-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NWhwc0JJ8Tfx9EAagLqfLXzmfaniGfEqjzjCV8fFEEnQpWJhX2IUG88xdLJvvKUX Pz6bAMq5NNiQDqE5CBel+Q== 0001193125-03-012010.txt : 20030623 0001193125-03-012010.hdr.sgml : 20030623 20030623171730 ACCESSION NUMBER: 0001193125-03-012010 CONFORMED SUBMISSION TYPE: CB PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20030623 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TELEFONICA S A CENTRAL INDEX KEY: 0000814052 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 000000000 STATE OF INCORPORATION: U3 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: CB BUSINESS ADDRESS: STREET 1: GRAN VIA 28 CITY: 28013 MADRID SPAIN MAIL ADDRESS: STREET 1: GRAN VIA 28 CITY: 28013 MADRID SPAIN STATE: U3 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL TELEPHONE COMPANY OF SPAIN DATE OF NAME CHANGE: 19880708 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TERRA NETWORKS SA CENTRAL INDEX KEY: 0001097636 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: CB SEC ACT: 1934 Act SEC FILE NUMBER: 005-50722 FILM NUMBER: 03753852 BUSINESS ADDRESS: STREET 1: PASEO DE LA CASTELLANA, NUMERO 92 STREET 2: - CITY: MADRID STATE: U3 ZIP: 28046 BUSINESS PHONE: 0113491452 MAIL ADDRESS: STREET 1: PASEO DE LA CASTELLANA, NUMERO 92 STREET 2: - CITY: MADRID STATE: U3 ZIP: 28046 CB 1 dcb.txt FORM CB ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM CB TENDER OFFER/RIGHTS OFFERING NOTIFICATION FORM Please place an X in the box(es) to designate the appropriate rule provision(s) relied upon to file this Form: [_] Securities Act Rule 801 (Rights Offering) [_] Securities Act Rule 802 (Exchange Offer) [_] Exchange Act Rule 13e-4(h)(8) (Issuer Tender Offer) [X] Exchange Act Rule 14d-1(c) (Third Party Tender Offer) [_] Exchange Act Rule 14e-2(d) (Subject Company Response) [_] Filed or submitted in paper if permitted by Regulation S-T Rule 101(b)(8) Terra Networks, S.A. (Name of Subject Company) Terra Networks, Inc. (Translation of Subject Company's Name into English (if applicable)) Kingdom of Spain (Jurisdiction of Subject Company's Incorporation or Organization) Telefonica, S.A. (Name of Person(s) Furnishing Form) American Depository Shares CUSIP 88100W103/ISIN US88100W1036 Common Stock ISIN ES0178174019 (CUSIP Number of Class of Securities (if applicable)) Antonio Alonso Ureba Joaquin de Fuentes Bardaji Telefonica, S.A. Gran Via, 28. Planta 9 28001 Madrid copies to: Richard D. Pritz Clifford Chance US LLP 200 Park Avenue New York, New York 10166 (Name, Address (including zip Code) and Telephone Number (including area code) of Person(s) Authorized to Receive Notices and Communications on Behalf of Person(s) Furnishing Form) June 23, 2003 (Date Tender Offer/Rights Offering Commenced) ================================================================================ PART I--INFORMATION SENT TO SECURITY HOLDERS Item 1. Home Jurisdiction Documents. The following document is attached to this Form CB as Exhibit A: News release issued by Telefonica announcing the offer dated June 23, 2003. Item 2. Informational Legends. This offer is made for the securities of a foreign company. The offer is subject to disclosure requirements of a foreign country that are different from those of the United States. Financial Statements included in the document, if any, have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of U.S. companies. It may be difficult for you to enforce your rights and any claim you may have arising under the U.S. federal securities laws because the offeror is located in a foreign country and some or all of its officers and directors may be residents of a foreign country. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court's judgment. PART II--INFORMATION NOT REQUIRED TO BE SENT TO SECURITY HOLDERS The following documents are attached to this Form CB as exhibits: Exhibit B: Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees dated June 23, 2003 Exhibit C: Letter to Clients dated June 23, 2003 Exhibit D: Letter of Transmittal dated June 23, 2003 Exhibit E: Letter to Record Holders Other Than Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees dated June 23, 2003 PART III--CONSENT TO SERVICE OF PROCESS On May 29, 2003, Telefonica filed with the Commission a written irrevocable consent and power of attorney on Form F-X. PART IV--SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. TELEFONICA, S.A. By: /S/ ANTONIO ALONSO UREBA ------------------------------ Name: Antonio Alonso Ureba Title: General Secretary and Secretary to the Board of Directors Date: June 23, 2003 2 EX-99.(A) 3 dex99a.txt NEWS RELEASE ISSUED BY TELEFONICA DATED JUNE 23,2003 Exhibit A TAKE-OVER BID FOR TERRA NETWORKS, S.A. LAUNCHED BY TELEFONICA, S.A. On June 19, 2003, THE SPANISH SECURITIES MARKET COMMISSION (hereinafter, "CNMV"), authorised the launching, by TELEFONICA, S.A. (hereinafter, the "BIDDER" or "TELEFONICA"), of a Take-over Bid (the "Bid") for TERRA NETWORKS, S.A. (hereinafter the "TARGET COMPANY" or "TERRA"). The Bid shall be governed by Spain's Securities Market Law 24/1998, dated July 28, 1998, by Royal Decree 1197/1991, dated July 26, 1991, and other applicable legislation, and shall be carried out according to the following: TERMS INTRODUCTION The present Bid is launched in Spain and in the United States of America. In the United States of America the Bid is addressed to the holders of shares in TERRA represented by American Depositary Shares ("ADSs"), which are listed on the United States' Nasdaq National Market. On the filing date of the Prospectus corresponding to the Bid, the number of TERRA shares represented by ADSs, according to information provided by TERRA, totaled 58,703,234 shares, of which, on June 9, 2003, 26,765,961 shares were subject to the Stock Option Plan for employees of Lycos, Inc. (a company controlled by TERRA), and 2,420,468 shares held by Lycos, Inc. were included in TERRA's treasury stock, leaving a total of 29,516,805 shares. Each of the ADSs grants the holder the right to receive one TERRA share. In accordance with Rule 14d-1(c) under the Securities Exchange Act of 1934, when 10% or less of the outstanding shares, calculated in accordance with the provisions of the aforementioned rule, of a foreign company subject to a take-over bid are owned by stockholders resident in the United States of America, the BIDDER is not obliged to present documentation otherwise required in Rule 13e-3 of the Exchange Act, and the only obligation is that the terms of the bid for the American stockholders be the same as those applicable to the rest of the stockholders, including the distribution of a translation of the documentation filed with the Spanish Securities Market Commission to the American stockholders. This documentation shall also be furnished to the Securities and Exchange Commission (hereinafter the "SEC") using a Form CB, at the latest on the day after the documentation is made available to the public in Spain. As a result, given that the information held by TELEFONICA demonstrates that, in accordance with applicable rules, less than 10% of the TERRA shares are owned by residents of the United States of America, TELEFONICA considers that this Bid is subject to the aforementioned regulations. On May 29, 2003, one day after the present Bid was announced in Spain on May 28, 2003, the corresponding Form CB was filed with the SEC by attaching a copy in English of the relevant facts and the press article published in Spain, together with a Form F-X communicating the appointment of an agent for service of process in the United States of America. In addition, TELEFONICA, after the present Bid is authorised in Spain, shall send English versions of the Prospectus together with any necessary complementary documentation to the holders of ADSs. Likewise, this documentation shall be filed with the SEC using a Form CB. Finally, and with regard to the procedure for the holders of TERRA shares represented by ADSs to accept the present Bid, please refer to section III.5. I. SUBJECTIVE ELEMENTS OF THE BID The target company of this Bid is TERRA, with a registered address at Calle Nicaragua n(0) 54, Barcelona, and holding Fiscal Identification Code number A-82/196080. The bidder is TELEFONICA, with a registered address in Madrid, Gran Via n(0) 28, and holding Fiscal Identification Code number A-28/015865. On May 28, 2003, the Board of Directors of the BIDDER adopted the necessary resolutions to launch the present Bid. TELEFONICA directly owns 230,792,328 shares in the share capital of TERRA, representing 38.37% thereof. Likewise, Telefonica del Peru, S.A. and Compania de Telecomunicaciones de Chile, S.A., companies controlled by the BIDDER, hold, respectively, 2,238,739 (0.37%) and 2,984,986 (0.50%) shares of TERRA. Furthermore, according to information provided by TERRA, TERRA does not hold any of its own shares directly, however it has a restricted reserve of Euros 1,858,000 corresponding to a total of 2,420,468 shares, held indirectly, on the date of this announcement, through Lycos, Inc., representing 0.402% of the share capital of TERRA. TELEFONICA exercises control over TERRA in accordance with the provisions of Article 4 of the Securities Market Law 24/1988 and Article 42 of the Spanish Commercial Code, as indicated in the Prospectus of the Bid. II. OBJECTIVE ELEMENTS OF THE BID II.1. Securities covered by the Bid. The Bid covers 100% of the shares of TERRA, that is, 601,467,915 shares with a nominal value of Euros 2.00 each. However, the shares of TERRA which TELEFONICA directly owns, i.e. 230,792,328 shares, which represent 38.37% of its share capital, shall not be included in the Bid and have been frozen until the date of publication of the result of the Bid in the corresponding Gazettes of Listed Securities. Pursuant to the foregoing, the aim of the Bid is to acquire 370,675,587 shares of TERRA (61.63% of its share capital) which, together with the frozen shares, amount to 100% of the shares of the TARGET COMPANY. The stockholders to which the Bid is addressed include: (a) the indirect stake held by TELEFONICA through Telefonica del Peru, S.A. (0.37% of the share capital) and Compania de Telecomunicaciones de Chile, S.A. (0.5% of the share capital); (b) the treasury stock of TERRA held by Lycos, Inc. (0.40%); and (c) TERRA shares subject to the Stock Option Plans for employees of TERRA and Lycos, Inc. (6.77%). The shares covered by the Bid shall be transferred by the person authorised to do so, free of liens and encumbrances or third party rights, so that the BIDDER acquires full title pursuant to the provisions established in Article 9 of the Spanish Securities Market Law, including any voting and economic rights that are inherent thereto at the time the Bid is launched. The terms of the Bid are identical for all shares to which this Bid is addressed. II.2. Consideration offered for the securities. The BIDDER offers the stockholders of TERRA the amount of Euros 5.25 for each share of TERRA. Consideration shall be paid in cash. II.3. Maximum number of shares covered by the Bid and minimum number to be acquired in order for the Bid to be effective. a) Maximum This Bid shall cover all the shares making up TERRA's share capital, i.e. 601,467,915 shares. Nevertheless, and as mentioned above, TELEFONICA has frozen 230,792,328 shares of TERRA (38.37%) which shall not accept the Bid and, consequently, the Bid effectively covers 370,675,587 shares, representing 61.63% of TERRA's share capital. b) Minimum The effectiveness of the Bid is conditional upon TELEFONICA acquiring a number of TERRA shares which, together with the 230,792,328 shares (38.37%) of the TARGET COMPANY that it already directly owns and which have been frozen until the result of the Bid is published, enable at least 75% of the share capital, i.e. 451,100,937 shares, to be directly acquired by the BIDDER. Consequently, compliance with said condition would entail acquiring a minimum of 220,308,609 shares of the TARGET COMPANY (36.63%). Therefore, if as a result of the present Bid, TELEFONICA only reached the minimum percentage to which the Bid is subject and the indirect stake held through Telefonica de Peru, S.A. and Compania de Telecomunicaciones de Chile, S.A. were not covered by the Bid, TELEFONICA's direct and indirect stake in TERRA after the Bid would then be 75.87% of the share capital of TERRA, without counting the aforementioned treasury stock. The BIDDER expressly reserves the right to waive the minimum number of shares to which the Bid is subject, without any decision whatsoever having been adopted in this regard at the date of the Prospectus. c) BIDDER's Commitments The BIDDER declares its commitment that, neither it, acting on its own behalf or through an intermediary, nor any company of its group, shall acquire shares, either directly or in a concerted manner, in the TARGET COMPANY by any means other than the Bid procedure from the time it was announced on May 28, 2003 until its end. If the Bid is unsuccessful, the BIDDER, the members of its management body, its senior executive staff and any person acting in concert with the same, may not launch another take-over bid until six months have elapsed since the date of publication of the Bid's result, nor may they acquire securities in said period which would require a bid to be launched. II.4. Guarantees established by the BIDDER for settlement of the Bid. In order to guarantee the payment of the consideration offered, the