Terremark Worldwide Inc.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (17CFR 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of the registrant’s voting stock held by non-affiliates of the registrant on July 8, 2002, based upon the closing market price of the registrant’s voting stock on the American Stock Exchange on July 8, 2002, was approximately $78,909,552.

The registrant had 204,482,250 shares of common stock, $0.001 par value, outstanding as of July 8, 2002.

This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such statements are indicated by words or phrases such as “anticipate,” “projects, “ “management believes,” “Terremark believes,” “intends,” “expects,” and similar words or phrases. These forward-looking statements are subject to risks, uncertainties or assumptions and may be affected by other factors. Some of these factors are set forth herein.

We are an internationally recognized multinational facilitator of Internet connectivity and provider of Internet infrastructure and managed services. We are the owner and operator of the NAP of the Americas, the fifth Tier-1 Network Access Point in the world. The NAP of the Americas, the first TerreNAP^(SM) Data Center, and the only carrier-neutral Tier-1 Network Access Point, or NAP, is located in Miami, Florida and provides peering, colocation and managed services to carriers, Internet service providers, and other Internet companies and enterprises.

The NAP of the Americas provides a neutral connection point where telecommunications carriers can establish connections between and among their networks to exchange Internet traffic either on a settlement-free basis (a process known as “peering”) or for a fee (known as “transit”), and can purchase capacity from each other. The NAP of the Americas also provides premium-class space where carriers, Internet Service Providers, Application Service Providers, content providers, Internet businesses, telecommunications providers and enterprises house their equipment and their network facilities in order to be close to the traffic exchange connections that take place at the NAP. This is known as colocation. In addition, the NAP of the Americas provides a menu of related managed services, such as a meet-point rooms, power management, and managed router services. We believe that the NAP of the Americas is becoming a primary channel of Internet traffic from Central and South America and the Caribbean to North America and Europe.

We were founded in 1982. On April 28, 2000, Terremark Holdings, Inc. completed a reverse merger with AmTec, Inc., a public company. Contemporaneous with the reverse merger we changed our corporate name to Terremark Worldwide, Inc. and adopted “TWW” as our trading symbol on the American Stock Exchange. Historical information of the surviving company is that of Terremark Holdings, Inc.

Network Access Points are locations where two or more networks meet to interconnect and exchange Internet traffic (traffic of data, voice, images, video and all forms of digital telecommunications), much like air carriers meet at airports to exchange passengers and cargo. Instead of airlines and transportation companies, however, participation in NAPs comes from telecommunications carriers, ISPs and large telecommunications and Internet users in general. Tier-1 NAPs are large centers that access and distribute Internet traffic and, following the airport analogy, operate much like large, international airport passenger and cargo transportation terminals or “hubs.”

When this exchange of Internet traffic is done settlement-free, the process is known as “peering” because “peers” transfer like amounts of Internet traffic. When the exchange of Internet traffic is done for a fee, it is known as “transit.” In either case, facilitating this exchange of Internet traffic is the primary service offered by all NAPs, which we will refer to collectively in this Annual Report as “peering.”

All five of the existing Tier-1 NAPs are in the United States. The first four were built in the early 1990’s to serve the northern part of the country, from East Coast to West Coast, and are located in New York, Washington, Chicago and San Francisco. These NAPs were built with sponsorship from the National Science Foundation in order to promote Internet development and used the existing infrastructures of telecommunication companies, to which ownership of the NAPs was eventually transferred. These four Tier-1 NAPs offer only peering services.

We own and operate the fifth Tier-1 NAP, which is known as the NAP of the Americas, and is located in Miami, Florida. While the NAP of the Americas also offers peering services, it is the only one of the five Tier-1 NAPs that enables customers to “colocate” equipment next to each other, and provides customers with other managed services. Using the airport analogy again, at the NAP of the Americas Internet traffic is exchanged, redirected to different destinations, and several managed services are provided, similar to what happens in air terminals with the provision of fuel, maintenance, spare parts, food, etc. This activity among the multiple participants at the NAP of the Americas creates a critical mass of customers and makes up a real and virtual market in which everyone can buy from and sell to each other and in which, in a unique manner, buyers and sellers, as captive customers, share the same facilities and services.

During the past year, the telecommunications and Internet infrastructure industry has come under economic and commercial pressure to restructure and reduce costs. While this uncertain environment has presented us with certain challenges that are more fully set forth below, it is important to highlight some of the positive effects that the current industry situation has had on the growth of the NAP of the Americas. For example, as many telecom and Internet companies have been forced to reduce their overhead, the market of talented employees available to us has increased. As a result, we have been able to build a very robust Network Services Team, thereby reducing our reliance on third party vendors and consultants. These employees form the outsourcing core of a proprietary knowledge base that is enhanced by daily interactions with our customers providing us with insights into our customer issues so that we can present them with targeted, value added solutions.

Another positive side effect of the industry downturn is that many telecommunications carriers discontinued plans to build their own data centers to provide high quality colocation space for their customers. This retrenchment, however, did not reduce their need to present their customers with competitive offerings that include highly conditioned, carrier-grade colocation facilities. Consequently, the NAP of the Americas has become an attractive solution for these telecommunications carriers because we built the facility specifically to address the needs of the most demanding telecommunications and enterprise customers. Although our significant investment in the NAP of the Americas has placed burdens on our financial resources, we believe that our strategy will be successful as our customers turn to us as an alternative to making these expenditures themselves.

The NAP of the Americas represents a new and unique breed of Internet infrastructure business. It is neither a traditional data center, nor a traditional NAP. It combines exchange point services (to facilitate peering), carrier-grade colocation space and managed services. Our strategy is to leverage our experience as the owner and operator of the NAP of the Americas to develop and operate TerreNAP^(SM) Data Centers, primarily in Europe and Latin America. TerreNAP^(SM) Data Centers provide exchange point services (for peering or transit), colocation and managed services to carriers, Internet Service Providers, other Internet companies and enterprises. We intend to use our 20 years of experience in dealing with Latin America, the know-how gained through our designing, engineering, building and operating the NAP of the Americas and the expertise of our employees, many of whom were formerly executives with GTE, Nortel, AT&T, BellSouth and Telcordia, for example, to roll out additional TerreNAP^(SM) Data Centers in our target markets.

The NAP of the Americas provides the following value proposition to its customers:


	•	*Carrier-neutrality:* Tier-1 telecommunications carriers are willing to colocate their equipment within our facility because they know that we will not give preference to any individual or group of customers.

	•	*Connectivity:* The NAP’s connectivity allows our customers to access the NAP through almost any provider they choose, because virtually all significant network providers are present at the NAP.

	•	*“Zero-Mile” Access:* Because the NAP of the Americas provides carrier-grade colocation space directly adjacent to the peering point, there is minimal distance between the peering point and customers’ equipment, which reduces points of failure and cost and increases efficiency.


	•	*The NAP’s Service Level Agreements:* The NAP guarantees 100% power availability and environmental stability at a level of reliability unmatched by other facilities.

	•	*Lower Costs And Increased Efficiency:* The combination of these attributes helps our customers reduce their total costs of providing services to their customers by eliminating local loop charges to connect their facility to the peering point, backhaul charges to and from connecting points, and the cost of redundancy to mitigate risks associated with increased points of failure along these routes.

We expect that TerreNAP Data Centers that we deploy in Latin America and Europe will reflect these same characteristics.

In February 2002, we entered into an agreement with Fundacao de Amparo a Pesquisa do Estado de São Paulo, the research foundation for the State of Sao Paulo, to operate and manage Brazil’s premier NAP created by FAPESP, which we have renamed the NAP do Brasil. Pursuant to the twenty year agreement, FAPESP turned over the exchange point to Terremark, which we will enhance and intend to move to new facilities modeled after the operational design of the NAP of the Americas within the next 12 months. FAPESP will receive 6% of the revenue generated by the enhanced NAP do Brazil for the first five years of operation, 5% during the following five years, and 1% during the last ten years. The term may be extended for an additional ten-year period, during which FAPESP would again receive 1% of revenues.

In June 2002, we entered into an exclusive agreement with the Comunidad Autonoma de Madrid to develop and operate carrier-neutral network access points in Spain. As part of that agreement the parties formed NAP de las Americas — Madrid S.A. to own and operate carrier-neutral NAPs in Spain, modeled after the NAP of the Americas. The shareholders in this new company are the Instituto Madrileno de Desarrollo — IMADE, the Camara Oficial de Comercio e Industria de Madrid, Red Electrica Telecomunicaciones, S.A., Telvent Desarrollos S.A., a subsidiary of Abengoa S.A., and Centro de Transportes de Coslada, S.A. At the time the NAP de las Americas — Madrid S.A. was formed we owned 1% of its equity, which we subsequently increased to 10%. We also have the option to purchase up to another 30% of the shares owned by the Comunidad and the Camara at cost, plus LIBOR. We will provide the technical and operational know-how for the development of an interim NAP which should be operational during the summer of 2002. Based on our expertise in designing, engineering, constructing and operating Tier-1 carrier-neutral NAPs, we will work with NAP de Las Americas — Madrid S.A. to select a permanent site, design the Madrid NAP and operate the business going forward.

When these facilities are operational, we will have TerreNAP Data Centers at the major crossroads of Internet traffic. Miami, the home of the NAP of the Americas, is ranked by Telegeography in its Packet Geography 2002 as the No.1 International Internet Hub City for Latin America and the Caribbean; Sao Paulo, where Terremark’s NAP do Brasil is located, is ranked No. 2; and Madrid is the 11th of the Top 50 International Internet Hub Cities in the world. The Madrid NAP will also benefit from Madrid’s strategic geographic location by serving as an Internet gateway to the European Union, North Africa and the Americas.

We continue to explore other locations and have additionally targeted Mexico as another prospective hub city in Latin America for expansion.

To implement our strategy and meet our current obligations we will need additional capital as more fully discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” In an effort to limit the additional capital required, our business model for expansion is best compared to that of a management company model in the hospitality industry. The model contemplates that a local in-country partner would own and fund the development and build-out of the location (the real estate company) where the TerreNAP Data Center will be located. The facility will ideally be a ground-up development built to the exacting specifications required for a top level NAP (as is the case in Miami), but it may be located in an existing building that is retrofitted to conform to the those specifications. We intend to control the operations of the NAP and be the primary tenant in our partners’ building under a long-term lease.


	Exchange Point Service: The NAP provides a service called Exchange Point Service, which is designed to facilitate both bilateral and multilateral peering, as well as the purchase of transit, among customers.

	Colocation Services: The NAP of the Americas provides the physical environment necessary to keep a customer’s Internet and telecommunications equipment up and running 24 hours a day, 7 days a week. This facility is custom designed to exceed industry standards for electrical and environmental systems. In addition, it offers a wide range of physical security features, including state-of-the-art biometric scanners, man traps, smoke detection, fire suppression systems, motion sensors, secured access, video camera surveillance and security breach alarms. High levels of reliability are achieved through a number of redundant subsystems including power and fiber trunks from multiple sources.

	Managed Services: The NAP of the Americas is rapidly becoming one of the primary distribution points in the world for network-based services. Our managed services are designed to support our customers’ mission-critical needs that focus on producing faster network response times. The NAP of the Americas currently offers the following managed services:


	•	TerreNAP^(SM) Engineering Services — The NAP of the Americas offers full-service facility and equipment design and engineering services, including structural, mechanical, electrical and network systems, all provided by our staff of industry certified engineers.

	•	TerreNAP^(SM) Installation Services — The NAP’s Installation Services Specialists provide basic installation of our customers’ equipment. This service reduces our customers’ implementation times, and increases the productivity of our customers’ technical personnel, by avoiding costly downtime due to lack of materials and equipment management and project coordination.

	•	TerreNAP^(SM) Managed Router Service — The NAP’s Managed Router Service leverages the value of network choice among the world’s largest carriers and ISPs located at the NAP of the Americas through configuration of Border Gateway Protocol (BGP) and the management of necessary hardware. This allows customers to optimize their network performance and reliability.

	•	TerreNAP^(SM) Meet-Point-Rooms (MPRs) — We own and manage the two carrier-neutral, and fully scalable “Meet-Point-Rooms” (MPRs) at the NAP of the Americas. We have provisioned each MPR with advanced optical cross-connect systems that support leading-edge telecommunications services such as optical wavelength service provisioning.

	•	TerreNAP^(SM) Power Circuit Services — The NAP of the Americas provides clean, reliable AC and DC power circuit services to our customers. The NAP’s design guarantees 100% availability of power, allowing us to perform routine maintenance activities at any component level without planned or unplanned outages. Our redundant AC power systems, which generate clean, computer-grade electricity, also feed our centralized and distributed 48 volt DC systems, giving our customers a large choice in power sources at the highest reliability levels.

	•	TerreNAP^(SM) Reference Timing — The NAP of the Americas offers a fully redundant managed timing reference source from our Datum NetSync Plus® SSU-2000 Rubidium system for delivering DS1/E1 synchronization and Network Time Protocol (NTP). This service allows our customers to save on equipment costs, installation times and maintenance of our customers’ network timing reference by using our on-site Stratum source.

	•	TerreNAP^(SM) Remote Hands Assistance — TerreNAP Remote Hands assists customers that need to remotely access their equipment to perform simple trouble-shooting or minor maintenance tasks on a 24x7x365 basis that do not require tools or equipment. TerreNAP Remote Hands services are available on demand or per contract.


	•	TerreNAP^(SM) Smart Hands Assistance — TerreNAP^(SM) Smart Hands enhances the TerreNAP^(SM) Remote Hands service with more complex remote assistance using industry certified engineers for troubleshooting and maintenance.

These services are designed to support the mission critical needs of network-based systems, supplying performance monitoring and systems management, and providing mission-critical IP infrastructure and managed services. We plan to continue developing other services as customer demand and technological advances dictate.

As of June 28, 2002, we have signed customer contracts that represent approximately $12 million of annualized recurring revenue with an average term of five years. This committed annual recurring amount typically includes revenue from colocation, peering and power services. However, it excludes revenue from managed services, which we expect will continue to increase as a percentage of total revenue. No customer accounted for more than 10% of Data Center revenues for the year ended March 31, 2002.

Our sales strategy has a deliberate approach to obtain new customers. We established the critical mass of customer connectivity and Tier-1 status for the NAP of the Americas. We accomplished this by signing contracts with the Tier-1 telecommunications carriers and ISPs that account for the majority of the world’s Internet fiber backbone. This created the critical mass of connectivity that differentiates the NAP of the Americas from other facilities that offer a limited choice of carriers. While we successfully completed this phase during the second quarter of fiscal year 2002, we have continued to add carrier customers to our portfolio to ensure the best possible selection of connectivity for our current and future customers.

With the NAP of the Americas positioned as the major connectivity point in the Southern United States and Latin America, in the third quarter of fiscal year 2002, we started focusing on selling our colocation space. Specifically, we marketed to the service divisions of the large Tier-1 carriers to expand their presence in the NAP, working with these groups to promote the NAP of the Americas to their customer base. In addition we have targeted Internet Service Providers, Application Service Providers and content providers as these companies often require a significant amount of connectivity and colocation space. We also sell our colocation services to Tier-2 carriers in Latin America and Europe that rely on Tier-1 carriers for access and services. Finally, we have developed offerings that address the needs of large enterprises that benefit from colocating their information systems in a secure facility with access to multiple carriers. We believe that this approach has been very successful, particularly when viewed in the context of the current capital restrictions and poor economic conditions that our target market is experiencing.

During the third quarter of fiscal year 2002, we also focused on leveraging our engineering and operations expertise to provide a targeted portfolio of managed services, particularly network and systems provisioning and operations services. This program has been successful, and a number of customers have entered into exclusive service agreements that call for our staff to provide all needed managed services for their equipment at the NAP of the Americas, including engineering, installation and on-going operations. We intend to continue introducing new services based on customer demand.

To execute our sales strategy, we have a staff of experienced sales executives divided into a new sales group and a customer support group. The new sales group is focused on establishing new customer relationships, and the customer support group works with our existing customers to better understand how we can add value to their operations at NAP of the Americas and ensure customer satisfaction.

We also have an indirect sales channel that includes resellers and agents, as well as a referral program that broadens the sales opportunities of our team. Through these programs, our sales force leverages the unique relationships with our carrier customers, allowing us unprecedented access to their customer base and target markets, and providing us with the opportunity to expand our reach through creative wholesale relationships. Many of our carrier customers requested that we establish this program so they could bundle

their core services with the NAP of the Americas’ managed services portfolio to provide a best-in-class solution for the end customer. In addition, these programs enable us to distribute carrier-provided services to other providers, thereby cross-selling our services with theirs. Our objective is to create a critical mass of TerreNAP services and those provided by other service providers, including our customers, which will enhance the value of the NAP of the Americas to all who have a presence there.

The market for Internet infrastructure services is extremely competitive and subject to rapid technological change. Many companies have announced that they will begin to provide or plan to expand their service offerings to compete with our services. We expect to encounter increased competition in the future due to increased consolidation and the development of strategic alliances in the industry. In addition, we will compete with foreign service providers as we expand internationally and as these service providers increasingly compete in the United States market. The principal competitive factors in our market include:


	•	Ability to deliver services when requested by the customer;

	•	Internet system engineering and other professional services expertise;

	•	Customer service;

	•	Network capability, reliability, quality of service and scalability;

	•	Variety of managed services offered;

	•	Access to network resources, including circuits, equipment and interconnection capacity to other networks;

	•	Broad geographic presence;

	•	Price;

	•	Ability to maintain and expand distribution channels;

	•	Brand name recognition;

	•	Timing of introductions of new services;

	•	Physical and network security;

	•	Financial resources; and

	•	Customer base.

Our current and potential competitors include: providers of data center services; global, regional and local telecommunications companies and Regional Bell Operating Companies; and information technology outsourcing firms. Some of our competitors, particularly the global telecommunications companies that have begun, or intend to begin, providing data center services, have substantially greater resources, more customers, longer operating histories, greater name recognition, and may have more established relationships in the industry than we do. As a result, these competitors may be able to develop and expand their Internet infrastructure services faster, devote greater resources to the marketing and sale of their products and adopt more aggressive pricing policies than we can. In addition, these competitors have entered and will likely continue to enter into business relationships to provide additional services that compete with the services we provide.

We believe our market is likely to consolidate in the near future, which could result in increased price and other competition. Some of our competitors may be able to provide customers with additional benefits relating to the customer’s Internet system and network management solutions, including reduced local and long distance communications costs, which could reduce the overall costs of their services relative to ours. We may not be able to offset the effects of any price reductions.

As we expand our operations in markets outside the United States, we will also encounter new competitors and competitive environments. Our foreign competitors may enjoy a government-sponsored monopoly on telecommunications services essential to our business, and will generally have a better understanding of their local industry and longer working relationships with local infrastructure providers.

We believe that we have certain competitive advantages. We are one of only five owners/operators of a Tier-1 NAP in the U.S. None of the other Tier-1 NAPs offer Class A1+ space immediately adjacent to the peering point as well as managed services. In addition, we are the only carrier-neutral Tier-1 NAP. Nevertheless, there are few substantial barriers to entry to the colocation and managed services market, and we expect to face additional competition from existing competitors and new market entrants in the future.

As of June 28, 2002, we had 133 full-time employees in the United States and 4 full-time employees in emerging markets.

Our employees are not represented by a labor union and are not covered by a collective bargaining agreement. We believe that our relations with our employees are good.

Our corporate headquarters are located at 2601 S. Bayshore Drive, Miami, Florida 33133. In fiscal year 2002, we paid annual rent of approximately $495,000. We also maintain smaller offices in downtown Miami, Florida and Sao Paulo, Brazil. The lease terms range from five to twenty years. We also maintain temporary construction offices. We believe that our current space is adequate for our expected growth in the next year.

We are, from time to time, involved as defendants in litigation relating to claims arising out of our operations in the normal course of business. These claims against us are generally covered by insurance. We are not currently subject to any litigation which singularly or in the aggregate could reasonably be expected to have a material adverse effect on our financial conditions or results of operations. We also engage as plaintiffs in a small number of collection lawsuits.

No matters were submitted to a vote of our stockholders during the quarter ended March 31, 2002.

Our common stock, par value $.001 per share, is quoted under the symbol “TWW” on the American Stock Exchange. Our authorized capital stock consists of 300,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of July 8, 2002, 204,482,250 shares of common stock were outstanding, 20 shares of our series G convertible preferred stock were outstanding and held by one holder of record and 294 shares of our series H convertible preferred stock were outstanding and held by one holder of record. We believe we have in excess of 8,800 beneficial owners of our common stock.

The following table sets forth, for the fiscal quarters indicated, the high and low sales prices for our common stock on the American Stock Exchange. Quotations are based on actual transactions and not bid prices.

We have never paid cash dividends on our common stock and do not plan to pay cash dividends in the foreseeable future. In accordance with a credit facility agreement with a financial institution we may not pay cash or stock dividends, without the written consent of the financial institution. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity and Capital Resources.”

In May 2002, we sold 10 million shares of our common stock for $7.5 million to a group that includes two of our directors, representing a premium to market.

In June 2002, we sold 5 million shares of our common stock to a Spanish company for $5 million. The number of shares sold pursuant to this transaction will be adjusted if: (i) on October 31, 2002 we have failed to materially meet certain cash flow projections or open an interim NAP in Madrid; or (ii) any time during the next 12 months we issue common stock at less than $1.00 per share. At the time of the transaction we owned 1% of the Spanish company’s equity, which we increased to 10% subsequent to the transaction.

These offers and sales of our common stock were exempt from the registration requirements of the Securities Act of 1933, as amended as the common stock was sold to accredited investors pursuant to Regulation D and to non-United States persons in offshore transactions pursuant to Regulation S.

The selected financial statement data set forth below has been derived from our financial statements, which have been audited by our independent certified public accountants. The information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and the Notes thereto included elsewhere in this report.


(1)	Long term obligations includes convertible debt, notes payable, less current portion and capital lease obligations, less current portion.
(2)	Stockholders equity as of March 31, 2000 and 1999 includes approximately $4,777 in convertible preferred stock.

The quarterly selected financial statement data set forth below has been derived from our unaudited financial statements. The information should be read in conjunction with those financial statements and our Consolidated Financial Statements and the Notes thereto included elsewhere in this report.


(1)	Summary financial statement data includes discontinued operations as a separate component of net loss as compared to amounts previously reported in Form 10-Q.

The following discussion of results of operations and financial condition is based upon and should be read in conjunction with our Consolidated Financial Statements and Notes thereto, the Selected Financial Data and other financial data appearing elsewhere in this report.

The NAP of the Americas provides a neutral connection point where telecommunications carriers can establish bilateral and multilateral connections between and among their networks, a process known as peering, and purchase capacity from each other. The NAP of the Americas also provides premium-class space where carriers, Internet Service Providers, Application Service Providers, content providers, Internet businesses, telecommunications providers and enterprises house their equipment and their network facilities in order to be close to the peering connections that take place at the NAP. This is known as colocation. In addition, the NAP of the Americas provides a menu of related managed services, such as meet-point rooms. We expect that the NAP of the Americas will be a primary channel of Internet traffic from Central and South America and the Caribbean to North America and Europe.

As a result of changes in our business conditions, including market changes in the telecommunications industry and the lack of debt and equity financing vehicles to fund other business expansion during the third quarter of the year ended March 31, 2001, we began to redefine and focus our TerreNAP Data Center strategy, and began implementing a plan to exit all lines of business not directly related to this strategy. Lines of business discontinued include IP fax services, unified messaging services, and telephony. As of March 31, 2002, we have completed our exit of lines of business not related to our TerreNAP Data Center strategy. This change in focus has impacted the composition of the financial revenues for the years ending March 31, 2002 and March 31, 2001.

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses Terremark Worldwide Inc.’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenues and collectibility of receivables, income taxes, contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following significant accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements:


	•	Revenue recognition and allowance for bad debts;

	•	Accounting for income taxes;

	•	Accounting for property and equipment; and

	•	Impairment of long-lived assets and long-lived assets to be disposed of.

Revenue Recognition and Allowance for Bad Debts. Revenue is recognized as service is provided when there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the receivable is reasonably assured. We assess collection based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. We do not request collateral from our customers. If we determine that collection is not reasonably assured, we defer the fee and recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash. In addition, an allowance is provided for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments for those customers that we had expected to collect the revenues. If the financial condition of our customers were to deteriorate or if they become insolvent, resulting in an impairment of their ability to make payments, allowances for doubtful accounts may be required, which would decrease net income in the period the determination was made. Management specifically analyzes accounts receivable and analyzes current economic news and trends, historical bad debts, customer concentrations, customer credit-worthiness and changes in customer payment terms when evaluating revenue recognition and the adequacy of our allowances.

Data center revenues currently consist of monthly recurring fees for colocation and exchange point services and non-recurring installation fees and managed services fees. Revenues from colocation and exchange point services are billed and recognized ratably over the period of usage. Installation fees are deferred and recognized ratably over the term of the related contract. Managed services fees are recognized in the period in which the services were provided.

Revenues from real estate sales are recognized at the time of delivery to the customer. Revenues from development, commission and construction fees are recognized when earned.

Revenues from construction contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to total estimated costs for each contract. This method is used because management considers cost incurred to be the best measure of progress on these contracts. The duration of a construction contract generally exceeds one year. Billings in excess of costs and estimated

Provisions for estimated losses on uncompleted contracts are made in the period in which losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions can be reasonably estimated. Accordingly, it is possible that our current estimates relating to completion cost and profitability of our uncompleted contracts will vary from actual results.

Accounting for Income Taxes. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce tax assets to the amounts expected to be realized.

We currently have provided for a full valuation allowance against our net deferred tax assets. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance and based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Should we determine that we would be able to realize our deferred tax assets in the foreseeable future, an adjustment to the deferred tax assets would increase net income in the period the determinations were made.

