at the address set
forth above unless otherwise indicated in the box above entitled "Special
Delivery Instructions."
The undersigned acknowledges that ICCA's acceptance of Existing Notes
validly tendered for exchange pursuant to any one of the procedures described in
the section of the Prospectus entitled "The Exchange Offer" and in the
instructions hereto will constitute a binding agreement between the undersigned
and upon the terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Existing Notes not tendered for exchange in the
name(s) of the undersigned. Similarly, unless otherwise indicated in the box
entitled "Special Delivery Instructions," please mail any certificates for
Existing Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the New Notes issued in exchange for the Existing Notes accepted
for exchange in the name(s) of, and return any Existing Notes not tendered for
exchange or not exchanged to, the person(s) so indicated. The undersigned
recognizes that ICCA has no obligation pursuant to the "Special Issuance
Instructions" and "Special Delivery Instructions" to transfer any Existing Notes
from the name of the holder of Existing Note(s) thereof if ICCA does not accept
for exchange any of the Existing Notes so tendered for exchange or if such
transfer would not be in compliance with any transfer restrictions applicable to
such Existing Note(s).
IN ORDER TO VALIDLY TENDER EXISTING NOTES FOR EXCHANGE, HOLDERS OF EXISTING
NOTES MUST COMPLETE, EXECUTE, AND DELIVER THIS LETTER OF TRANSMITTAL.
Except as stated in the Prospectus, all authority herein conferred or
agreed to be conferred shall survive the death or incapacity of the undersigned,
and any obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Except as
otherwise stated in the Prospectus, this tender for exchange of Existing Notes
is irrevocable.
8
<PAGE> 9
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Must be signed by the registered holder(s) of Existing Notes exactly as
name(s) appear(s) on certificate(s) representing the Existing Notes or on a
security position listing or by the person(s) authorized to become registered
Existing Note holder(s) by certificates and documents transmitted herewith. If
signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information. (See
Instruction 6).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Owner(s)
Dated , 1997
------------------
Name(s)
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity
------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
(Area Code and Telephone No.)
---------------------------------------------------
(Tax Identification or Social Security Nos.)
------------------------------------
GUARANTEE OF SIGNATURE(S)
(SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 1)
Name
----------------------------------------------------------------------------
Title
---------------------------------------------------------------------------
Name of Eligible Institution Guaranteeing Signatures
----------------------------
Address (including zip code) and telephone number (including area code) of Firm
Authorized Signature
------------------------------------------------------------
Dated: 1997
------------,
9
<PAGE> 10
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc. or is a commercial bank or
trust company having an office or correspondence in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934 which is a member of one of the following
recognized Signature Guarantee Programs (an "Eligible Institution"):
a. The Securities Transfer Agent Medallion Program (STAMP)
b. The New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Existing
Notes tendered herewith and such registered holder(s) have not completed the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) if such Existing Notes are
tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND EXISTING NOTES; GUARANTEED
DELIVERY PROCEDURE. This Letter of Transmittal is to be completed by holders of
Existing Notes (i) if certificates are to be forwarded herewith or (ii) if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer or guaranteed delivery set forth in the section of the Prospectus
entitled "The Exchange Offer." Certificates for all physically tendered Existing
Notes or any confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth on the cover of this Letter of Transmittal prior to 5:00 p.m.,
New York City time, on the Expiration Date. Holders of Existing Notes who elect
to tender Existing Notes and (i) whose Existing Notes are not immediately
available, (ii) who cannot deliver the Existing Notes or other required
documents to the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date or (iii) who are unable to complete the procedure for book-entry
transfer on a timely basis, may have such tender effected if: (a) such tender is
made by or through an Eligible Institution; and (b) prior to 5:00 p.m., New York
City time, on the Expiration Date, the Exchange Agent has received from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile hereof) and Notice of Guaranteed Delivery (by
telegram, telex, facsimile transmission, mail or hand delivery) setting forth
the name and address of the holder of such Existing Notes, the certificate
numbers(s) of such Existing Notes and the principal amount of Existing Notes
tendered for exchange, stating that tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, the certificates representing such Existing Notes (or a
Book-Entry Confirmation), in proper form for transfer, and any other documents
required by this Letter of Transmittal, will be deposited by such Eligible
Institution with the Exchange Agent; and (c) certificates for all tendered
Existing Notes, or a Book-Entry Confirmation, together with a copy of the
previously executed Letter of Transmittal (or facsimile thereof) and any other
documents required by this Letter of Transmittal are received by the Exchange
Agent within five New York Stock Exchange trading days after the Expiration
Date.
THE METHOD OF DELIVERY OF EXISTING NOTES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER
OF SERIES A NOTES. EXCEPT AS OTHERWISE PROVIDED BELOW,
10
<PAGE> 11
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE. DO NOT SEND THIS LETTER OF
TRANSMITTAL NOR ANY EXISTING NOTES TO INTERAMERICAS COMMUNICATIONS CORPORATION
OR THE TRUSTEE.
No alternative, conditional or contingent tenders will be accepted. All
tendering holders of Existing Notes, by execution of this Letter of Transmittal
(or facsimile hereof, if applicable), waive any right to receive notice of the
acceptance of their Existing Notes for exchange.
3. INADEQUATE SPACE. If the space provided in the box entitled
"Description of Existing Notes" above is inadequate, the certificate numbers and
principal amounts of the Existing Notes being tendered should be listed on a
separate signed schedule affixed hereto.