BIDDER has opened a cash account at Banco Bilbao Vizcaya Argentaria, S.A. for a total of Euros 1,946,046,832, an amount which has been irrevocably attached to the settlement of the Bid. II.5. Financing of the Bid. TELEFONICA shall use the funds deposited in Banco Bilbao Vizcaya Argentaria, S.A., referred to in section II.4 above, to acquire the shares of TERRA to which this Bid is addressed. Said deposit was established with excess treasury from the BIDDER, without using any available credit facilities to do so. TELEFONICA's net debt shall be increased by the same amount in which its treasury is decreased. The TARGET COMPANY will not incur any debt as a result of this Bid. III. FORMAL ELEMENTS OF THE BID III.1. Acceptance period. The acceptance period of the present Bid shall be one month as from the date of publication of the first of the announcements of the Bid, pursuant to the provisions established in Article 18 of Royal Decree 1197/1991 dated July 26, 1991 (said announcements, according to this Article, shall be published in the Official Gazette of the Mercantile Registry, in the Gazettes of Listed Securities of the Securities Markets of Madrid, Barcelona, Bilbao and Valencia, and in two newspapers, one of them distributed nationally and the other widely distributed in the place of the TARGET COMPANY's registered address). For these purposes, a month shall be counted from date to date. If the first day of the term is not a business day for the purposes of the Spanish Computer Assisted Trading System ("SIBE"), the acceptance period shall begin on the next business day for SIBE purposes; and if the last day of the term is not a business day, the acceptance period shall be automatically extended until midnight on the next immediate business day for SIBE purposes. Pursuant to the provisions established in Article 19 of Royal Decree 1197/1991, as long as the two-month legal maximum is not exceeded, the BIDDER may extend the period of acceptance initially established with the prior authorisation of the CNMV and shall announce the extension in the same media in which the announcement of the Bid was published, at least three days before the end of the initial acceptance period. III.2. Formalities relating to the acceptance and manner and term in which the consideration shall be received. III.2.1 Formalities related to the acceptance of the Bid. (i) Declarations of acceptance of the Bid shall be unconditional and irrevocable, and any tenders which do not meet these requirements shall be deemed invalid and shall not be accepted. Holders who wish to declare their acceptance of the Bid should do so by any official means to the Governing Body of the Securities Markets of Madrid, Barcelona, Bilbao, Valencia, within the period indicated through any entity which is a member of the market and said entity shall be responsible for the title and possession of the shares to which the acceptances refer, as well as for the non-existence of any liens or encumbrances or third-party rights which restrict the voting or economic rights of such shares or the free transferability thereof. Each declaration of acceptance of the Bid made by a TERRA stockholder before the corresponding entity shall include all the identification details required under current law for this type of transaction. Such declaration of acceptance shall also include all the necessary details on the title of the TERRA shares in order to formalise the transfer thereof to the BIDDER. (ii) Each TERRA stockholder may require the entity, through which it is processing its acceptance, to provide a receipt proving that the acceptance was processed, in accordance with applicable procedural rules. (iii) Under no circumstances shall the BIDDER accept securities of which the registration references were subsequent to the last day of the acceptance period of this Bid, i.e. the shares offered for sale must have been purchased, at the latest, on the last day of the acceptance period of the Bid. III.2.2. Settlement procedure and delivery of consideration for the Bid. Upon the Bid expiration, or of any period resulting from the extension or modification thereof, as the case may be, the Governing Bodies of the Securities Markets of Madrid, Barcelona, Bilbao and Valencia shall notify the CNMV, within a maximum of five business days, of the total number of shares included in the declarations of acceptance presented. Once the CNMV knows the total number of acceptances, it shall notify the Governing Bodies of the Securities Markets of Madrid, Barcelona, Bilbao and Valencia, and TELEFONICA and TERRA, within three days, of the positive or negative result of the Bid. The Governing Bodies shall publish this result no later than the following day in the corresponding Gazettes of Listed Securities. The publication date of the result of the Bid shall be the date of the session to which said Gazettes refer. The acquisition of the shares shall be settled by either BBVA BOLSA SV S.A. or INVERCAIXA VALORES, S.V., S.A., who shall act on behalf of the BIDDER in accordance with the appointment set forth in section III.4 below. The settlement and payment of the consideration offered shall be made following the procedure established for this purpose by the Management Company for the Registry, Clearing and Settlement of Securities (IBERCLEAR); the trading date of the corresponding securities market transaction shall refer to the date of publication of the result of the Bid in the Gazettes of Securities Listed on the Securities Markets of Madrid, Barcelona, Bilbao and Valencia. Should the BIDDER not acquire the minimum established in section II.3, the BIDDER may waive said condition, acquiring all the securities offered, although on the date of the Prospectus, the BIDDER has made no decision in this regard. In the event that the minimum is not reached, TELEFONICA undertakes, within 3 days of being informed of the result of the Bid by the CNMV, to notify the CNMV of its decision whether or not to waive the minimum limit conditioning the Bid. In any event, the aforementioned notification shall be made public by the BIDDER in the manner foreseen in Article 18.1 of Royal Decree 1197/91, on the day after said notification. III.3. Acceptance and settlement expenses of the Bid. The stockholders of TERRA who accept the Bid shall bear and pay the corresponding fees for the participation of a stockbroker in the transaction, the charges of the corresponding Governing Bodies of the Securities Markets and the IBERCLEAR settlement, as well as any other expense incurred by the seller relating to the sale and purchase. Expenses incurred by TELEFONICA shall be borne by the BIDDER. In the event that the Bid is unsuccessful, all expenses derived from the acceptance and return of the documents confirming the ownership of the securities which were provided by those who accepted the Bid, shall be borne by TELEFONICA. III.4. Appointment of the Stockbrokers acting on behalf of the BIDDER. The BIDDER has appointed BBVA BOLSA, S.V., S.A., with a registered address at Gran Via 12, 48001 Bilbao, holding Fiscal Identification Code number A-28/718112, and INVERCAIXA VALORES, S.V., S.A., with a registered address at Avenida Diagonal, 621-629, 08028 Barcelona, holding Fiscal Identification Code number A-58/483124 as the entities in charge of settling the share purchase transactions that may result from this Bid and which are processed by the Governing Bodies of the Securities Markets of Madrid, Barcelona, Bilbao and Valencia. III.5. Formalities for the acceptance of the Bid in the case of TERRA shares represented by American Depositary Shares ("ADSs"). With regard to the acceptance of the Bid in the case of TERRA shares represented by ADSs listed on the Nasdaq National Market, TELEFONICA has appointed Citibank N.A. (hereinafter, "Citibank"), acting through its office at 111 Wall Street, New York, New York 10005, USA, as Agent for the Bid in the United States of America. Any holder of ADSs wishing to accept the present Bid with the shares in TERRA represented by its ADSs may contact Citibank directly, attaching to its acceptance a certificate confirming ownership, or the banks, brokers or trustees where the ADSs are deposited or, if applicable, by means of the book-entry system of The Depository Trust Company ("DTC") if it has its ADSs registered with such company, notifying that it intends to accept the present Bid within the periods established to this end in the Prospectus. Citibank shall send more detailed instructions on this procedure directly to the holders of ADSs. For the purposes of Article 27 of Royal Decree 1197/1991 dated July 26, 1991, governing take-over bids, Citibank shall notify a member of the Spanish market, immediately and, in any event, within a maximum of two securities market working days from the end of the period for the acceptance of the present Bid, of the total number of shares represented by ADSs that have accepted the Bid, so that said member of the market may inform the Governing Bodies of the Securities Markets within said term, of the total number of shares included in the declarations of acceptance presented. Settlement and payment of the consideration offered will be carried out in accordance with the provisions of section III.2.2 above, whereby, once Citibank receives the corresponding funds in Euros, it will pay the holders of the ADSs the price of the consideration in U.S. dollars at the applicable Euro/U.S. Dollar rate of exchange available at that time in the open market, less any fees, taxes and expenses corresponding to the transaction, which shall be listed in the aforementioned instructions to be sent to the holders of the ADSs. These fees and expenses shall include the acceptance and settlement expenses listed in section III.3 above and the treatment of which is described in this section. IV. OTHER INFORMATION IV.1. Objective of the Bid and future activity of the TARGET COMPANY. TELEFONICA's objective in filing this Bid is to increase its holding in TERRA, in order to obtain full control and to further integrate the two companies, in accordance with the terms set out below. On February 12, 2003, the two companies executed a Strategic Alliance Framework Agreement (hereinafter, the "Framework Agreement"), a long-term agreement designed for both companies to take advantage of TELEFONICA's capacity as a provider of connectivity and broadband and narrowband access, and TERRA's capacity as an Internet portal, aggregator, provider and manager of Internet content and services, in fixed telephony, so that both companies may capture the synergies and savings generated by the Internet, a complex and ever-changing business sector. However, this business model could offer even greater potential for TERRA and TELEFONICA if all aspects of the same are developed fully. To this end, achieving the highest degree of integration of operations permitted by the market and current regulations appears to be the best strategy for overcoming as far as possible the main factors which condition the evolution of the business model, which are basically as follows: o The flexibility and freedom in business needed both to boost growth in demand and to improve positioning in the competitive market. o The efficiency of operations that the drastic decrease in the margins of these products and services demands. o The increase in investment required for development, due to the technological complexity of the platforms and the capacity requirements for access to and transmission of information. o Growing customer demand for products and services that integrate connectivity, Internet access, and value-added services and content. In an attempt to fulfil these conditions, the general plan for the subsequent development of the business model would be based on the following factors: o The operation of TERRA as a specific line of business in order to maximise the potential of its trademark and Internet capacities (with particular emphasis on the residential and professional segments), while streamlining its structural and management resources; o The integration of TERRA with the fixed telephony operators in markets in which operators of the TELEFONICA Group have a presence; o Establishing TERRA as the unit integrating the TELEFONICA Group's online content offer; and o Bolstering the integrated offer of connectivity products and services, Internet access and value-added content and services, to customers of the TELEFONICA Group. Given TELEFONICA's current holding in TERRA and the nature of the factors which would permit the expansion of the new business model, TELEFONICA believes it is necessary for it to increase its control over TERRA by increasing its stake therein, which shall enable an improved development and growth in the Internet business of the TELEFONICA Group, by bringing the interests of both companies closer together and adequately integrating them into the value chain of the Internet business. To do this, TELEFONICA has decided to direct the Bid at all the shares of TERRA in order to obtain the highest percentage possible of its share capital. The development of the business model which TELEFONICA intends to boost pursues a greater integration of TERRA with fixed telephony operators and TELEFONICA Group data and with its corporate units that are involved in the management and purchase of content, in the manner described below. Activity, Assets and Liabilities. The BIDDER has no