Accounting for Property and Equipment. Property and equipment, net includes acquired assets and those accounted for under capital leases. Purchased assets are recorded at cost and capital leased assets are recorded at the net present value of minimum lease payments. Property and equipment are depreciated on the straight-line method over their estimated remaining useful lives, which are generally five to twenty years for leasehold improvements, three years for computer software and five years for furniture, fixtures and equipment.

Should management determine that the actual useful lives of property and equipment placed into service are less than originally anticipated, or if any of our property and equipment was deemed to have incurred an impairment, additional depreciation or an impairment charge would be required, which would decrease net income in the period the determination was made. Conversely, should management determine that the actual useful lives of our property and equipment placed into service was greater than originally anticipated, less depreciation may be required, which would increase net income in the period the determination was made.

Impairment of Long-lived Assets and Long-lived Assets to be Disposed of. In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, we evaluate long-lived assets and identifiable intangibles for impairment whenever events or changes in circumstances indicate that the net carrying amount may not be recoverable. When these events occur, we determine if there is impairment by comparing the carrying value of the long-lived asset to the estimated undiscounted future cash flows expected to result from the use of the asset. If an impairment is indicated, an impairment charge is provided for the excess of the carrying amount of the asset over its fair value and would decrease net income in the period determination was made.

Changes in business conditions in the telecommunications industry and resulting decline in related construction projects caused us to perform an impairment analysis during the year ended March 31, 2002 of our goodwill acquired in the Post Shell acquisition. Based on this analysis, we determined that the asset, which is included in our real estate segment, was impaired by $3,190,000. We believe that the remaining $2,315,336 in Post Shell goodwill is recoverable through future related cash flows.

Changes in business conditions in the telecommunications industry and resulting decline in related real estate leasing activities caused us to perform an impairment analysis during the year ended March 31, 2002 of

the promote interests in TECOTA which we acquired in the telecom facilities management operations sale. Based on this analysis, we determined that the asset, which is included in our real estate segment, was impaired by $3,800,000. We believe that the remaining $904,964 in TECOTA promote interests is recoverable through future related cash flows.

During the three months ended September 30, 2001, we recorded a $6,462,315 impairment charge related to our colocation facility in Santa Clara, California, based on an option to purchase the facility granted to one of our vendors. Subsequent expiration of the option and continued decline in related colocation industry activities caused us in the quarter ended March 31, 2002 to change our classification for the facility to “held for sale”. As a result, we recorded an additional $5,521,355 impairment. These charges are included in our telecom facilities management segment, have fully impaired the related assets and include approximately $1,530,000 in expected carrying and selling costs.

Results of Operations for the Year Ended March 31, 2002 as Compared to the Year Ended March 31, 2001

Revenue. Total revenue decreased $24.3 million, or 60.5%, to $ 15.9 million for the year ended March 31, 2002 from $40.1 million for the year ended March 31, 2001, reflecting our exit of the real estate development business.

Data center revenue increased $3.0 million, or 1,171%, to $3.2 million for the year ended March 31, 2002 from $0.3 million for the year ended March 31, 2001. The increase was attributable to our peering, colocation and managed services offered at the NAP, which became operational on July 2001. The data center revenue in the prior year was derived from our peering and colocation services offered at the interim NAP which became operational in December 2000. We expect data center revenues to increase in future periods as customers set up their operations in the NAP of the Americas. Future data center revenues will be derived from peering, colocation and managed services.

Revenue from real estate sales was $2.8 million for the year ended March 31, 2001, and was attributable to the sale of twelve condominium units. The net revenue from the last six condominium units sold during the year ended March 31, 2002 is recorded as a gain on the sale of real estate held for sale.

Development, commission and construction fees decreased approximately $9.3 million during the year ended March 31, 2002 as compared to the year ended March 31, 2001. This decrease resulted from a decrease in development, commission and construction fees earned primarily resulting from a decrease in commissions from telecom facilities management operations. Since we sold a large portion of our telecom facilities management operations in February 2001, related leasing commissions and management fees have decreased.

Contract construction revenue decreased $14.2 million, from $22.4 million for the year ended March 31, 2001 to $8.3 million for the year ended March 31, 2002. The decrease is attributable to the reduction in the number of contracts in 2002 as compared to 2001. During the year ended March 31, 2002, we completed two contracts and as of March 31, 2002, we had five construction contracts in process. During the year ended March 31, 2001, we completed twelve contracts and as of March 31, 2001, we had seven contracts in process.

Data Center Operations. Data center operations expenses increased $10.0 million for the year ended March 31, 2002 from $1.2 million for the year ended March 31, 2001. The increase was attributable to costs associated with the operations of the NAP of the Americas facility which became operational in July 2001. The data center operations expense in the prior year was derived from operations of the interim NAP facility, which became operational in December 2000. Data center operations consist mainly of rent, operations personnel, electricity, chilled water and security services. With the exception of electricity and chilled water, the majority of these expenses are fixed in nature. We expect that our costs of electricity and chilled water costs will increase in the future as more customers utilize the NAP of the Americas.

Start-up Costs — Data Centers. Start-up costs for the year ended March 31, 2002 primarily relate to the NAP of the Americas in Miami, Florida, and were approximately $3.4 million as compared to $6.5 million for the year ended March 31, 2001. Start-up costs in the previous year relate to the NAP of the Americas and the interim NAP facility.

Contract Construction Expenses. Contract construction expenses decreased $12.9 million from $20.3 million for the year ended March 31, 2001 to $7.4 million for the year ended March 31, 2002. This decrease is a result of the number of contracts in process, stage of completion and dollar amount of those projects. We do not currently anticipate any losses on any of the individual contracts.

General and Administrative Expenses. During fiscal year 2002, our efforts included establishing internal operations to support our Internet infrastructure services strategy. General and administrative expenses decreased by $4.4 million from approximately $19.9 million for the year ended March 31, 2001 to $15.6 million for the year ended March 31, 2002. This decrease is attributable to the decrease in our investment in personnel and corporate infrastructure related to non-core assets. The significant components of these expenses include personnel, insurance, office expenses and professional fees. In addition, during the year ended March 31, 2002, we implemented several cost-savings initiatives, including staff reductions and an overall decrease in discretionary spending.

Sales and Marketing Expenses. Sales and marketing expenses increased $0.9 million, or 30.8%, for the year ended March 31, 2002 as compared to the previous fiscal year. The increase is principally due to marketing the TerreNAP Data Centers including NAP of the Americas, partially offset by the decrease in marketing expenses associated with the sale of real estate.

Depreciation and Amortization Expense. Depreciation and amortization expense increased from $3.3 million for the year ended March 31, 2001 to $7.3 million for the year ended March 31, 2002. The increase resulted primarily from the depreciation of the leasehold improvements and equipment used in the NAP of the Americas, which was placed in service on July 1, 2001. Therefore, no similar expenses were recorded for the comparable period during 2001.

Impairment of Long-lived Assets. During the year ended March 31, 2002, in accordance with SFAS No. 121, we evaluated the carrying value of our leasehold improvements related to our colocation facility in Santa Clara and our goodwill related to Post Shell and our TECOTA promote interests. Our investment in our Santa Clara facility was impaired due to a decline in the technology sector and general economic conditions. Accordingly, we recorded an impairment charge of approximately $12.0 million. We are currently attempting to sell our leasehold interest and terminate our obligation under the lease. In addition, changes in business conditions in the telecommunications industry and resulting decline in related construction projects caused us to record an impairment to Post Shell’s goodwill of approximately $3.2 million. Furthermore, the decline in real estate leasing activities caused us to record an impairment of $3.8 million to the TECOTA promote interests. As a result of our agreement to sell certain telecom facilities management operations, during the year ended March 31, 2001, we recognized a $4.2 million impairment of intangible assets relating to management contracts sold.

Interest Income. Interest income decreased from $0.5 million for the year ended March 31, 2001 to $0.1 million for the year ended March 31, 2002 due to a decrease in our average cash balances invested and a decline in short-term interest rates.

Interest Expense. Interest expense increased from $1.1 million for the year ended March 31, 2001 to $9.8 million for the year ended March 31, 2002 due to an increase in our average debt balance outstanding.

Gain On the Sale of Real Estate Held for Sale. During the year ended March 31, 2002, we sold Fortune House II for $17.2 million and recorded a gain of $3.9 million. We also sold six condominium units and recorded a net gain of $0.3 million.

Net Loss From Continuing Operations. Net loss from continuing operations increased from $21.4 million for the year ended March 31, 2001 to $57.4 million for the year ended March 31, 2002. This increase was primarily due to non-cash items, which include impairment of long-lived assets of approximately $19 million, and depreciation and amortization expense of approximately $7.3 million. Also contributing to the loss were interest expense of approximately $9.7 million and $14.6 million of expenses generated from the start-up and operations of the NAP of the Americas.

Loss From Discontinued Operations and Loss on Disposition of Discontinued Operations. In March 2001, we implemented our plan to dispose of acquired businesses whose operations reflect Internet faxing, unified messaging and telephony services. These operations were acquired earlier in the year ended March 31, 2001 in association with the AmTec, Spectrum Communication, IXS.Net and Asia Connect acquisitions. Since the operations represent a class of customer and a major line of business, the results of these activities and estimated loss on disposal are accounted for as discontinued operations. The loss on disposition of discontinued operations of $61.1 million includes write-off of approximately $54.4 million in goodwill. For the year ended March 31, 2001, discontinued operations had $1.8 million of total revenues and a loss of $11.4 million, net of $10.2 million in goodwill amortization. For the year ended March 31, 2002 there were no losses from discontinued operations or loss on disposition of discontinued operations.

Results of Operations for the Year Ended March 31, 2001 as Compared to the Year Ended March 31, 2000

Revenue. Total revenue grew $24.8 million, or 160.9%, to $40.1 million for the year ended March 31, 2001 from $15.4 million for the year ended March 31, 2000.

Data center revenue was $0.3 million for the year ended March 31, 2001. No data center revenue was recorded for the previous comparable period. The increase was attributable to our peering and colocation services offered at the interim NAP. We expect data center revenues to increase in future periods as customers set up their operations in the NAP of the Americas. Future data center revenues will be derived from peering, colocation and managed services.

Revenue from real estate sales decreased $8.2 million, or 75.0% from $11.0 million for the year ended March 31, 2000 to $2.8 million for the year ended March 31, 2001. Revenue for the year ended March 31, 2000 is attributable to the sale of 45 condominium units. As a result of fewer units being available for sale, only twelve units were sold in the year ended March 31, 2001.

Development, commission and construction fees increased approximately $9.9 million during the year ended March 31, 2001 as compared to the year ended March 31, 2000. This increase resulted from increases of $4.0 million in commissions from lease signings, primarily related to telecom facilities under management, $1.1 million in management fees earned related to management of telecom, commercial and residential properties and $4.75 million related to the sale of certain rights under agreements entered into in conjunction with a hotel development project. Since we sold a large portion of our telecom facilities management operations in February 2001, related leasing commissions and management fees are expected to decrease in future periods.

Contract construction revenue increased $21.7 million, from $0.7 million for the year ended March 31, 2000 to $22.4 million for the year ended March 31, 2001. During 2001, we obtained 19 third party contract construction projects as a result of our acquisition of Post Shell Technology Contractors, Inc., now known as Terremark Technology Contractors Inc. As of March 31, 2001, we had seven construction contracts in process.

Data Center Operations. Data center operation expenses were $1.2 million for the year ended March 31, 2001. No cost was recorded for the year ended March 31, 2000. The increase was attributable to costs associated with the operations of the interim NAP Facility which became operational in December 2000. We expect that data center operations costs will increase in the future as customers set up their operations in the NAP of the Americas.

Start-Up Costs — Data Centers. Start-up costs of data centers were $6.5 million for the year ended March 31, 2001. No costs were recorded for the comparable period during 2000. The increase was attributable to costs associated with the interim NAP Facility and the NAP of the Americas.

Cost of Real Estate Sold. Cost of real estate sold decreased by $6.7 million, or 75.9%, from $8.8 million for the year ended March 31, 2000 to $2.1 million for the year ended March 31, 2001. The decrease is primarily attributable to the decrease in the number of condominium units sold as a result of fewer units being available for sale.

Contract Construction Expenses. Contract construction expenses increased $19.8 million from $0.5 million for the year ended March 31, 2000 to $20.3 million for the year ended March 31, 2001. This increase is attributable to an increase in the number of construction contracts in progress as a result of our acquisition of Post Shell Technology Contractors during the period and the percentages of completion of those projects. We do not currently anticipate any losses on any of the individual contracts.

General and Administrative Expenses. During fiscal 2001, our efforts included the integration of our acquisitions and establishing internal operations to support our Internet and telecom infrastructure services strategy. General and administrative expenses increased by $12.0 million from approximately $7.9 million for the year ended March 31, 2000 to $19.9 million for the year ended March 31, 2001. This increase is attributable to our investment in personnel and corporate infrastructure and the related additional operating expenses resulting from the acquisitions of Telecom Routing Exchange Developers, Post Shell Technology Contractors, IXS.Net and Asia Connect. Although we are currently attempting to reduce expenses in activities not related to our core strategy, we expect general and administrative expenses relating to TerreNAP Data Center to continue increasing over time as we continue to expand our operations.

Sales and Marketing Expenses. Sales and marketing expenses decreased $0.2 million, or 5.6%, for the year ended March 31, 2001. The decrease is principally due to the decrease of marketing expenses associated with the sale of real estate offset by the increase in marketing expenses associated with marketing the new merged company and TerreNAP Data Centers including NAP of the Americas. During the year ended March 31, 2000, expenses were incurred in connection with the promotion of the sale of two Fortune House condominium projects. During the year ended March 31, 2001, all sales and marketing efforts were terminated in the Fortune House projects.

Depreciation and Amortization Expense. Depreciation and amortization expense increased from $81,000 for the year ended March 31, 2000 to $3.3 million for the year ended March 31, 2001. The increase resulted primarily from amortization of intangible assets associated the acquisitions of Telecom Routing Exchange Developers and Post Shell Technology Contractors.

Impairment of Long-lived Assets. During the year ended March 31, 2000, we recorded a $0.4 million impairment related to real estate held. As a result of our agreement to sell certain telecom facilities management operations during the third quarter of the year ended March 31, 2001, we recognized a $4.1 million impairment of intangible assets which were subsequently sold during the following quarter.

Interest Income. Interest income increased from $0.2 million for the year ended March 31, 2000 to $0.5 million for the year ended March 31, 2001 due to an increase in our average invested cash balances.

Interest Expense. Interest expense increased from $0.8 million for the year ended March 31, 2000 to $1.1 million for the year ended March 31, 2001 primarily due to the issuance of our convertible debentures.

Dividends On Preferred Stock. Dividends on our redeemable preferred stock were $0.4 million for the year ended March 31, 2000 compared to $35,000 for the year ended March 31, 2001. On April 28, 2000, the preferred stock was converted to shares of our common stock.

Net Loss From Continuing Operations. Net loss from continuing operations increased from $6.0 million for the year ended March 31, 2000 to $21.4 million for the year ended March 31, 2001 as a result of the factors discussed above. During the year ended March 31, 2001, our activities were directed towards the integration of our acquisitions and establishing internal operations to support Internet and telecom infrastructure services.

Loss From Discontinued Operations and Loss on Disposition of Discontinued Operations. In March 2001, we implemented our plan to dispose of certain acquired businesses whose operations reflect Internet faxing, unified messaging and telephony services. These operations were acquired earlier in the year ended March 31, 2001 in association with the AmTec, Spectrum Communication, IXS.Net and Asia Connect acquisitions. Since the operations represent a class of customer and a major line of business, the results of these activities and estimated loss on disposal are accounted for as discontinued operations. The loss on disposition of discontinued operations of $61.1 million includes the write-off of $54.4 million in goodwill. For

Cash used in continuing operations for the year ended March 31, 2002 was approximately $36.4 million compared to cash used in operations of $6.3 million for the year ended March 31, 2001, an increase of $30.1 million. This increase was primarily the result of our net loss. Cash used in discontinued operations amounted to $22.2 million for the year ended March 31, 2001. No cash used in discontinued operations was recorded for the year ended March 31, 2002. In the aggregate, cash used in operating activities was $36.4 million and $28.6 million for the years ended March 31, 2002 and 2001, respectively.

Cash used in investing activities for the year ended March 31, 2002 was $28.7 million compared to cash provided by investing activities of $28.6 million for the year ended March 31, 2001. For the year ended March 31, 2002, cash of $45.8 million was used primarily for the purchase of property and equipment related to the NAP of the Americas and our colocation facility in Santa Clara, California. For the year ended March 31, 2001, cash provided by investing activities was primarily composed of proceeds from the sale of Terremark Centre for $55.8 million, offset by $24.4 million of cash primarily used for the purchase of property and equipment primarily related to the NAP of the Americas and our facility in Santa Clara, California.

Cash provided by financing activities for the year ended March 31, 2002 was $59.9 million compared to cash provided by financing activities of $2.1 million for the year ended March 31, 2001, an increase of $57.8 million. The increase in cash provided by financing activities resulted primarily from $81.8 million of new borrowings and issuance of convertible debt and $9.3 million of construction payables relating to the NAP of the Americas and our colocation facility in Santa Clara, California partially offset by loan payments of $26.5 million. Cash provided by financing activities for the year ended March 31, 2001 resulted primarily from payments on loans of approximately $73.6 million, including repayment of approximately $55.2 million in debt associated with Terremark Centre and repayment of approximately $14.6 million related to a cancelled line of credit, partly offset by $28.1 million provided by the sale of our common stock.

During fiscal year 2003, $93.1 million of our liabilities, including notes, construction and other trade payables will come due. We had a net working capital deficit of approximately $89.0 million and stockholder’s deficit of approximately $49.3 million at March 31, 2002 and incurred a net loss of approximately $57.4 million for the twelve months then ended. This loss is the result of:


	•	non-cash items, including impairment charges of long-lived assets of approximately $19.0 million, and depreciation and amortization expense of approximately $7.3 million;

	•	interest expense of approximately $9.7 million;

	•	approximately $14.6 million of expenses generated from the start-up and operations of the NAP of the Americas; and

	•	not generating sufficient revenue during the year to support the increase in infrastructure.

During the year ended March 31, 2002, we met our liquidity needs primarily through obtaining additional debt financing and the issuance of equity interests. Some of our debt financing was either provided by or guaranteed by a principle executive officer. We also successfully shut down or disposed of our remaining non-core operations and implemented a series of expense reductions. We expect that we will need an infusion of cash to fund our business operations during the next fiscal year. Our current liquidity needs are primarily related to repayment of our construction payables, other payables and debt and to support operations. We have developed a plan to continue operating through the year ended March 31, 2003. Actual funding requirements


	•	signing of additional customer contracts at NAP of the Americas;

	•	restructuring of $23.7 million of construction payables into long term payables or equity or a combination thereof;

	•	exercise of our option to sell our common stock to a financial institution resulting in $10.2 million in additional equity;

	•	no funding under any of our guarantees; and

	•	restructuring of our $48 million credit facility, as discussed below.

We have identified additional potential customers and are actively marketing to them available services in the NAP of the Americas. Our plan is predicated on obtaining additional customer contracts by March 31, 2003, which on an annual basis will generate revenues of approximately $20 million. We have also been pursuing and continue to seek sources of additional debt and equity financing. We are actively engaged in discussions with certain vendors to restructure the terms of our construction payable obligations. Our failure to obtain adequate terms from creditors and additional debt or equity financing and meet this plan will result in liquidity problems and require us to curtail, in whole or in part, current operations. There can be no assurances that our plan will be adequately implemented in the time frame contemplated, even if such funds are obtained. Further, any additional equity financing if obtained, will be dilutive to existing stockholders. As a result of these matters, substantial doubt exists about our ability to continue as a going concern.

Our plan to increase liquidity includes additional equity funding, entering into strategic relationships, and the potential sale of additional debt securities sufficient to fund our 2003 business plan. There can be no assurance that such financing will be available to us. Our ability to obtain financing may be adversely affected by future declines in the technology sector and general economic conditions.

We intend to allocate our financial resources to activities that are consistent with our strategy of developing and operating TerreNAP Data Centers, including the NAP of the Americas. However, the development of the NAP of the Americas and other TerreNAP Data Centers will require substantial capital resources. As part of our business strategy, we intend to continue to evaluate potential acquisitions, joint ventures and strategic alliances in or with companies that provide services or operations that complement our existing businesses. These acquisitions may also require financing, which may not be available to us on acceptable terms.

In June 2002, we entered into an exclusive agreement with the Comunidad Autonoma de Madrid to develop and operate carrier-neutral network access points (NAPs) in Spain. As part of that agreement the parties formed NAP de las Americas — Madrid S.A. for the purpose of owning and operating carrier-neutral Tier-1 NAPs in Spain and of which we own 10%. We contributed approximately $250,000 towards the capitalization of NAP de las Americas — Madrid S.A. to obtain the 10% interest. The shareholders in this new company are the Instituto Madrileno de Desarrollo — IMADE, the Camara Oficial de Comercio e Industria de Madrid, Red Electrica Telecomunicaciones, S.A., Telvent Desarrollos S.A., a subsidiary of Abengoa S.A., and Centro de Transportes de Coslada, S.A. In June 2002, the NAP de las Americas — Madrid purchased 5 million shares of our common stock at $1.00 per share. We also have the option to purchase up to another 30% of the NAP de las Americas — Madrid shares owned by the Comunidad and the Camara at the initial capitalization value, plus LIBOR.

In May 2002, we received a $1.5 million short-term loan at 10% interest from our Chief Executive Officer.

In April 2002, we entered into a Put and Warrant purchase agreement with an international financial institution. Under the agreement, we have an option to put up to $10.2 million in aggregate value of our shares

of common stock, at a per share value equivalent to 86.6% of the closing price of the stock on the day the option is exercised. The amount of shares that we put to the financial institution is limited to 9.9% of our then outstanding common stock. Upon the exercise of the option, we will issue and grant to the financial institution three call warrants that grant the financial institution the right to purchase additional shares in an aggregate amount equal to 20% of the shares sold to the institution under the option. The strike price for the first call warrant is equal to the market price of our share price on the option exercise date. The strike price of the second call warrant will be at a 15% premium of our share price on the option exercise date. The strike price of the last call warrant will be at a 15% discount of our share price on the option exercise date. All three call warrants have a six month term. The option expires during October 2002. If the option expires without exercise, we are required to pay $500,000 in fees.

In April 2002, we received a binding commitment from two directors and some of our shareholders for the purchase of $7.5 million of common stock at $0.75 per share. In May 2002, the transaction was completed by receiving $3.6 million in cash and the conversion of $3.9 million in short term promissory notes to equity. In March 2002, we received $950,000 in cash related to the future stock sale. As of March 31, 2002, this cash receipt was recorded as common stock subscriptions.

On September 5, 2001, we closed on a $48.0 million credit facility with a bank. The credit facility bears interest at an annual rate of 9.25%, interest is paid monthly and the principal balloons in March 2003. To obtain the loan, we paid a $720,000 commitment fee. We have the option to exercise two nine-month extension periods, subject to some conditions, each for a fee of 0.5% of the principal balance outstanding together with a principal repayment of $2.5 million. During each extension period, a $250,000 monthly principal repayment plus interest is due. At closing, the total amount of the credit facility was disbursed except for approximately $6.6 million that has been held as an interest reserve available to us through June 2002. For the first nine months after the closing of the loan, the reserve has been drawn down on a monthly basis to make interest payments. Subsequently, we will pay interest through cash on hand. The proceeds of the credit facility were primarily used to:


	•	repay a $10 million short-term loan from Manuel D. Medina, our Chief Executive Officer, the proceeds of which we had used to fund the build out of the NAP of the Americas (he, in turn, used the $10 million to repay a personal $10 million short-term loan from the bank);

	•	repay $3.5 million of debt that we owed to the bank under a line of credit personally guaranteed by Mr. Medina;

	•	pay $1.2 million in loan costs related to the $48 million credit facility (including the $720,000 commitment fee); and

	•	fund the NAP of Americas build out costs.

The credit facility is secured by all of our assets and all of our stock in certain of our subsidiaries. The credit facility allows for up to a $25.0 million junior lien position on the assets of our NAP of the Americas, Inc. subsidiary. Mr. Medina has personally guaranteed the $48 million credit facility.

During July 2002, we reached an agreement in principle to amend the credit facility. Under the amended terms, the initial maturity date has been extended to September 2003 and we have the option to exercise two six-month extension periods each at a cost of 0.5% of the principal balance outstanding together with a principal repayment of $2.5 million. The annual interest rate has been reduced to 7.50% and we will commence making monthly interest payments in July 2002. All other material provisions of the credit facility will remain unchanged. This amendment will be binding upon execution of the documents modifying the terms and conditions of the credit facility, which we expect to complete in July 2002. The credit facility is classified as current in our financial statements.

In addition to his personal guarantee of the credit facility, and in order for us to obtain the facility, the bank further required that Mr. Medina, prior to the bank disbursing funds under the credit facility (i) provide a $5.0 million certificate of deposit to the bank as collateral on certain personal loans that Mr. Medina has with the bank and (ii) commit to accelerate the maturity date of those personal loans to December 31, 2001.

Subsequent to September 2001, Mr. Medina and the bank changed the maturity date on the personal loans, first to December 31, 2001 and later to July 1, 2002. Mr. Medina also agreed to subordinate debt that we owe to Mr. Medina in the event of our default under the credit facility. Mr. Medina has repaid part of those personal loans to the bank through liquidation of the $5.0 million certificate of deposit in January 2002 leaving an outstanding principal balance of approximately $5.4 million and he intends to exercise his right under such personal loan agreements to extend their maturity date from July 1, 2002 to December 31, 2002.