4. WITHDRAWALS. A tender of Existing Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date by delivery of
written notice of withdrawal to the Exchange Agent at the address set forth on
the cover of this Letter of Transmittal. To be effective, a notice of withdrawal
of Existing Notes must (i) specify the name of the person who tendered the
Existing Notes to be withdrawn (the "Depositor"), (ii) identify the Existing
Notes to be withdrawn (including the certificate number or numbers and aggregate
principal amount of such Existing Notes), (iii) be signed by the holder of
Existing Notes in the same manner as the original signature on the Letter of
Transmittal by which such Existing Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the applicable transfer agent register the transfer of such Existing Notes
into the name of the person withdrawing the tender. Withdrawals of tenders of
Existing Notes may not be rescinded, and any Existing Notes withdrawn will
thereafter be deemed not validly tendered for purposes of the Exchange Offer and
no New Notes will be issued with respect thereto unless the Existing Notes so
withdrawn are validly retendered. Properly withdrawn Existing Notes may be
retendered by following one of the procedures described in the section of the
Prospectus entitled "The Exchange Offer -- Procedures for Tendering" at any time
prior to 5:00 p.m., New York City time, on the Expiration Date.
5. PARTIAL TENDERS (Not applicable to holders of Existing Notes who tender
Existing Notes by book-entry transfer). Tenders of Existing Notes will be
accepted only in integral multiples of $1,000 principal amount. If a tender for
exchange is to be made with respect to less than the entire principal amount of
any Existing Notes, fill in the principal amount of Existing Notes which are
tendered for exchange in column (4) of the box entitled "Description of Existing
Notes," as more fully described in the footnotes thereto. In case of a partial
tender for exchange, a new certificate, in fully registered form, for the
remainder of the principal amount of the Existing Notes, will be sent to the
holders of Existing Notes unless otherwise indicated in the appropriate box on
this Letter of Transmittal as promptly as practicable after the expiration or
termination of the Exchange Offer.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, POWERS OF ATTORNEY AND
ENDORSEMENTS.
(a) The signature(s) of the holder of Existing Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the
Existing Notes without alteration, enlargement or any change whatsoever.
(b) If tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this letter of Transmittal.
(c) If any tendered Existing Notes are registered in different names on
several certificates, it will be
11
<PAGE> 12
necessary to complete, sign and submit as many separate copies of this Letter of
Transmittal and any necessary or required documents as there are different
registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the Existing
Notes listed and transmitted hereby, no endorsements of Existing Notes or
separate powers of attorney are required. If, however, Existing Notes not
tendered or not accepted, are to be issued or returned in the name of a person
other than the holder of Existing Notes then the Existing Notes transmitted
hereby must be endorsed or accompanied by appropriate powers of attorney in a
form satisfactory to ICCA, in either case signed exactly as the name(s) of the
holder of Existing Notes appear(s) on the Existing Notes. Signatures on such
Existing Notes or powers of attorney must be guaranteed by an Eligible
Institution (unless signed by an Eligible Institution).
(e) If this Letter of Transmittal or Existing Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to ICCA of their authority so to act must be submitted.
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of Existing Notes listed, the Existing Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name(s) of the registered holder of Existing Notes appear(s) on the
certificates. Signatures on such Existing Notes or powers of attorney must be
guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
7. TRANSFER TAXES. Except as set forth in this Instruction 7, ICCA will
pay all transfer taxes, if any, applicable to the transfer and exchange of
Existing Notes pursuant to the Exchange Offer. If, however, issuance of New
Notes is to be made to, or Existing Notes not tendered for exchange are to be
issued or returned in the name of, any person other than the holder of Existing
Notes, and satisfactory evidence of payment of such taxes or exemptions from
taxes therefrom is not submitted with this Letter of Transmittal, the amount of
any transfer taxes payable on account of the transfer to such person will be
imposed on and payable by the holder of Existing Notes tendering Existing Notes
for exchange prior to the issuance of the New Notes.
8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the New Notes are to be
issued, or if any Existing Notes not tendered for exchange are to be issued or
sent to someone other than the holder of Existing Notes or to an address or
other than that shown above, the appropriate boxes on this Letter of Transmittal
should be complete. Holders of Existing Notes tendering Existing Notes by
book-entry transfer may request that Existing Notes not accepted be credited to
such account maintained at the Depositary as such holder of Existing Notes may
designate.
9. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time or receipt), acceptance and withdrawal of
Existing Notes will be determined by ICCA, in its sole discretion, whose
determination shall be final and binding. ICCA reserves the absolute right to
reject any or all tenders for exchange of any particular Existing Notes that are
not in proper form, or the acceptance of which would, in the opinion of ICCA or
its counsel, be unlawful. ICCA reserves the absolute right to waive any defect,
irregularity or condition of tender for exchange with regard to any particular
Existing Notes. ICCA's interpretation of the term of, and conditions to, the
Exchange Offer (including the instructions herein) will be final and binding.
Unless waived, any defects or irregularities in connection with the Exchange
Offer must be cured within such time as ICCA shall determine. Neither ICCA, the
Exchange Agent nor any other person shall be under any duty to give notice of
any defects or irregularities in Existing Notes tendered for exchange, nor shall
any of them incur any liability for failure to give such notice. A tender of
Existing Notes will not be deemed to have been made until all defects and
irregularities with respect to such tender have been cured or waived. Any
Existing Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the
12
<PAGE> 13
tendering holders, unless otherwise provided in this Letter of Transmittal, as
soon as practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. ICCA reserve the absolute right to waive, amend
or modify certain of the specified conditions as described under "The Exchange
Offer -- Conditions of the Exchange Offer" in the Prospectus in the case of any
Existing Notes tendered (except as otherwise provided in the Prospectus).
11. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES. If a holder of
Existing Notes desires to tender Existing Notes pursuant to the Exchange Offer,
but any of such Existing Notes has been mutilated, lost, stolen or destroyed,
such holder of Existing Notes should contact the Exchange Agent at the address
above for further instructions.