plans regarding the assets of the TARGET COMPANY other than to use and, as the case may be, restructure those assets, at any given time, in the manner which it deems most appropriate in order for the TARGET COMPANY to carry out its activities according to the business model described in section IV.1 above. Thus, with regard to the markets on which TELEFONICA is present through fixed telephony operators, and as it increases its stake in TERRA, TELEFONICA's plan is to carry the integration further by increasing the level of services provided by TELEFONICA to TERRA and the use of the TERRA trademark as such when offering the portals in certain customer segments and, if applicable, in Internet access. TELEFONICA shall boost its range of services, portals and Internet content through TERRA's trademark and capacities, together with the assets the BIDDER has in this sector. In the remaining markets, the possibility shall be examined of offering additional telecommunications services on TERRA's Internet portals, together with a greater centralisation of operations management, combined with other mobile telephony business and TELEFONICA Group data. With respect to Lycos, TELEFONICA wishes that it be managed with the highest level of flexibility and independence that is demanded by the world's leading Internet market, i.e. the US market. In relation to third party arrangements and agreements which TERRA currently has in order to develop its range of contents and portals, TELEFONICA intends to maintain them and to gradually analyse their progress according to their results, degree of complementarity and adequacy for the construction of its range of portals and Internet services. However, if the future criteria regarding profitability and generation of value for the stockholders of TERRA and, indirectly, of TELEFONICA, render it advisable to expand, transfer, restructure, cease or reduce any of the TARGET COMPANY's activities or restrict the same to certain geographic areas, the BIDDER would proceed to analyse the plan of action appropriate for the assets relevant to such activities without there being an intention whatsoever in this regard at the date of the Prospectus. At the date of the Prospectus, TELEFONICA has no plans to significantly alter TERRA's level of debt or to modify its share capital figure. Likewise, at the date of the Prospectus, no substantial modification is envisaged of TERRA's employment policy, except as derived from the materialisation of the synergies referred to in section IV.2 below. TELEFONICA has not signed any agreement, nor has it assumed any undertaking whatsoever, with respect to maintaining any company, line of business or asset within TERRA's company group. Finally, TELEFONICA has no plans to carry out any merger, spin-off, transformation or transfer which may directly or indirectly affect TERRA, the companies of its group, or any of its lines of business, or significant assets of TERRA, or to transfer the shares of the TARGET COMPANY to third parties after this Bid. Nevertheless, the possibility remains of these alternatives being considered in the future. In any case, it should be taken into account that the evolution of rapidly changing Internet markets may lead to a change in some of the aforementioned plans, which may advise the taking of decisions different from those envisaged herein. Changes to the By-laws and management body. The BIDDER does not intend to modify the By-laws of TERRA after this Bid. If the Bid is successful, TELEFONICA intends to renew the Board of Directors of TERRA, in order to increase its presence on the same according to the shareholding acquired after the Bid. In any case, pursuant to current regulations and the recommendations that are generally accepted in good government practice, TELEFONICA intends to maintain independent directors on the Board of Directors, according to the resulting shareholding structure following the Bid under the Prospectus. Trading of the securities of the TARGET COMPANY. Given that the present Bid is not a de-listing bid, TELEFONICA does not intend to apply for the de-listing of TERRA's shares through this Bid. Notwithstanding the foregoing, if as a result of the present Bid the distribution of TERRA shares does not allow adequate trading frequency and liquidity, TELEFONICA undertakes to adopt, within a term of 6 months following the end of the Bid, any measures that are necessary to maintain the listing of the TERRA shares or to apply for their de-listing in compliance with any applicable requirements including, as the case may be, the launching of a de-listing take-over bid in the aforementioned term. IV.2. Impact of this operation on the BIDDER The acquisition of shares in TERRA will not affect the BIDDER's dividend policy. TELEFONICA intends to maintain its current dividend policy based on expected cash flow generated by its operations. The price of the Bid, taking as a reference TERRA's consolidated group financial statements at March 31, 2003, adjusted with the share capital decrease registered in June, shall generate an additional goodwill in TELEFONICA of approximately Euros 72 million. This goodwill shall be amortised over a term of ten years, at a rate of Euros 7.2 million per year, according to TELEFONICA's current accounting policy. Assuming that the Bid is 100% accepted, the estimated negative impact of the same on the consolidated results of the BIDDER in the 2003 financial year, and if the new stake acquired were consolidated for a period of 6 months, would amount to Euros 50.3 million, an amount which includes the proportional amortisation of the goodwill, financial results after tax and the allocation of results of the acquired stake. On the other hand, in the event of reaching the minimum number of shares to which the Bid is subject, TERRA shall be necessarily integrated into TELEFONICA's consolidated fiscal group in the next financial year, i.e. in 2004. Consequently, as from that time, the positive or negative taxable base obtained by TERRA in each financial year shall be integrated into the Group's consolidated tax base. Likewise, any credits or other tax benefits accrued by TERRA shall be added and used by the consolidated fiscal group of which TELEFONICA is the controlling company. This impact, amongst others, has been taken into account to establish the minimum 75% limit referred to in section II.3.b) above. However, the negative taxable bases and tax benefits generated to date by the TARGET COMPANY, pending offset, may only be offset in the consolidated tax base of the TELEFONICA Group up to the maximum allowed by the individual positive tax base generated by TERRA itself in each financial year. In the event that any corporate operation were carried out in the future which affected TERRA (merger, spin-off or others), the treatment of said bases and tax benefits shall depend on the specific operation eventually carried out. Assuming that the Bid is 100% accepted, the consolidated debt ratio(1) of the TELEFONICA Group, based on the financial statements at March 31, 2003, would be 47.6%, as opposed to 45.5% before the operation. As a result of integrating the businesses, making a joint effort in markets where TELEFONICA is present and eliminating redundant functions and competencies in its /1/ Debt ratio: Net debt / (Own resources + External stockholders + Income to be distributed + Long-term debt with public administrations + Net debt). Net debt: Long-term creditors (excluding minority stockholder debt) + Issues and bank debt--Long-term and short-term financial investments--Treasury. - ------------------------ positioning, TELEFONICA expects to be able to generate synergies with this operation; as regards income, by repositioning the business in order to boost the growth of the broadband market, increasing the Group's Internet market share, increasing customer income and margins; as regards expenses and investment resources allocated to the business, by restructuring the business and eliminating redundancies, streamlining its work centres and saving on management and administration costs, integrating the services and product development units, improving the efficiency of content purchase and production and generating savings in marketing and commercial campaigns. As a result of all the foregoing, TELEFONICA expects to generate an additional operating margin of Euros 14.2 million in the final quarter of 2003, increasing this forecast to Euros 268.9 million for the period 2003-2006, including said quarter. IV.3. Availability of the Prospectus. Pursuant to the provisions of Article 18.3 of Royal Decree 1197/1991, dated July 26, 1991 the Prospectus and its supporting documentation has been made available to the interested parties, and was deposited at the Governing Bodies of the Securities Markets in Madrid, Barcelona, Bilbao and Valencia; at the registered address of TELEFONICA (Calle Gran Via, n(0) 28, 28013, Madrid); at the registered address of TERRA (Calle Nicaragua, n(0) 54, 08029, Barcelona); at the registered address of BBVA BOLSA S.V., S.A. (Gran Via 12, 48001, Bilbao); and at the registered address of INVERCAIXA VALORES S.V., S.A. (Avda. Diagonal, 621-629, 08028, Barcelona), on the day after the publication of the first of the announcements concerning this Bid. Furthermore, the Prospectus and its supporting documentation may be consulted in the public records of the CNMV in Madrid (Paseo de la Castellana 15) and at its representative office in Barcelona (Paseo de Gracia 19), as well as on the CNMV website (in the latter case, only the Prospectus shall be available). In Madrid, on June 18, 2003 TELEFONICA, S.A. The U.S. Information Agent for the Offer is: [GEORGESON LOGO] 17 State Street, 10th Floor New York, New York 10004 Banks and Brokers Call: (212) 440-9800 All Others Call Toll Free: (800) 249-1370 EX-99.(B) 4 dex99b.txt LETTER TO BROKERS, DEALERS, COMMERCIAL BANKS DATED JUNE 23, 2003 Exhibit B TENDER OFFER for all of the Ordinary Shares represented by American Depositary Shares of TERRA NETWORKS, S.A. by TELEFONICA, S.A. for cash in the amount of the U.S. dollar equivalent of Euro 05.25 per Ordinary Share tendered THE TENDER OFFER COMMENCES ON MONDAY, JUNE 23, 2003 -------------------------------------------------- THE TENDER OFFER WILL EXPIRE AT 6:00 P.M., NEW YORK CITY TIME, ON WEDNESDAY, JULY 23, 2003 UNLESS THE TENDER OFFER IS EXTENDED ---------------------------------------------------------------------------- NO WITHDRAWAL RIGHTS WILL BE AVAILABLE ALL TENDERS ARE UNCONDITIONAL AND IRREVOCABLE To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Telefonica, S.A., a company organized under the laws of the Kingdom of Spain ("Telefonica" or the "Company"), is making an offer (the "Tender Offer") of cash in the amount, without interest, of the U.S. dollar equivalent of Euro 05.25 (net of applicable fees, taxes and expenses including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery to the Terra Shares represented thereby, in an amount not exceeding U.S.$0.04 per Terra ADS cancelled) for each outstanding ordinary share, par value Euro 02.00 per share (the "Terra Shares") of Terra Networks, S.A., a company organized under the laws of the Kingdom of Spain ("Terra"), including Terra Shares represented by American Depositary Shares (the "Terra ADSs"), each Terra ADS representing one Terra Share, upon the terms and subject to the conditions set forth in the enclosed Prospectus for the Take-Over Bid Launched by Telefonica, S.A. for Terra Networks, S.A., authorized by the Comision Nacional del Mercado de Valores of Spain (the "CNMV") on June 19, 2003 and dated June 18, 2003 (the "Prospectus"). Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Terra ADSs in your name or in the name of your nominee. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. The Prospectus; 2. A Letter of Transmittal for your use in accepting the Tender Offer and tendering Terra ADSs and for the information of your clients; and 3. A printed form of letter that may be sent to your clients for whose accounts you hold Terra ADSs, with space provided for obtaining such clients' instructions with regard to the Tender Offer. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE AS THE TENDER OFFER WILL EXPIRE AT 6:00 P.M., NEW YORK CITY TIME, ON WEDNESDAY, JULY 23, 2003, UNLESS THE TENDER OFFER IS EXTENDED. Please note the following: 1. Tender Agent: Citibank, N.A. has been appointed as Tender Agent by the Company for the Tender Offer. 2. Information Agent: Georgeson Shareholder has been appointed as Information Agent by the Company for the Tender Offer. Any questions you may have with respect to the ways in which Terra Shares may be tendered in the form of Terra ADSs in the Tender Offer should be directed to the Information Agent at (800) 249-1370. 3. Securities Subject to the Tender Offer: The Tender Offer is being made for all issued and outstanding Terra Shares, including Terra Shares represented by Terra ADSs. Holders of Terra Shares represented by Terra ADSs validly tendered in the Tender Offer will receive cash, without interest, in the amount of the U.S. dollar equivalent of Euro 05.25 (after deduction of applicable fees, taxes and expenses, including, without limitation, fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of such Terra ADSs and delivery of the Terra Shares represented thereby in an amount not exceeding U.S. $0.04 per Terra ADS cancelled) for each Terra Share represented by a Terra ADS validly tendered. 