On September 5, 2001, in consideration of Mr. Medina agreeing to repay his indebtedness to the bank earlier than otherwise required, pledging the certificate of deposit to the bank and personally guaranteeing the $48 million credit facility and approximately $21 million of construction payables, we entered into an amended and restated employment agreement with him. Under the terms of the amended and restated employment agreement we will indemnify Mr. Medina from any personal liability related to his guarantees of any of our debt, use commercially reasonable efforts to relieve Mr. Medina of all his guarantees of our debt, provide up to $6.5 million of cash collateral to the bank should Mr. Medina be unable to repay the personal loans when due and provide a non interest-bearing $5.0 million loan to Mr. Medina for as long as his guarantees of our debt exist. If the promissory note becomes in default, we have the right of offset against all amounts payable by us to Mr. Medina, the aggregate of which is approximately $2.2 million as of March 31, 2002. The note is shown as an adjustment to equity. Additionally, as long as Mr. Medina’s guarantees of our debt exist, we have agreed to nominate Mr. Medina to our Board of Directors and not remove Mr. Medina, unless for good cause, or remove any of our officers without Mr. Medina’s consent. There was no change in the amount or timing of Mr. Medina’s cash or non-cash compensation in connection with these agreements, nor did Mr. Medina receive any guarantee fee or other fees in connection with his guaranteeing our indebtedness. We do not anticipate funding the $6.5 million of cash collateral.

The $48 million credit facility and the loan to Mr. Medina have been approved by our Board of Directors.

In July 2002, the terms of Mr. Medina’s $5.0 million non-interest bearing note were amended. As amended, the note has a maturity date of December 5, 2004 and bears interest subsequent to September 5, 2002 at the applicable federal rate. Interest is due in bi-annual installments. On a quarterly basis, we will review the collectibility of this note. As of July 9, 2002, we owed Mr. Medina approximately $3.7 million. For so long as the $5.0 million note from Mr. Medina is outstanding we have the right to withhold payment to Mr. Medina of $1,375,000 in our convertible debt held by him.


	•	$26.4 million in principal amount of subordinated convertible debt issued. Interest accrues at 13%, and is payable quarterly beginning March 31, 2001. The debt matures on December 31, 2005 and is convertible into shares of our common stock at $1.87 weighted average conversion price. We are permitted to prepay the debentures, which will entitle holders to warrants or a premium over their outstanding principal declining from 105% in 2001 at the rate of 1% per year;

	•	$4.3 million in principal amount of subordinated convertible debt issued. Interest accrues at 13.125%, and is payable quarterly beginning December 31, 2001. The debt matures on August 30, 2004 and is convertible into shares of our common stock at a $0.66 weighted average conversion price We are permitted to prepay the debentures;

	•	$48.0 million loan from a commercial bank referred to above (as of March 31, 2002 approximately $43.3 million is outstanding);

	•	$4.2 million under various capital lease arrangements, with various terms, secured by equipment;

	•	$1.4 million under a loan from a commercial bank secured by certain assets and personal guarantees of a director and certain of our shareholders. The note payable matured as of December 2001. During the year ended March 31, 2002, we made principal reductions on this loan of $375,000 and are currently working with the lender to extend amounts due;

	•	$7.5 million of short term financing borrowed from related parties, including certain directors, shareholders and members of our executive management team; and

Subsequent to March 31, 2002, we paid approximately $951,000 in interest that was due on our subordinated convertible debt on March 31, 2002. Subsequent to June 30, 2002, we paid approximately $1,000,000 in interest that was due on our subordinated convertible debt on June 30, 2002.

In addition to our operating commitments, we have made certain guarantees. The Technology Center of the Americas, LLC, (“TECOTA”) where the NAP of the Americas is located, obtained $48.0 million of equity and $61.0 million of construction financing to fund the construction of TECOTA during November 2000. During September 2001, our guaranty of the construction financing was reduced from approximately $60.6 million to $9.5 million. As of March 31, 2002, TECOTA had accounts payable and accrued expenses of $0.8 million and debt of $33.5 million. We do not expect to fund any amounts under our guarantee.

We lease space for our operations, office equipment and furniture under non-cancelable operating leases. Some equipment is also leased under a capital lease, which are included in leasehold improvements, furniture and equipment. The following represents the minimum future operating and capital lease payments for these commitments, as well as the combined aggregate maturities for all of our debt as of March 31, 2002:


(1)	Included in the 2003 notes payable is $43.3 million credit facility with a bank. Although this facility matures during March 2003, we have the option to exercise two nine-month extension periods each at a cost of 0.5% of the principal balance outstanding and a principal repayment of $2.5 million. During each extension period, a $250,000 monthly principal repayment plus interest is due.

You should carefully consider the risks described below and the other information in this annual report. Our business, financial condition or operating results could be seriously harmed if any of these risks materialize. The trading price of our common stock may also decline due to any of these risks.

The deployment of our TerreNAP^(SM) Data Center strategy will require us to expend substantial resources for leases, improvements of facilities, purchase of complementary businesses, assets and equipment, implementation of multiple telecommunications connections and hiring of network, administrative, customer support and sales and marketing personnel. In general, we expect that it may take us a significant period of time to select the appropriate location for a new TerreNAP^(SM) Data Center, construct the necessary facilities, install equipment and telecommunications infrastructure and hire operations and sales personnel. The failure to generate sufficient cash flows or to raise sufficient funds may require us to delay or abandon some or all of our development and expansion plans or otherwise forego market opportunities, making it difficult for us to generate additional revenue and to respond to competitive pressures.

Expenditures commence well before a TerreNAP^(SM) Data Center opens, and it may take an extended period for us to approach break-even capacity utilization. As a result, we expect that individual TerreNAP^(SM) Data Centers will experience losses for more than one year from the time they are opened. If we do not attract customers to new TerreNAP^(SM) Data Centers in a timely manner, or at all, our business would be materially

To date, we have funded our operations through private debt and equity offerings. However, because we have not yet achieved positive cash flow from our operations, we will continue to require capital support until we are cash flow positive.

Our consolidated financial statements as of fiscal year-end March 31, 2002 have been prepared on the assumption that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Our independent auditors have issued a report dated July 12, 2002 stating that our recurring operating losses, negative cash flows, and liquidity deficit, combined with our current lack of credit facilities, raise substantial doubt as to our ability to continue as a going concern. Investors in our securities should review carefully our financial statements and the report of our independent accountants thereon. Our ability to continue as a going concern is dependent on several factors, including our ability to raise additional debt and capital. There can be no assurance that any financing will be available through bank borrowings, debt or equity issuances, vendor lines of credit, or otherwise, on acceptable terms or at all. If future financing requirements are satisfied through the issuance of equity securities, investors may experience significant dilution both in terms of their percentage interest in the Company and the net book value per share of common stock. While we are actively seeking strategic solutions to our funding issues, there can be no assurance that we will be able to continue as a going concern.

The nature of our operations changed subsequent to our April 28, 2000 merger with AmTec, Inc. Our operations continue to evolve as we develop our Internet infrastructure and managed services business. We began offering Internet infrastructure and managed services in 2001. Due to our short operating history, our business model is still evolving. Consequently, we believe that period-to-period comparisons of our results of operation may not be necessarily meaningful and should not be relied upon as indicators of future performance. We have experienced revenue growth in the recent period, but this growth may not be indicative of our future operating results. Many of the factors that could cause our operating results to fluctuate significantly in the future are beyond our control. We believe that we will continue to experience net losses on a quarterly and annual basis for the foreseeable future. We may also use significant amounts of cash and/or equity to acquire complementary businesses, products, services or technologies.

The market for Internet infrastructure services has only recently begun to develop, is evolving rapidly and likely will be characterized by an increasing number of market entrants. There is significant uncertainty regarding whether this market ultimately will prove to be viable or, if it becomes viable, that it will grow. Our future growth, if any, will be dependent on the willingness of carriers to peer and colocate within our facilities, enterprises to outsource the system and network management of their mission-critical Internet operations and our ability to market our services in a cost-effective manner to a sufficiently large number of those potential customers. There can be no assurance that the market for our services will develop, that our services will be adopted or that businesses, organizations or consumers will use the Internet for commerce and communication. If this market fails to develop, or develops more slowly than expected, or if the our services do not achieve market acceptance, our business, results of operations and financial condition would be materially and adversely affected.

We intend to allocate our financial resources to activities that are consistent with our strategy of developing and operating TerreNAP^(SM) Data Centers, including the NAP of the Americas. We have therefore implemented a policy of reducing expenditures in areas that are not consistent with that objective. However, the development of the NAP of the Americas and other TerreNAP^(SM) Data Centers will require substantial capital resources. We are exploring various alternatives, including the raising of debt and equity both in private and public markets and obtaining financing from our vendors. In the event that we are unsuccessful in obtaining sufficient financial resources to permit us to fully implement our proposed plans, we will consider various alternatives, including possible joint ventures and reducing the scale or deferring implementation of proposed projects. However, there is no assurance that we will have the funds necessary to discharge our obligations associated with operating the NAP of the Americas or developing and operating other TerreNAP^(SM) Data Centers.

The expansion of our operations through the opening of additional TerreNAP^(SM) Data Centers in emerging markets is part of our strategy. To expand successfully, we must be able to assess markets, locate and secure new TerreNAP^(SM) Data Center sites, install hardware, software and other equipment in and develop TerreNAP^(SM) Data Center facilities, and attract carriers, Internet service providers and other customers to the new locations. To manage this expansion effectively, we must continue to improve our operational and financial systems and expand, train and manage our employee base and build a menu of managed services. We anticipate continuing to make significant investments in the NAP of the Americas and new TerreNAP^(SM) Data Centers and network infrastructure, product development, sales and marketing programs and personnel. Our inability to establish additional TerreNAP^(SM) Data Centers or effectively manage our expansion would have a material adverse effect upon our business. Furthermore, if we were to become unable to continue leveraging third-party products in our services offerings, our product development costs could increase significantly. Finally, several of our customers are emerging growth companies that may have negative cash flows, and there is the possibility that we will not be able to collect receivables on a timely basis.

We expect to continue to make additional significant investments in sales and marketing and the development of new services as part of our expansion strategy. We will incur further expenses from sales personnel hired to test market our services in markets where there is no TerreNAP^(SM) Data Center. In addition, we typically experience a lengthy sales cycle for our services, particularly given the importance to customers of securing Internet connectivity for mission-critical operations and the need to educate certain customers regarding TerreNAP^(SM) Data Center, and benefits of colocation and Internet connectivity services. The rate of growth in our customer base and the length of the sales cycle for our services may cause significant adverse results to our business, and our financial condition would be materially and adversely affected. Due to the typically lengthy sales cycle for our services, our expenses may occur prior to customer commitments for our services. There can be no assurance that the increase in our sales and marketing efforts will result in increased sales of our services.

Our success is substantially dependent on the continued growth of our customer base and the retention of our customers. Our ability to attract new customers will depend on a variety of factors, including the willingness of carriers to peer at our facilities, the willingness of businesses to outsource their mission-critical Internet operations, the reliability and cost-effectiveness of our services and our ability to effectively market such services. We intend to develop alternative distribution and lead generation relationships with potential channel partners. Any failure by us to develop these relationships could materially and adversely impact our ability to generate increased revenues, which would have a material adverse effect on our business, results of operations and financial condition.

We depend on a limited number of third party suppliers for key components of our infrastructure, and the loss of one or more suppliers may slow our growth or cause us to lose customers. For example, the flywheel electrical generators that we use for power backup at the NAP of the Americas and the routers used as part of our peering infrastructure, that, are available only from sole or limited sources in the quantities and quality demanded by us. We purchase these components and technology assistance pursuant to short term agreements with our infrastructure contractors. We do not carry inventories of components and we have no guaranteed supply or service arrangements with any of these vendors. Any failure to obtain required products or services on a timely basis, at an acceptable cost would impede the growth of our business, causing our financial condition to be materially and adversely affected. In addition, any failure of our suppliers to provide products or components that comply with evolving Internet standards, would materially and adversely affect our business, results of operations and financial condition.

We conduct business internationally. Accordingly, our future operating results could be materially adversely affected by a variety of factors, some of which are beyond our control, including currency exchange fluctuation, longer accounts receivable payment cycles and difficulty in collections, and in managing operations, taxes, restrictions on repatriation of earnings, regulatory, political or economic conditions in a specific country or region, trade protection measures and other regulatory requirements.

The market for Internet infrastructure services is extremely competitive and subject to rapid technological change. Many companies have announced that they will begin to provide or plan to expand their service offerings to compete with our services. We expect to encounter increased competition in the future due to increased consolidation and the development of strategic alliances in the industry. In addition, we will compete with foreign service providers as we expand internationally and as these service providers increasingly compete in the United States market. The principal competitive factors in our market include:


	•	Ability to deliver services when requested by the customer;

	•	Internet system engineering and other professional services expertise;

	•	Customer service;

	•	Network capability, reliability, quality of service and scalability;

	•	Variety of managed services offered;

	•	Access to network resources, including circuits, equipment and interconnection capacity to other networks;

	•	Broad geographic presence;

	•	Price;

	•	Ability to maintain and expand distribution channels;

	•	Brand name recognition;

	•	Timing of introductions of new services;

	•	Physical and network security;

	•	Financial resources; and

	•	Customer base

Our current and potential competitors include: providers of data center services; global, regional and local telecommunications companies and Regional Bell Operating Companies; and information technology outsourcing firms. Some of our competitors, particularly the global telecommunications companies that have begun, or intend to begin, providing data center services, have substantially greater resources, more customers, longer operating histories, greater name recognition, and may have more established relationships in the industry than we do. As a result, these competitors may be able to develop and expand their Internet infrastructure services faster, devote greater resources to the marketing and sale of their products and adopt more aggressive pricing policies than we can. In addition, these competitors have entered and will likely continue to enter into business relationships to provide additional services that compete with the services we provide.

We believe our market is likely to consolidate in the near future, which could result in increased price and other competition. Some of our competitors may be able to provide customers with additional benefits relating to the customer’s Internet system and network management solutions, including reduced local and long distance communications costs, which could reduce the overall costs of their services relative to ours. We may not be able to offset the effects of any price reductions.

As we expand our operations in markets outside the United States, we will also encounter new competitors and competitive environments. Our foreign competitors may enjoy a government-sponsored monopoly on telecommunications services essential to our business, and will generally have a better understanding of their local industry and longer working relationships with local infrastructure providers.

We believe that we have certain competitive advantages but there are few barriers to entry. We are recognized by industry members as one of five owners/operators of Tier-1 NAP in the US. None of the other four Tier-1 NAPs offer Class A1+ space immediately adjacent to the peering point as well as managed services. In addition, we are the only carrier-neutral NAP. Nevertheless, there are few substantial barriers to

We are dependent on key personnel. We are highly dependent on the services of Manuel D. Medina, our Chairman. The loss of Mr. Medina could materially harm our business. Our potential growth and expansion and the merger and integration of separate businesses, are expected to place increased demands on our management skills and resources. We cannot assure you that we will be able to retain and attract skilled and experienced management. The failure to attract and retain personnel could materially harm our business and impair the price of our stock.

If our shares are delisted from the American Stock Exchange, we may apply to have our shares quoted on Nasdaq’s Bulletin Board or in the “pink sheets” maintained by the National Quotation Bureau, Inc. The Bulletin Board and the “pink sheets” are generally considered to be less efficient markets than the American Stock Exchange on which the shares are currently traded. In addition, if our shares are no longer listed on the American Stock Exchange or another national securities exchange in the United States, our shares may be subject to the “penny stock” regulations. If our shares are delisted from the American Stock Exchange, our stockholders could find it difficult to sell our stock and the price of our stock could be adversely affected.

You should not expect to receive dividends on our common stock. We have not paid dividends on our common stock to date and have no plans for paying dividends on the common stock in the foreseeable future. We have certain obligations to pay dividends in kind, which may be paid, at our option, in common stock to holders of the Series G and Series H preferred shares. Except for those dividends on the shares of issued and outstanding preferred stock, and cash or in-kind dividends that we may pay on other preferred stock that may be issued in the future that require dividends, we intend to retain any earnings to pay for the expansion of our business. In addition, covenants in our financing agreements prohibit the payment of dividends.

We could pay additional taxes because our operations are subject to various foreign taxes. We structure our operations based on assumptions about various tax laws, U.S. and international tax treaty developments, international currency exchange and capital repatriation laws and other relevant laws of a variety of non-U.S. jurisdictions. Taxing or other authorities might not reach the same conclusions we reach. We could suffer adverse tax and other financial consequences if our assumptions about these matters are incorrect or the relevant laws are changed or modified.

Distributions and other payments from our subsidiaries and affiliates may be subject to foreign taxes, reducing our earnings. Distributions of earnings and other payments, including interest, we receive from our subsidiaries and affiliates may be subject to withholding taxes imposed by the jurisdictions in which these entities are formed or operating. These taxes would reduce the amount of after-tax cash we would receive from these entities.

Our customer service could suffer if we are unable to obtain satisfactory services from local communications providers, which could adversely affect our ability to compete. We depend on local carriers to provide various communications services to us and to our customers. We have from time to time had delays in receiving these communications services. We may not be able to obtain these services on the scale and within the time required by us at an affordable cost, or at all. If adequate services are not provided, customer service could suffer as could our competitive position and financial results. Further these service providers could become competitors in the future.

Recent terrorist activity in the United States and the military action to counter terrorism could adversely impact our business. The September 11, 2001 terrorist attacks in the United States, the ensuing declaration of war on terrorism and the continued threat of terrorist activity and other acts of war or hostility appear to be having an adverse effect on business, financial and general economic conditions in the U.S. These effects may, in turn, result in increased costs due to the need to provide enhanced security, which would have a material adverse effect on our business and results of operations. These circumstances may also adversely affect our ability to attract and retain customers, our ability to raise capital and the operation and maintenance of our NAP facilities.

Our business could be harmed by prolonged electrical power outages or shortages, or increased costs of energy. Our NAP facilities are susceptible to regional costs of power, electrical power shortages and planned or unplanned power outages caused by these shortages. A power shortage may result in an increase of the cost of energy, which we may not be able to pass on to our customers. We attempt to limit exposure to system downtime by using backup generators and power supplies. Power outages, which last beyond our backup and alternative power arrangements, could harm our customers and our business.

In June 2001, the Financial Accounting Standards Board approved Statement of Financial Accounting Standards No. 141 (FASB 141), Business Combinations, and Statement of Financial Accounting Standards No. 142 (FASB 142), Goodwill and Other Intangible Assets. FASB 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. FASB 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. The provisions of FAS 142 are effective for fiscal years beginning after December 15, 2001. We will adopt FAS 142 at the beginning of the fiscal year ending March 31, 2003.

In August 2001, the Financial Accounting Standards Board approved Statement of Financial Accounting Standards No. 144 (FASB 144), Accounting for the Impairment or Disposal of Long-Lived Assets. FASB 144 supercedes FASB 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of business. FASB 144 retains the requirements of FASB 121 for recognition and measurement of an impairment loss on long-lived assets, and establishes a single accounting model for all long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. The provisions of FAS 144 are effective for fiscal years beginning after December 15, 2001. We will adopt FAS 144 at the beginning of the fiscal year ending March 31, 2003.

We do not expect the adoption of FASB 141, FASB 142 or FASB 144 to have a material effect on our consolidated financial statements assuming we are a going concern. Had we continued amortizing our intangible assets, the annual amortization expense would have been approximately $3.3 million for the next four years.

We have not entered into any financial instruments for trading or hedging purposes.

Our carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses is a reasonable approximation of their fair value.

Our exposure to market risk resulting from changes in interest rates relates primarily to our debt. An immediate 10% increase or decrease in current interest rates would furthermore not have a material impact to our debt obligations due to the fixed nature of our debt obligations. The fair market value of our long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. These interest rate changes may affect the fair market value of the fixed interest rate debt but does not impact our earnings or cash flows.

To date, all of our recognized revenue has been denominated in U.S. dollars, generated mostly from customers in the U.S., and our exposure to foreign currency exchange rate fluctuations has been minimal. We expect that future revenues may be derived from customers outside of the U.S. and may be denominated in foreign currency. As a result, our operating results or cash flows may be impacted due to currency fluctuations relative to the U.S. dollar.

Furthermore, to the extent we engage in international sales that are denominated in U.S. dollars, an increase in the value of the U.S. dollar relative to foreign currencies could make our services less competitive in the international markets. Although we will continue to monitor our exposure to currency fluctuations, and when appropriate, may use financial hedging techniques in the future to minimize the effect of these

Some of our operating costs are subject to price fluctuations caused by the volatility of underlying commodity prices. The commodity most likely to have an impact on our results of operations in the event of significant price change is electricity. We are closely monitoring the cost of electricity. To the extent that electricity costs continue to rise, we are investigating opportunities to pass these additional power costs onto our customers that utilize this power. We do not employ forward contracts or other financial instruments to hedge commodity price risk.

The financial statements required by this Item 8 are attached to hereto as Exhibit (a)(1).

On April 28, 2000, Terremark Holdings, Inc. merged with and into AmTec, Inc. AmTec was the surviving corporation in this merger and its name was changed to Terremark Worldwide, Inc.

Prior to this transaction, Deloitte & Touche LLP was engaged by AmTec to perform the March 31, 2000 audit of AmTec, Inc. As a result of the transaction with Terremark Holdings, PricewaterhouseCoopers, LLP was engaged by us as our principal accountants to audit our financial statements for the year ended March 31, 2001. The engagement of PricewaterhouseCoopers was made effective April 28, 2000.

Deloitte & Touche LLP was engaged to audit AmTec’s March 31, 2000 financial statements. During AmTec’s two most recent fiscal years ended March 31, 2000, there were no disagreements between management and Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Deloitte & Touche LLP, would have caused Deloitte & Touche LLP to make reference to the subject matter of the disagreement in connection with its report. In addition, the financial statements of AmTec for such periods contained no adverse opinion or disclaimers of opinion, and were not qualified or modified in any way. Also, during this same period there were no reportable events as defined or listed in Item 304 of Regulation S-K.

Our directors, executive officers and key employees and their ages as of June 26, 2002, are as follows:

Manuel D. Medina has served as our Chairman of the Board, President and Chief Executive Officer since April 28, 2000, the date of our merger, and as that of Terremark since its founding in 1982. In addition, Mr. Medina is a managing partner of Communications Investors Group, the holder of the Series G preferred stock. Mr. Medina has been a director of Fusion Telecommunications International since December 14, 1998. Before founding Terremark, Mr. Medina, a certified public accountant, worked with PricewaterhouseCoopers LLP. Subsequently, he established and operated an independent financial and real estate consulting company. Mr. Medina earned a Bachelors of Science degree in Accounting from Florida Atlantic University in 1974.

Joseph R. Wright, Jr. has served as our Vice Chairman of the Board since April 28, 2000. Mr. Wright is currently the President & CEO of PanAmSat Corporation. Prior to that, Mr. Wright served as Chairman of the Board from May 1995 to April 2000. Mr. Wright also served as Chairman of the Board of GRC International, Inc. a United States public company that provides technical information technology support to government and private entities from 1996 to 2000. He is also Co-Chairman of Baker & Taylor Holdings, Inc., an international book and video distribution company, and Vice Chairman of Jefferson Consulting Group, a Washington D.C. consulting firm. From 1989 to 1994, Mr. Wright served as Executive Vice President, Vice Chairman and Director of W.R. Grace & Co., an international chemicals and health care company, President of Grace Energy Corporation and Chairman of Grace Environmental Company. From 1982 to 1989, Mr. Wright held the positions of Director and Deputy Director of the Office of Management and Budget, The White House, and was a member of President Reagan’s cabinet. Before 1982, he served as Deputy Secretary, United States Department of Commerce, President of Citicorp Retail Services and Retail Consumer Services, held posts in the United States Department of Agriculture and the United States Department of Commerce, and was Vice President and Partner of Booz Allen & Hamilton, a management consulting firm. Mr. Wright also serves on the Boards of Directors of PanAm Sat corporation, Fusion Telecommunications International, Inc., Cereus Technology Partners, RealMed Corporation and serves on the AT&T Government Markets Advisory Board. He is a former member of the President’s Export Council and a former member of the Board of Directors of Travelers, Harcourt Brace Janovich, and Hampton University.

Guillermo Amore has served as a member of our board of directors since February 2001. From August 2000 to February 2001, Mr. Amore served as the President and Chief Operating Officer of our wholly-owned subsidiary, Terremark Latin America, Inc., prior to which, he served as Chairman and Chief Executive Officer of Spectrum Telecommunications Corporation until its acquisition. Mr. Amore has nearly 35 years of telecommunications experience, much of it focused on the developing markets of Latin America and the Caribbean. During his tenure at GTE Corporation he built an extensive network of contacts in the region. These contacts served him well in business development and regulatory affairs during his stewardship of Grupo Isacell S.A. of Mexico and of Spectrum Telecommunications. Mr. Amore holds an MBA from Harvard University and a Bachelors degree in Science in Electrical Engineering from Pontificia Universidad Javeriana, Colombia.

Timothy Elwes has served as a member of our board of directors since April 2000. Mr. Elwes has also served as member of the board of directors of Timothy Elwes & Partners Ltd., a financial services company, from May 1978 until October 1994, the business of which was merged into Fidux Trust Co. Ltd. in December 1995. Mr. Elwes is a director of Fidux Trust Co. Ltd. He is also a non-executive director of Partridge Fine Arts plc, a public company since 1989. He has served as a director of Makecater Ltd., a property-developing company, since 1995. Since 1989 he has served as a director of Tagring Ltd., a financial services company.

Jose Maria Figueres-Olsen has served as a member of our board of directors since October 2000. Mr. Figueres-Olsen is the former President of Costa Rica, serving as the head of state of his native country from 1994 to 1998, during which he made sustainable development the cornerstone of his administration and led his country into the digital economy through the implementation of several IT programs and the attraction of foreign investment including Intel. Since leaving office, President Figueres-Olsen has served as a Director of the Digital Nations Consortium, launched by the MIT Media Lab to develop a new generation of technologies and applications that enable people to design, create, and learn new ways to become more active participants in developing societies. President Figueres-Olsen also serves on the Board of Directors of the World Resources Institute, the World Wildlife Fund, the Stockholm Environment Institute, and Leadership in Environment and Development. President Figueres-Olsen holds a degree in Industrial Engineering from the United States Military Academy at West Point and a Masters degree in Public Administration (Mason Fellow) from the John F. Kennedy School of Government at Harvard University.