12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for
information or for additional copies of the Prospectus and this Letter of
Transmittal may be directed to the Exchange Agent or to the Information Agent at
the address or telephone number set forth on the cover of this Letter of
Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF
APPLICABLE) PROPERLY COMPLETED AND DULY EXECUTED TOGETHER WITH THE EXISTING
NOTES, OR CONFIRMATION OF BOOK-ENTRY OR THE NOTICE OF GUARANTEED DELIVERY, AND
ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Existing Notes whose
tendered Existing Notes are accepted for exchange may be subject to backup
withholding unless the holder provides ICCA (as payor), through the Exchange
Agent, with either (i) such holder's correct taxpayer identification number
("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN provided
on Substitute Form W-9 is correct (or that such holder of Existing Notes is
awaiting a TIN) and that (A) the holder of Existing Notes has not been notified
by the International Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the holder of Existing Notes that he
or she is no longer subject to backup withholding; or (ii) an adequate basis for
exemption from backup withholding. If such holder of Existing Notes is an
individual, the TIN is such holder's social security number. If the Exchange
Agent is not provided with the correct taxpayer identification number, the
holder of Existing Notes may be subject to certain penalties imposed by the
Internal Revenue Service.
Certain holders of Existing Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt holders of Existing Notes should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an exempt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (which the Exchange Agent will
provide upon request) signed under penalty of perjury, attesting to the holder's
exempt status See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "Guidelines") for additional
instructions.
If backup withholding applies, ICCA is required to withhold 31% of any
payment made to the holder of Existing Notes or other payee. Backup withholding
is not an additional federal income tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
The holder of Existing Notes is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) of the record
owner of the Existing Notes. If the Existing Notes
13
<PAGE> 14
are held in more than one name or are not held in the name of the actual owner,
consult the enclosed Guidelines for additional guidance regarding which number
to report.
- --------------------------------------------------------------------------------
PAYER'S NAME:
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT ----------------------------
SUBSTITUTE AND CERTIFY BY SIGNING AND DATING BELOW. SOCIAL SECURITY NUMBER
FORM W-9
OR
----------------------------
EMPLOYER IDENTIFICATION NUMBER
----------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PART 3 --
PERJURY, I CERTIFY THAT: AWAITING TIN [ ]
(1) THE NUMBER SHOWN ON THIS FORM IS MY CURRENT
TAXPAYER IDENTIFICATION NUMBER (OR I AM WAITING
FOR A NUMBER TO BE ISSUED TO ME) AND
(2) I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE
EITHER BECAUSE I HAVE NOT BEEN NOTIFIED BY THE
INTERNAL REVENUE SERVICE ("IRS") THAT I AM
SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A
FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR
THE IRS HAS NOTIFIED ME THAT I AM NO LONGER
SUBJECT TO BACKUP WITHHOLDING.
----------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- YOU MUST CROSS OUT ITEM (2) IN PART 2 ABOVE IF YOU
HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING BECAUSE
PAYER'S REQUEST FOR OF UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN. HOWEVER, IF AFTER
TAXPAYER IDENTIFICATION BEING NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING YOU RECEIVE
NUMBER ("TIN") ANOTHER NOTIFICATION FROM THE IRS STATING THAT YOU ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING, DO NOT CROSS OUT ITEM (2).
SIGNATURE __________ DATE ______________
NAME_____________________________________
ADDRESS__________________________________
CITY ______ STATE ____ ZIP CODE
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART 3 OF SUBSTITUTE FORM W-9.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
- -----------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF PERSON (AWAITING) TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND
EITHER (A) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE
APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE OR (B) I INTEND TO MAIL
OR DELIVER SUCH APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER
IDENTIFICATION NUMBER WITHIN SIXTY (60) DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE
WITHHELD UNTIL I PROVIDE A NUMBER.
<S> <C>
------------------------------------------------------------------- ------------------------------------
Signature Date
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
14% SENIOR NOTES DUE 2007
The undesigned hereby acknowledges receipt of the Prospectus dated
, 1997 (the "Prospectus") of InterAmericas Communications
Corporation, a Texas corporation (the "Company") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), that together constitute the
Company's offer (the "Exchange Offer"). Capitalized terms used but not defined
herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the 14% Senior Note due
2007 (the "Existing Notes") held by you for the account of the undersigned.
The aggregate face amount of the Existing Notes held by you for the account
of the undersigned is (fill in amount):
$ of the Existing Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[ ] To TENDER the following Existing Notes held by you for the account of the
undersigned (insert principal amount of Existing Notes to be tendered, if
any):
$ of the Existing Notes.
[ ] NOTE to TENDER any Existing Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Existing Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of the Existing Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) , (ii) the undersigned is acquiring the New
Notes in the ordinary course of business of the undersigned, (iii) the
undersigned is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of New Notes, (iv) the undersigned acknowledges that any person participating in
the Exchange Offer for the purpose of distributing the New Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
of 1933, as amended, in connection with any resale transaction of the New Notes
acquired by such person and cannot rely on the position of the Staff of the
Securities and Exchange Commission set forth in certain no-action letters. (See
the section of the Prospectus entitled "The Exchange Offer -- Resale of the New
Notes"), (v) the undersigned understands that a secondary resale transaction
described in clause (iv) above should be covered by an effective registration
statement containing the selling securityholder information required by Item 507
or Item 508, if applicable, of Regulation S-K of the Commission, (vi) the
undersigned is not an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company, (vii) if the undersigned is not a broker-dealer, that it is
not engaged in, and does not intend to engage in, a distribution of New Notes;
and (viii) if the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Existing Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes received in respect of such
Existing Notes pursuant to the Exchange Offer; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act, (b) to agree, on
behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to
take such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of Existing Notes.