4. Conditions: The Tender Offer is conditioned upon the valid tender of the number of Terra Shares which, taken together with the number of Terra Shares that Telefonica already owns, represents at least 75% of Terra's share capital. 2 5. Terra's Position: As of the date of the Prospectus, Terra's board of directors has not yet stated its position with respect to the Tender Offer. The laws of the Kingdom of Spain, however, require Terra's board of directors to state its position with respect to the Tender Offer within ten days after receipt of notice from the CNMV of its authorization of the Tender Offer. 6. Method for Tender; Delivery of Tender Offer Consideration: Any holder of Terra Shares represented by Terra ADSs wishing the acceptance of this Tender Offer must (1) if the holder holds Terra Shares represented by Terra ADSs in certificated form, deliver duly completed acceptance documents, together with the certificates evidencing the Terra ADSs representing the Terra Shares to the Tender Agent or (2) if the holder holds Terra Shares represented by Terra ADSs through The Depository Trust Company ("DTC"), tender by means of the book-entry tender procedures of DTC, in each case prior to the expiration of the Tender Offer. No alternative, conditional or contingent tenders will be accepted. All tendering holders of Terra Shares represented by Terra ADSs waive any right to receive any notice of the acceptance of their Terra Shares represented by Terra ADSs for payment. Under no circumstances will interest be paid on the purchase price of the Terra ADSs, regardless of any extension of the Tender Offer or any delay in payment of the purchase price. 7. Guaranteed Delivery Procedures: No guaranteed delivery procedures will be made available under the Tender Offer. 8. Withdrawal Rights: No withdrawal rights are available in the Tender Offer. All tenders of Terra Shares represented by Terra ADSs are unconditional and irrevocable. Telefonica will not pay any fees or commissions to any broker or dealer or other person (other than the Tender Agent and the Information Agent as described in the Prospectus) for soliciting tenders of Terra ADSs pursuant to the Tender Offer. Telefonica will, however, upon request, reimburse you for customary mailing and handling costs incurred by you in forwarding the enclosed materials to your customers. Telefonica will not pay any stock transfer taxes applicable to its purchase of Terra Shares represented by Terra ADSs pursuant to the Tender Offer. Requests for additional copies of the enclosed materials should be directed to the Information Agent at the telephone number listed above. June 23, 2003 Very truly yours, CITIBANK, N.A. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE COMPANY, TERRA, THE TENDER AGENT, THE INFORMATION AGENT OR ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE TENDER OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(C) 5 dex99c.txt LETTER TO CLIENTS DATED JUNE 23, 2003 Exhibit C TENDER OFFER for all of the Ordinary Shares represented by American Depositary Shares of TERRA NETWORKS, S.A. by TELEFONICA, S.A. for cash in the amount of the U.S. dollar equivalent of Euro 05.25 per Ordinary Share tendered THE TENDER OFFER COMMENCES ON MONDAY, JUNE 23, 2003 -------------------------------------------------- THE TENDER OFFER WILL EXPIRE AT 6:00 P.M., NEW YORK CITY TIME, ON WEDNESDAY, JULY 23, 2003 UNLESS THE TENDER OFFER IS EXTENDED ---------------------------------------------------------------------------- NO WITHDRAWAL RIGHTS WILL BE AVAILABLE ALL TENDERS ARE UNCONDITIONAL AND IRREVOCABLE To Our Clients: Enclosed for your consideration is the Prospectus for the Take-Over Bid Launched by Telefonica, S.A. for Terra Networks, S.A., authorized by the Comision Nacional del Mercado de Valores of Spain ("CNMV") on June 19, 2003 and dated June 18, 2003 (the "Prospectus") relating to the offer by Telefonica, S.A., a company organized under the laws of the Kingdom of Spain ("Telefonica" or the "Company") to purchase all of the outstanding ordinary shares, par value Euro 02.00 per share (the "Terra Shares"), including Terra Shares represented by American Depositary Shares (the "Terra ADSs"), of Terra Networks, S.A., a company organized under the laws of the Kingdom of Spain ("Terra"), each Terra ADS representing one Terra Share, for cash in the amount, without interest, of the U.S. dollar equivalent of Euro 05.25 (after deduction of applicable fees, taxes and expenses, including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery of the Terra Shares represented thereby, in an amount not exceeding U.S. $0.04 per Terra ADS cancelled) for each outstanding Terra Share represented by a Terra ADS tendered, in each case upon the terms and subject to the conditions set forth in the Prospectus (the "Tender Offer"). We hold Terra ADSs for your account. A tender of Terra Shares represented by such Terra ADSs can be made only by us pursuant to your instructions. Accordingly, we request instruction as to whether you wish us to tender on your behalf any or all of the Terra Shares represented by Terra ADSs we hold for your account pursuant to the terms and conditions of the Prospectus. Instructions with respect to the Tender Offer are enclosed. The enclosed Letter of Transmittal is furnished to you for your information only and may not be used by you to tender the Terra Shares represented by your Terra ADSs. Please note the following: 1. The Tender Offer will expire at 6:00 P.M., New York City time, on Wednesday, July 23, 2003 (the "Expiration Date"), unless the Tender Offer is extended. If you wish to tender the Terra Shares represented by your Terra ADSs in the Tender Offer, please instruct us sufficiently in advance of the Expiration Date. 2. The Tender Offer is being made for all issued and outstanding Terra Shares, including Terra Shares represented by Terra ADSs. If you tender the Terra Shares represented by your Terra ADSs in the Tender Offer, you will receive in cash, without interest, the amount of the U.S. dollar equivalent of Euro 05.25 (after deduction of applicable fees, taxes and expenses, including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery of the Terra Shares represented thereby, in an amount not exceeding U.S. $0.04 per Terra ADS cancelled) for each Terra Share represented by a Terra ADS validly tendered. 3. The Tender Offer is conditioned upon the valid tender of the number of Terra Shares which, taken together with the number of Terra Shares that Telefonica already owns, represents at least 75% of Terra's share capital. 4. No withdrawal rights will be available in the Tender Offer. All tenders of Terra Shares represented by Terra ADSs are unconditional and irrevocable. 5. As of the date of the Prospectus, Terra's board of directors has not yet stated its position with respect to the Tender Offer. The laws of the Kingdom of Spain, however, require Terra's board of directors to state its position with respect to the Tender Offer within ten days after receipt of notice from the CNMV of its authorization of the Tender Offer. 6. Depending on the results of the Tender Offer, Telefonica may choose to delist the Terra ADSs from the Nasdaq National Market. Additionally, if after the Tender Offer the Terra ADSs fail to meet the requirements to remain listed on Nasdaq, Nasdaq may require Telefonica to delist the Terra ADSs. 7. Notwithstanding any other provision of the Tender Offer, delivery of cash consideration for Terra Shares, including Terra Shares represented by Terra ADSs, accepted for tender under the Tender Offer will in all cases be commenced on behalf of the Company by Citibank, N.A., as tender agent (the "Tender Agent"), under the Tender Offer within four business days after receipt by the Tender Agent of the Euro cash consideration from the Company, which will be converted into U.S. dollars at the applicable conversion rate available at that time in the open market. 8. If you tender the Terra Shares represented by your Terra ADSs you may be obligated to pay the fees or commissions of your broker or custodian. Terra will not pay any stock transfer taxes applicable to its purchase of Terra ADSs pursuant to the Tender Offer. 9. Georgeson Shareholder has been appointed as information agent (the "Information Agent") by the Company for the Tender Offer. Any questions you may have with respect to the ways in which Terra Shares may be tendered in the form of Terra ADSs in the Tender Offer should be directed to the Information Agent at (800) 249-1370. The Prospectus and related information concerning the Tender Offer, Telefonica and Terra have been, and any updates disseminated in Spain will be, furnished to the U.S. Securities and Exchange Commission (the "SEC"), and will be available from the SEC at its web site, www.sec.gov. The Tender Offer qualifies for the so-called "Tier I Exemption" under Rule 14d-1(c) of the Securities Exchange Act of 1934 and is therefore exempt from many of the requirements of the U.S. securities laws. Accordingly, the Prospectus does not include all of the information that would have been included had the exemption not applied. For United States federal income tax purposes, it is not clear on what date a holder selling Terra ADSs pursuant to the Tender Offer will be treated as having made such sale. In certain circumstances, a tendering holder may be treated as having sold his Terra ADSs on a date prior to payment of cash consideration for the Terra ADSs. In such a case, the holder may recognize exchange gain or loss (as defined in Section 988 of the Internal Revenue Code) when he receives cash consideration for his Terra ADSs, which exchange gain or loss will be an ordinary gain or loss regardless of whether the holder held his Terra ADSs as a capital asset. Holders should consult their tax advisors regarding the United States federal income tax consequences to them of selling Terra ADSs pursuant to the Tender Offer. Holders who have a gain on the sale of their Terra ADSs in the Tender Offer should consult their tax advisors as to whether they must pay Spanish tax on the gain. In general, in the case of holders that are entitled to the benefits of the United States' or another country's income tax treaty with Spain, any gain from the sale of Terra ADSs in the Tender Offer will be exempt from Spanish tax, although holders should consult their own advisors regarding the requirements to benefit from such exemption and the application of those requirements in the holders' own particular circumstances. A holder who has a gain will be required under Spanish law to file a form with the Spanish tax authorities reporting his gain, even if he is not required to pay any Spanish tax on the gain. Penalties of up to Euro 901.52 can be imposed for failure to file this form. If you wish us to tender any or all of the Terra Shares represented by the Terra ADSs we hold for your account, please so instruct us by completing, executing, detaching and returning to us the instructions with respect to the Tender Offer enclosed herein. Under the terms of the Tender Offer, unless you instruct us otherwise, if you authorize the tender of the Terra Shares represented by your Terra ADSs, all the Terra Shares represented by the Terra ADSs held in your account will be tendered. An envelope to return your instructions to us is enclosed. Your instructions should be forwarded to us in ample time to permit us to tender the Terra Shares represented by the Terra ADSs to the Tender Agent on your behalf prior to the Expiration Date, initially set for 6:00 P.M., New York City time, on Wednesday, July 23, 2003. ================================================================================ INSTRUCTIONS WITH RESPECT TO THE TENDER OFFER for all of the Ordinary Shares represented by American Depositary Shares of TERRA NETWORKS, S.A. by TELEFONICA, S.A. for cash in the amount of the U.S. dollar equivalent of Euro 05.25 per Ordinary Share tendered The undersigned acknowledge(s) receipt of (i) your letter and (ii) the Prospectus for the Take-Over Bid Launched by Telefonica, S.A. for Terra Networks, S.A., dated June 18, 2003 (the "Prospectus"), in connection with the offer (the "Tender Offer") by Telefonica, S.A., a company organized under the laws of the Kingdom of Spain ("Telefonica" or the "Company"), to purchase all of the outstanding ordinary shares, par value Euro 02.00 per share (the "Terra Shares"), of Terra Networks, S.A., a company organized under the laws of the Kingdom of Spain ("Terra"), including Terra Shares represented by American Depositary Shares (the "Terra ADSs") for cash, without interest, in the amount of the U.S. dollar equivalent of Euro 05.25 (after deduction of applicable fees, taxes and expenses, including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery of the Terra Shares represented thereby in an amount not exceeding U.S. $0.04 per Terra ADS cancelled) for each Terra Share represented by a Terra ADS validly tendered, in each case, upon the terms and subject to the conditions set forth in the Prospectus. The undersigned hereby unconditionally and irrevocably instructs you to tender to the Company (through Citibank, N.A., as Tender Agent) the amount specified below of Terra Shares represented by Terra ADSs held on behalf of the undersigned which you hold for the account of the undersigned, upon the terms and subject to the conditions set forth in the Prospectus.