Marvin S. Rosen has served as a member of our board of directors since April 2000. Mr. Rosen is a co-founder of Fusion Telecommunications International and has served as its Vice Chairman since December 1998. From September 1995 through January 1997, Mr. Rosen served as the Finance Chairman of the Democratic National Committee. Mr. Rosen currently serves on the Board of Directors of the Children’s Health Fund (New York City), since 1994, the Robert F. Kennedy Memorial, since 1995, Bio-Medical Disposal, Inc., since 1998 and Fusion Telecommunications International, Inc., since 1997, where he has also been Vice-Chairman since December 1998. Mr. Rosen received his Bachelor of Science degree in Commerce from the University of Virginia, his LL.B. from Dickinson School of Law and his LL.M. in Corporations from New York University Law School.

Miguel J. Rosenfeld has served as a member of our board of directors since April 2000. Since November 1991, he has also served as a Senior Vice President of Delia Feallo Productions, Inc., where he has been responsible for the development of soap opera productions in Latin America. From January 1995 until May 1998, he was the Director of Affiliates and Cable for Latin America for Protele, a division of Televisa International LLC. From December 1984 until September 1998, he was a sales manager for Capitalvision International Corporation. Mr. Rosenfeld holds a Bachelors degree in Administration from the University of Buenos Aires which he earned in 1975.

Joel A. Schleicher has served as a member of our board of directors since April 2000. Mr. Schleicher has been President and Chief Executive Officer for Exp@nets since June 1998. Exp@nets is a leading nationwide provider of networked communication solutions to business. His previous communications industry experience started as the Chief Operating Officer, President and director of Nextel Communications, Inc. from 1989 to 1995 and subsequently with ProCommunications, Inc. from 1996 to 1997. He has been a member of the board of directors of NovAtel, Inc., a global GPS provider, since 1997, Fusion Telecommunications, an international long distance service provider, since 1998, and TechTronic Industries, a Hong Kong based manufacturer of consumer appliances, since 1998. Before Nextel, Mr. Schleicher spent 10 years in the consumer durables and energy sectors of industry and four years with KPMG Peat Marwick in various capacities. He is a graduate of the Carlson School of the University of Minnesota.

Kenneth I. Starr has served as a member of our board of directors since April 2000. Mr. Starr has also served as the Chairman and Chief Executive Officer of Starr & Company, a New York City-based accounting and business management firm, since he founded this firm in 1986.

Brian K. Goodkind has served as our Executive Vice President and Chief Operating Officer since April 2000. From April 1998 until his election to these offices, Mr. Goodkind served as the Vice-Chairman, Executive Vice President, and General Counsel to Terremark. In these capacities, Mr. Goodkind oversaw the operations, risk management, systems development, and legal matters for Terremark. Mr. Goodkind has been a member of the Florida Bar since 1982, and was in private practice for 16 years, specializing in commercial litigation, employment law, international transactions and real estate. His experience includes over 11 years, from 1986 to 1998, as one of two founding partners of a seventy-attorney full-service law firm, of which he served as managing partner for over five years. Mr. Goodkind received his Bachelor of Arts degree from the University of Alabama and his Juris Doctor from the University of Florida.

José A. Segrera has served as Senior Vice President and Chief Financial Officer since September 2001. Prior to joining Terremark, Mr. Segrera served as the interim chief financial officer of FirstCom Corporation, which recently merged into AT&T Latin America. From 1992 to 1997, Mr. Segrera was with the assurance practice at KPMG LLP; most recently as a manager. Mr. Segrera received his Bachelors in Business Administration and his Masters in Professional Accounting from the University of Miami.

José E. González has served as Senior Vice President, General Counsel and Secretary since January 2001. Prior to joining Terremark, Mr. González served as the Vice President and Regional Counsel for Sunbeam Corporation, responsible for legal affairs throughout Canada, Latin America/Caribbean and Asia. From 1995 to 1998, Mr. González was Assistant General Counsel, International, responsible for the international legal affairs of Blockbuster Entertainment, a subsidiary of Viacom, Inc. From 1990 to 1995 Mr. González was a member of the General Counsel’s Office of the American Express Company, where he served as Regional Counsel for Latin America and the Caribbean. Mr. González received his Bachelors of Arts degree from Fordham University in 1982 and his Juris Doctor from Fordham University School of Law in 1985. He is a member of the Bar of the State of New York and certified to practice as in-house counsel by the Bar of the State of Florida.

Monty Bannerman has served as our Chief Technology Officer and Senior Vice President Corporate Strategy since December 2000. In June 1997, Mr. Bannerman founded IXS.NET, a provider of IP telephony services in China, and DSP.NET, an ISP in the Bay Area. From December 1984 to June 1996, Mr. Bannerman was Vice President of Bell Canada International (BCI). Mr. Bannerman is a graduate of Mohawk College in Hamilton, Ontario where he earned a degree in Business Administration and Finance.

Jamie Dos Santos has served as our Senior Vice President Global Sales since April 2001. From 1981 to 2001, Ms. Dos Santos worked with the Bell System. Ms. Dos Santos held various positions during her tenure with Telcordia/Bell Systems including Director of Professional Services Latin America, Regional Account Director starting her career as a Business Service Representative prior to divestiture. Ms. Dos Santos attended the University of Florida and Bellcore’s elite Technical training curriculum receiving various degrees in telecommunications.

Sandra B. Gonzalez-Levy has served as our Senior Vice President Corporate Communications since July 2000. From January 1997 to June 2000, Mrs. Gonzalez-Levy was President and Chief Executive Officer of the Miami-Dade Community College Foundation, Inc. Mrs. Gonzalez-Levy was Group Senior Vice President and Public Relations Director with Barnett Bank, N.A. From 1980 to December 1996, she was with the Greater Miami Chamber of Commerce most recent as Senior Vice President, in charge of the International Economic Development and Hispanic Business Departments. Mrs. Gonzalez-Levy holds a Masters degree of Business Administration from Barry University.

Marvin Wheeler has served as our Senior Vice President of Operations and General Manager of the NAP of the Americas since March 2001. From June 1978 to March 2000, Mr. Wheeler worked at BellSouth managing Data Center and WAN/LAN Operations in addition to directing some of the 24/7 operations centers in the Southeast United States. Mr. Wheeler graduated from the University of Florida, where he earned a degree in Business Administration with a concentration in marketing.

We have entered into employment agreements with Manuel D. Medina, Brian K. Goodkind, José A. Segrera and José E. González.

The following tables set forth certain information concerning compensation for the fiscal years ended March 31, 2002, 2001 and 2000 of our executive officers, including the Chief Executive Officer and four executive officers whose total annual salary and bonus exceeded $100,000, for the fiscal year ended March 31, 2002.


(1)	Pursuant to a one-year consulting agreement with the Company, whereby Mr. Wright receives $8,333 per month.
(2)	During fiscal year 2000, we paid approximately $30,000 per year on behalf of Mr. Wright for certain personal tax and accounting services rendered by third parties for Mr. Wright.

The following table sets forth information regarding the beneficial ownership of shares of our common stock, as of June 28, 2002, by (i) each of our directors, (ii) each of our executive officers, (iii) by all of our directors and executive officers as a group and (iv) by each person that beneficially owns five percent or more of shares of common stock. Each person named in the table has sole voting and investment power with respect to all shares of common stock shown as beneficially owned, expect as otherwise set forth in the notes to the table. Unless otherwise provided, the address of each holder is c/o Terremark Worldwide, Inc., 2601 South Bayshore Drive, Miami, Florida 33133.


	*	Represents less than 1%.


	(1)	A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from June 28, 2002 upon the exercise of convertible debentures, options or warrants. Each beneficial owner’s percentage ownership is determined by assuming that convertible debentures, options and warrants that are held by that person, but not those held by any other person, and that are exercisable within 60 days from June 28, 2002 have been exercised.
	(2)	Includes shares to which Mr. Medina has sole voting and investment power or shares voting and investment power with his spouse. Also includes 895,277 shares of common stock underlying convertible debentures and 134,000 shares of common stock underlying options.
	(3)	Does not include 50,000 shares held in trust for the benefit of Mr. Wright’s grandchildren, with respect to which Mr. Wright disclaims any beneficial ownership. Includes 3,334,000 shares of common stock underlying options and 323,373 shares of common stock underlying warrants.


	(4)	Includes 1,154,201 shares of common stock underlying convertible debentures which are held by a trust with respect to which Mr. Amore is a general partner and with respect to which holder disclaims any beneficial ownership except as to the extent of his pecuniary interest therein. Includes 4,000 shares owned by Mr. Amore’s brother, over which Mr. Amore has investment control and 134,000 shares of common stock underlying options. Includes 610,909 shares of common stock held by the same trust, with respect to which Mr. Amore disclaims beneficial ownership except to the extent of his pecuniary interest therein. Does not include 477,074 shares held in a trust for the benefit of Mr. Amore’s grandchildren, with respect to which holder disclaims any beneficial ownership therein.
	(5)	Includes 205,810 shares of common stock underlying convertible debentures and 169,001 shares of common stock underlying options.
	(6)	Includes 145,000 shares held indirectly by Mr. Rosenfeld and 134,000 shares of common stock underlying options. Does not include 49,189 shares held by Mr. Rosenfeld’s children and mother, with respect to which holder disclaims any beneficial ownership.
	(7)	Includes 30,000 shares owned by Mr. Starr’s wife and 8,000 shares owned by Mr. Starr’s children. Also includes 100,000 shares of common stock underlying warrants and 134,000 shares of common stock underlying options.
	(8)	Includes 80,843 shares of common stock underlying convertible debentures and 150,000 shares of common stock underlying options.
	(9)	Includes shares to which Mr. Figueres-Olsen has sole voting and investment power or shares voting and investment power with his spouse and 134,000 shares of common stock underlying options.


(10)	Includes 160,668 shares of common stock underlying options.
(11)	Includes 134,000 shares of common stock underlying options.
(12)	Includes 50,001 shares of common stock underlying options.
(13)	The information set forth herein is based upon the most recent Schedule 13D (and any amendments thereto) filed with the SEC and, accordingly, may not reflect the owner’s respective holdings as of the date of this report.

This table summarizes share and exercise price information about our equity compensation plans as of March 31, 2002.

In May 2002, we received a $1.5 million short-term loan at a 10% interest rate from Manuel D. Medina, our Chief Executive Officer.

In April 2002, we received a binding commitment from a group that includes two of our directors — Guillermo Amore and Miguel Rosenfeld for the purchase of 10 million shares of common stock at $.75 per share. In May 2002, the transaction was completed by receiving $3.6 million in cash and the conversion of $3.9 million in short term promissory notes to equity.

On September 5, 2001, we closed on a $48.0 million credit facility with a bank. In addition to Mr. Medina personally guaranteeing the credit facility, and in order for us to obtain the facility, the bank further required Mr. Medina to, prior to the bank disbursing funds under the credit facility, (i) provide a $5.0 million certificate of deposit to the bank as collateral for certain personal loans Mr. Medina has with the bank,

and (ii) commit to accelerate the maturity date of those personal loans to December 31, 2001. Subsequent to September 2001, Mr. Medina and the bank changed the maturity date on the personal loans, first to December 31, 2001 and later to July 1, 2002. Mr. Medina also agreed to subordinate debt that we owed to Mr. Medina in the event of our default under the credit facility. Mr. Medina has repaid part of those personal loans to the bank through liquidation of the $5.0 million certificate of deposit in January 2002 leaving an outstanding principal balance of approximately $5.4 million and he intends to exercise his right under such personal loan agreements to extend their maturity date from July 1, 2002 to December 31, 2002.

On September 5, 2001, in consideration of Mr. Medina agreeing to repay his indebtedness to the bank earlier than otherwise required, pledging the certificate of deposit to the bank and personally guaranteeing the $48 million credit facility and approximately $21 million of construction payables, we entered into an amended and restated employment agreement with him. Under the terms of the amended and restated employment agreement we will indemnify Mr. Medina from any personal liability related to his guarantees of any of our debt, use commercially reasonable efforts to relieve Mr. Medina of all his guarantees of our debt, provide up to $6.5 million of cash collateral to the bank should Mr. Medina be unable to repay the personal loans when due and provide a non interest-bearing $5.0 million loan to Mr. Medina for as long as his guarantees of our debt exist. If the promissory note becomes in default, we have the right of offset against all amounts payable by us to Mr. Medina, which is approximately $2.2 million as of March 31, 2002. The note is shown as an adjustment to equity. Additionally, as long as Mr. Medina’s guarantees of our debt exist, we have agreed to nominate Mr. Medina to our Board of Directors and not remove Mr. Medina, unless for good cause, or remove any of our officers without Mr. Medina’s consent. There was no change in the amount or timing of Mr. Medina’s cash or non-cash compensation in connection with these agreements, nor did Mr. Medina receive any guarantee fee or other fees in connection with his guaranteeing our indebtedness. We do not anticipate funding the $6.5 million of cash collateral.

The $48 million credit facility and the promissory note from Mr. Medina have been approved by our Board of Directors.

In July 2002, the terms of non-interest bearing note were amended. As amended, the note has a maturity date of December 5, 2004 and bears interest subsequent to September 5, 2002 at the applicable federal rate. Interest is due in bi-annual installments. On a quarterly basis, we will review the collectibility of this note. As of July 9, 2002, we owed Mr. Medina approximately $3.7 million. We have the right to withhold payment to Mr. Medina of $1,375,000 in amounts due.

(a) 1 and 2. The financial statements listed in the accompanying Table of Contents to Consolidated Financial Statements and Financial Statement Schedule on page F-1 herein are filed as part of this report.

3. The exhibits listed in the Exhibit Index are filed with or incorporated by reference as part of this report.

(b) No reports were filed on Form 8-K during the fourth quarter of the fiscal year ended March 31, 2001.

(c) The following exhibits, which are furnished with this Annual Report or incorporated herein by reference, are filed as part of this Annual Report.


	*	Filed herewith.


	(1)	Previously filed as part of the Company’s Current Report on Form 8-K dated March 6, 1997.
	(2)	Previously filed as part of the Company’s Definitive Proxy Statement filed on April 18, 1996.
	(3)	Previously filed as part of the Company’s Definitive Proxy Statement filed on March 24, 2000.
	(4)	Previously filed as part of the Company’s Current Report on Form 8-K dated February 28, 2001.


	(5)	Previously filed as an exhibit to the Company’s Registration Statement on Form S-3 filed May 15, 2000.
	(6)	Previously filed as exhibit 3.5 to the Company’s Annual Report on Form 10-K filed on July 16, 2001.
	(7)	Previously filed as exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed on February 14, 2001.
	(8)	Previously filed as exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q filed on February 14, 2001.
	(9)	Previously filed as part of the Company’s Transition Report on Form 10-KSB for the transition period from October 1, 1994 to March 31, 1995.


(10)	Previously filed as exhibit 10.6 to the Company’s Annual Report on Form 10-KSB filed June 29, 2000.
(11)	Previously filed as exhibit 10.6 to the Company’s Annual Report on Form 10-K filed on July 16, 2001.
(12)	Previously filed as exhibit 10.1 to the Company’s Quarterly report on Form 10-Q filed on November 14, 2001.
(13)	Previously filed as exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2000.
(14)	Previously filed as exhibit 10.2 to the Company’s Quarterly report on Form 10-Q filed on November 14, 2001.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 15th day of July 2002.


	By:	/s/ MANUEL D. MEDINA



	Manuel D. Medina, Chairman of the Board, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in stockholders’ (deficit) equity and of cash flows present fairly, in all material respects, the financial position of Terremark Worldwide, Inc. and its subsidiaries at March 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2002 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net liquidity deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The accompanying notes are an integral part of these consolidated financial statements.

During the year ended March 31, 2002, the Company issued $849,015, net in warrants to third parties in lieu of cash payment primarily for assets and interest.

During the year ended March 31, 2002, $29,000 in warrants was exercised and reclassified to equity.

During the year ended March 31, 2002, $242,700 in convertible debt was converted and reclassified to equity.

During the year ended March 31, 2001, the Company reclassified approximately $12,860,657 in real estate inventories to real estate held for sale.

During the year ended March 31, 2001, the Company converted approximately $3,900,382 from notes and accounts payable to convertible debt.

During the year ended March 31, 2001, the Company issued $394,000 in warrants to a third party in lieu of cash compensation for a one year consulting agreement.

See Notes 4 and 5 in the accompanying notes for additional discussion of non-cash acquisitions and dispositions.

The accompanying notes are an integral part of these consolidated financial statements.

Terremark Worldwide, Inc. (together with its subsidiaries the “Company”) is a multinational corporation that provides Internet infrastructure and managed services. It is the owner and operator of the NAP of the Americas, the fifth Tier-1 Network Access Point (“NAP”) in the world. The NAP of the Americas in Miami, Florida, was fully placed in service on July 1, 2001. The Company’s strategy is to leverage its experience as the owner and operator of the NAP of the Americas by developing and operating TerreNAP^SM Data Centers in Latin America and Europe. TerreNAP^SM Data Centers provide peering, colocation and managed services to carriers, Internet service providers, other Internet companies and enterprises.

On April 28, 2000, the predecessor to the Company, Terremark Holdings, Inc. (“THI”), which was founded in 1982, completed a reverse merger with AmTec Inc. (“AmTec”). AmTec’s operations consisted of equity investments and other alliances that provided long distance international telecommunications services, including telephony and data in Asia, and Internet Protocol (“IP”) fax services in Hong Kong, Guangdong Province of the People’s Republic of China and Taiwan. Historical information of the surviving company is that of THI.

In addition to the AmTec merger, the Company made five additional acquisitions (Note 4) during the first two quarters of the year ended March 31, 2001. These acquisitions expanded the Company’s operations to include providing: 1) IP fax services and unified messaging services in Asia, 2) telephony services in South America, 3) development expertise for telecommunications facilities, and 4) telecommunications facilities construction services.

Changes in business conditions, including market changes in the telecommunications industry and the availability of debt and equity financing vehicles to fund other business expansion, caused the Company during the third quarter of the year ended March 31, 2001 to redefine and focus on its TerreNAP Data Center strategy, and begin implementing a plan to exit all lines of business not directly related to that strategy. Lines of business discontinued include IP fax services, unified messaging services, and telephony (Note 5). As of March 31, 2002, the Company has completed its exit of lines of business not related to its TerreNAP Data Center strategy.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. During fiscal year 2003, $93.1 million of the Company’s liabilities, including notes, construction and other trade payables will come due. The Company had a net working capital deficit of approximately $89.0 million and stockholder’s deficit of approximately $49.3 million at March 31, 2002 and incurred a net loss of approximately $57.4 million for the twelve months then ended. This loss is the result of:


	•	non-cash items, including impairment charges of long-lived assets of approximately $19.0 million and depreciation and amortization expense of approximately $7.3 million;

	•	interest expense of approximately $9.7 million;

	•	approximately $14.6 million of expenses generated from the start-up and operations of the NAP of the Americas; and

	•	not generating sufficient revenue during the year to support the increase in infrastructure.

During the year ended March 31, 2002, the Company met its liquidity needs through obtaining additional debt financing and the issuance of equity interests and entering into arrangements with a principal executive officer to provide some guarantees and financing as discussed in Note 10. The Company also shut down or

disposed of remaining non-core operations and implemented a series of expense reductions. Management expects the Company will need an infusion of cash to fund business operations during the year ended March 31, 2003. The Company’s liquidity needs are primarily related to repayment of construction payables and debt and to support operations. The Company has developed a plan to continue operating through the year ended March 31, 2003. Actual funding requirements are dependent upon management’s ability to meet its expectations and will be significantly impacted if some or all of the following assumptions, which underly the expectations are not met:


	•	signing of additional customer contracts at NAP of the Americas;

	•	restructuring of $23.7 million of construction payables into long term payables or equity or a combination thereof;

	•	exercise of the Company’s option to sell its common stock to a financial institution resulting in $10.2 million in additional equity (Note 18);

	•	no funding under any of the Company’s guarantees; and

	•	restructuring of the Company’s $48 million credit facility (see Note 18).

The Company has identified additional potential customers and is actively marketing to them available services in the NAP of the Americas. The Company’s plan is predicated on obtaining additional customer contracts through March 31, 2003, which on an annual basis will generate revenues of approximately $20 million. The Company has also been pursuing and continues to seek sources of additional debt and equity financing. The Company is actively engaged in discussions with certain vendors to restructure the terms of the Company’s construction payable obligations. The Company’s failure to obtain adequate terms from creditors and additional debt or equity financing and meet its plan will result in liquidity problems and require the Company to curtail in whole or in part current operations. There can be no assurances that the Company’s plan will be adequately implemented in the time frame contemplated, even if such funds are obtained. Further, any additional equity financing if obtained will be dilutive to existing stockholders. As a result of these matters, substantial doubt exists about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The nature of the Company’s operations changed subsequent to the April 28, 2000 merger with AmTec, Inc. Its operations continue to evolve as it develops its Internet infrastructure and managed services business.

The deployment of the Company’s TerreNAP Data Center strategy will require the Company to expend substantial resources for leases, assets, equipment and hiring of network, administrative, customer support and sales and marketing personnel. These expenditures commence well before a TerreNAP Data Center opens, and it may take an extended period for the Company to approach break-even. To date, the Company has funded its operations through private debt and equity offerings. However, because the Company has not yet

achieved positive cash flow from operations, the Company will continue to require capital support until it is cash flow positive. The Company intends to continue to allocate its financial resources to activities that are consistent with its expansion strategy, such as making additional significant investments in sales and marketing and the development of new services. The Company’s business could be adversely affected if it were unable to obtain necessary licenses and approvals in order to expand its services and enter new markets.

The market for Internet infrastructure services has only recently begun to develop, is evolving rapidly and likely will be characterized by an increasing number of market entrants. The market for Internet infrastructure services is extremely competitive and subject to rapid technological change. Management believes that the Company has some competitive advantages. However, the market for Internet infrastructure services is characterized by few barriers to entry. Current and potential competitors include: providers of data center services; global, regional and local telecommunications companies and regional Bell operating companies; and information technology outsourcing firms. As the Company continues to expand operations in markets outside the United States, it will also encounter new competitors and competitive environments. The Company believes that the market for Internet infrastructure services is likely to consolidate in the near future, which could result in increased price and other competition.

The Company’s strategy includes the expansion of operations through the opening of additional TerreNAP Data Centers. Some of the Company’s customers are emerging growth companies that may have negative cash flows and the Company may not be able to collect receivables on a timely basis. If the Company were unable to effectively manage its expansion it would have a material adverse effect on its business. The Company’s success is substantially dependent on the continued growth of its customer base and the retention of current customers. The Company’s customer service could suffer if it is unable to obtain satisfactory services from local communications providers. The loss of one or more of the Company’s suppliers may slow its growth or cause it to lose customers. The Company’s business could be harmed by prolonged electrical power outages, shortages or increased costs of energy. The Company’s success is also dependent on its Chairman, Manuel D. Medina.

The Company conducts business internationally and its operations could be subject to various foreign taxes. Distributions and other payments from the Company’s subsidiaries and affiliates may also be subject to foreign taxes, reducing its earnings. The Company does not have any plans to pay dividends on its common stock and covenants in its financing agreements prohibit the payment of dividends. If the Company’s stock were to be delisted from the American Stock Exchange, its stockholders could find it difficult to sell the Company’s stock and the price of the Company’s stock could be adversely affected.

A summary of significant accounting principles and practices used by the Company in preparing its consolidated financial statements follows.

The Company’s consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries. All significant inter-company balances and transactions are eliminated in consolidation.

Certain businesses acquired during the year ended March 31, 2001 whose operations reflect IP fax, unified messaging and telephony services were approved for disposition during March 2001. Since the operations represent a class of customer and a major line of business as contemplated in Accounting Principles Board Opinion 30 “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” (“APB 30”), their operations were accounted for as discontinued operations in the year ended March 31, 2001. Included in discontinued operations are AmTec’s, Spectrum’s, Asia Connect’s and IXS.NET’s businesses. In addition, disposal of certain activities not representing an operating segment as contemplated under APB 30 are accounted for in current operations.

The Company prepares its financial statements in conformity with accepted accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include revenue and costs related to construction contracts, impairment of long-lived assets, contingent liabilities and loss on disposition of discontinued operations.

Certain reclassifications have been made to the prior periods’ financial statements to conform with current presentation.

In June 2001, the Financial Accounting Standards Board approved Statement of Financial Accounting Standards No. 141 (FASB 141), Business Combinations, and Statement of Financial Accounting Standards No. 142 (FASB 142), Goodwill and Other Intangible Assets. FASB 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. FASB 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. The provisions of FAS 142 are effective for fiscal years beginning after December 15, 2001. The Company will adopt FAS 142 at the beginning of its fiscal year ending March 31, 2003.

In August 2001, the Financial Accounting Standards Board approved Statement of Financial Accounting Standards No. 144 (FASB 144), Accounting for the Impairment or Disposal of Long-Lived Assets. FASB 144 supercedes FASB 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of business. FASB 144 retains the requirements of FASB 121 for recognition and measurement of an impairment loss on long-lived assets, and establishes a single accounting model for all long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. The provisions of FAS 144 are effective for fiscal years beginning after December 15, 2001. The Company will adopt FAS 144 at the beginning of its fiscal year ending March 31, 2003.

The Company does not expect the adoption of FASB 141, FASB 142 or FASB 144 to have a material effect on its consolidated financial statements assuming it continues as a going concern. Had the Company continued amortizing its intangible assets, the annual amortization expense would have been approximately $3.3 million through the year ended March 31, 2006.