15
<PAGE> 16
SIGN HERE
Name of Beneficial Owner(s):
----------------------------------------------------
Signature(s):
-------------------------------------------------------------------
Name(s) (please print):
---------------------------------------------------------
Address:
------------------------------------------------------------------------
Telephone Number:
---------------------------------------------------------------
Taxpayer Identification or Social Security Number:
------------------------------
Date:
---------------------------------------------------------------------------
16
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
SENIOR NOTES DUE OCTOBER 27, 2007
OF
INTERAMERICAS COMMUNICATIONS CORPORATION, INC.
This form or one substantially equivalent hereto must b e used to accept
the Exchange Offer of InterAmericas Communications Corporation, Inc., a Texas
corporation (the "Company"), made pursuant to the Prospectus, dated ________,
1997 (the "Prospectus"), if certificates for the outstanding 14% Senior Notes
due October 27, 2007 of the Company (the "Existing Notes") are not immediately
available or if the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach State
Street Bank and Trust Company (the "Exchange Agent") on or prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. This Notice of
Guaranteed Delivery may be delivered or transmitted by telegram, facsimile
transmission, mail or hand delivery to the Exchange Agent as set forth below.
See "The Exchange Offer--Procedures for Tendering" in the Prospectus.
Capitalized terms used herein but not defined herein have the respective
meanings given to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
1997 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
The Exchange Agent:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand Delivery or Overnight Courier:
State Street Bank and Trust Company (For Eligible Institutions Only) State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department
P.O. Box 778 (617) 664-5232 4th Floor
Boston, MA 02102-0078 Two International Place
Attention: Sandra Szczsponik Confirm by Telephone: Boston, MA 02110
Attention: Sandra Szczsponik
(617) 664-5314
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instruments thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the aggregate principal
amount of Existing Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
1
<PAGE> 2
Signature(s) of Owner(s) or Name(s) of Holder(s):
Authorized Signatory:
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
Principal Amount of Existing Notes Tendered:* Address:
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
Certificate No(s). of Existing Notes
(if available): Area Code and Telephone No.:
- ---------------------------------- -----------------------------------
If Existing Notes
- ---------------------------------- will be delivered by book-entry
transfer at The Depository
- ---------------------------------- Trust Company, insert
Date: Depository Account No.:
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
This Notice of Guaranteed Delivery must be signed by the holder(s) of Existing
Notes exactly as its (their) name(s) appear on certificates for Private Notes or
on a security position listing as the owner of Existing Notes, or by person(s)
authorized to become holder(s) by endorsements and documents transmitted with
this Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information.
Please print name(s) and address(es)
Name(s): ------------------------------------------------------
------------------------------------------------------
Capacity: ------------------------------------------------------
Address(es)------------------------------------------------------
Do not send Existing Notes with this form. Notes should be sent to the Exchange
Agent together with a properly completed and duly executed Letter of
Transmittal.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or a correspondent in the United States,
hereby (a) represents that each holder of Existing Notes on whose behalf this
tender is being made "own(s)" the Existing Notes covered hereby within the
meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b)
represents that such tender of Existing Notes complies with such Rule 14e-4, and
(c) guarantees that, within five New York Stock Exchange trading days after the
Expiration Date, a properly completed and duly executed Letter of Transmittal
(or a facsimile thereof), together with certificates representing the Existing
Notes covered hereby in proper form for transfer (or confirmation of the
book-entry transfer of such Existing Notes into the Exchange Agent's account at
The Depository Trust Company, pursuant to the procedure for book-entry transfer
set forth in the Prospectus) and required documents will be deposited by the
undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of Transmittal
and Existing Notes tendered hereby to the Exchange Agent within the time period
set forth above and that failure to do so could result in financial loss to the
undersigned.
Name of Firm:
-------------------------- ----------------------------------
Authorized Signature
Name:
-----------------------------
Address: Title:
-----------------------------
Area Code and Telephone No.: Date:
------------- -----------------------------
2
<PAGE> 1
EXHIBIT 99.3
November , 1997
EXCHANGE AGENT AGREEMENT
State Street Bank and Trust Company
Corporate Trust Administration, CT/OP/0238
777 Main Street
Hartford, CT 06115
Attention: Frank McDonald
Vice President
Dear Mr. McDonald:
InterAmericas Communications Corporation, a Texas corporation (the
"Company"), proposes to make an offer (the "Exchange Offer") to exchange up to
$150,000,000 aggregate principal amount of its 14% Senior Notes due October 27,
1007 (the "New Notes"), for a like principal amount of its outstanding 14%
Senior Subordinated Notes due October 27, 2007 (the "Existing Notes"). The terms
and conditions of the Exchange Offer are set forth in a prospectus (the
"Prospectus") included in the Company's registration statement on Form S-4 (File
No. 333-_____), as amended (the "Registration Statement"), filed with the
Securities and Exchange Commission (the "SEC"), proposed to be distributed to
all record holders of the Existing Notes. The Existing Notes and the New Notes
are collectively referred to herein as the "Notes." Capitalized terms used
herein and not defined shall have the respective meanings ascribed to them in
the Prospectus.
The Company hereby appoints State Street Bank and Trust Company to act
as exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer no State Street Bank and Trust
Company.
The Exchange Offer is expected to be commenced by the Company on or
about December , 1997. The Letter of Transmittal accompanying the Prospectus is
to be used by the holders of the Existing Notes to accept the Exchange Offer and
contains instructions with respect to the delivery of certificates for New Notes
tendered.