Total Number of Terra Shares Represented by Terra ADSs to be Tendered*: Date: ________________________________________________
SIGN HERE Signature(s): Print Name(s): Print Address(es): Area Code and Telephone Number(s): Taxpayer Identification or Social Security Number(s):
- -------------------------------------------------------------------------------- By executing and delivering this instruction letter, the undersigned acknowledges that it is tendering all Terra Shares represented by the Terra ADSs referenced in this letter. - -------- * Unless we receive specific instructions as to the number of Terra Shares represented by the Terra ADSs to be tendered in the Tender Offer, if you instruct us to tender the Terra Shares represented by your Terra ADSs in the Tender Offer all of the Terra Shares represented by the Terra ADSs held by us for your account will be tendered. EX-99.(D) 6 dex99d.txt LETTER OF TRANSMITTAL DATED JUNE 23, 2003 Exhibit D LETTER OF TRANSMITTAL to accompany American Depositary Receipt certificates evidencing American Depositary Shares representing Ordinary Shares of TERRA NETWORKS, S.A., a company incorporated under the laws of the Kingdom of Spain, tendered in connection with the Tender Offer by TELEFONICA, S.A., a company organized under the laws of the Kingdom of Spain to purchase all outstanding Ordinary Shares represented by Terra ADSs for cash in the amount of the U.S. dollar equivalent of Euro 05.25 per Terra ADS tendered This Letter of Transmittal should be completed and signed in the space provided below and in the space provided on the Substitute Form W-9 below and mailed or delivered, together with your Terra ADR certificate(s), to Citibank, N.A., as Tender Agent, at one of the following addresses:
By Hand: By Mail: By Overnight Courier: -------- -------- --------------------- Citibank, N.A. Citibank, N.A. Citibank, N.A. c/o Securities Transfer and Reporting Corporate Actions Corporate Actions Services Inc. P.O. Box 43034 161 Bay State Drive Corporate Actions Providence, RI 02940-3034 Braintree, MA 02184 100 William Street--Galleria New York, NY 10038
For information, call the Information Agent, Georgeson Shareholder, toll free at (800) 249-1370 Delivery of this Letter of Transmittal to an address other than as set forth above will not constitute a valid delivery - ------------------------------------------------------------------------------------------- THE TENDER OFFER WILL EXPIRE AT 6:00 P.M., NEW YORK CITY TIME, ON WEDNESDAY, JULY 23, 2003, UNLESS THE TENDER OFFER IS EXTENDED. NO WITHDRAWAL RIGHTS ARE AVAILABLE IN THIS TENDER OFFER. - ------------------------------------------------------------------------------------------- If your Terra ADR certificate(s) evidencing your Terra ADSs have been lost, stolen or destroyed, call the Tender Agent toll free at (800) 308-7887. (See Instruction 9) - -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------- ITEM A: DESCRIPTION OF SECURITIES ENCLOSED - -------------------------------------------------------------------------------------------------------------------- Number of Terra ADSs Enclosed Total Number of (attach additional lists if Terra ADSs necessary--see Instruction 13) Tendered/(1)/ Name(s) and Address(es) of Record Holder(s) of Terra ADSs ------------------------------------------ --------------- (if blank, please fill in exactly as name(s) appear(s) Terra ADR Certificate Number of Terra ADSs on the Terra ADR certificate(s)) Number(s) Represented Thereby - --------------------------------------------------------- --------------------- -------------------- - --------------------------------------------------------------------------------------------------------------------
- -------- (1) Unless otherwise indicated, all Terra ADSs represented by Terra ADR certificates delivered to the Tender Agent will be deemed to have been tendered. (See Instruction 16) READ THE INSTRUCTIONS CAREFULLY BEFORE COMPLETING THIS LETTER OF TRANSMITTAL This Letter of Transmittal is to be used by holders of American Depositary Receipt Certificates (the "Terra ADRs") evidencing American Depositary Shares (the "Terra ADSs") representing Ordinary Shares (the "Terra Shares") of Terra Networks, S.A., a company organized under the laws of the Kingdom of Spain ("Terra"). By executing and delivering this Letter of Transmittal the undersigned acknowledges that it is tendering all the Terra Shares represented by the Terra ADSs referenced in this Letter of Transmittal. The undersigned hereby surrenders to Citibank, N.A., as Tender Agent (the "Tender Agent"), subject to the terms and conditions of (i) the Prospectus for the Take-Over Bid Launched by Telefonica, S.A. ("Telefonica" or the "Company") for Terra Networks, S.A., authorized by the Comision Nacional del Mercado de Valores of Spain on June 19, 2003 and dated June 18, 2003 (the "Prospectus"), (ii) the Tender Agency Agreement, dated as of June 20, 2003, with effect as of June 18, 2003 (the "Tender Agency Agreement"), by and between the Company and the Tender Agent and (iii) this Letter of Transmittal (the Prospectus, the Tender Agency Agreement and this Letter of Transmittal together constituting the "Tender Offer Materials"), the Terra ADR certificate(s) enclosed herewith evidencing Terra ADSs in order to tender the Terra Shares represented by Terra ADSs in the Tender Offer described in the Tender Offer Materials in exchange for cash in the amount, without interest, of the U.S. dollar equivalent of Euro 05.25 per Terra ADS tendered (after deduction of applicable fees, taxes and expenses, including, without limitation, fees payable to the depositary bank in connection with the cancellation of the Terra ADSs and delivery of the Terra Shares represented thereby in an amount not exceeding U.S. $0.04 per Terra ADS cancelled). Upon the terms and subject to the conditions of the Tender Offer Materials (and if Telefonica's offer to purchase Terra ADSs is extended or amended, the terms of any such extension or amendment), and effective upon acceptance for payment of the Terra Shares represented by the Terra ADSs surrendered herewith in accordance with the terms of the Tender Offer Materials, the undersigned hereby sells, assigns and transfers to or upon the order of Telefonica all right, title and interest in and to all of the Terra Shares represented by the Terra ADSs that are being surrendered hereby (and any and all dividends, distributions, rights, other Terra ADSs or other securities issued or issuable in respect thereof on or after the date hereof (collectively, the "Distributions")) and irrevocably constitutes and appoints the Tender Agent the true and lawful agent and attorney-in-fact of the undersigned with respect to such Terra Shares represented by the Terra ADSs (and all Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) cancel the Terra ADSs (and to pay on behalf of the undersigned all fees payable to the depositary bank for the Terra ADS in respect of cancellation) and to deliver the Terra Shares represented by such Terra ADSs (and any and all Distributions) together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of Telefonica, (ii) present such Terra Shares represented by the Terra ADSs surrendered hereby (and any and all Distributions) for transfer on the books of Terra, and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Terra Shares represented by the Terra ADSs surrendered hereby, all in accordance with the terms of the Tender Offer Materials and as may otherwise be required by law. The undersigned hereby represents and warrants that the undersigned is the registered holder of the enclosed Terra ADR certificate(s) evidencing Terra ADSs, with good title thereto and full power and authority to sell, assign and transfer the Terra ADSs evidenced by the enclosed Terra ADR certificate(s), the Terra Shares represented thereby, and all Distributions, free and clear of all liens, restrictions, charges and encumbrances, and not subject to any adverse claims. The undersigned will, upon request, execute any additional documents necessary or desirable to the Tender Agent or the Company to complete the tender of the Terra Shares represented by the Terra ADSs evidenced by the enclosed Terra ADR certificate(s) under the terms set forth in the Tender Offer Materials. In addition, the undersigned shall remit and transfer promptly to the Tender Agent for the account of Telefonica all Distributions in respect of the Terra Shares represented by the Terra ADSs surrendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, Telefonica shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Terra Shares represented by the Terra ADSs surrendered hereby or deduct from such purchase price, the amount or value of such Distributions as determined by Telefonica in its sole discretion. 2 All authority conferred or agreed to be conferred in this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and other legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. It is understood and agreed that within four business days after receipt by the Tender Agent of the Euro cash consideration, the Tender Agent shall cause (i) the Euro cash consideration to be converted into U.S. dollars at the applicable conversion rate available at that time in the open market, (ii) checks to be issued for the U.S. dollar amount (after deduction of applicable fees, taxes and expenses, including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery of the Terra Shares represented thereby in an amount not exceeding U.S. $0.04 per Terra ADS cancelled) payable to the applicable holders of Terra ADSs who have validly tendered their Terra ADSs and (iii) the mailing of checks so issued to the applicable holder (or to the person(s) specified herein) to commence. Unless otherwise indicated below in the box entitled "Special Issuance Instructions," the undersigned requests to receive, in consideration for the Terra Shares represented by the Terra ADSs tendered hereby, cash in the form of a single check issued to the undersigned in the amount, without interest, of the U.S. dollar equivalent of Euro 05.25 per Terra Share represented by a Terra ADS herewith (net of applicable fees, taxes and expenses, including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery of the Terra Shares represented thereby in an amount not exceeding U.S. $0.04 per Terra ADS cancelled). Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions," the undersigned requests that cash in the form of a check in the amount, without interest, of the U.S. dollar equivalent of Euro 05.25 per Terra Share represented by the Terra ADSs tendered herewith (net of applicable fees, taxes and expenses, including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery of the Terra Shares represented thereby in an amount not exceeding U.S. $0.04 per Terra ADS cancelled), be mailed to the undersigned at the address shown above. In the event that both the Special Issuance Instructions and the Special Delivery Instructions are completed, the undersigned requests that the cash in the form of a check in the amount, without interest, of the U.S. dollar equivalent of Euro 05.25 per Terra Share represented by the Terra ADSs tendered herewith (net of applicable fees, taxes and expenses, including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery of the Terra Shares represented thereby in an amount not exceeding U.S. $0.04 per Terra ADS cancelled), be mailed to the person or entity so indicated at the address so indicated. Appropriate medallion signature guarantees by an Eligible Guarantor Institution (as defined in Instruction 2) have been included with respect to the Terra ADSs surrendered herewith for which Special Issuance Instructions for the cash consideration has been given. The undersigned recognizes that Telefonica has no obligation, pursuant to the "Special Issuance Instructions," to transfer any Terra ADSs from the name of the registered holder thereof if Telefonica does not accept for payment any of the Terra Shares represented by the Terra ADSs so tendered. 3 ITEM B: SPECIAL ISSUANCE INSTRUCTIONS ITEM C: SPECIAL DELIVERY INSTRUCTIONS (See Instructions 5, 7, and 8) (See Instructions 4, 7 and 8) To be completed ONLY if the cash in the form of a check To be completed ONLY if the cash in the form of a in the amount, without interest, of the U.S. dollar check in the amount, without interest, of the U.S. equivalent of Euro 05.25 per Terra Share tendered in the dollar equivalent of Euro 05.25 per Terra Share form of a Terra ADS (net of applicable fees, taxes and tendered in the form of a Terra ADS (net of applicable expenses) and/or certificates representing Terra ADSs not fees, taxes and expenses) and/or certificates tendered or accepted for payment are to be issued and representing Terra ADSs not tendered or accepted for delivered to persons other than to the record holder(s) payment are to be mailed to an address other than the identified above. address of the record holder(s) identified above. Issue [ ] check [ ] certificate(s) and Mail to: Mail [ ] check [ ] certificate(s) to: Name(s): Name(s): c/o (Please Print) (Please Print) Address: Address: City: City: State: _______________ Zip Code: State: _______________ Zip Code: Tax I.D. No. or Social Security No.:
IMPORTANT: ALL TERRA ADS HOLDERS MUST SIGN HERE - ------------------------------------------------------------------------------- ITEM D: SIGNATURE(S) (See Instructions 6 and 7) (Also complete Substitute Form W-9 below) Date: _________________________________________ Area Code and Telephone No.: Signature(s): (Must be signed by record owner(s), exactly as the name(s) appear(s) on the Terra ADR certificate(s) enclosed or by person(s) authorized to become the registered holder(s) of the Terra ADSs evidenced by the Terra ADR certificate(s) as evidenced by the endorsement transmitted herewith. If signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, the capacity of the person signing should also be indicated.) Name(s): Capacity (full title): - ------------------------------------------------------------------------------- - --------------------------------------------------------------------------- ITEM E: GUARANTEE OF SIGNATURES (If Required--See Instructions 2, 5 and 6) Authorized Signature: Name: Title: Name of Firm: Address: (Including Zip Code) Area Code and Telephone Number: Date: - --------------------------------------------------------------------------- 4 Instructions 1. How to Tender the Terra Shares Represented by Your Terra ADSs Evidenced by Terra ADR Certificate(s) in the Tender Offer. Telefonica has appointed Citibank, N.A., as Tender Agent in connection with the acceptance of the Terra Shares represented by Terra ADSs. The Terra ADSs are listed on the Nasdaq National Market. Any holder of Terra ADSs wishing to accept this offer by tendering the Terra Shares represented by his Terra ADSs must (1) if the holder holds Terra ADSs in certificated form, deliver duly completed acceptance documents, together with the certificates representing the Terra ADSs, to the Tender Agent, (2) if the holder holds Terra ADSs in an account with a bank, broker or other nominee, contact and instruct the bank, broker or other nominee to effect the tender for the holder or (3) if the holder holds Terra ADSs through The Depository Trust Company ("DTC"), tender by means of the book-entry tender procedures of DTC, in each case prior to the expiration of the Tender Offer. No alternative, conditional or contingent tenders will be accepted. All tendering holders of Terra ADSs, by execution of this Letter of Transmittal, waive any right to receive any notice of the acceptance of their Terra ADSs for payment. Under no circumstances will interest be paid on the purchase price of the Terra ADSs, regardless of any extension of the Tender Offer or any delay in payment of the purchase price. No withdrawal rights are available in this Tender Offer. For holders of Terra Shares represented by Terra ADSs tendering such Terra ADS by means of the book-entry tender procedures of DTC, all applicable references herein to delivery of Terra ADR certificate(s) shall be deemed to mean delivery by such book-entry tender procedures. 2. Guarantee of Signatures. No signature guarantee is required on this Letter of Transmittal if (a) this Letter of Transmittal is signed by the registered holder of the Terra ADSs evidenced by the Terra ADR certificate(s) surrendered herewith (unless such holder has completed the box entitled "Special Issuance Instructions") or (b) the Terra ADSs evidenced by the Terra ADR certificate(s) are surrendered for the account of an Eligible Guarantor Institution such as a commercial bank, trust company, securities broker/dealer, credit union, or savings association participating in a Medallion Program approved by the Securities Transfer Association, Inc. or by any other "Eligible Guarantor Institution" as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934 (each of the foregoing being an "Eligible Guarantor Institution"). In all other cases, all signatures on this Letter of Transmittal must be medallion guaranteed by an Eligible Guarantor Institution. See Instructions 5 and 6. 3. Delivery of Letter of Transmittal and Terra ADR Certificate(s). Do not send your Terra ADR certificate(s) directly to Terra or to the Company. The Terra ADSs evidenced by Terra ADR certificate(s), together with a properly completed and duly executed and dated Letter of Transmittal and any other documents required by this Letter of Transmittal should be delivered to the Tender Agent at one of the addresses set forth above prior to 6:00 P.M., New York City time, on Wednesday, July 23, 2003 (the "Expiration Date"). The method of delivery of the Terra ADR certificate(s) and any other required documents, is at the election and risk of the tendering holder of the Terra ADSs, and the delivery will be deemed made only when actually received by the Tender Agent. However, if the Terra ADR certificate(s) are sent by mail, it is recommended that they be sent by registered mail, properly insured, with return receipt requested. Risk of loss and title of the Terra ADSs evidenced by Terra ADR certificate(s) shall pass only upon proper delivery of the Terra ADR certificate(s) to the Tender Agent. All questions as to validity, form and eligibility of any Terra ADR certificate delivered hereunder will be determined by the Company (which may delegate power in whole or in part to the Tender Agent) and such determination shall be final and binding. A tender of Terra Shares represented by Terra ADSs will not be deemed to have been validly made until all irregularities have been resolved prior to the Expiration Date. 5 4. Special Delivery Instructions. If the cash in the form of a check for the amount, without interest, of the U.S. dollar equivalent of Euro 05.25 per Terra Share represented by a Terra ADS validly tendered (net of applicable fees, taxes or expenses, including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery of the Terra Shares represented thereby in an amount not exceeding U.S. $0.04 per Terra ADS cancelled) and/or Terra ADR certificate(s) for Terra ADSs representing Terra Shares not tendered or accepted for payment is to be issued in the name of the registered holder of the Terra ADSs evidenced by the Terra ADR certificate(s) surrendered with this Letter of Transmittal but are to be mailed to an address different from the address set forth in Item A of this Letter of Transmittal, please complete Item C of this Letter of Transmittal ("Special Delivery Instructions"). 5. Special Issuance Instructions. If the check and/or Terra ADR certificate(s) for Terra ADSs representing Terra Shares not tendered or accepted for payment is to be issued in the name(s) of (a) person(s) other than the registered holder(s) of the Terra ADSs evidenced by the Terra ADR certificate(s) surrendered with this Letter of Transmittal, Item B ("Special Issuance Instructions") must be duly completed, the Terra ADR certificate(s) must be properly endorsed or be accompanied by an appropriate instrument(s) of transfer, properly executed by the registered holder(s), and the signature(s) to the endorsement and on the instrument of transfer must be guaranteed in Item E of this Letter of Transmittal ("Guarantee of Signature") by an Eligible Guarantor Institution that is a member in good standing of a recognized Medallion Program approved by The Securities Transfer Association, Inc. or by any other "Eligible Guarantor Institution" as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. 6. Signature by Holder's Representative or by Transferee. If you sign this Letter of Transmittal in a representative capacity (i.e., as an executor, administrator, trustee, guardian, attorney, officer of a corporation or other person acting in a representative capacity), you must enclose with the Letter of Transmittal evidence, satisfactory to the Tender Agent and the Company, of your authority to sign this Letter of Transmittal on behalf of the registered holder. If this Letter of Transmittal is signed in Item D by (a) person(s) other than the registered holder(s) or (b) person(s) representing the registered holder(s), the Terra ADR certificate(s) must be properly endorsed, or be accompanied by appropriate instrument(s) of transfer, properly executed by the registered owner(s), and signature(s) to the endorsement and on the instrument of transfer must be guaranteed in Item E ("Guarantee of Signature") by an Eligible Guarantor Institution that is a member in good standing of a recognized Medallion Program approved by The Securities Transfer Association, Inc. or by any other "Eligible Guarantor Institution" as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. 7. Joint Holders or Multiple Holders of Terra ADR Certificate(s). If Terra ADSs evidenced by the Terra ADR certificate(s) are surrendered by joint holders or owners, all such persons must sign the Letter of Transmittal in Item D and any schedule prepared in accordance with Instruction 13. If Terra ADSs evidenced by the Terra ADR certificate(s) are registered in multiple names or forms of ownership, separate Letters of Transmittal must be completed, signed and returned for each different registration. 8. Stock Transfer Taxes. It is not anticipated that any transfer taxes will be payable in connection with the issuance of the check in the amount of the cash payment in exchange for Terra Shares represented by Terra ADSs evidenced by the Terra ADR certificate(s) surrendered herewith. If, however, the check in the amount of the cash payment (and/or Terra ADR certificate(s) for Terra ADSs representing Terra Shares not tendered or accepted for payment) is to be issued to a person other than the registered holder of the Terra ADSs evidenced by the Terra ADR certificate(s) surrendered herewith, the person signing in Item D of the Letter of Transmittal will need to (i) pay to the Tender Agent any transfer or other taxes required by reason of the issuance and delivery of the check in the amount of the cash payment and/or Terra ADR 6 certificate(s) for Terra ADSs not tendered or accepted for payment to a person other than the registered holder of the Terra ADSs evidenced by the Terra ADR certificate(s), or (ii) establish, to the satisfaction of the Tender Agent, that such taxes have been paid or are not applicable. 9. Lost, Stolen or Destroyed Terra ADR Certificate(s). If your Terra ADR certificate(s) has/have been lost, stolen or destroyed, please call the Tender Agent toll free at (800) 308-7887. You will then be instructed as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. 10. Purpose of Substitute Form W-9. Each registered holder of the Terra ADSs evidenced by the Terra ADR certificate(s) or if Item B is completed each person whose name appears in Item B of this Letter of Transmittal is required to notify the Tender Agent of such holder's or other person's correct taxpayer identification number (which is either the Social Security Number or the Employer Identification Number) by completing the Substitute Form W-9 certifying that (i) the taxpayer identification number provided in the Substitute Form W-9 is correct (or that each holder or other person is awaiting a taxpayer identification number); (ii) each holder or person completing the Substitute Form W-9 either (a) is exempt from backup withholding, (b) has not been notified by the Internal Revenue Service that such holder or other person is subject to backup withholding as a result of failure to report all interest and dividends, or (c) has been notified by the Internal Revenue Service that the holder or the other person completing the Substitute Form W-9 is no longer subject to backup withholding; and (iii) each holder or person completing the Substitute Form W-9 is a U.S. person (including a U.S. resident alien). If the holder or other person completing the Substitute Form W-9 is instead subject to backup withholding, such holder or other person must cross out Item 2 in Part III of the certifications before signing the Substitute Form W-9. Failure to provide the information requested on Substitute Form W-9 may subject the holder or other person completing the Substitute Form W-9 to applicable federal income tax withholding on any payments made in connection with the surrendered Terra ADSs. Foreign investors should consult their tax advisors regarding the need to complete IRS Form W-8 and any other forms that may be required. 