The Company has adopted Statement of Financial Accounting Standards No. 128, “Earnings Per Share.” Basic earnings (loss) per share (“EPS”) equals net income (loss) divided by the number of weighted average common shares. Diluted EPS includes potentially dilutive securities such as stock options and convertible securities. The effect of shares issuable upon exercise of convertible preferred stock, warrants and stock options is anti-dilutive, therefore diluted (loss) earnings per share is not presented in a comparative format.

Revenue is recognized as service is provided when there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the receivable is reasonably assured. The Company assesses collection based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. The Company does not request collateral from customers. If the Company determines that collection is not reasonably assured, the Company defers the fee and recognizes revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash. Management specifically analyzes accounts receivable and analyzes current economic news and trends, historical bad debts, customer concentrations, customer credit-worthiness and changes in customer payment terms when evaluating revenue recognition and the adequacy of the Company’s reserves.

Data center revenues currently consist of monthly recurring fees for colocation and exchange point services and non-recurring installation and managed services fees. Revenues from colocation and exchange point services are recognized ratably over the period of usage. Installation fees are deferred and recognized ratably over the term of the related contract. Managed services fees are recognized in the period in which the services are provided.

Revenues from real estate sales are recognized at the time of delivery to the customer. Revenues from development, commission and construction fees are recognized when earned.

Construction contract expenses costs include all direct material and labor costs and indirect costs related to contract performance such as indirect labor, supplies, tools, repairs, bad debt and depreciation.

Provisions for estimated losses on uncompleted contracts are made in the period in which losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions can be reasonably estimated. Accordingly, it is possible that the Company’s current estimates relating to completion cost and profitability of its uncompleted contracts will vary from actual results.

The Company considers all amounts held in highly liquid instruments with an original purchased maturity of three months or less to be cash equivalents. Cash and cash equivalents include cash balances maintained in the operating and interest-bearing money market accounts at the Company’s banks. Restricted cash at March 31, 2002 represents cash deposits with a financial institution collateralizing a $750,000 letter of credit issued to the lessor of the Company’s colocation facility in Santa Clara, California (Note 8). Restricted cash at March 31, 2001 represents customer purchase deposits.

The Company’s management regularly evaluates factors affecting collectibility of receivable balances. The Company estimates an allowance for doubtful accounts based upon the actual payment history of each individual customer. Consequently, an adverse change in the financial condition of a particular customer could affect the Company’s estimate of its bad debt.

Property and equipment, net includes acquired assets and those accounted for under capital leases. Purchased assets are recorded at cost and capital leased assets are recorded at the net present value of minimum lease payments. Property and equipment are depreciated on the straight-line method over their estimated remaining useful lives, as follows:

Identifiable intangible assets consist primarily of certain rights, customer relationships and contracts. The identifiable intangible assets are amortized on the straight-line method over periods ranging from one to five years. Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in conjunction with business acquisitions and is amortized on the straight-line basis over a five year period. At March 31, 2002, identifiable intangible assets and goodwill consists of TECOTA promote interest of $904,964, NAP of the Americas intangible of $9,999,871 and Post Shell goodwill of $2,315,336.

In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Live Assets to Be Disposed Of, the Company evaluates long-lived assets and identifiable intangibles for impairment whenever events or changes in circumstances indicate that the net carrying amount may not be recoverable. When such events occur, the Company determines if there is impairment by comparing the carrying value of the long-lived asset to the estimated undiscounted future cash flows expected to result from use of the asset. If an impairment is indicated, an impairment charge is provided for the excess of the carrying amount of the asset over its fair value. Accordingly, during the year ended March 31, 2002 and 2001, the Company recorded approximately $19.0 million and $4.2 million, respectively, in impairment charges (Notes 4, 5 and 8).

Trade payables and other liabilities include liabilities incurred during the normal course of business.

On April 28, 2000, the predecessor to the Company, Terremark Holdings, Inc. (THI) merged with and into AmTec, Inc., a publicly traded international telecommunications and services company. As a result of the merger, each share of THI common stock was converted into approximately 63 shares of the Company’s common stock. The stockholders’ equity in the historical financial statements reflects this conversion as if it had occurred at the beginning of each period.

The AmTec merger was accounted for using the purchase method of accounting, with THI treated as the acquirer for accounting purposes. As a result, the assets and liabilities of THI are recorded at historical values and the assets and liabilities of AmTec was recorded at their estimated fair values at the date of the merger. The purchase price was based on market capitalization of AmTec using $0.99 per AmTec common share, the average closing price of AmTec shares, for a period immediately before and after announcement on November 9, 1999 of the proposed merger, plus merger related costs.

The following unaudited condensed results of operations for the twelve months ended March 31, 2001 was prepared assuming the merger occurred on April 1, 2000, and assumes AmTec’s operations are a part of continuing operations.

The amounts for the twelve months ended March 31, 2001 include AmTec’s actual results for the period April 1, 2000 to April 28, 2000. In preparing the pro forma information, various assumptions were made. This information is not necessarily indicative of what would have occurred had these transactions occurred on April 1, 2000 nor is it indicative of the results of future combined operations.

During the year ended March 31, 2001, the Company acquired five businesses. The Company accounted for each acquisition as a purchase. When consideration included common stock, its value was determined using the average closing price of the Company’s stock for a period immediately before and after each acquisition’s announcement. The effect of each acquisition individually and in the aggregate on the Company’s consolidated financial statements was not material. The acquisitions are as follows:

On May 31, 2000, the Company acquired Telecom Routing Exchange Developers, Inc. (“T-Rex”), a corporation holding rights to develop and manage facilities catering to the telecommunications industry, in exchange for eight million shares of common stock. Since the Company was a non-public entity at the time the AmTec merger was announced and the terms were conditional on the consummation of the AmTec merger, the purchase price was based on the closing price of the Company’s common stock of $1.94 per common share on the acquisition date.

On June 23, 2000, the Company acquired all of the outstanding stock of Post Shell Technology Contractors, Inc. (“Post Shell”), a provider of construction services, in exchange for three million shares of common stock. The acquisition was accounted for using the purchase method of accounting. The purchase price was based on the market capitalization of the Company using an average closing price of $2.81 per common share for a period immediately before and after the announcement of the acquisition on June 26, 2000.

Changes in business conditions in the telecommunications industry and resulting decline in related construction projects caused the Company to perform an impairment analysis during the year ended March 31, 2002 of its goodwill acquired in the Post Shell acquisition. Based on this analysis, the Company determined that the asset, which is included in its real estate segment, was impaired by approximately $3.2 million. The Company believes that the remaining amount of approximately $2.3 million in Post Shell goodwill is recoverable through future related cash flows.

On August 9, 2000, the Company acquired an 80% ownership interest in Spectrum Telecommunications, Inc. (“Spectrum”) through issuing three million shares of common stock. Spectrum provides telecommunication services in Latin America. On February 16, 2001, the Company acquired for $100 the remaining 20% ownership interest.

On August 14, 2000, the Company acquired 100% of IXS.Net (“IXS”), a private IP fax services provider in Asia, by issuing 412,500 shares of common stock and transferring a 7.55% ownership interest in the Company’s subsidiary, Asia Connect L.L.C.

On September 1, 2000, the Company completed its acquisition of a controlling interest in Asia Connect L.L.C. (Asia Connect). Asia Connect is developing unified messaging services in Asia. The Company had a 92.45% interest in Asia Connect.

Acquisitions during the twelve months ended March 31, 2001 are summarized as follows:

On February 23, 2001, the Company sold certain of its telecom facilities management operations to MP Telecom, LLC (“MP”), an entity owned by certain officers and a director of the Company.

Assets sold include all of the Company’s equity ownership interests (including any rights to “promote” interests) in the T-Rex branded “Telecom Hotel” together with assets owned by Telecom Routing Exchange Developers, Inc., a wholly owned subsidiary of the Company. As part of the transaction, the Company retained its management rights for The Technology Center of the Americas (“TECOTA”), in which the NAP of the Americas is located. The purchaser conveyed to the Company its rights to the promote and equity interests in TECOTA. As a result of these transactions, at March 31, 2001, the Company owns 100% of the promote interest and .84% of the equity interests in TECOTA.

As part of the transaction, MP conveyed to the Company 1,400,000 shares of the Company’s common stock, representing a portion of 8,000,000 shares issued to MP and its affiliates in conjunction with the T-Rex acquisition. MP also conveyed its minority interest in the Company’s co-location business. The Company paid

$900,000 to the purchaser in connection with the transaction. The principals of MP and certain Company officers agreed to limit the aggregate number of Company shares sold by them during any trading day until December 25, 2001.

During the quarter ended December 31, 2000, the Company recognized an impairment of intangible assets of $4,155,178 in contemplation of the transaction with MP, which closed during the quarter ended March 31, 2001.

Changes in business conditions in the telecommunications industry and resulting decline in related real estate leasing activities caused the Company to perform an impairment analysis during the year ended March 31, 2002 of its promote interests in TECOTA acquired in the telecom facilities management operations sale. Based on this analysis, the Company determined that the asset, which is included in its real estate segment, was impaired by $3.8 million. The Company believes that the remaining $905,000 in TECOTA promote interests is recoverable through future related cash flows.

In March 2001, the Company implemented its plan to dispose of certain acquired businesses whose operations reflect IP fax, unified messaging and telephony services. Since the operations represent a class of customer and a major line of business as contemplated in Accounting Principles Board Opinion 30, the results of these activities and estimated loss on disposal are accounted for as discontinued operations.

As of March 31, 2001, $2,245,896 in assets, exclusive of goodwill, had been disposed. Remaining assets to be disposed amounted to $6,390,009. Subsequent to March 31, 2001, these assets were sold for proceeds aggregating $500,000 in cash and assumption of approximately $1,740,838 in liabilities. The loss on disposition of discontinued operations includes the write-off of $54,381,681 in goodwill. For the year ended March 31, 2001, discontinued operations had $1,760,640 of total revenues and a loss of $11,346,447, net of $10,153,140 in goodwill amortization. The net liabilities for discontinued operations at March 31, 2002 and 2001 primarily represent trade payables, which remain an obligation of the Company. In addition, the Company at March 31, 2002 and 2001 guaranteed approximately $550,000 in debt related to discontinued operations.

In February 2001, the Company sold for $4,750,000 certain rights, including the entitlement to a contingent payment and related preferred return, under agreements entered into in conjunction with a hotel development project in Miami, Florida. For the year ended March 31, 2001, these proceeds are included in development, commission and construction fees.

On July 2001, the Company sold for $17.2 million Fortune House II, a proposed condominium/hotel project in Ft. Lauderdale, Florida. In connection with the sale, the Company repaid approximately $12.1 million in related notes payable and recorded a gain of approximately $3.9 million.

On December 22, 1999, the Company acquired for approximately $56.0 million all partnership interests of Terremark Centre, Ltd. (“TCL”). TCL is a single purpose entity and fee simple owner of a 294,000 square foot 21 story Class A office building and 16 townhouses, located in Coconut Grove, Florida. The acquisition was financed through assumption of a first mortgage of approximately $28.3 million and issuance of approximately $27.1 million in purchase money notes to the sellers. In April 2000, the Company sold its interests for approximately $58.8 million. No gain or loss was recognized on this sale. The cash proceeds were used to repay approximately $55.8 million in related debt.

Property and equipment, net includes approximately $60.0 million in assets related to the NAP of the Americas at March 31, 2002.

During the three months ended September 30, 2001, the Company reached final agreement with a vendor regarding amounts due. As a result, the Company recorded approximately $1.0 million and $267,880 of reductions in data center operations expense and property and equipment, respectively.

During the three months ended September 30, 2001, the Company recorded a $6,642,315 impairment charge to its colocation facility in Santa Clara, California, based on an option to purchase the facility granted to one of its vendors. Subsequent expiration of the option and continued decline in related colocation industry activities caused the Company in the quarter ended March 31, 2002 to change its strategy for the facility to held for sale. As a result, the Company recorded an additional $5,521,355 impairment charge. These charges are included in the telecom facilities management segment, have fully impaired the related assets and include approximately $1,530,000 in expected carrying and lease termination costs.

Construction in process at March 31, 2001 primarily includes costs related to the NAP of the Americas and the colocation facility in Santa Clara, California.

Loan costs, principally loan origination and related fees, are deferred and amortized as interest expense over the life of the respective loan using the straight-line method, which approximates the effective interest method.

On September 5, 2001, the Company closed on a $48 million loan. The credit facility bears interest at an annual rate of 9.25%, interest is paid monthly and the principal balloons in 12 months. To obtain the loan, the Company paid a $720,000 commitment fee to the lender. The Company has the option to exercise two nine-month extension periods, subject to certain conditions, each at a cost of 0.5% of the principal balance outstanding together with a principal repayment of $2.5 million. During each period under extension, a $250,000 monthly principal repayment plus interest is due. At closing, the total amount of the loan was disbursed except for approximately $6.6 million that was held as an interest reserve available to the Company through June 2002. Through June 2002, the interest reserve is disbursed monthly to make interest payments.

Subsequently, the Company will pay interest through cash on hand. The proceeds of the credit facility were used to:


	•	repay a $10 million short-term loan from Manuel D. Medina, the Company’s Chief Executive Officer, the proceeds of which the Company had used to fund the buildout of the NAP of the Americas (he, in turn, used the $10 million to repay a personal $10 million short-term loan from the bank);

	•	repay $3.5 million of debt that the Company owed to the bank under a line of credit personally guaranteed by Mr. Medina;

	•	pay $1.2 million in loan costs related to the $48 million credit facility (including the $720,000 commitment fee); and

	•	fund the NAP of Americas build out costs.

The credit facility is secured by all of the Company’s assets and allows for up to a $25.0 million junior lien position on the assets of our NAP of the Americas, Inc. subsidiary. Mr. Medina has personally guaranteed the $48 million credit facility.

During July 2002, the Company reached an agreement in principle to amend its existing $48 million credit facility. Under the amended terms, the initial maturity date has been extended to September 2003 and the Company has the option to exercise two six-month extension periods each at a cost of 0.5% of the principal balance outstanding together with a principal repayment of $2.5 million. The annual interest rate has been reduced to 7.50% and the Company will commence making monthly interest payments in July 2002. All other material provisions of the credit facility will remain unchanged. This amendment will be binding upon execution of the documents modifying the terms and conditions of this credit facility, which the Company expects to complete in July 2002. The credit facility is classified as current.

In addition to Mr. Medina’s personal guarantee of the credit facility, and in order to obtain the facility, the bank further required Mr. Medina, prior to the bank disbursing funds under the credit facility, to (i) provide $5.0 million certificate of deposit to the bank as collateral on certain personal loans that Mr. Medina has with the bank and (ii) commit to accelerate the maturity date of those personal loans to December 31, 2001. Subsequent to September 2001, Mr. Medina and the bank changed the maturity date on the personal loans, first to December 31, 2001 and later to July 1, 2002. In the event of the Company’s default under the credit facility Mr. Medina also agreed to subordinate debt that the Company owed to Mr. Medina. Mr. Medina has repaid part of those personal loans to the bank through liquidation of the 5.0 million certificate of deposit in January 2002 leaving an outstanding principal balance of approximately $5.4 million and he intends to exercise his right under such personal loan agreements to extend their maturity date from July 1, 2002 to December 31, 2002.

On September 5, 2001 and in consideration of Mr. Medina’s agreeing to repay his indebtedness to the bank earlier than otherwise required, pledging the certificate of deposit to the bank and personally guaranteeing the $48 million credit facility and approximately $21 million of construction payables, the Company entered into an amended and restated employment agreement with him. Under the terms of the amended and restated employment agreement, the Company will indemnify Mr. Medina from any personal liability related to his guarantees of the Company’s debt, use commercially reasonable efforts to relieve Mr. Medina of all his guarantees of the Company’s debt, provide up to $6.5 million of cash collateral to the bank should Mr. Medina be unable to repay the personal loans when due and provide a non interest-bearing $5.0 million loan to Mr. Medina for as long as his guarantees of the Company’s debt exist. If the loan to Mr. Medina becomes in default, the Company has a right of offset against all amounts payable by the Company to Mr. Medina, the aggregate of which is approximately $2.2 million as of March 31, 2002. The note receivable from Mr. Medina is shown as an adjustment to equity. The $48 million credit facility and the note receivable from Mr. Medina have been approved by the Board of Directors.

A note issued by a subsidiary of the Company, and guaranteed by the Company is in default since it matured in December 2001. During the year ended March 31, 2002, the Company made principal payments on the loan reducing its balance to $1,375,000 at March 31, 2002. Although the lender has the right to call on the guarantee it has not done so and the Company and the lender are negotiating to extend the terms of repayment.

During the year ended March 31, 2002, the Company’s $5 million line of credit with a financial institution was repaid and cancelled. The line of credit allowed for the issuance of letters of credit. At March 31, 2001, the Company had two stand-by letters of credit totaling $1.5 million related to deposits for leased space. Therefore, the line of credit was fully utilized.

Interest expense of approximately $9.8 million, $1.1 million and $804,785, net of amounts capitalized to leasehold improvements and real estate inventories totaling $891,644, $605,332 and $41,038 was recognized in fiscal years 2002, 2001 and 2000, respectively.

The future maturities through March 31 for each of the following five years and thereafter of the Company’s borrowings as of March 31, 2002 are as follows:

Construction payables include approximately $23 million of amounts due to two vendors under promissory notes maturing from October 2002 through December 2002 bearing interest at annual rates ranging from 8.5 to 10 percent. Approximately $21 million of the amounts due under the promissory notes are guaranteed by Mr. Medina. These amounts relate to construction of the NAP of the Americas and its colocation facility in Santa Clara, California. The Company has the option with a certain vendor to make a payment of $8.0 million and convert the remaining payable of approximately $9.0 million into the Company’s common stock. The option expires in October 2002. The conversion of the payable would be at the then current market value of the Company’s common stock.

The Company issued approximately $10.5 million of 13% subordinated convertible debt during the year ended March 31, 2002 and approximately $15.9 million during the year ended March 31, 2001. The Company issued approximately $4.3 million of 13.125% subordinated convertible debt during the year ended March 31, 2002. The 13% debt matures on December 31, 2005 and the 13.125% debt matures on August 30, 2004. The debt is convertible into the Company’s stock at a weighted average conversion price of $1.87 and $0.66 for the convertible debt issued at 13% and 13.125%, respectively. Prepayment by the Company is permitted under

both debt instruments, but will entitle holders of the 13% subordinated debenture to warrants or a premium over their outstanding principal and interest based upon the following schedule:

Subsequent to March 31, 2002, the Company paid approximately $951,000 in interest that was due on March 31, 2002. Subsequent to June 30, 2002, the Company paid approximately $1,000,000 in interest that was due on June 30, 2002.

In addition to acquisitions effectuated through common stock transactions, the Company entered into the following equity transactions:

On March 7, 2002, 100,000 warrants issued on March 1, 2002 at $0.01 per share were converted to 100,000 shares of common stock.

On February 19, 2002, $242,700 of convertible debt was converted to 160,071 shares of common stock at $1.52 per share.

In conjunction with the AmTec merger on April 28, 2000, the Company sold 68,722,349 shares of common stock to a third party for approximately $28.1 million.

At March 31, 2000, the Company had 4,176,693 shares of convertible preferred stock outstanding. The $1 par value preferred stock had a 10% cumulative preferred dividend, payable annually commencing March 31, 2000. During April 2000, the preferred stock was acquired by certain members of the Company’s management. Upon consummation of the AmTec merger, the preferred shares were converted into 7,853,985 shares of the Company’s common stock.

In May 2001, the Company issued 294 shares of Series H redeemable convertible preferred stock for $500,000. The preferred stock allows for a preferential annual dividend of $102 per share and is initially convertible into 294,000 shares of common stock. The preferred stock is redeemable at $1,700 per share plus any unpaid dividends at the request of the holder on the earlier of June 1, 2005 or termination of a service agreement between the Company and the holder.

The Company assumed AmTec’s 20 outstanding shares of Series G convertible preferred stock (“Series G Preferred”) in the AmTec merger, which do not bear dividends. Conversion of the Series G Preferred into common stock is based on the issue price plus an 8% per annum non-compounding premium, divided by the lesser of: (a) $1.50 per Series G Preferred share or (b) the closing price of the Company’s common stock, as reported on the American Stock Exchange, on the business day immediately preceding the conversion. The Series G Preferred also has a stated liquidation preference value of $100,000 per share plus

8% in-kind dividends since March 1999, the date of issuance. The holders have no voting rights except with respect to matters that affect rights related to the Series G Preferred.

The Company uses the Black-Scholes model to estimate the fair value of warrants at the date of grant.

During the year ended March 31, 2002, the Company issued warrants to purchase 750,000 shares of common stock and warrants to purchase 68,000 shares of common stock at exercise prices of $0.77 and $1.72, respectively, to a third party for services performed. On March 20, 2002, these warrants were reissued at $0.01 per share with a $364,828 estimated value. These warrants expire June 2007.

On June 26, 2001, the Company issued warrants with a $26,575 estimated value, to purchase 25,000 shares of common stock to a third party for services performed. The warrants are exercisable at $2.00 per share and expire June 2003.

On June 12, 2001, the Company issued warrants with a $46,150 estimated value, to purchase 50,000 shares of common stock to a third party for services performed. The warrants are exercisable at $1.72 per share and expire June 2002.

On June 12, 2001, the Company issued warrants with a $22,490 estimated value, to purchase 13,000 shares of common stock to a third party for services performed. The warrants are exercisable at $1.72 per share and expire June 2011.

On June 12, 2001, the Company issued warrants to purchase 19,000 shares of common stock at an exercise price of $1.72, to a third party for services performed. On January 31, 2002, the Company reissued these warrants at $0.48 per share with a $7,942 estimated value. These warrants expire January 31, 2012.

On March 22, 2001, the Company issued warrants with a $352,200 estimated value, to purchase 300,000 shares of common stock to a third party for services performed. The warrants are exercisable at $2.00 per share and expire March 2006.

In conjunction with the AmTec merger, the Company assumed 3,036,981 warrants to acquire common stock at prices ranging from $1.25 to $3.31 per share. The Company assigned a value of $1,687,038 to the warrants, which expire in June 2001 through March 2004.

In November 2000, the Company issued 250,000 warrants to acquire common stock at $2.76 per share in payment for services provided. The Company assigned a value of $394,000 to the warrants, which expire in 2008.

In conjunction with the AmTec merger, the Company adopted its two stock option plans, which were the 1995 and 1996 stock option plans, and assumed all outstanding stock options. On June 23, 2000, the Board of Directors of the Company adopted the 2000 stock option plan. Prior to the AmTec merger, the Company did not have a plan. Incentive and nonqualified options and stock appreciation rights may be granted to employees, officers, directors, and consultants of the Company. There are 12,500,000 shares of common stock reserved for issuance under the 1995 and 1996 plans and 5,000,000 under the 2000 plan. The exercise price of the options are determined by the Board of Directors, but in the case of an incentive stock option, the exercise price may not be less than 100% of the fair market value at the time of grant. Options vest over periods not to exceed ten years.

On October 19, 2001, the Company issued options to purchase 100,000 shares of common stock to each member of the Company’s Board of Directors, for a total of 900,000 options. The exercise price of the options is $0.67 per share. The options are immediately exercisable.

A summary of the status of all of the Company’s stock options issued as of March 31, 2002 and 2001, and changes during the years is presented below:

The Company has followed the guidelines under SFAS No. 123 to determine the fair value of options at the date of grant. The fair value of the options at the date of grant was determined using an adjusted Black-Scholes option pricing model, which is generally accepted as appropriate primarily for short-term, exchange-traded options. For the purpose of valuing the Company’s options granted during the year ended March 31, 2002 and 2001, the following assumptions were used:

The following tables summarize information about options outstanding at March 31, 2002 and 2001:

The Company applies Accounting Principles Board Opinion No. 25 and related Interpretations in accounting for its employee options. Accordingly, no compensation cost has been recognized with respect to such awards. Had compensation cost for the Company’s stock option plans been determined consistent with Statement of Financial Accounting Standards No. 123 “Accounting for Stock-Based Compensation,” the Company’s net earnings and earnings per share for the years ended March 31, 2002 and 2001, would have approximated the pro forma amounts indicated below:

The deferred tax provision consists of income taxes relating to differences between the tax bases of assets and liabilities and their financial reporting amounts.

The Company provides a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has established a valuation allowance against deferred tax assets of $45,506,913 and $27,687,376 as of March 31, 2002 and 2001, respectively, since the Company has a history of operating losses and in the near term does not expect taxable income. Accordingly, the deferred tax asset will likely not be realized. The Company’s federal and state net operating loss carryforwards begin to expire in 2011. Utilization of the net operating losses generated prior to the AmTec merger may be limited by the Internal Revenue Code.

The reconciliation between the statutory income tax rate and the effective income tax rate on pre-tax (loss) income is as follows:

The Company leases space for its operations, office equipment and furniture under operating leases. Certain equipment is also leased under capital leases, which are included in leasehold improvements, furniture and equipment.

As of March 31, 2002, the Company has entered into capital lease agreements with third parties for equipment related primarily to the NAP of the Americas. Generally, the lease terms are for 48 months, and the aggregate gross related assets total approximately $6.1 million.

Operating lease expense amounted to approximately $7.0 million, $1.3 million and $72,833 for the years ended March 31, 2002, 2001 and 2000, respectively.

At March 31, 2002, future minimum lease payments for each of the following five years and thereafter under non-cancellable operating and capital leases having a remaining term in excess of one year are as follows:

As of June 28, 2002, the Company has signed customer contracts that represent over $12 million of annualized committed revenue with an average term of 5 years. No customer accounted for more than 10% of Data Center revenues for the year ended March 31, 2002.

From time to time, the Company is involved in various litigation relating to claims arising out of the normal course of business. These claims are generally covered by insurance. The Company is not currently subject to any litigation which singularly or in the aggregate could reasonably be expected to have a material adverse effect on the Company’s financial position or results of operations.