The Exchange Offer shall expire at 5:00 P.M., New York City time, on January ,
1997, or on such later date or time to which the Company may extend the Exchange
Offer (the "Expiration Date"). Subject to the terms and conditions set forth in
the Prospectus, the Company expressly reserves the right to extend the Exchange
Offer from time to time, and may extend the Exchange Offer by giving oral
(confirmed in writing) or written notice to you before 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
The Company expressly reserves the right, in its sole discretion, to
amend or terminate the Exchange Offer, and not to accept for exchange any New
Notes not theretofore accepted for exchange. The Company will give oral
(confirmed in writing) or written notice of any amendment, termination or
nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer", in the Letter of Transmittal accompanying the Prospectus or as
specifically set forth herein; provided, however, that in no way will your
general duty to act in good faith and without gross negligence or willful
misconduct be limited by the foregoing.
<PAGE> 2
2. You will establish an account with respect to the New Notes at
The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes
of the Exchange Offer within two business days after the date of the Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the New Notes by causing the
Book-Entry Transfer Facility to transfer such New Notes into your account in
accordance with the Book-Entry Transfer Facility's procedures for such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Existing Notes (and confirmation of book-entry transfers of
Existing Notes into your account at the Book-Entry Transfer Facility) and any
other documents delivered or mailed to you by or for holders of the New Notes,
to ascertain whether: (i) the Letters of Transmittal, certificates and any such
other documents are duly executed and properly completed in accordance with
instructions set forth therein and that such book-entry confirmations are in due
and proper form and contain the information required to be set forth therein,
and (ii) the Existing Notes have otherwise been properly tendered. In each case
where the Letter of Transmittal or any other document has been improperly
completed or executed, or where book-entry confirmations are not in due and
proper form or omit certain information, or any of the certificates for Existing
Notes are not in proper form for transfer or some other irregularity in
connection with the acceptance of the Exchange Offer exists, you will endeavor
to inform the presenters of the need for fulfillment of all requirements and to
take any other action as may be necessary or advisable to cause such
irregularity to be corrected.
4. With the approval of the Chairman, the President and Chief
Executive Officer, the Chief Financial Officer (such approval, if given orally,
to be confirmed in writing) or any other person designated by such an officer in
writing, you are authorized to waive any irregularities in connection with any
tender of Existing Notes pursuant to the Exchange Offer.
5. Tenders of Existing Notes may be made only as set forth in the
Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer-Procedures for Tendering", and Existing Notes shall be considered
properly tendered to you only when tendered in accordance with the procedures
set forth therein. Notwithstanding the provisions of this paragraph 5, Existing
Notes which the Chairman, President and Chief Executive Officer or the Chief
Financial Officer or any other officer of the Company designated by any such
person shall approve as having been properly tendered shall be considered to be
properly tendered (such approval, if given orally, shall be confirmed in
writing).
6. You shall advise the Company with respect to any Existing
Notes received subsequent to the Expiration Date and accept its instructions
with respect to disposition of such Existing Notes.
7. You shall accept tenders:
(a) in cases where the Existing Notes are registered in two or
more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Existing
Notes provided that customary transfer requirements, including those regarding
any applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Existing Notes when so indicated
and as permitted in the Letter of Transmittal and deliver certificates for
Existing Notes to the transfer agent for split-up
2
<PAGE> 3
and return any untendered Existing Notes to the holder (or such other person as
may be designated in the Letter of Transmittal) as promptly as practicable after
expiration or termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, the Company will notify you (such notice if given orally, to be
confirmed in writing) of its acceptance, promptly after the Expiration Date, of
all Existing Notes properly tendered and you, on behalf of the Company, will
exchange such Existing Notes for New Notes and cause such Existing Notes to be
canceled. Delivery of New Notes will be made on behalf of the Company by you at
the rate of $1,000 principal amount of New Notes for each $1,000 principal
amount of the Existing Notes tendered promptly after notice (such notice if
given orally, to be confirmed in writing) of acceptance of said Existing Notes
by the Company; provided, however, that in all cases, Existing Notes tendered
pursuant to the Exchange Offer will be exchanged only after timely receipt by
you of certificates for such Existing Notes (or confirmation of book-entry
transfer into your account at the Book-Entry Transfer Facility), a properly
completed and, except as described in the section of the prospectus captioned
"The Exchange Offer-Procedures for Tendering", duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees and
any other required documents. Unless otherwise instructed by the Company, you
shall issue New Notes only in denominations of $1,000 or any integral multiple
thereof.
9. Tenders, pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and upon the conditions set forth in the
Prospectus and the Letter of Transmittal, Existing Notes tendered pursuant to
the Exchange Offer may be withdrawn at any time on or prior to the Expiration
Date in accordance with the terms of the Exchange Offer.
10. The Company shall not be required to exchange any Existing
Notes tendered if any of the conditions set forth in the Exchange Offer are not
met. Notice of any decision by the Company not to exchange any Existing Notes
tendered shall be given (and confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not
accept for exchange all or part of the Existing Notes tendered because of an
invalid tender, the occurrence of certain other events set forth in the
Prospectus or otherwise, you shall as soon as practicable after the expiration
or termination of the Exchange Offer return those certificates for unaccepted
Existing Notes (or effect appropriate book-entry transfer), together with any
related required documents and the Letter of Transmittal relating thereto that
are in you possession, to the persons who deposited them (or effected such
book-entry transfer).