11. Questions and Additional Copies. All questions regarding the appropriate procedures for participating in the Tender Offer, should be directed by telephone to the Information Agent at (800) 249-1370. 12. Single Check. Unless otherwise indicated in Item C ("Special Issuance Instructions"), cash in the form of a single check in the amount, without interest, of the U.S. dollar equivalent of Euro 05.25 per Terra Share represented by a Terra ADS validly tendered (net of applicable fees, taxes and expenses, including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery of the Terra Shares represented thereby in an amount not exceeding U.S. $0.04 per Terra ADS cancelled) will be issued to you in exchange for all the Terra Shares represented by the Terra ADSs evidenced by the Terra ADR certificate(s) you tendered with this Letter of Transmittal. 13. Insufficient Space. If the space provided under Items A, B or C is inadequate, you may list the required information on a separate schedule attached to this Letter of Transmittal, which must be signed by the same person(s) signing in Item D. 14. Guaranteed Delivery Procedures. No guaranteed delivery procedures will be made available under the Tender Offer. 15. Procedures for Withdrawal. All tenders of Terra Shares represented by Terra ADSs are unconditional and irrevocable. No withdrawal rights will be available in this Tender Offer. 7 16. Partial Tenders. If fewer than all of the Terra Shares represented by the Terra ADSs evidenced by any Terra ADR certificate(s) are to be tendered, fill in the number of Terra ADSs that are to be tendered in the box entitled "Total Number of ADSs Tendered." In this case, new Terra ADR certificate(s) for the Terra ADSs that were evidenced by your old Terra ADR certificate(s), but for which no Terra Shares were tendered, will be sent to you, unless otherwise provided in the appropriate box on this Letter of Transmittal, as promptly as practicable after the date the Tender Offer is declared "successful" in Spain by the Comision Nacional del Mercado de Valores of Spain. All Terra Shares represented by the Terra ADSs evidenced by Terra ADR certificate(s) delivered to the Tender Agent will be deemed to have been tendered unless otherwise indicated. 17. Waiver of Conditions. Telefonica reserves the right, in its sole discretion, to waive, at any time or from time to time, in accordance with Spanish law, any of the specified conditions of the Tender Offer, in whole or in part. Important: This Letter of Transmittal together with any required signature guarantees, and any other required documents, must be received by the Tender Agent, together with the Terra ADR certificate(s) evidencing the Terra ADSs tendered prior to the Expiration Date. 8 PLEASE COMPLETE THE SUBSTITUTE FORM W-9 BELOW TO PROVIDE THE TENDER AGENT WITH YOUR TAX IDENTIFICATION NUMBER AND A CERTIFICATION AS TO YOUR EXEMPTION FROM BACK-UP WITHHOLDING TO BE COMPLETED BY TENDERING HOLDERS OF TERRA ADSs (OR OTHER PAYEES) (See Instruction 10) - ---------------------------------------------------------------------------------------------------------------------------- Payer's Name: Citibank, N.A., as Tender Agent - ---------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE Part I--Taxpayer's Identification Security Number OR Employer Form W-9 Number--For all accounts, enter taxpayer Identification Number Department of the Treasury identification number in the box at right. Internal Revenue Service (For most individuals, this is your Social Payor's Request for Taxpayer Security number. If you do not have a ------------------------ Identification Number (TIN) number, see Obtaining a Number in the (If awaiting TIN, write "Applied For") and Certification enclosed Guidelines.) Certify by signing and dating below. Note: If the account is in more than one name, see chart in the enclosed Guidelines to determine which number to give the payer. ------------------------------------------------------------------------------------------ Part II--For Payees exempt from back-up withholding, see the enclosed Guidelines and complete as instructed therein. - ---------------------------------------------------------------------------------------------------------------------------- Part III--Certification--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct 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: (a) I am exempt from backup withholding, or (b) 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 (c) the IRS has notified me that I am no longer subject to backup withholding; and (3) I am a U.S. person (including a U.S. resident alien). Certification Instructions--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you were no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines).
------------------------ ------------------------ Signature Date --------------------------------------------------- YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART I OF THIS SUBSTITUTE FORM W-9 CERTIFICATE OF 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 an application in the near future. I understand that, notwithstanding the information I provided in Part III of the Substitute Form W-9 (and the fact that I have completed this Certificate of Awaiting Taxpayer Identification Number), all reportable payments made to me thereafter will be subject to the applicable percentage of backup withholding tax until I provide a properly certified taxpayer identification number. ------------------------ ------------------------ Signature Date Note: Failure to complete and return this Substitute Form W-9 may subject the you to applicable Federal income tax withholding on any payments made to you. Please review the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional details. 9 Guidelines For Certification of Taxpayer Identification Number on Substitute Form W-9 Name. If you are an individual, you must generally enter the name shown on your social security card. However, if you have changed your last name, for instance, due to marriage without informing the Social Security Administration of the name change, enter your first name, the last name shown on your social security card, and your new last name. If the account is in joint names, list first and then circle the name of the person or entity whose number you enter in Part I of the form. Sole proprietor. Enter your individual name as shown on your social security card on the "Name" line. You may enter your business, trade, or "doing business as (DBA)" name on the "Business name" line. Limited liability company (LLC). If you are a single-member LLC (including a foreign LLC with a domestic owner) that is disregarded as an entity separate from its owner under Treasury regulations section 301.7701-3, enter the owner's name on the "Name" line. Enter the LLC's name on the "Business name" line. Caution: A disregarded domestic entity that has a foreign owner must use the appropriate Form W-8. Other entities. Enter your business name as shown on required Federal tax documents on the "Name" line. This name should match the name shown on the charter or other legal document creating the entity. You may enter any business, trade, or DBA name on the "Business name" line. Part I-Taxpayer Identification Number (TIN) Enter your TIN in the appropriate box. If you are a resident alien and you do not have and are not eligible to get an SSN, your TIN is your IRS individual taxpayer identification number (ITIN). Enter it in the social security number box. If you do not have an ITIN, see How to get a TIN below. If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN. However, the IRS prefers that you use your SSN. If you are an LLC that is disregarded as an entity separate from its owner (see Limited Liability Company (LLC) above), and are owned by an individual, enter your SSN (or "pre-LLC" EIN, if desired). If the owner of a disregarded LLC is a corporation, partnership, etc., enter the owner's EIN. Note: See the chart on this page for further clarification of name and TIN combinations. How to get a TIN. If you do not have a TIN, apply for one immediately. To apply for an SSN, get Form SS-5, Application for a Social Security Card, from your local Social Security Administration office. Get Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN or Form SS-4, Application for Employer Identification Number, to apply for an EIN. You may get Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM (1-800-829-3676) or from the IRS's Internet Web Site at www.irs.gov. If you do not have a TIN, write "Applied For" in the space for the TIN, sign and date the form, and give it to the requester. For interest and dividend payments, and certain payments made with respect to readily tradable instruments, generally you will have 60 days to get a TIN and give it to the requester before you are subject to backup withholding on payments. The 60-day rule does not apply to other types of payments. You will be subject to backup withholding on all such payments until you provide your TIN to the requester. Note: Writing "Applied For" means that you have already applied for a TIN or that you intend to apply for one soon. Part II-For U.S. Payees Exempt From Backup Withholding Individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments, such as interest and dividends. For more information on exempt payees, see the separate Instructions for the Requestor of Form W-9. If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding. Enter your correct TIN in Part I, write "Exempt" in Part II, and sign and date the form. If you are a nonresident alien or a foreign entity not subject to backup withholding, give the requester the appropriate completed Form W-8. Part III-Certification To establish to the withholding agent that you are a U.S. person, or resident alien, sign Form W-9. You may be requested to sign by the withholding agent even if items 1, 3, and 5 below indicate otherwise. For a joint account, only the person whose TIN is shown in Part I should sign (when required). 2. Interest, dividend, and barter exchange accounts opened before 1984 and broker accounts considered active during 1983. You must give your correct TIN, but you do not have to sign the certification. 3. Interest, dividend, broker, and barter exchange accounts opened after 1983 and broker accounts considered inactive during 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form. 4. Real estate transactions. You must sign the certification. You may cross out item 2 of the certification. 5. Other payments. You must give your correct TIN, but you do not have to sign the certification unless you have been notified that you have previously given an incorrect TIN. "Other payments" include payments made in the course of the requester's trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services (including payments to corporations), payments to a nonemployee for services, payments to certain fishing boat crew members and fishermen, and gross proceeds paid to attorneys (including payments to corporations). 6. Mortgage interest paid by you, acquisition or abandonment of secured property, cancellation of debt, qualified state tuition program payments, IRA or MSA contributions or distributions, and pension distributions. You must give your correct TIN, but you do not have to sign the certification. Privacy Act Notice Section 6109 of the Internal Revenue Code requires you to give your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA or MSA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. The IRS may also provide this information to the Department of Justice for civil and criminal litigation, and to cities, states, and the District of Columbia to carry out their tax laws. You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold applicable rates of taxable interest, dividend, and certain other payments to a payee who does not give a TIN to a payer. Certain penalties may also apply What Name and Number To Give the Requestor ------------------------------------------------------ For this type of account: Give name and SSN of: ------------------------------------------------------ 1. Individual The individual 2. Two or more The actual owner of individuals (joint the account or, if account) combined funds, the first individual on the account/(1)/ 3. Custodian account of a The minor/(2)/ minor (Uniform Gift to Minors Act) 4. a. The usual The grantor-trustee/(1)/ revocable savings trust (grantor is The actual owner/(2)/ also trustee) b. So-called trust account that is not a legal or valid trust under state law 5. Sole proprietorship The owner/(3)/ ------------------------------------------------------ For this type of account: Give name and EIN of: ------------------------------------------------------ 6. Sole proprietorship The owner/(3)/ 7. A valid trust, estate, or Legal entity pension trust 8. Corporate The corporation ------------------------------------------------------ 9. Association, club, The organization religious, charitable, educational, or other tax-exempt organization 10. Partnership The partnership 11. A broker or registered The broker or nominee nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments ------------------------------------------------------