Technology Center of the Americas LLC (“TECOTA”), an entity that the Company has a .84% member interest owns the building which leases the space for the NAP of the Americas under a 20 year lease. The Company has entered into an agreement to provide construction and management services to TECOTA for fees. For the year ended March 31, 2002 and 2001 the Company earned approximately $408,000 and approximately $1.4 million in related fees respectively. In addition, the Company has guaranteed $9.5 million of TECOTA debt.

In October 2000, the Company signed a 20-year lease for the colocation facility in Santa Clara, California.

Due to the nature of the following relationships, the terms of the respective agreements might not be the same as those that would result from transactions among wholly unrelated parties. All significant related party transactions require approval by the Company’s Board of Directors.

The Company provides management and construction services to partnerships where certain officers own an interest. Management and construction fees earned totaled $0, $102,348 and $119,416 for the years ended March 31, 2002, 2001 and 2000, respectively.

Included in the March 31, 2002 balance sheet are amounts from related parties and include $5.0 million Note Receivable (Note 10 and Note 18), $7.2 million in Notes Payable (Note 10) and approximately $4.5 million in Convertible Debt (Note 12).

In May 2002, the Company received a binding commitment from certain directors and shareholders of the Company for the purchase of $7.5 million of common stock at $.75 per share. In May 2002, the transaction was completed by receiving $3.6 million in cash and the conversion of $3.9 million in short term promissory notes to equity. In March 2002, the Company received $950,000 in cash related to the future stock sale. As of March 31, 2002, this cash receipt was recorded as common stock subscriptions.

In May 2002, the Company received a $1.5 million short-term loan at a 10% interest rate from Mr. Medina.

In February 2001, the Company sold certain of its operations to related parties (Note 5).

In April 2000, certain members of the Company’s management acquired convertible preferred stock which was subsequently converted to common stock (Note 13).

The Company owns a .84% member interest in TECOTA and provides construction and management services for fees. In addition, the Company has guaranteed $9.5 million of TECOTA’s debt (Note 13).

Mr. Medina had guaranteed the Company’s $48 million credit facility (Note 10) and approximately $21 million in construction payables (Note 11).

As of March 31, 2002, the Company had two reportable business segments, data center operations and real estate services. The data center operations segment provides Tier 1 NAP, Internet infrastructure and managed services in a data center environment. The real estate services segment constructs, develops and manages real estate projects. The Company’s reportable segments are strategic business operations that offer different products and services.

During the year ended March 31, 2001, the Company had an additional segment, telecom facilities management, which developed, managed and leased facilities catering primarily to the telecommunications industry. In conjunction with the Company’s change in its strategy related to its colocation facility in Santa Clara, California, the Company no longer considers the remaining operations to be separate from its other two segments. Therefore, amounts unrelated to the colocation facility have been reclassified in the current and prior year presentations to their respective March 31, 2002 segments.

The accounting policies of the segments are the same as those described in significant accounting policies. Revenues generated among segments are recorded at rates similar to those recorded in third-party transactions. Transfers of assets and liabilities between segments are recorded at cost. The Company evaluates

performance based on the segment’s net operating results. The following presents information about reportable segments.

In July 2002, the Company and Mr. Medina agreed to modify the terms of the $5.0 million non-interest bearing note. As amended, the note has a maturity date of December 5, 2004 and bears interest subsequent to September 5, 2002 at the applicable federal rate. Interest is due in bi-annual installments. On a quarterly basis, the Company will review the collectibility of this note. As of July 9, 2002, the Company owed Mr. Medina approximately $3.7 million. The Company has the right to withhold payment to Mr. Medina of $1,375,000 in amounts due.

In June 2002, the Company entered into an exclusive agreement with the Comunidad Autonoma de Madrid to develop and operate carrier-neutral network access points (NAPs) in Spain. As part of that agreement, the parties formed NAP de las Americas — Madrid S.A. for the purpose of owning and operating carrier-neutral Tier-1 NAPs in Spain and of which the Company owns 10%. The Company contributed approximately $250,000 towards the capitalization of NAP de las Americas — Madrid S.A. to obtain the 10% interest. The shareholders in this new company are the Instituto Madrileno de Desarrollo — IMADE, the Camara Oficial de Comercio e Industria de Madrid, Red Electrica Telecomunicaciones, S.A., Telvent Desarrollos S.A., a subsidiary of Abengoa S.A., and Centro de Transportes de Coslada, S.A. In June 2002, the NAP de las Americas — Madrid purchased 5 million shares of the Company’s common stock at $1.00 per share. The Company also has the option to purchase up to another 30% of the NAP de las Americas — Madrid shares owned by the Comunidad and the Camara at initial capitalization, plus LIBOR. The number of shares sold will be adjusted if the Company during the next 12 months issues common stock at less than $1.00 per share.

In May 2002, the Company received a $1.5 million short term loan at 10% interest from Mr. Medina.

In April 2002, the Company entered into a Put and Warrant purchase agreement with an international financial institution. Under the agreement, the Company has an option to sell up to $10.2 million in aggregate value of its shares of common stock, at a per share price equivalent to 86.6% of the closing price of the Company’s common stock on the day the option is exercised. The amount of shares that the Company puts to the financial institution is limited to 9.9% of the then outstanding common stock. Upon the exercise of the option, the Company will issue and grant to the financial institution three call warrants that grant the financial institution the right to purchase additional shares in an aggregate amount equal to 20% of the shares sold to the institution under the option. The strike price for the first call warrant is equal to the market price of the Company’s share price on the option exercise date. The strike price of the second call warrant will be at a 15% premium of the Company’s share price on the option exercise date. The strike price of the last call warrant will be at a 15% discount of our share price on the option exercise date. All three call warrants have a six month term. The option expires during October 2002. If the option expires without exercise, the Company is required to pay $500,000 in fees.

F-29 EX-4.5 3 g77123kexv4w5.txt FORM OF 13.125% SUB CONV DEBENTURE EXHIBIT 4.5 NEITHER THIS DEBENTURE NOR THE COMMON STOCK INTO WHICH IT IS CONVERTIBLE HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT THAT HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE COMPANY, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAWS. TERREMARK WORLDWIDE, INC. 13.125% SUBORDINATED CONVERTIBLE DEBENTURE DUE AUGUST 30, 2004 This SUBORDINATED CONVERTIBLE DEBENTURE (the "Debenture"), is made and entered into as of the later of the dates set forth on the execution page below, by and between Terremark Worldwide, Inc., a Delaware corporation (the "Company") and the investor or investors as set forth on the execution page below, or their registered assigns as recorded in the Company's books (the "Investor"). RECITALS: A. The Company desires to obtain financing for its capital needs through the issue and sale of debentures convertible into shares of the Company's common stock, par value $.001 (the "Common Stock"). B. The Company desires to sell and the Investor desires to buy this Debenture. NOW, THEREFORE, in consideration of the above recitals and the mutual covenants, representations, warranties and agreements set forth herein, and for the purpose of defining the terms and provisions of this Debenture, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto intending to be legally bound do hereby agree as follows: 1. Principal And Interest. The Company will pay the principal amount set forth on the execution page below (the "Principal") on August 30, 2004 (the "Principal Payment Date") to the Investor, or successor thereof, registered on the books of the Company (the "Holder"), as of the close of business on (i) the date immediately preceding the Principal Payment Date or, in the alternative, (ii) the date immediately preceding the Principal Payment Date that in the State of Florida is not a holiday and a day on which banks are authorized to close (the "Principal Record Date"). The Debentures will bear interest at the rate of 13.125% per annum (the "Interest"), which will be paid quarterly, beginning on December 31, 2001 and thereafter on the last day of each calendar quarter until the outstanding principal amount of this Debenture has been paid in full (individually, an "Interest Payment Date," collectively, the "Interest Payment Dates," and the Interest Payment Dates together with the Principal Payment Date, the "Payment Dates") to the Holder as of the close of business on (i) the date immediately preceding the Interest Payment Date, or, in the alternative, (ii) the date immediately preceding the Interest Payment Date which in the State of Florida is a Business Day (as hereafter defined) if the date specified in (i) is not a Business Day (collectively, the "Interest Record Dates"). Interest shall be computed on the basis of a 360-day year of twelve 30-day months. For the purposes hereof, the term "Business Day" shall mean any day which is not a Saturday, Sunday or day on that banks in the State of Florida are authorized or obligated by law, executive order or governmental decree to be closed. 2. Method of Payment. The Company will pay Principal and Interest (i) in money of the United States that at the time of payment is legal tender for payment of public and private debts or (ii) by its check payable in such money mailed to the Holder's registered address as reflected in the Company's books. If the Payment Dates are other than Business Days, payment may be made on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. 3. Conversion. (a) The Holder shall have the right, from time to time at any time prior to the payment of the outstanding principal of this Debenture, or redemption of this Debenture, to convert the entire unpaid principal amount of this Debenture together with accrued but unpaid interest (or any portion of such amounts that is $50,000 or an integral multiple thereof), into that number of fully paid and non-assessable shares of Common Stock equal to the aggregate principal amount of (and accrued but unpaid interest on) this Debenture being converted, as of the Date of Conversion (as defined below), divided by the Conversion Price set forth below. Upon any such conversion, the Company shall pay to the Holder all accrued and unpaid interest on the principal amount of this Debenture so converted to the extent such interest is not converted. (b) In order to convert this Debenture, the accrued but unpaid interest hereon or a portion thereof, into shares of Common Stock, the Holder must telecopy or otherwise deliver prior to 5:00 p.m., Eastern Time, on any Business Day, a copy of the fully executed notice of conversion in the form attached hereto as Exhibit A (the "Notice of Conversion") to the Company at its principal office, which notice shall specify the amount to be converted on the date the Notice of Conversion is delivered to the Company (the "Date of Conversion") together with a copy of the Schedule of Conversion in the form attached hereto as Exhibit B, duly completed as appropriate. No fractional shares of Common Stock shall be issued upon conversion. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall pay cash to such Holder based on the closing price of the Common Stock on the last trading day prior to the Date of Conversion. (c) The Company shall issue and deliver, within 15 Business Days after delivery to the Company of the Notice of Conversion to the Holder or to the nominee of such 2 Holder, at the address of the Holder on the books of the Company or as otherwise directed by such Holder, a certificate or certificates for the number of shares of Common Stock to that the Holder shall be entitled as aforesaid. The person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of the Date of Conversion. (d) The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of the principal amount of this Debenture and all interest that would accrue thereon through the Principal Payment Date; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect such conversion, the Company will take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. (e) Following any conversion, the principal amount of this Debenture shall be reduced by an amount equal to the portion so converted. Appropriate adjustments shall be made on the records of the Company. (f) The conversion price per share of Common Stock shall be equal to 125% of the average Market Price of the Common Stock for the thirty trading days preceding the date of the closing (the "Conversion Price") with respect to this Debenture and is agreed to be the amount set forth on the signature page of this Debenture, subject to adjustment from time to time, pursuant to the provisions set forth below. For the purposes of this Section 3(f), "Market Price" shall mean (i) if the shares of Common Stock are listed or admitted for trading on a national securities exchange, the last reported sales price regular way, or, in the case no such reported sale takes place on such day or days, the average of the reported closing bid and asked prices regular way, in either case on the principal national securities exchange on which the shares of the Common Stock are listed or admitted for trading, or (ii) if the shares of Common Stock are not listed or admitted for trading on a national securities exchange (A) the last transaction price for the Common Stock on The Nasdaq Stock Market ("Nasdaq") or, in the case no such reported transaction takes place on such day or days, the average of the reported closing bid and asked prices thereof quoted on Nasdaq, or (B) if the shares of Common Stock are not quoted on Nasdaq, the average of the closing bid and asked prices of the Common Stock as quoted on the Over-The-Counter Bulletin Board maintained by the National Association of Securities Dealers, Inc. (the "Bulletin Board"), or (C) if the shares of Common Stock are not quoted on Nasdaq or on the Bulletin Board, the average of the closing bid and asked prices of the Common Stock in the over-the-counter market, as reported by The National Quotation Bureau, Inc., or an equivalent generally accepted reporting service, or (iii) if on any such trading day or days the shares of Common Stock are not quoted by any such organization, the fair market value of the shares of Common Stock on such day or days, as determined in good faith by the Board of Directors of the Company. In case (i) the outstanding shares of the Common Stock shall be subdivided into a greater number of shares, (ii) a dividend or other distribution in Common Stock shall be paid in respect of Common Stock, (iii) the outstanding shares of Common Stock shall be combined into a smaller number of shares thereof, or (iv) any shares of the Company's capital stock are issued 3 by reclassification of the Common Stock (including any reclassification upon a consolidation or merger in which the Company is the continuing corporation), the Conversion Price in effect immediately prior to such subdivision, combination or reclassification or at the record date of such dividend or distribution shall, simultaneously with the effectiveness of such subdivision, combination or reclassification or immediately after the record date of such dividend or distribution, be proportionately adjusted to equal the product obtained by multiplying the Conversion Price by a fraction, the numerator of which is the number of outstanding shares of Common Stock (on a fully diluted basis) prior to such combination, subdivision, reclassification or dividend, and the denominator of which is that number of outstanding shares of Common Stock (on a fully diluted basis) after giving effect to such combination, subdivision, reclassification or dividend. For purposes of this Debenture, "on a fully diluted basis" means that all outstanding options or rights to subscribe for shares of Common Stock and all securities convertible into or exchangeable for shares of Common Stock (such options, rights and securities are collectively referred to herein as "Convertible Securities") and all options or rights to acquire Convertible Securities have been exercised, converted or exchanged. (g) If, prior to the conversion of the entire principal amount of this Debenture, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, sale of all or substantially all of the Company's assets, or other similar event, as a result of which shares of Common Stock of the Company shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities of the Company or another entity, or other property, then the Holder shall thereafter have the right to purchase and receive upon conversion of this Debenture (or the conversion of the accrued and unpaid interest hereon), upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such shares of stock, securities and/or other property as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore purchasable and receivable upon the conversion of this Debenture held by such Holder had such merger, consolidation, exchange of shares, recapitalization, sale of all or substantially all of the assets or reorganization not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion) shall thereafter be applicable, as nearly as may be practicable in relation to any shares of stock or securities thereafter deliverable upon the exercise hereof. (h) No adjustment of the Conversion Price shall be made in an amount less than $.05 per share. Upon any adjustment of the Conversion Price, then and in each case the Company shall give written notice thereof, by first class mail, addressed to the Holder at the address of such Holder as shown on the books of the Company, which notice shall state the Conversion Price resulting from such adjustment, setting forth in reasonable detail the methods of calculation and the facts upon which such calculation is based. (i) The Company will use its commercially reasonable efforts to register and list the shares of Common Stock issued upon conversion as more fully set forth in the Subscription Agreement pursuant to which this Debenture was issued. Notwithstanding the 4 foregoing, no transfer of the Common Stock issuable upon conversion pursuant to this Section 3 shall be permitted prior to December 31, 2002. For the purposes of this Debenture, the term "Transfer" shall include any direct or indirect sale, assignment, pledge, encumbrance or other granting of an interest in the shares of Common Stock. 4. Paying Agent And Registrar. The Company, or a subsidiary or affiliate thereof, shall act as authenticating agent, paying agent, and registrar. The Company may, without notice, engage a third party to act as authenticating agent, paying agent, or registrar. 5. Subscription Agreement. The Company has issued this Debenture in connection with that certain Subscription Agreement dated as of the later of the dates set forth on the execution page below between the Company and the Investor (the "Subscription Agreement"). This Debenture is subject to all the terms of the Subscription Agreement. To the extent permitted by applicable law, in the event of any inconsistency between the terms of Subscription Agreement and the Debenture, the terms of the Subscription Agreement shall control. 6. Subordination. (a) The indebtedness evidenced hereby and any and all modifications, restatements, refinancings and renewals thereof, together with any and all interest accrued or to accrue hereon is hereby subordinated to the payment of the Senior Indebtedness (as hereafter defined). Upon any distribution of any assets of the Company, whether by reason of sale, reorganization, liquidation, dissolution, arrangement, bankruptcy, receivership, assignment for the benefit of creditors, foreclosure or otherwise, the Senior Indebtedness shall be entitled to receive a payment in full prior to the payment of all or any part of the indebtedness evidenced hereby. To enable the holders of the Senior Indebtedness to assert and enforce their rights in any such proceeding or upon the happening of any such event, the holders of the Senior Indebtedness or any persons whom the holders of the Senior Indebtedness may designate are hereby irrevocably appointed attorney in fact for the undersigned with full power to act in the place and stead of the undersigned, including the right to make, present, file and vote such proofs of claim against the Company on account of all or any part of the indebtedness evidenced hereby as the holders of the Senior Indebtedness may deem advisable and to receive and collect any and all dividends or other payments made thereon and to apply the same on account of the Senior Indebtedness. (b) Notwithstanding the foregoing, so long as the Company is not in default under any of its obligations of payment or performance under the Senior Indebtedness, the Holder of this Debenture shall not be prohibited from receiving payments of interest and payment of principal as provided herein. (c) In the event any payments are made by the Company to the Holder of this Debenture or any amounts are received by the Holders of this Debenture contrary to the provisions of this Debenture, the Holders of this Debenture will promptly remit said payments or amounts to the holders of the Senior Debt. (d) For the purposes of this Section, the term "Senior Indebtedness" shall mean trade credit, project and equipment financing, any financing provided by a commercial 5 bank and the Company's Subordinated Convertible Debentures in the original principal amount of $25,647,700, due on December 31, 2005. 7. Redemption. This Debenture will be redeemable, at the Company's option, in whole but not in part, at any time or from time to time (the "Redemption Date") by giving not less than 15 nor more than 60 days' prior notice mailed by first-class mail to the Holder's last address as it appears the books of the Company, and by delivering accrued and unpaid Interest, if any, calculated on a pro rata basis up to the Redemption Date on the Redemption Date, plus the amount of Principal the Company wishes to redeem, in the manner described in Section 2, Method of Payment. On and after the Redemption Date, interest shall cease to accrue on the Principal, unless the Company defaults in the payment of the Redemption Price. Notwithstanding the giving of notice by the Company pursuant to this Section 7, the Holder shall have the right to convert this Debenture by giving notice to the Company pursuant to Section 3. Such notice must be given no later than one Business Day prior to the Redemption Date. 8. Denominations; Transfer; Exchange. The Investor may register the transfer or exchange of the Debenture by submitting to the registrar of the Company (the "Registrar") the following completed documents: (i) the Assignment Form attached as Exhibit C and (ii) the Letter Regarding Transfer attached as Exhibit D. The Registrar may require the Investor, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Subscription Agreement. The Registrar need not register the transfer, or exchange the Debenture, if the Debenture is selected for redemption. 9. Persons Deemed Owners. The Holder shall be treated as the owner of the Debenture for all purposes. 10. Amendment; Supplement; Waiver. The Debenture may be amended or supplemented with the consent of the Holder and any existing default or compliance with any provision may be waived with the consent of the Holder. 11. Defaults And Remedies. The following events constitute "Events of Default": (a) the Company's default, which continues for a period of at least ten (10) days, in the payment of Principal under, or Interest on, this Debenture when the same becomes due and payable upon redemption or otherwise; (b) the Company's default in the performance of, or other breach of any covenant or agreement of the Company in, the Subscription Agreement or the Debenture, and such default or breach continues for a period of 30 consecutive days after written notice by the holder; (c) any final judgment or order against the Company (not covered by insurance) for the payment of money in excess of $1,000,000 in the aggregate for all such final judgments or orders (treating any deductibles, self-insurance or retention as not so covered) and which is not paid or discharged, or if there shall be any period of 60 consecutive days following the entry of a final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against the Company to exceed $1,000,000, and which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (d) a court having jurisdiction in the premises enters a decree or order for (i) relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company for all or 6 substantially all of the property and assets of the Company or (iii) the winding up or liquidation of the affairs of the Company and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (e) the Company (i) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order of relief in an involuntary case under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or for all or substantially all of the property and assets of the Company or (iii) effects any general assignment for the benefit of creditors. If an Event of Default occurs and is continuing, the Holder, by written notice to the Company, may declare the outstanding Principal and the accrued Interest, if any, on the debentures, to be immediately due and payable. If a bankruptcy or insolvency default with respect to the Company occurs and is continuing, the accrued Interest automatically becomes due and payable. The Holder may not enforce either the Subscription Agreement or the Debenture, except as provided in said documents. IN WITNESS WHEREOF, the undersigned has executed this Debenture in the principal amount and on the date set forth below: ISSUER: TERREMARK WORLDWIDE, INC. By: ----------------------------------- Print Name: --------------------------- Title: -------------------------------- NAME AND ADDRESS OF INVESTOR: Debenture No. - -------------------------------------- ---- - -------------------------------------- - -------------------------------------- Debenture Principal Amount $ ---------- Date of Issuance: , 2001 -------- Conversion Price: $ ----------- 7 EXHIBIT A NOTICE OF CONVERSION The undersigned irrevocably elects to convert $___________ of the principal amount of, and accrued but unpaid interest on, the 13.125% Subordinated Convertible Debenture due August 30, 2004 (the "Debenture") into _________ shares of Common Stock (the "Common Stock") of Terremark Worldwide, Inc. (the "Company") according to the conditions set forth in the Debenture as of the date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. The undersigned represents and warrants that all offers and sales by the undersigned of the shares of Common Stock issuable upon conversion shall be made pursuant to the registration of such shares of Common Stock under the Securities Act of 1933, as amended, or pursuant to an exemption from registration under such Act. Date of conversion: -------------------------- Signature: ----------------------------------- Name: ---------------------------------------- Address: ------------------------------------- ------------------------------------- Exhibit A-1 EXHIBIT B SCHEDULE OF CONVERSION The following exchanges of a part of this Debenture for shares of Common Stock have been made:

Schedule B-1 EXHIBIT C ASSIGNMENT FORM To assign the Debenture, fill in the form below: (I) or (We) assign and transfer the Debenture to: (Insert Assignee's Soc. Sec. Or Tax I.D. No.) (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ to transfer the Debenture on the books of the Company. The agent may substitute another to act for him/her. Date: --------------------- Your Signature: ------------------------------------ (Sign exactly as your name appears on the other side of the Debenture) Signature Guarantee: ----------------------------------------------------------- Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Registrar). Exhibit C-1 EXHIBIT D LETTER REGARDING TRANSFERS ---------------, ----- Terremark Worldwide, Inc. 2601 S. Bayshore Drive Miami Beach, FL 33133 Attention: --------------------- Re: Terremark Worldwide, Inc. 13.125% Subordinated Convertible Debenture Due August 30, 2004 Ladies and Gentlemen: In connection with our proposed purchase of the 13.125% Subordinated Convertible Debenture due August 30, 2004 (the "Debenture") dated as of the later of the dates set forth on the execution page between Terremark Worldwide, Inc. (the "Company") and the investor named on the execution page of the Debenture (the "Investor"), we confirm that: 1. We understand that any subsequent transfer of the Debenture is subject to certain restrictions and conditions set forth in the Subscription Agreement dated as of the later of the dates set forth on the execution page of the Debenture between the Company and the Investor (the "Subscription Agreement") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Debenture except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Debenture has not been registered under the Securities Act, and that the Debenture may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that we will not resell or otherwise transfer the Debenture except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and we further agree to provide to any person to whom the Debenture is transferred a notice advising such transferee that resales of the Debenture are restricted as stated herein. 3. We understand that, on any proposed resale of the Debenture, we will be required to furnish to the Company, such certifications, legal opinions and other information as the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We acknowledge that the Company will rely upon the truth and accuracy of such information. We further understand that the Debenture purchased by us will bear a legend to the foregoing effect. Exhibit D-1 4. We are either (a) an "accredited investor" as defined in Rule 501 of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be; or (b) a non "US Person" as defined in Regulation S of the Securities Act, and the offer and sale of the Debenture by the Company has taken place, and is taking place, in an "offshore transaction" and has not taken place, and is not taking place, within the United States of America or its territories or possessions. 5. We are acquiring the Debenture purchased by us for our account or for one or more accounts (each of which is an "accredited investor" or a non "US Person") as to each of which we exercise sole investment discretion. We are not acquiring the Debenture with a view toward distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction. The Company is entitled to rely upon this letter and is irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, By: ------------------------------------ Name: ------------------------------- Title: ------------------------------ Exhibit D-2 EX-10.10 4 g77123kexv10w10.txt $5 MILLION PROMISSORY NOTE/ M. MEDINA Exhibit 10.10 PROMISSORY NOTE $5,000,000.00 September 5, 2001 Miami, Florida FOR VALUE RECEIVED, Manuel D. Medina, a resident of Miami-Dade County, Florida (the "Borrower") hereby promises to pay to the order of Terremark Worldwide, Inc., a Delaware corporation (the "Lender") at 2601 South Bayshore Drive, Miami, Florida 33133, or such other address as the Lender shall provide by notice in writing to the Borrower, the principal amount of Five Million Dollars ($5,000,000.00) in lawful money of the United States of America and in immediately available funds within 90 days after the date the Borrower's personal guarantees of the Lender's debt to Ocean Bank are terminated for any reason (the "Maturity Date"). At the option of the Lender, all sums advanced hereunder shall become immediately due and payable, without notice or demand, upon the occurrence of any one or more of the following events of default: the death of, insolvency of, business failure of, appointment of a receiver for any part of the property or assignment for the benefit of creditors by, or the commencement of any proceedings under any bankruptcy or insolvency laws, by or against, the Borrower. No delay or omission on the part of the Lender in the exercise of any right hereunder shall operate as a waiver of such right or of any such other right under this Promissory Note. A waiver by the Lender of any right or remedy conferred to him hereunder on any one occasion shall not be construed as bar to, or waiver of, any such right or remedy as to any future occasion. If this Promissory Note becomes in default and is placed in the hands of an attorney, the Borrower agrees to pay all the costs, charges and expenses incurred by the Lender in the enforcement of his rights hereunder including, but not limited to, reasonable attorneys' fees. If this Promissory Note becomes in default, the Lender may offset, and apply towards the repayment of all sums due under this Note, all monies, credits or other property of any nature whatsoever (and the proceeds thereof) of the Borrower, now or at any time hereafter in the possession of the Lender. The Borrower and all persons now or hereafter becoming obligated or liable for the payment of this Promissory Note do jointly and severally waive demand, notice of nonpayment, protest, notice of dishonor and presentment. This Promissory Note may be prepaid in whole or in part without a prepayment penalty. This Promissory Note shall be construed in enforced according to the laws of the State of Florida, including all principles of choice of laws, conflict of laws or comity. /s/ MANUEL D. MEDINA ----------------------------------------- Manuel D. Medina EX-10.11 5 g77123kexv10w11.txt SHARE PURCHASE AGREEMENT Exhibit 10.11 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT dated as of June 13, 2002 (this "AGREEMENT"), is entered into by and between Terremark Worldwide, Inc., a Delaware corporation (the "COMPANY" or "TERREMARK") and NAP de Las Americas - Madrid, S.A., a Spanish limited liability company (the "INVESTOR"). RECITALS WHEREAS, the Company wishes to issue and sell to the Investor an aggregate of 5,000,000 shares (the "SHARES") of the authorized but unissued Common Stock, U.S. $0.001 par value, of the Company (the "COMMON STOCK") at a purchase price of U.S. $1.00 per share, for an aggregate purchase price of U.S. $5,000,000.00; and WHEREAS, the Investor wishes to purchase the Shares on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties agree as follows: ARTICLE I PURCHASE AND SALE OF THE SECURITIES 1.01 ISSUANCE AND SALE OF THE SHARES. The Company has authorized the sale and issuance to the Investor of the Shares, and subject to the terms and conditions hereof and in reliance upon the representations, warranties, covenants and agreements of Investor contained herein, agrees to issue and sell to the Investor the Shares, and the Investor hereby agrees to purchase from the Company the Shares for U.S. $1.00 per share, for an aggregate purchase price of U.S. $5,000,000.00 (the "PURCHASE PRICE"). 1.02 CLOSINGS AND DELIVERY OF THE SHARES. (a) The sale and purchase of the Shares shall take place at a closing (the "CLOSING"), at 10:00 a.m. (Eastern Time) within five (5) business days after the date of this Agreement (the "CLOSING DATE") or at such other place and time as may be mutually agreed upon by the Company and the Investor. (b) At Closing: (i) The Investor shall deliver the Purchase Price to the Company by wire transfer of immediately available funds in consideration for the Shares; and Page 1 of 24 (ii) The Company shall issue and shall deliver to the Investor a stock certificate or certificates in definitive form, registered in the name of the Investor, or its designee, representing the number of Shares purchased by the Investor. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to the Investor as of the date hereof and as of the Closing Date as follows: 2.01 ISSUANCE OF SHARES. The Shares issued under this Agreement have been duly authorized by all necessary corporate action and, when paid for in accordance with the terms of this Agreement, the Shares shall be validly issued and outstanding, fully paid and nonassessable, free and clear of all liens, charges, and encumbrances of any nature whatsoever, including any preferential rights of other shareholders of any nature or third parties and the Investor shall be entitled to all rights accorded to a holder of capital stock of the same class in the Company. The Company has complied with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Shares hereunder. 2.02 BYLAWS AND CORPORATE AGREEMENTS. All the rights and obligations of the stockholders of the Company in their capacity as such are included in the Certificate of Incorporation and the Bylaws of the Company and there are no other rights, obligations or undertakings of any kind including any rights regarding the Shares. The Company is not and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not conflict with or result, with or without the passage of time and the giving of notice, in a breach of the Certificate of Incorporation or Bylaws of the Company, or any material agreement, indenture or other instrument, judgment, order, writ or decree to which the Company is a party or by which it is bound. 2.03 COMMISSION REPORTS. The Company has duly and timely, or under applicable extensions, filed with the Securities and Exchange Commission (the "COMMISSION") all reports and other documents (individually a "REPORT" and collectively the "REPORTS") required to be filed by it by the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). 2.04 DISCLOSURE. None of this Agreement, the Exhibits hereto, the Reports or any other documents, certificates or instruments furnished to the Investor by or on behalf of the Company or any subsidiary in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made herein or therein, not misleading. 2.05 CORPORATE EXISTENCE AND QUALIFICATION. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with full power and authority (corporate and other) to own, lease and operate its properties and Page 2 of 24 assets and to conduct its business as it is now being conducted. The Company is duly incorporated and qualified to do business as a foreign corporation and is in good standing in each jurisdiction of the United States, or any other country, state province, or political subdivision in which the character of the business conducted by it or the nature of the properties owned or leased by it makes such qualification necessary for the conduct of its business, except where the failure to be so qualified would not have a material adverse effect on the assets, condition or affairs of the Company (a "MATERIAL ADVERSE EFFECT"). 2.06 CAPITALIZATION. The authorized capital stock of the Company consists of (i) 300,000,000 shares of common stock, par value U.S. $0.001 per share, of which 199,482,250 shares are issued and outstanding and (ii) 10,000,000 shares of preferred stock, par value U.S. $0.001 per share, of which 20 shares are designated as Series G convertible preferred stock and 5,882 shares are designated as Series H convertible preferred stock. As of May 31, 2002, 20 shares of Series G convertible preferred stock were issued and outstanding and convertible into 1,675,555 shares of common stock, and 294 shares of Series H convertible preferred stock were issued and outstanding and convertible into 294,000 shares of common stock. As of the May 31, 2002, there were outstanding options, warrants and convertible debentures (of which U.S. $30,655,000.00were outstanding) currently exercisable for or convertible into a total of 42,936,151 shares of common stock. The Company has all requisite power and authority to issue, sell and deliver the Shares in accordance with and upon the terms and conditions set forth in this Agreement, and all corporate action required to be taken by the Company for the due and proper authorization, issuance, sale and delivery of the Shares has been validly and sufficiently taken. The Company has not violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its capital stock. 2.07 AUTHORITY. All corporate action on the part of the Company, necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder, and the authorization, issuance, sale and delivery of the Shares have been taken, and this Agreement constitutes the legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). 2.08 COMPLIANCE WITH LAW. The Company is not, and will not be at Closing, in violation or default of any order, writ or decree to which it is a party or by which it is bound, or of any provision of any federal or state statute, rule, ordinance or regulation applicable to the Company, except for such violation which would not result, either individually or in the aggregate, in any Material Adverse Effect. 2.09 TAXES. The Company has accurately prepared and timely filed all federal, state, local, foreign and other tax returns for income, gross receipts, sales, use and other taxes and custom duties ("TAXES") required by law to be filed by it, has paid all taxes owed by the Company (whether or not shown on any tax return), except for assessments, the amount or validity of which currently is being contested in good faith by appropriate proceedings and with respect to which adequate reserves in accordance with GAAP have been provided on the books Page 3 of 24 of the Company. There is no dispute or claim concerning any tax liability of the Company either (a) claimed or raised by any authority in writing or (b) as to which the Company has knowledge based upon personal contact with any agency of such authority. 2.10 ACTIONS PENDING. There is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company which questions the validity of this Agreement or the transactions contemplated hereby, or any action taken or to be taken pursuant hereto. There is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened, against or involving the Company or any of its respective properties or assets and which, if adversely determined, will result in a Material Adverse Effect. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any subsidiary which will result in a Material Adverse Effect. 2.11 GOVERNMENTAL CONSENTS. Assuming the truth and accuracy of the Investor's representations set forth in Article III of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for those required under applicable state securities laws. 2.12 OFFERING. Assuming the truth and accuracy of the Investor's representations set forth in Article III of this Agreement, the offer, sale and issuance of the Shares as contemplated by this Agreement is exempt from the registration requirements of the Securities Act (as defined in Article III, subsection (a) of this Agreement) and the state securities laws of any state of the United States, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption. 2.13 PERMITS. The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which would not have a Material Adverse Effect. The Company is not in default under of such franchises, permits, licenses or other similar authority, except where such default would not have a Material Adverse Effect. 2.14 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have material obligation or liability (whether accrued, absolute, contingent, unliquidated or otherwise, either known to the Company or which, after diligent investigation and inquiry, should have been discovered by the Company, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the Closing, or any action or inaction at or prior to the Closing, or state of facts existing at or prior to the Closing other than: (i) liabilities set forth on the Company's unaudited consolidated balance sheet as of December 31, 2001, and (ii) liabilities and obligations which have arisen after December 31, 2001 in the ordinary course of business. 2.15 BUSINESS CONDITIONS. Since December 31, 2001, there has not been any material adverse change in the business, financial condition, operations or results of operations of the Company. Page 4 of 24 2.16 BROKERS. No broker or finder has acted for the Company in connection with the transactions contemplated by this Agreement, and no broker or finder is entitled to any broker's or finder's fee or other commission in respect thereof based in any way on agreements, understandings or arrangements with the Company. 2.17 SUBSIDIARIES. All the representations and warranties made herein shall also be deemed to be made with regard to each of the Company's subsidiaries. 2.18 AUDITED FINANCIAL STATEMENTS. The audited financial statements of the Company for the fiscal year ended March 31, 2002 (the "2002 Audited Financial Statements") shall not differ in any material respect from the unaudited financial statements for such period provided to Investor by the Company. ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR 3.01 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor represents and warrants to the Company that: (a) The Investor acknowledges that the offer, issuance and sale to it of the Shares is intended to be exempt from the registration requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"), pursuant to the provisions of Regulation D and/or Regulation S promulgated by the Commission under the Securities Act. The Investor represents and warrants to the Company that it is not a "U.S. Person" as that term is defined in Rule 902(k) of Regulation S. (b) Without limiting or conditioning the representations and warranties of the Company contained in Article II above, the Investor acknowledges that during the course of the transaction and prior to this Agreement that it has received information relating to the Company and has been given a reasonable opportunity to ask questions of and receive answers from the Company and its representatives concerning the Company. The Investor acknowledges that the Company's representatives have answered all inquiries made on behalf of the Investor to the satisfaction of the person or persons making such inquiry. (c) The Investor has had the opportunity to employ the services of an investment advisor, attorney or accountant in connection with making the investment contemplated by this Agreement, has read and understands all of the documents furnished or made available by the Company to the Investor, has evaluated the merits and risks of such an investment, and recognizes the highly speculative nature of this investment. Investor can bear the risk of the total loss of the investment made hereby. Page 5 of 24 (d) The Investor understands that the offering of Shares has not been reviewed by the Commission and no finding or determination as to the fairness of this investment has been made by the Commission. It is the Investor's present intention that the Shares being purchased by the Investor are being acquired for the Investor's own account and not with a present view to or for sale in connection with any distribution thereof. (e) No Person has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or valid claim against or upon the Investor for any commission, fee or other compensation as a finder or broker because of any act or omission of the Investor or any agent for the Investor. (f) The Investor understands that (i) the Shares currently have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act, (ii) the Shares must be held until such time as they are registered under the Securities Act pursuant to Article IV below or exempt from such registration, and (iii) the Company will make a notation on its transfer books to such effect. (g) The Investor has full corporate or other power and authority to enter into and to perform this Agreement in accordance with its terms. (h) The execution of, and performance of the transactions contemplated by, this Agreement is not in conflict with or will not result in any material breach of any terms, conditions or provisions of, or constitute a material default under, its corporate charter, limited partnership agreement, or other organizational document, as applicable, or any indenture, lease, agreement, order, judgment or other instrument to which the Investor is a party or by which it is bound. (i) The Investor acknowledges that the Company is a reporting company under the Exchange Act and is subject to the disclosure requirements of Regulation FD under the Exchange Act. The Investor acknowledges that certain of the information furnished by the Company to the Investor or its advisers in connection with this Agreement, is confidential and nonpublic and agrees that all such information shall be kept in confidence by the Investor and neither used by the Investor for the Investor's personal benefit (other than in connection with this Agreement), nor disclosed to any third party for any reason (other than to its agents, advisors, attorneys, consultants or other advisors in connection with the transactions contemplated by this Agreement); provided, however, that this obligation shall not apply to any such information that (i) is part of the public knowledge or literature and readily accessible at the date hereof, (ii) becomes a part of the public knowledge or literature and readily accessible by publication (except as a result of a breach of this provision) or (iii) is Page 6 of 24 received from third parties (except third parties who disclose such information in violation of any confidentiality agreements or obligations, including, without limitation, any Agreement entered into with the Company). (j) The investor acknowledges and agrees that, pursuant to the provisions of Regulation S, the Shares cannot be sold, assigned, transferred, conveyed, pledged or otherwise disposed of to any U.S. Person or within the United States of America or its territories without complying with the applicable distribution compliance period as set forth in Rule 903 of Regulation S. The Investor agrees not to engage in hedging transactions with regard to the Shares unless in compliance with the Securities Act. (k) The Investor acknowledges and agrees that the certificates representing the Shares shall bear the following legend (unless subsequently registered under the Act): "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TOT HESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE CORPORATION, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE CORPORATION, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAWS." The Investor also acknowledges that the Company may place a stop transfer order against transfer of any of the Shares, if necessary in the Company's reasonable judgment, in order to assure compliance by the Investor with the terms of this Agreement. 3.02 COVENANTS OF THE INVESTOR. In order to enable the Company to conduct the registration in compliance with applicable securities laws, the Investor hereby agrees as follows: (a) The Investor shall provide all information or other materials and deliver such documents and undertakings and take all such other actions as may be reasonably required by the Company in order to permit the Company to comply with applicable requirements of the Securities Act and the Page 7 of 24 Commission and to comply with the requirements of applicable state securities laws and administrative agencies. (b) All information provided by the Investor to the Company in connection with the registration statement shall be true and correct in all material respects as of the date provided to the Company and will not omit any material fact necessary to make such information not misleading. The Investor shall notify the Company in writing immediately of any changes in any information provided to the Company in connection with the registration statement at all times during which the registration statement remains effective and the Investor has any shares included therein. 3.03 The Investor further covenants and agrees with the Company that it shall not sell or otherwise dispose of any of the Shares (which term, for purposes of this Section 3.03, shall include those shares issued to the Investor, if any, pursuant to Sections 4.06 and 4.07, below), regardless of when registered, for a period of 12 months from the Closing Date. ARTICLE IV COVENANTS OF THE COMPANY The Company covenants and agrees with the Investor as follows: 4.01. REGISTRATION AND LISTING. (a) The Company shall prepare and file with the Commission a registration statement with respect to all of the Shares and all of the shares issued to the Investor, if any, pursuant to Sections 4.06 or 4.07, below (collectively, the "Registrable Shares") and shall use commercially reasonable efforts to cause such registration statement to become effective no later than June 30, 2003. The Company shall keep such registration statement effective until the earlier to occur of (i) the expiration of the time period referred to in Rule 144(k) under the Securities Act with respect to all beneficial holders of the Registrable Shares other than affiliates of the Company and (ii) such time as all of the Registrable Shares have been sold or are otherwise freely tradable without registration under the Securities Act. (b) The Company shall prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all the Registrable Shares. (c) The Company shall furnish to the Investor such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as it may Page 8 of 24 reasonably request in order to facilitate the disposition of the Registrable Shares. (d) The Company shall use commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities laws of such jurisdictions in the United States as shall be reasonably requested by the Investor; PROVIDED THAT the Company shall not be required in connection therewith or as a condition thereto to qualify to do business, to subject itself to taxation in any such jurisdiction or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act. (e) In the event of any underwritten public offering, the Company shall enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. If the underwriter in such offering requests the delivery of a "comfort letter" from the Company's independent auditors or the delivery of an opinion of counsel to the Company, the costs of such comfort letter or opinion shall be borne by the Investor. The Investor shall also enter into and perform its obligations under such an agreement. (f) The Company shall notify the Investor when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (g) The Company shall use commercially reasonable efforts to cause all Registrable Shares to be listed on the American Stock Exchange not later than June 30, 2003. (h) The Company shall perform all the necessary actions to register or qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions within the United States and Puerto Rico as the holder shall reasonably request, and perform all the necessary actions as may be required in such jurisdictions; provided, however, that the Company shall not be obligated to file any general consent to service of process or qualify as a foreign corporation in any jurisdiction. 4.02 EXPENSES. Except as set forth in Section 4.01(e), all expenses incurred in complying with the foregoing, including, without limitation, all registration, filing and qualification fees (including all expenses incident to filing with the American Stock Exchange), printing and accounting expenses, fees and disbursements of counsel for the Company, expenses Page 9 of 24 of any special audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws or any jurisdictions, other than underwriting fees or commissions relating to the Registrable Shares, shall be paid by the Company. 4.03 INDEMNIFICATION WITH RESPECT TO THE REGISTRABLE SHARES. (a) To the extent permitted by law, the Company will indemnify and hold harmless the Investor, any underwriter (as defined in the Securities Act) for the Investor and each other person, if any, who controls the Investor or such underwriter, within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Securities Act, or the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "VIOLATION"): (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement under which the Registrable Shares were registered under the Securities Act, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, or the Exchange Act or any state securities law; and the Company will pay to the Investor and each such underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Subsection 4.03(a) shall not apply to (x) amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed), or (y) any such loss, claim, damage, liability or action in respect of the Investor or an underwriter or controlling person to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by the Investor or such underwriter or controlling person. (b) To the extent permitted by law, the Investor will indemnify and hold harmless the Company, each of its directors, each of its officers who shall sign the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, any underwriter, any other person selling securities in such registration statement and any controlling person of any such underwriter or other person, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, Page 10 of 24 under the Securities Act, or the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with information furnished by the Investor for use in preparation of the registration statement, as approved by the Investor; and the Investor will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Subsection 4.03(b), in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Subsection 4.03(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Investor (which consent shall not be unreasonably withheld or delayed); provided, that, in no event shall any indemnity under this Subsection 4.03(b) exceed the net proceeds from the offering received by such Investor. (c) Promptly after receipt by an indemnified party under this Section 4.03 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 4.03, deliver to the indemnifying party a written notice of the commencement thereof. The indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate (in the written opinion of counsel for the indemnified party which counsel shall be reasonably acceptable to the Company) due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 4.03, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 4.03. (d) If the indemnification provided for in this Section 4.03 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or Page 11 of 24 omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. 4.04 REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Commission Rule 144, at all times; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to the Investor, so long as the Investor owns any Registrable Shares, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Commission Rule 144, the Securities Act and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing the Investor of any rule or regulation of the Commission which permits the selling of any such securities without registration or pursuant to such form. 4.05 UNAUDITED AND AUDITED FINANCIAL STATEMENTS. The Company shall deliver to the Investor copies of the unaudited financial statements of the Company for the fiscal year ended March 31, 2002, but in no event later than three days prior to the Closing. The Company shall deliver to the Investor copies of the audited financial statements of the Company for such fiscal year as soon as they may lawfully be disclosed to the Investor. 4.06 COMPENSATION TO INVESTOR UPON THE OCCURRENCE OF ANY OF THE FOLLOWING EVENTS. If on October 31, 2002 (the "CALCULATION DATE"): (i) the Company has "materially" failed to meet the cash flow projections attached hereto as Exhibit D; or (ii) As a result of acts or omissions attributable to the Company, the Investor has failed to begin operating an interim network access point in Madrid, then Page 12 of 24 at the request of either the Investor or the Company, the Company shall issue to the Investor such number of additional shares of Common Stock (the "Additional Shares") as determined in this Section 4.06. The number of Additional Shares to be issued shall be calculated as follows: (1) the quotient of (A) the aggregate number of shares theretofore issued or required to be issued to the Investor pursuant to this Agreement, divided by (B) the Section 4.06 Adjustment Price (defined below), less (2) the aggregate number of shares theretofore issued or required to be issued to the Investor pursuant to this Agreement. The "SECTION 4.06 ADJUSTMENT PRICE" shall be the greater of U.S. $0.50 or the 10/31 Closing Price. The Company covenants and agrees that (i) all shares issuable pursuant to this Section shall be, when issued, free of preemptive rights, validly authorized and issued, fully paid and non-assessable and free from all taxes; and (ii) during the time period within which the Additional Shares may be issued, the Company will, at all times, have authorized and reserved for the purpose of issue a sufficient number of shares of Common Stock. 4.07 NO DILUTION. Except for shares of Common Stock issuable upon the exercise of options, puts, convertible debentures and warrants outstanding on the date of this Agreement (but excluding the option heretofore granted by the Company to any financial institution), the Company covenants and agrees that if, from date hereof and continuing until the first anniversary of the Closing, it issues any shares of its Common Stock for a purchase price less than the "Anti-Dilution Price", the Company shall issue to the Investor such number of additional shares of Common Stock as shall be determined by dividing 5,000,000 by the Anti-Dilution Price, and subtracting from the quotient thereof the number of shares previously issued to the Investor in respect of this Agreement. For purposes hereof, the "Anti-Dilution Price" shall equal (a) U.S. $1.00 per share; (b) the Section 4.06 Adjustment Price (if and only if there shall have been an adjustment pursuant to Section 4.06); or (c) any higher Anti-Dilution Price previously established under this Section 4.07. The Company covenants and agrees that (i) all shares issuable pursuant to this Section shall be, when issued, free of preemptive rights, validly authorized and issued, fully paid and non-assessable and free from all taxes; and (ii) during the time period within which such shares may be issued, the Company will, at all times, have authorized and reserved for the purpose of issue a sufficient number of shares of Common Stock. 4.08 COMPANY INVESTMENT IN INVESTOR. Concurrently with the Closing, the Company shall have consummated the purchase of at least ten percent (10%) of the outstanding equity capital of the Investor. 4.09 THE COMPANY'S GLOBAL STRATEGY. The Company covenants and agrees to use its best commercially reasonable efforts to incorporate the Investor's Madrid network access point into its global network access point strategy. 4.10 SURVIVAL. The obligations of the Company and the Investor under this Article IV shall survive the Closing and the completion of any offering of the Shares in a registration statement under this Article IV, and otherwise. Page 13 of 24 ARTICLE V CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING The obligations of the Investor under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions, the waiver of which shall not be effective against the Investor if it does not consent in writing thereto: 5.01 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company contained in Article II shall be true on and as of the Closing with the same effect as those such representations and warranties have been made on and as of the date of Closing. 5.02 PERFORMANCE. The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied by it on or before the Closing. 5.03 QUALIFICATIONS. Such authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be duly obtained and effective as of the Closing. 5.04 CORPORATE PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings taken or required to be taken in connection with the transactions contemplated at the Closing and all documents instant thereto shall be reasonably satisfactory in form and substance to the Investor, and the Investor shall have received all such counterpart original and certified or other copies of such documents as it reasonably may request. 5.05 NO PROCEEDINGS. There shall not have been commenced or threatened against the Investor, or against any person affiliated with the Investor, any proceeding involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated in this Agreement. 5.06 OPINION AND LETTER OF COUNSEL. The Investor shall have received the opinion of (i) Greenberg Traurig, P.A., counsel to the Company, dated the date of the Closing, substantially in the form set forth in Exhibit A hereto and (ii) Jose E. Gonzalez, General Counsel to the Company, dated the date of the Closing, substantially in the form set forth in Exhibit B hereto. 