12. All certificates for reissued Existing Notes, unaccepted
Existing Notes or for New Notes (other than those effected by book-entry
transfer) shall be forwarded by (a) first-class certified mail, return receipt
requested, under a blanket surety bond obtained by you protecting you and the
Company form loss or liability arising out of the nonreceipt or nondelivery of
such certificates or (b) by registered mail insured by you separately for the
replacement value of each of such certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or other solicitation fees to any broker, dealer, commercial bank,
trust company or other nominee or to engage or use any person to solicit
tenders.
14. As Exchange Agent hereunder, you:
(a) shall have no duties or obligations other than those
specifically set forth in the Prospectus, the Letter of Transmittal or herein or
as may be subsequently agreed to in writing by you and the Company;
3
<PAGE> 4
(b) will be regarded as making no representations and having
no responsibilities as to the validity, sufficiency, value or genuineness of any
of the certificates for the Existing Notes deposited with you pursuant to the
Exchange Offer, and will not be required to and will make no representation as
to the validity, value or genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action hereunder
which might in your reasonable judgment involve any expense or liability, unless
you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in acting in
reliance upon any certificate, instrument, opinion, notice, letter, telegram or
other document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its due
execution and validity and effectiveness of its provisions, but also as to the
truth and accuracy of any information contained therein, which you shall in good
faith believe to be genuine or to have been signed or represented by a proper
person or persons;
(f) may rely on and shall be protected in acting upon written
or oral instructions from any officer of the company;
(g) may consult with you counsel with respect to any questions
relating to your duties and responsibilities, and the written opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by you hereunder in good faith
and in accordance with the written opinion of such counsel; and
(h) shall not advise any person tendering Existing Notes
pursuant to the Exchange Offer as to whether to tender or refrain from tendering
all or any portion of Existing Notes or as to the market value, decline or
appreciation in market value of any Existing Notes that may or not occur as a
result of the Exchange Offer or as to the market value of the New Notes;
provided, however, that in no way will your general duty to act in good faith
and without gross negligence or willful misconduct be limited by the foregoing.
15. You shall take such action as may from time to time be
requested by the Company or its counsel (and such other action as you may
reasonably deem appropriate) to furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery (as defined in the Prospectus)
or such other forms as may be approved from time to time by the Company, to all
persons requesting such documents and to accept and comply with telephone
requests for information relating to the Exchange Offer, provided that such
information shall relate only to the procedures for accepting (or withdrawing
from ) the Exchange Offer. The Company will furnish you with copies of such
documents at your request.
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to Douglas G. Geib, II, the Chief
Financial Officer of the Company (telephone number 305/377-6790, facsimile
number 305/377-6791 and such other person or persons as the Company may request,
daily (and more frequently during the week immediately preceding the Expiration
Date and if otherwise requested) up to and including the Expiration Date, as to
the aggregate principal amount of Existing Notes which have been duly tendered
pursuant to the Exchange Offer and the items received by you pursuant to the
Exchange Offer and this Agreement, separately reporting and giving cumulative
totals as to items properly received and items improperly received. In addition,
you will also inform, and cooperate in making available to, the Company or any
such other person or persons upon oral request made from time to time prior to
the Expiration Date of such other information as it or he or she reasonably
requests. Such
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<PAGE> 5
cooperation shall include, without limitation, the granting by you to the
Company and such person as the Company may request of access to those persons on
your staff who are responsible for receiving tenders, in order to ensure that
immediately prior to the Expiration Date the Company shall have received
information in sufficient detail to enable it to decide whether to extend the
Exchange Offer. You shall prepare a final list of all persons whose tenders were
accepted, the aggregate principal amount of New Notes tendered, the aggregate
principal amount of New Notes accepted and the identity of any Participating
Broker-Dealers and the aggregate principal amount of New Notes delivered to
each, and deliver said list to the Company.
17. Letters of Transmittal, book-entry confirmations and Notices
of Guaranteed Delivery received by you shall be preserved by you for a period of
time at least equal to the period of time you preserve other records pertaining
to the transfer of securities, or one year, whichever is longer, and thereafter
shall be delivered by you to the Company. You shall dispose of unused Letters of
Transmittal and other surplus materials as instructed by the Company.
18. You hereby expressly waive any lien, encumbrance or right of
set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall
be entitled to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the
Letter of Transmittal and further acknowledge that you have examined each of
them. Any inconsistency between this Agreement, on the one hand, and the
Prospectus and the Letter of Transmittal (as they may be amended from time to
time), on the other hand, shall be resolved in favor of the latter two
documents, except with respect to the duties, liabilities and indemnification of
you as Exchange Agent, which shall be controlled by this Agreement;
21. The Company covenants and agrees to indemnify and hold you
harmless in your capacity as Exchange Agent hereunder against any loss,
liability, cost or expense, including attorney's fees and expenses arising out
of or in connection with any act, omission, delay or refusal made by you in
reliance upon any signature, endorsement, assignment, certificate, order,
request, notice, instruction or other instrument or document reasonably believed
by you to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Existing Notes reasonably believed by you in good
faith to be authorized, and in delaying or refusing in good faith to accept any
tenders or effect any transfer of New Notes; provided, however, that anything in
this Agreement to the contrary notwithstanding, the company shall not be liable
for indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of your gross negligence or willful misconduct. In no case
shall the Company be liable under this indemnity with respect to any claim
against you unless the Company shall be notified by you, by letter or cable or
by facsimile which is confirmed by letter, of the written assertion of a claim
against you or of any other action commenced against you, promptly after you
shall have received any such written assertion or notice of commencement of
action. The Company shall be entitled to participate, at its own expense, in the
defense of any such claim or other action, and, if the company so elects, the
Company may assume the defense of any pending or threatened action against you
in respect of which indemnification may be sought hereunder, in which case the
Company shall not thereafter be responsible for the subsequently incurred fees
and disbursements of legal counsel for you under this paragraph so long as the
Company shall retain counsel reasonably satisfactory to you to defend such suit;
provided, that the Company shall not be entitled to assume the defense of any
such action if the named parties to such action include both you and the Company
and representation of both parties by the same legal counsel would, in the
written opinion of your counsel, be inappropriate due to actual or potential
conflicting interests between you and the Company. You understand and agree that
the company shall not be liable under this paragraph for the fees and expenses
of more than one legal counsel for you.