- -------- (1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's SSN. (3) You must show your individual name, but you may also enter your business or "DBA" name. You may use either your SSN or EIN (if you have one). (4) List first and circle the name of the legal trust, estate or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.) Note: If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed. 10 IMPORTANT TAX INFORMATION Under the U.S. federal income tax law, a holder whose Terra ADSs evidenced by the Terra ADR certificate(s) are surrendered for payment (or any other payee) is required by law to provide the Tender Agent (as payer) with the holder's (or other payee's) correct Taxpayer Identification Number "TIN" on Substitute Form W-9. If the holder or other payee is an individual, the TIN is the holder's or other payee's social security number. If the Tender Agent is not provided with the correct TIN, the holder or other payee may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such holder or other payee with respect to Terra ADSs evidenced by the Terra ADR certificate(s) surrendered for payment may be subject to applicable backup withholding. Some holders, including, among others, all corporations and some foreign individuals, are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that individual must submit a statement on Internal Revenue Service Form W-8, signed under penalties of perjury, attesting to the individual's exempt status. Forms of such statements can be obtained from the Tender Agent. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Tender Agent is required to withhold the applicable percentage of any payments made to the shareholder or other payee. Backup withholding is not an additional tax. Rather, the 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. Purpose of Substitute Form W-9 To prevent backup withholding on payments that are made to a holder or other payee with respect to any Terra ADSs evidenced by the Terra ADR certificate(s) surrendered for payment, the holder or other payee is required to notify the Tender Agent of the holder's correct TIN (or the TIN of any other payee) by completing the form certifying that the TIN provided on Substitute Form W-9 is correct, or that the holder or other payee is awaiting a TIN, and that (1) the holder or other payee is exempt from backup withholding, (2) the holder or other payee has not been notified by the Internal Revenue Service that the holder or other payee is subject to backup withholding as a result of a failure to report all interest or dividends or (3) the Internal Revenue Service has notified the holder or other payee that the holder or other payee is no longer subject to backup withholding and the holder or other payee is a U.S. person (including a U.S. resident alien). What Number to Give the Tender Agent The holder (or other payee) is required to give the Tender Agent the social security number or employer identification number of the record holder (or any other payee) of Terra ADSs evidenced by the Terra ADR certificate(s) surrendered with this document. If the Terra ADR certificate(s) are registered in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the surrendering holder (or other payee) has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the holder (or other payee) should write "Applied For" in the space provided for the TIN in Part I, sign and date the Substitute Form W-9, and complete the additional Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I and the Tender Agent is not provided with a TIN by the time of payment, the Tender Agent will withhold the applicable percentage of backup withholding of all payments to that holder (or other payee) until a properly certified TIN is provided to the Tender Agent. 11 EX-99.(E) 7 dex99e.txt TO RECORD HOLDERS OTHER THAN BROKERS, DEALERS DATED JUNE 23, 2003 Exhibit E TENDER OFFER for all of the Ordinary Shares represented by American Depositary Shares of TERRA NETWORKS, S.A. by TELEFONICA, S.A. for cash in the amount of the U.S. dollar equivalent of Euro 05.25 per Ordinary Share tendered THE TENDER OFFER COMMENCES ON MONDAY, JUNE 23, 2003 -------------------------------------------------- THE TENDER OFFER WILL EXPIRE AT 6:00 P.M., NEW YORK CITY TIME, ON WEDNESDAY, JULY 23, 2003 UNLESS THE TENDER OFFER IS EXTENDED ---------------------------------------------------------------------------- NO WITHDRAWAL RIGHTS WILL BE AVAILABLE ALL TENDERS ARE UNCONDITIONAL AND IRREVOCABLE To Record Holders Other Than Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Enclosed for your consideration is the Prospectus for the Take-Over Bid Launched by Telefonica, S.A. for Terra Networks, S.A., authorized by the Comision Nacional del Mercado de Valores of Spain ("CNMV") on June 19, 2003 and dated June 18, 2003 (the "Prospectus") relating to the offer by Telefonica, S.A., a company organized under the laws of the Kingdom of Spain ("Telefonica" or the "Company") to purchase all of the outstanding ordinary shares, par value Euro 02.00 per share (the "Terra Shares"), of Terra Networks, S.A., a company organized under the laws of the Kingdom of Spain ("Terra"), in the form of American Depositary Shares (the "Terra ADSs"), each Terra ADS representing one Terra Share for cash in the amount, without interest, of the U.S. dollar equivalent of Euro 05.25 (after deduction of applicable fees, taxes and expenses, including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery of the Terra Shares represented thereby in an amount not exceeding U.S. $0.04 per Terra ADS cancelled) for each outstanding Terra Share in the form of a Terra ADS tendered, in each case upon the terms and subject to the conditions set forth in the Prospectus (the "Tender Offer"). Enclosed herewith for your information are copies of the following documents: 1. The Prospectus; and 2. A Letter of Transmittal for your use in accepting the Tender Offer and tendering the Terra Shares represented by your Terra ADSs. Please note the following: 1. The Tender Offer will expire at 6:00 P.M., New York City time, on Wednesday, July 23, 2003 (the "Expiration Date"), unless the Tender Offer is extended. Any holder of Terra Shares represented by Terra ADSs wishing the acceptance of this Tender Offer must (1) if the holder holds Terra Shares represented by Terra ADSs in certificated form, deliver duly completed acceptance documents, together with the certificates representing the Terra Shares represented by Terra ADSs, to the Tender Agent or (2) if the holder holds Terra Shares represented by Terra ADSs through The Depository Trust Company ("DTC"), tender by means of the book-entry tender procedures of DTC, in each case prior to the expiration of the Tender Offer. No alternative, conditional or contingent tenders will be accepted. All tendering holders of Terra Shares represented by Terra ADSs waive any right to receive any notice of the acceptance for payment of the Terra Shares represented by their Terra ADSs. Under no circumstances will interest be paid on the purchase price of the Terra ADSs, regardless of any extension of the Tender Offer or any delay in payment of the purchase price. 2. The Tender Offer is being made for all issued and outstanding Terra Shares represented by Terra ADSs. If you tender the Terra Shares represented by your Terra ADSs in the Tender Offer, you will receive in cash, without interest, in the amount of the U.S. dollar equivalent of Euro 05.25 (after deduction of applicable fees, taxes and expenses, including, without limitation, the fees payable to the depositary bank for the Terra ADSs in connection with the cancellation of Terra ADSs and delivery of the Terra Shares represented thereby in an amount not exceeding U.S. $0.04 per Terra ADS cancelled) for each Terra Share represented by a Terra ADS validly tendered. 3. The Tender Offer is conditioned upon the valid tender of the number of Terra Shares which, taken together with the number of Terra Shares that Telefonica already owns, represents at least 75% of Terra's share capital. 4. No withdrawal rights will be available in the Tender Offer. All tenders of Terra Shares represented by Terra ADSs are unconditional and irrevocable. 5. As of the date of the Prospectus, Terra's board of directors has not yet stated its position with respect to the Tender Offer. The laws of the Kingdom of Spain, however, require Terra's board of directors to state its position with respect to the Tender Offer within ten days after receipt of notice from the CNMV of its authorization of the Tender Offer. 2 6. Depending on the results of the Tender Offer, Telefonica may chose to delist the Terra ADSs from the Nasdaq National Market. Additionally, if after the Tender Offer the Terra ADSs fail to meet the requirements to remain listed on Nasdaq, Nasdaq may require Telefonica to delist the Terra ADSs. 7. Notwithstanding any other provision of the Tender Offer, delivery of cash consideration for Terra Shares (represented by Terra ADSs) accepted for tender under the Tender Offer will in all cases be commenced on behalf of the Company by Citibank, N.A., as tender agent (the "Tender Agent"), under the Tender Offer within four business days after receipt by the Tender Agent of the Euro cash consideration from the Company, which will be converted into U.S. dollars at the applicable conversion rate available at that time in the open market. 8. Georgeson Shareholder has been appointed as information agent (the "Information Agent") by the Company for the Tender Offer. Any questions you may have with respect to the ways in which Terra Shares may be tendered in the form of Terra ADSs in the Tender Offer should be directed to the Information Agent at (800) 249-1370. 9. Telefonica will not pay any stock transfer taxes applicable to its purchase of Terra ADSs pursuant to the Tender Offer. The Prospectus and related information concerning the Tender Offer, Telefonica and Terra have been, and any updates disseminated in Spain will be, furnished to the U.S. Securities and Exchange Commission (the "SEC"), and will be available from the SEC at its web site, www.sec.gov. The Tender Offer qualifies for the so-called "Tier I Exemption" under Rule 14d-1(c) of the Securities Exchange Act of 1934 and is therefore exempt from many of the requirements of the U.S. securities laws. Accordingly, the Prospectus does not include all of the information that would have been included had the exemption not applied. For United States federal income tax purposes, it is not clear on what date a holder selling Terra ADSs pursuant to the Tender Offer will be treated as having made such sale. In certain circumstances, a tendering holder may be treated as having sold his Terra ADSs on a date prior to payment of cash consideration for the Terra ADSs. In such a case, the holder may recognize exchange gain or loss (as defined in Section 988 of the Internal Revenue Code) when he receives cash consideration for his Terra ADSs, which exchange gain or loss will be an ordinary gain or loss regardless of whether the holder held his Terra ADSs as a capital asset. Holders should consult their tax advisors regarding the United States federal income tax consequences to them of selling Terra ADSs pursuant to the Tender Offer. Holders who have a gain on the sale of their Terra ADSs in the Tender Offer should consult their tax advisors as to whether they must pay Spanish tax on the gain. In general, in the case of holders that are entitled to the benefits of the United States' or another country's income tax treaty with Spain, any gain from the sale of Terra ADSs in the Tender Offer will be exempt from Spanish tax, although holders should consult their own advisors regarding the requirements to benefit from such exemption and the application of those requirements in the holders' own particular circumstances. A holder who has a gain will be required under Spanish law to file a form with the Spanish tax authorities reporting his gain, even if he is not required to pay any Spanish tax on the gain. Penalties of up to Euro 901.52 can be imposed for failure to file this form. June 23, 2003 Very truly yours, CITIBANK, N.A. 3 -----END PRIVACY-ENHANCED MESSAGE-----