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<PAGE> 6
22. You shall arrange to comply with all requirements under the
tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required, in certain
instances, to deduct [thirty-one percent (31%)] with respect to interest paid on
the New Notes and proceeds from the sale, exchange, redemption or retirement of
the New Notes from holders who have not supplied their correct Taxpayer
Identification Number or required certification. Such funds will be turned over
to the Internal Revenue Service in accordance with applicable regulations.
23. You shall notify the Company of the amount of any transfer
taxes payable in respect of the exchange of Existing Notes and, upon receipt of
a written approval form the Company, shall deliver or cause to be delivered, in
a timely manner to each governmental authority to which any transfer taxes are
payable in respect of the exchange of Existing Notes, your check in the amount
of all transfer taxes so payable, and the Company shall reimburse you for the
amount of any and all transfer taxes payable in respect of the exchange of
Existing Notes; provided, however, that you shall reimburse the Company for
amounts refunded to you in respect of your payment of any such transfer taxes,
at such time as such refund is received by you.
24. This Agreement and your appointment as Exchange Agent
hereunder shall be construed and enforced in accordance with the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state, and without regard to conflicts of law principles.
25. This Agreement shall be binding upon and inure solely to the
benefit of each party hereto and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this agreement. Without
limitation of the foregoing, the parties hereto expressly agree that no holder
of Existing Notes or New Notes shall have any right, benefit or remedy of any
nature whatsoever under, or by reason of, this Agreement.
26. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
27. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
28. This agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part, except by
a written instrument signed by a duly authorized representative of the party to
be charged.
29. Unless otherwise provided herein, all notices, requests and
other communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given to such party, addressed to it,
at its address or telecopy number set forth below:
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<PAGE> 7
If to the Company, to:
InterAmericas Communications Corporation
1221 Brickell Avenue
9th Floor
Miami, FL 33131
Telephone: 305/377-6790
Telecopy: 305/377-6791
Attention: Douglas G. Geib, II
Chief Financial Officer
With a copy to:
Baker & McKenzie
701 Brickell Avenue
Suite 1600
Miami, FL 33131
Telephone: 305/789-8900
Telecopy: 305/789-8953
Attention: Andrew Hulsh, Esq.
If to the Exchange Agent, to:
State Street Bank and Trust Company
Corporate Trust Administration, CT/OP/0238
Hartford, CT 06115
Telephone: (860) 986-7835
Telecopy: (860) 986-7920
Attention: Frank McDonald
Vice President
30. Unless terminated earlier by the parties hereto, this
Agreement shall terminate 90 days following the Expiration Date. Notwithstanding
the foregoing, paragraphs 17, 19, 21 and 23 shall survive the termination of
this agreement. Upon any termination of this Agreement, you shall promptly
deliver to the Company any certificates for Notes, funds or property then held
by you as Exchange Agent under this Agreement.
31. This Agreement shall be binding and effective as of the date
hereof.
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
INTERAMERICAS COMMUNICATIONS CORPORATION
By:
-----------------------------------
Name:
Title:
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<PAGE> 8
Accepted as of the date
First above written:
STATE STREET BANK AND TRUST
COMPANY, as Exchange Agent
By:
----------------------------------------
Name:
Title:
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<PAGE> 9
SCHEDULE I
FEE SCHEDULE FOR
EXCHANGE AGENT SERVICES
I. ACCEPTANCE FEE Waived
Our Acceptance Fee includes review of all relevant
documentation, closing of transaction, setting up records
and opening accounts.
II. ADMINISTRATIVE FEE
Our administrative fee covers all duties of the Agent
including distributing exchange offer documents to DTC,
receipt and examination of required exchange offer
documentation, reporting to company, calculation of and
delivery to participants and DTC. Fees shall be billed
upon closing.
III. OUT OF POCKET EXPENSES As incurred
All out-of-pocket expenses including but not limited to
postage, express mail, telecopier, long distance telephone,
wire transfer charges, courier expenses, or other expense
incurred by the Bank during its acceptance and
administration shall be billed at cost as incurred.
IV. EXTRAORDINARY SERVICES
Charges for the performance of any service not of a routine
administrative nature or not contemplated at closing and
specifically covered elsewhere in this schedule of fees will
be determined by appraisal in amounts commensurate with the
service rendered.
9
<PAGE> 1
EXHIBIT 99.4
INFORMATION AGENT AGREEMENT
(the "Agreement")
InterAmericas Communications Corporation
1221 Brickell Avenue
Miami, Florida 33131
To: Kissel-Blake Inc.
110 Wall Street, 11th Floor
New York, NY 10005
From: InterAmericas Communications Corporation
1221 Brickell Avenue
Miami, Florida 33131
Date: November 17, 1997
Gentlemen:
InterAmericas Communications Corporation, a Texas corporation hereby
offers to exchange its outstanding 14% Senior Notes due October 20, 2007, on the
terms and subject to the conditions set forth in the Prospectus and related
Letter of Transmittal (which together constitute the "Exchange Offer")
substantially in the form of the documents attached hereto as Exhibits A and B,
respectively.
We hereby confirm your appointment as our Information Agent in
connection with the Exchange Offer, and by your signature below you hereby
confirm your acceptance of such appointment. You hereby further agree that your
authority and action as Information Agent shall be governed by the terms of this
Agreement, as follows:
1. DUTIES OF INFORMATION AGENT: It is understood and agreed that your
primary duties as our Information Agent will include (i) advice to and
confidential consultation with us and our authorized representative in
connection with the Exchange Offer and our related communications; (ii)
disseminating printed materials relating to the Exchange Offer (including all
amendments and supplements thereto) to brokers, securities dealers, banks, trust
companies, nominees and any noteholder of the Company who may request the same:
(iii) responding promptly and accurately to every party who contracts you as our
Information Agent requesting information pertaining to the Exchange Offer; and
(iv) initiating calls to noteholders concerning the Exchange Offer (should we so
elect). In no event will you make any premature disclosure concerning the
Exchange Offer or any recommendation, either directly or indirectly, regarding
the advisability of tendering securities pursuant to the Exchange Offer. If any
such advice is requested of you, you shall respond that you are not authorized
to give such advice and shall recommend that the person requesting such advice
consult his or her own investment advisor or broker.
2. COMPENSATION: In consideration of the services to be performed by
you in connection with the Exchange Offer, we hereby agree to pay to you a fee
of US$________ plus your ordinary and customary charges for reasonable
disbursements and expenses incurred by you in connection with the Exchange
Offer. It is further understood and agreed that one half of your fee is payable
herewith and the balance of your fee plus your compensation for disbursements
and expenses incurred by you on our behalf will be paid upon receipt by us of
your final statement, after completion, expiration or termination of the
Exchange Offer, provided however that should the Exchange Offer be extended for
more than forty-five (45) days, you reserve the right to charge an additional
fee of not in excess of $______. We understand that disbursements and expenses
include, without limitation (i) all postage, airfreight, trucking and other
delivery costs relating to the forwarding of our printed materials to brokerage
firms, banks and any noteholder of the Company who may request them; and (ii)
$2.25 per collect or toll free telephone call accepted (plus telephone line
charges) from noteholders seeking assistance or information. In the event we opt
to have you do so, we understand that the cost of initiating calls to
noteholders of record at their homes or places of business will be at the rate
of $3.75 per call (plus telephone look up and line charges).
We acknowledge that our obligations under this Section 2 are not
conditioned upon the successful consummation of the Exchange Offer or any number
of Senior Notes being exchanged pursuant to the Exchange and that in the event
of our failure to make prompt payment of your invoices for any amounts which may
become due to you under this Agreement, you shall be entitled to recover
interest compounded at 1 1/2 percent per month and reasonable costs and expenses
of collection (including reasonable fees and expenses of counsel) on any overdue
amounts from ourselves or any affiliate which may guarantee our payment and
performance at your further request.
3. INDEMNITY AND FAILURE: (a) We hereby covenant and agree to hold you
harmless and to indemnify you against any loss, claim, damage, liability or
expense (including reasonable fees and expenses of your legal counsel) arising
out of or resulting from the performance of your duties under this Agreement,
except any such loss, claim, damage, liability or expense arising out of or
resulting from your gross negligence or material breach of this Agreement.
(b) It is stipulated and agreed that the foregoing indemnification is
subject to the further condition that in no case shall we be liable with respect
to any claim against you unless we shall be notified by registered or certified
letter or by cable, telex, or telecopier message confirmed by letter of the
written assertion of a claim against you or of your involvement in any action or
proceeding, promptly after you shall have been served with a written notice of
claim, summons or other first legal process giving information as to the nature
and basis of the claim. It is further understood and agreed that upon receipt of
such notice, we shall be entitled to participate at our own expense in the
defense of any suit brought to enforce any such claim, and, if we so elect, we
shall assume your defense of any such suit. In the event that we assume the
defense of any such suit, we shall not be liable for the fees and expenses of
any additional counsel thereafter retained by you, so long as we shall retain
counsel reasonably satisfactory to you to defend such suit. In addition, you
agree not to settle any litigation in connection with any claim of liability
respect to which you may seek indemnification form us without prior written
consent.
4. ASSIGNMENT: This Agreement and appointment as Information Agent
hereunder shall inure to the benefit of, and the obligations created thereby
shall be binding upon the successors and assigns of the parties hereto, except
that if we assign this Agreement, we shall remain liable to you for the prompt
and full payment of your fees and expenses, and you may neither assign your
rights nor delegate your duties hereunder without our prior written consent.
5. INTERPRETATION:
(a) This Agreement shall be construed and enforced in accordance
with the laws of the State of New York.
(b) If any provision of this Agreement shall be held illegal,
invalid or unenforceable by any court, this Agreement shall be
construed and enforced as if such provision had not been
contained herein and shall be deemed in agreement between us
to the full extent permitted by applicable law.
(c) Section headings have been inserted for convenience of
reference only, are not part of this Agreement and shall not
be used in any way in the interpretation of any of the
provisions hereof.
Please acknowledge receipt of this Agreement and Exhibits hereto and
confirm the arrangements herein provided by signing and returning the enclosed
copy of the undersigned, whereupon this Agreement and the terms and conditions
herein provided shall constitute a binding agreement between us.
Sincerely,
- ----------------------------- -----------------------------
(Witness) (Authorized Representative)
- ----------------------------- -----------------------------
(Type Full Name of Witness) (Type Full Name and Title of
Representative)
Accepted as of this ____
day of _______, 19___.
KISSEL-BLAKE INC.
By
/s/ Donna M. Corso /s/ Joseph F. Spedale
- ----------------------------- -----------------------------
(Witness) Joseph F. Spedale
Executive Vice President &
Donna M. Corso Chief Operating Officer
Assistant Director