5.07 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company's Certificate of Incorporation and Bylaws are in the form attached hereto as Exhibit C and shall not have been amended or modified. 5.08 SECURITIES LAW COMPLIANCE. The Company shall have made all filings, subject to applicable extensions, required to be made on or prior to the Closing under all applicable U.S. federal and state securities laws necessary to consummate the issuance of the Shares pursuant to this Agreement in compliance with such laws. Nothing contained herein shall be deemed to require the Company to make any such filings prior to the due date therefore. Page 14 of 24 5.09 CLOSING DOCUMENTS. The Company shall have delivered to the Investor all of the following documents: (a) an Officer's Certificate dated the date of the Closing, stating that the conditions specified in this Article V have been fully satisfied; (b) a copy of the resolutions duly adopted by the Company's Board of Directors and certified by the Secretary of the Company authorizing the execution, delivery and performance of this Agreement, the issuance and sale of the Shares, and the consummation of all other transactions contemplated by this Agreement; and a Certificate of Good Standing in effect at the Closing and certified by the Secretary of State of the State of Delaware. 5.10 COMPANY INVESTMENT IN INVESTOR. The Company shall, concurrently to the Closing , have consummated the purchase of at least ten percent (10%) of the outstanding equity capital of the Investor pursuant to Section 4.08, above, and shall have made full payment of the purchase price paid by Centro de Transportes Coslada to it. 5.11 LICENSE. The Company and the Investor shall have entered into a license agreement in form and substance satisfactory to the Investor and the Company. Pursuant to such license, the Company shall have granted to the Investor, INTER ALIA: (i) an exclusive and non-transferable, royalty-free, fully paid right and license to use in Spain the Company's trademark "Nap de las Americas" for a period of twenty (20) years, commencing on the Closing Date; and (ii) an exclusive and non-transferable, royalty-free, fully paid right and license to use in Spain the Company's technical and other know-how with respect to the formation and operation of network access points for a period of fifteen (15) years, commencing on the Closing Date. Page 15 of 24 ARTICLE VI MUTUAL COVENANTS The Company will furnish to the Investor and the Investor will furnish to the Company, such information and assistance as the other may reasonably request in connection with the preparation of any regulatory filings or submissions. The Company will provide the Investor and the Investor will provide the Company, with copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between such party or any of its representatives, on the one hand, and any governmental agency or authority or member of their respective staffs, on the other hand, with respect to this Agreement and the transactions contemplated hereby. ARTICLE VII INDEMNIFICATION The Company agrees to indemnify and hold harmless the Investor and its directors, officers, affiliates, agents, successors and assigns from and against any and all actual losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorney's fees, charges and disbursements but excluding consequential damages) incurred as a result of any misrepresentation or breach of the warranties and covenants made by the Company herein, except where such misrepresentation or breach is caused by the Investor. The Investor agrees to indemnify and hold harmless the Company and its directors, officers, affiliates, agents, successors and assigns from and against any and all actual losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys fees, charges and disbursements but excluding consequential damages) incurred by the Company as result of any breach of the representations and covenants made by the Investor herein, except where such misrepresentation or breach is caused by the Company. ARTICLE VIII MISCELLANEOUS 8.01 FURTHER ASSURANCES. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, including, without limitation, using all reasonable efforts to obtain all necessary waivers, consents and approvals and to effect all necessary registrations and filings. 8.02 EXPENSES. Except as otherwise provided herein, each party hereto will pay its own expenses in connection with the transactions contemplated hereby, whether or not such transactions shall be consummated. Page 16 of 24 8.03 SURVIVAL OF AGREEMENTS. All representations and warranties made herein or in any agreement, certificate or instrument delivered to the Investor pursuant to or in connection with this Agreement shall survive the execution and delivery of this Agreement, the issuance, sale and delivery of the Shares. 8.04 BROKERAGE. Each party hereto will indemnify and hold harmless the others against and in respect of any claim for brokerage or other commissions relative to this Agreement or to the transactions contemplated hereby, based in any way on agreements, arrangements or understandings made or claimed to have been made by such party with any third party. 8.05 PARTIES IN INTEREST. All representations, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. Without limiting the generality of the foregoing, all representations, covenants and agreements benefiting the Investor, unless otherwise herein or therein provided, shall inure to the benefit of any and all subsequent holders from time to time of Shares and all such holders shall be bound by all of the obligations of the Investor hereunder. 8.06 NOTICES. All notices, requests, consents, demands, and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the date of transmittal of services via telecopy to the party to whom notice is to be given (with a confirming copy delivered within 24 hours thereafter), (iii) on the third day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, or (iv) on the date of delivery if sent via a nationally recognized courier providing a receipt for delivery and properly addressed as set forth on signature page hereto. Any notice or other communication between the parties hereto shall be sent to the Company, addressed to it at 2601 S. Bayshore Drive, Miami, Florida 33133, Attention: General Counsel. Any party may change its address for purposes of this paragraph by giving notice of the new address to each of the other parties in the manner set forth above. 8.07 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Florida, United States of America, without giving effect to any choice of law or conflicting provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the laws of any jurisdiction other than the State of Florida to be applied. 8.08 EXCLUSIVE JURISDICTION AND CONSENT TO SERVICE OF PROCESS. The parties agree that any legal action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby shall be instituted in a federal court sitting in Miami-Dade County, Florida which shall be the exclusive jurisdiction and venue of said legal proceedings and each party hereto waives any objection which such party may now or hereafter have to the lay of venue of any such action, suit or proceeding, and irrevocably submits to the jurisdiction of any such court in any such action, suit or proceeding. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against such party (or the subsidiary of such party) when transmitted in accordance with Section 8.06. Nothing contained Page 17 of 24 herein shall be deemed to affect the right of any party hereto to serve process in any manner permitted by law. 8.09 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided in this Agreement, any and all remedies expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. The parties accordingly agree that they shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court having jurisdiction, this being in addition to any other remedy to that they are entitled at law or in equity. 8.10 ENTIRE AGREEMENT. This Agreement, including the exhibits, constitutes the sole and entire agreement of the parties with respect to the subject matter hereof. All exhibits and schedules hereto are hereby incorporated herein by reference. 8.11 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.12 AMENDMENTS AND WAIVERS. This Agreement may be amended or modified, and provisions hereof may be waived, with the written consent of the Company and the holders of at least a majority of the outstanding Shares. Any such amendment, modification or waiver shall be binding on all parties, including those not signing such amendment, modification or waiver, and such consent may be given or withheld for any reason or for no reason. 8.13 SEVERABILITY. If any provision of this Agreement shall be declared void or unenforceable by any judicial or administrative authority, the validity of any other provision and of the entire Agreement shall not be affected thereby. 8.14 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting any term or provision of this Agreement. 8.15 DEFINITION OF "PERSON." As used in this Agreement, the term "Person" shall mean an individual, corporation, trust, partnership, limited liability company or partnership, joint venture, unincorporated organization, governmental authority or any agency or political subdivision thereof, or other entity. Page 18 of 24 IN WITNESS WHEREOF, the Company and the Investor have executed this Stock Purchase Agreement as of the date first above written. THE COMPANY: THE INVESTOR: TERREMARK WORLDWIDE, INC. NAP DE LAS AMERICAS - MADRID, S.A. By: /s/ Guillermo Amore By: /s/ Jose Maria Isardo - -------------------------------- ------------------------------------ Name: Guillermo Amore Name: Jose Maria Isardo Title: Director Title: President Address: 2601 S. Bayshore Drive Address: Camara Oficial de Comercio Miami, Florida 33133 e Industria deMadrid, Plaza de la Independencia, n(0)1 Madrid, Spain Page 19 of 24 EXHIBIT A LEGAL OPINIONS OF GREENBERG TRAURIG 1. The Shares issued under the Agreement have been duly authorized by all necessary corporate actions and, when paid for in accordance with the terms of the Agreement, the Shares shall be validly issued and outstanding, fully paid and nonassessable, free and clear of all liens, charges, and encumbrances of any nature whatsoever, including any preferential rights of other shareholders of any nature or third parties and the Investor shall be entitled to all rights according to a holder of capital stock of the same class in the Company. 2. All the rights and obligations of the holders of common stock of the Company in their capacity as such are included in the Certificate of Incorporation and the By-laws of the Company and there are no other rights, obligations or undertakings of any kind including any rights regarding the Shares. The Company is not, and the execution, delivery and performance of the Agreement and the consummation of the transactions contemplated thereby will not conflict with or result, with or without the passage of time and the giving of notice, in a breach of the Certificate of Incorporation or Bylaws of the Company, or any material agreement, indenture or other instrument, judgment, order, writ or decree to which the Company is a party or by which it is bound. 3. While we have not verified, and are not passing upon and do not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Reports, no facts have come to our attention which lead us to believe that any of the Reports filed on or after April 28, 2000 contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made herein or therein, not misleading. 4. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with full power and authority (corporate and other) to own, lease and operate its properties and assets and to conduct its business as it is now being conducted and as it is proposed to be conducted. 5. The authorized capital stock of the Company consists of (i) 300,000,000 shares of common stock, par value U.S. $0.001 per share, of which 199,482,250 shares are issued and outstanding and (ii) 10,000,000 shares of preferred stock, par value U.S. $0.001 per share, of which 20 shares are designated as Series G convertible preferred stock and 5,882 shares are designated as Series H convertible preferred stock. The Company has all requisite power and authority to issue, sell and deliver the Shares in accordance with and upon the terms and conditions set forth in the Agreement, and all corporate action required to be taken by the Company for the due and proper authorization, issuance, sale and delivery of the Shares has been validly and sufficiently taken. The Company has not violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its capital stock. 6. All corporate action on the part of the Company, its officers, directors and stockholders, necessary for the authorization, execution and delivery of the Agreement, the performance of all obligations of the Company thereunder, and the authorization, issuance, sale and delivery of the Shares have been taken, and the Agreement constitutes the legal, valid and Page 20 of 24 binding agreement of the Company enforceable against the Company in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). 7. Assuming the truth and accuracy of the Investor's representations set forth in Article III of the Agreement, the Company has complied with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Shares hereunder, and no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for those required under applicable state securities laws. 8. Assuming the truth and accuracy of the Investor's representations set forth in Article III of the Agreement, the offer, sale and issuance of the Shares as contemplated by the Agreement is exempt from the registration requirements of the Securities Act and the state securities laws of any state of the United States. Page 21 of 24 EXHIBIT B LEGAL OPINIONS OF COMPANY'S GENERAL COUNSEL 1. The Company has duly and timely or under applicable extensions, filed with the Commission all Reports required to be filed by it by the Exchange Act. 2. The Company is duly incorporated and qualified to do business as a foreign corporation and is in good standing in each jurisdiction of the United States, or any other country, state province, or political subdivision in which the character of the business conducted by it or the nature of the properties owned or leased by it makes such qualification necessary for the conduct of its business, except where the failure to be so qualified would not have a material adverse effect on the assets, condition, affairs or prospects of the Company, financially or otherwise (a "Material Adverse Effect"). 3. As of May 31, 2002, 20 shares of Series G convertible preferred stock were issued and outstanding and convertible into 1,675,555 shares of common stock, and 294 shares of Series H convertible preferred stock were issued and outstanding and convertible into 294,000 shares of common stock. As of May 31, 2002, there were outstanding options, warrants and convertible debentures (of which U.S. $30,655,000.00 were outstanding) currently exercisable for or convertible into a total of 42,936,151 shares of common stock. 4. The Company is not, and to my knowledge will not be at Closing, in violation or default of any order, writ or decree to which it is a party or by which it is bound, or of any provision, to my knowledge, of any federal or state statute, rule, ordinance or regulation applicable to the Company, except for such violation which would not result, either individually or in the aggregate, in a Material Adverse Effect . 5. There is no action, suit, claim or proceeding pending or, to my knowledge, threatened against, or to my knowledge, any investigation of the Company which questions the validity of this Agreement or the transactions contemplated hereby, or any action taken or to be taken pursuant hereto. There is no action, suit, claim, investigation or proceeding pending or, to my knowledge, threatened, against or involving, or to my knowledge, any investigation of the Company or any of its respective properties or assets and which, if adversely determined, will result in a Material Adverse Effect. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any subsidiary which will result in a Material Adverse Effect. 6. To my knowledge, the Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which would not have a material adverse effect. To my knowledge, the Company is not in default under of such franchises, permits, licenses or other similar authority, except where such default would not have a Material Adverse Effect. Page 22 of 24 EXHIBIT C CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE COMPANY Page 23 of 24 EXHIBIT D CASH FLOW PLAN Page 24 of 24 EX-10.12 6 g77123kexv10w12.txt FORM OF PROMISSORY NOTE EXHIBIT 10.12 PROMISSORY NOTE $ (date) ------------ ----------------- FOR VALUE RECEIVED, the undersigned, Terremark Worldwide, Inc. (the "Maker") hereby promises to pay to the order of _________________ (the "Holder") the principal sum of _________________ ($__________), together with interest thereon at the rate of xxxxxxx percent (xx%) per annum computed on the balance of principal remaining from time to time unpaid from the date of disbursement, as follows: The outstanding principal balance, together with any accrued and unpaid interest thereon, shall be due, if not sooner paid on ________________ ("Maturity Date"). If the payment of the outstanding principal balance, together with any accrued and unpaid interest thereon, is not made on or before the Maturity Date, then such total shall thereafter, until paid, accrue and bear interest at the default interest rate of the highest rate then permitted by applicable law. Any provision contained in this Note to the contrary notwithstanding, Holder shall not be entitled to receive or collect, nor shall Maker be obligated to pay, interest on any of the indebtedness evidenced hereby in excess of the maximum rate of interest permitted by applicable law, and if any provision of this Note shall ever be construed or held to permit the collection or to require the payment of any amount of interest in excess of that permitted by applicable law, the provisions of this paragraph shall control and shall override any contrary or inconsistent provision herein. It is the intention of the parties to conform strictly to applicable usury laws, and to the extent the terms of this Note or any other such document are determined to be inconsistent with such usury laws, this Note shall be subject to reduction to the maximum rate of interest allowed under applicable usury laws. Holder shall be entitled to collect all costs of collection including attorneys' fees if Maker is in default. Maker shall have the right to prepay, at any time and from time to time, in any amount, the outstanding principal balance of this Note without premium or penalty. This Note shall be governed and construed under the laws of the State of Florida. Maker waives presentment for payment, protest and demand, and notice of protest, demand and dishonor. The sums due under this Note shall not be subject to offset, deduction or claims in the nature thereof which any maker, endorser or guarantor may have against the holder hereof; each such maker, endorser and guarantor hereby waives any such claim of offset, deduction or any claim in the nature thereof. The Holder shall have the right to assign this Note; provided, however, that the right to principal of, and stated interest of this Note is not negotiable by endorsement of the Holder or any assignee of the Holder unless such endorsement is accompanied by the following actions of the Borrower: (i) The Borrower shall maintain a registry of the ownership of this Note (the "Registry"). (ii) The Registry shall reflect the Holder as the original Holder of this Note, and shall reflect such subsequent transferee as the Borrower shall receive notice thereof, by delivery to it of a certified copy of the assignment of the Note duly executed by the then current Holder thereof. (iii) Notice of the assignment of this Note shall be furnished by the Holder (as reflected in the Registry) to the Borrower by certified or registered mail. THIS OBLIGATION IS REGISTERED AS TO BOTH PRINCIPAL AND ANY STATED INTEREST WITH THE MAKER. PRINCIPAL AND STATED INTEREST SHALL BE PAYABLE ONLY TO THE REGISTERED OWNER. THIS OBLIGATION WILL ONLY BE ISSUED TO THE PERSON NAMED AS THE PAYEE HEREIN AND THE TRANSFER OF THE OBLIGATION MAY BE EFFECTED ONLY BY THE SURRENDER OF THIS INSTRUMENT AND EITHER THE REISSUANCE BY THE MAKER OF THIS INSTRUMENT TO A NEW PAYEE OR THE ISSUANCE BY THE MAKER OF A NEW INSTRUMENT TO THE NEW PAYEE. THIS OBLIGATION CAN NOT BE CONVERTED INTO A FORM IN WHICH THE RIGHT TO THE PRINCIPAL OF OR STATED INTEREST ON THE OBLIGATION MAY BE AFFECTED BY PHYSICAL TRANSFER OF THE OBLIGATION. All notices and payments required or permitted hereunder shall be in writing and shall be either personally served or sent by registered or certified mail, return receipt requested, postage prepaid, as follows: Page 1 of 2 (a) If to Maker: Terremark Worldwide, Inc. 2601 South Bayshore Drive, 9th Floor Miami, Florida 33133 (b) If to Holder: ------------------------ ------------------------ ------------------------ All notices given in accordance with this paragraph shall be effective and deemed received upon receipt by the addressee. MAKER: ---------------------------------- (AUTHORIZED OFFICER: NAME & TITLE) EX-10.13 7 g77123kexv10w13.txt EMPLOYEEMENT AGREEMENT / JOSE SEGRERA EXHIBIT 10.13 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is made and entered into on this 8th day of September, 2001, effective as of the date set forth in paragraph 2.1 below, and is by and between Terremark Worldwide, Inc., a Delaware corporation (the "Company"), and Jose Segrera (hereinafter called the "Executive"). RECITALS A. The Executive possesses knowledge and skills which the Company believes will be of substantial benefit to its operations and success, and the Company desires to employ the Executive on the terms and conditions set forth below. B. The Executive is willing to make his services available to the Company on the terms and conditions set forth below. AGREEMENT NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties agree as follows: 1. Employment. 1.1 Employment and Term. The Company hereby agrees to employ the Executive and the Executive hereby agrees to serve the Company on the terms and conditions set forth herein. 1.2 Duties of Executive. During the Term of Employment under this Agreement, the Executive shall serve as the Chief Financial Officer of the Company, shall diligently perform all services as may be assigned to him by the Board (provided that, such services shall not materially differ from the services currently provided by the Executive), and shall exercise such power and authority as may from time to time be delegated to him by the Board. The Executive shall devote his full time and attention to the business and affairs of the Company, render such services to the best of his ability, and use his best efforts to promote the interests of the Company. It shall not be a violation of this Agreement for the Executive to (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, or (iii) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities to the Company in accordance with this Agreement. 2. Term. 2.1 Initial Term. The initial Term of Employment under this Agreement, and the employment of the Executive hereunder, shall commence on the date set forth above (the "Commencement Date") and shall expire on the date that is twelve months after the Commencement Date, unless sooner terminated in accordance with Section 5 hereof (the "Initial Term"). 2.2 Renewal Terms. At the end of the Initial Term, the Term of Employment automatically shall renew for successive one year terms (subject to earlier termination as provided in Section 5 hereof), unless the Company or the Executive delivers written notice to the other at least one month prior to the Expiration Date of its or his election not to renew the Term of Employment. 2.3 Term of Employment and Expiration Date. The period during which the Executive shall be employed by the Company pursuant to the terms of this Agreement is sometimes referred to in this Agreement as the "Term of Employment", and the date on which the Term of Employment shall expire (including the date on which any renewal term shall expire), is sometimes referred to in this Agreement as the "Expiration Date". 3. Compensation. 3.1 Base Salary. The Executive shall receive a base salary at the annual rate of $150,000.00 (the "Base Salary") during the Term of Employment, with such Base Salary payable in installments consistent with the Company's normal payroll schedule, subject to applicable withholding and other taxes. The Base Salary shall be reviewed, at least annually, for merit increases and may, by action and in the sole discretion of the Board, be increased at any time or from time to time. 3.2 Bonuses. During the Term of Employment, the Executive shall be eligible to receive bonuses in such amounts and at such times as the Board shall determine in its sole discretion. 4. Expense Reimbursement and Other Benefits. 4.1 Reimbursement of Expenses. Upon the submission of proper substantiation by the Executive, and subject to such rules and guidelines as the Company may from time to time adopt, the Company shall reimburse the Executive for all reasonable expenses actually paid or incurred by the Executive during the Term of Employment in the course of and pursuant to the business of the Company. The Executive shall account to the Company in writing for all expenses for which reimbursement is sought and shall supply to the Company copies of all relevant invoices, receipts or other evidence reasonably requested by the Company. 4.2 Compensation/Benefit Programs. During the term of Employment, the Executive shall be entitled to participate in all medical, dental, hospitalization, accidental death and dismemberment, disability, travel and life insurance plans, and any and all other plans as are presently and hereinafter offered by the Company to its executives, including savings, pension, profit-sharing and deferred compensation plans, subject to the general eligibility and participation provisions set forth in such plans. 4.3 Working Facilities. During the Term of Employment, the Company shall furnish the Executive with an office, secretarial help and such other facilities and services suitable to his/her position and adequate for the performance of his/her duties hereunder. 4.4 Stock Options. During the Term of Employment, the Executive shall be eligible to be granted options (the "Stock Options") to purchase common stock (the "Common Stock") of the Company under (and therefore subject to all terms and conditions of) the Company's 2000 Stock Option Plan, as amended, and any successor plan thereto (the "Stock Option Plan") and all rules of regulation of the Securities and Exchange Commission applicable to stock option plans then in effect. The number of Stock Options and terms and conditions of the Stock Options shall be determined by the Committee appointed pursuant to the Stock Option Plan, or by the Board of Directors of the Company, in its sole discretion and pursuant to the Stock Option Plan. Notwithstanding the forgoing, the Company agrees to request its Board of Directors to issue to the Executive 100,000 options for TWW common stock with a -2- market strike price, vesting 1/3, 1/3, 1/3 after one year, two years and three years, respectively. If the unlikely event the Board refuses to do so, the Executive may, at his option, immediately terminate this Agreement by written notice to the Company. 4.5 Other Benefits. The Executive shall be entitled to three weeks of vacation each calendar year during the Term of Employment, (subject to the general eligibility provisions set forth in Company's personnel policy), to be taken at such times as the Executive and the Company shall mutually determine and provided that no vacation time shall interfere with the duties required to be rendered by the Executive hereunder. Any vacation time not taken by Executive during any calendar year may not be carried forward into any succeeding calendar year. The Executive shall receive such additional benefits, if any, as the Board of the Company shall from time to time determine. 5. Termination. 5.1 Termination for Cause. The Company shall at all times have the right, upon written notice to the Executive, to terminate the Term of Employment, for Cause. For purposes of this Agreement, the term "Cause" shall mean (i) an action or omission of the Executive which constitutes a willful and material breach of, or failure or refusal (other than by reason of his disability) to perform his duties under, this Agreement which is not cured within fifteen (15) days after receipt by the Executive of written notice of same, (ii) fraud, embezzlement, misappropriation of funds or breach of trust in connection with his services hereunder, (iii) conviction of a felony or any other crime which involves dishonesty or a breach of trust, or (iv) gross negligence in connection with the performance of the Executive's duties hereunder, which is not cured within fifteen (15) days after written receipt by the Executive of written notice of same. Any termination for Cause shall be made in writing to the Executive, which notice shall set forth in detail all acts or omissions upon which the Company is relying for such termination. The Executive shall have the right to address the Board regarding the acts set forth in the notice of termination. Upon any termination pursuant to this Section 5.1, the Company shall only be obligated to pay to the Executive his Base Salary to the date of termination. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 4.1). 5.2 Disability. The Company shall at all times have the right, upon written notice to the Executive, to terminate the Term of Employment, if the Executive shall become entitled to benefits under the Company's group disability policy or any individual disability policy then in effect, or, if the Executive shall as the result of mental or physical incapacity, illness or disability, become unable to perform his obligations hereunder for a period of 90 days in any 12-month period. The Company shall have sole discretion based upon competent medical advice to determine whether the Executive continues to be disabled. Upon any termination pursuant to this Section 5.2, the Company shall (i) pay to the Executive any unpaid Base Salary through the effective date of termination specified in such notice, (ii) pay to the Executive a severance payment equal to one month of the Executive's Base Salary at the time of the termination of the Executive's employment with the Company. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however to the provisions of Section 4.1). 5.3 Death. Upon the death of the Executive during the Term of Employment, the Company shall pay to the estate of the deceased Executive any unpaid Base Salary through the Executive's date of death. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of the Executive's death, subject, however to the provisions of Section 4.1). -3- 5.4 Termination Without Cause. At any time the Company shall have the right to terminate the Term of Employment by written notice to the Executive. Upon any termination pursuant to this Section 5.4 (that is not a termination under any of Sections 5.1, 5.2, 5.3, 5.5 or 5.6), the Company shall (i) pay to the Executive any unpaid Base Salary through the effective date of termination specified in such notice, (ii) continue to pay the Executive's Base Salary for a period (the " Continuation Period") through the date on which the Term of Employment would have ended pursuant to Section 2 hereof in the absence of an earlier termination pursuant to this Section 5 but in no event for more than six (6) months from notice of termination hereunder, provided, however, Executive shall have been employed by Company for a period of at least ninety (90) days to be eligible for such payment, (iii) continue to provide the Executive with the benefits he/she was receiving under Sections 4.2 and 4.4 hereof (the "Benefits") through the end of the Continuation Period in the manner and at such times as the Incentive Compensation or Benefits otherwise would have been payable or provided to the Executive, provided, however, Executive shall have been employed by Company for a period of at least ninety (90) days to be eligible for such Benefits or payment of the cash value of such Benefits, as set forth below. In the event that the Company is unable to provide the Executive with any Benefits required hereunder by reason of the termination of the Executive's employment pursuant to this Section 5.4, then the Company shall pay the Executive cash equal to the value of the Benefit that otherwise would have accrued for the Executive's benefit under the plan, for the period during which such Benefits could not be provided under the plans. The Company's good faith determination of the amount that would have been contributed or the value of any Benefits that would have accrued under any plan shall be binding and conclusive on the Executive. For this purpose, the Company may use as the value of any Benefit the cost to the Company of providing that Benefit to the Executive. Further, the vesting of the Executive's Stock Options, if any, shall be subject to the terms of the Stock Option Plan. The Company shall have no further liability hereunder (other than for (x) reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 4.1, and (y) payment of compensation for unused vacation days that have accumulated during the calendar year in which such termination occurs). For all purposes under this Agreement, the failure by Company to offer to renew the Agreement following the expiration of the Initial Term or any Renewal Term on the same terms and conditions hereunder shall be treated as if the Company terminated this Agreement pursuant to this Section 5.4. 5.5 Termination by Executive. (a) The Executive shall at all times have the right, upon sixty (60) days written notice to the Company, to terminate the Term of Employment. (b) Upon termination of the Term of Employment pursuant to this Section 5.5 (that is not a termination under Section 5.6) by the Executive without Good Reason, the Company shall pay to the Executive any unpaid Base Salary through the effective date of termination specified in such notice. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 4.1). At the Company's sole option, upon receipt of notice from the Executive pursuant to this Section, the Company may immediately terminate the Term of Employment, in which case, in addition to the covenants set forth above, the Company shall pay the Executive 60 days of Base Salary. For all purposes under this Agreement, the failure by Executive to offer to renew the Agreement following the expiration of the Initial Term or any Renewal Term on the same terms and conditions hereunder shall be treated as if the Executive terminated this Agreement pursuant to this Section 5.5, except that the Executive shall not be entitled to any Base Salary in excess of that which is due through the last day of Executive's employment hereunder. -4- (c) Upon termination of the Term of Employment pursuant to this Section 5.5 (that is not a termination under Section 5.6) by the Executive for Good Reason, the Company shall pay to the Executive the same amounts that would have been payable by the Company to the Executive under Section 5.4 of this Agreement if the Term of Employment had been terminated by the Company without Cause. The Company shall have no further liability hereunder. (d) For purposes of this Agreement, "Good Reason" shall mean (i) the assignment to the Executive of any duties or responsibilities inconsistent in any respect with the Executive's position or a similar position in the Company or one of its subsidiaries, as contemplated by Section 1.2 of this Agreement, or any other action by the Company which results in a substantial and compelling diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Article 3 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location outside of the area for which Executive was originally hired to work except for travel reasonably required in the performance of the Executive's responsibilities. For purposes of this Section 5.5(d), any good faith determination of "Good Reason" made by the Board shall be conclusive. 5.6 Change in Control of the Company. (a) In the event that (i) a Change in Control (as defined in paragraph (b) of this Section 5.6) in the Company shall occur during the Term of Employment, and (ii) prior to the later of the Expiration Date or one year after the date of the Change in Control, either (x) the Term of Employment is terminated by the Company without Cause, pursuant to Section 5.4 hereof or (y) the Executive terminates the Term of Employment for Good Reason the Company shall (1) pay to the Executive any unpaid Base Salary through the effective date of termination, (2) pay to the Executive as a single lump sum payment, within 30 days of the termination of his employment hereunder, a lump sum payment equal to the sum of (x) two times the sum of Executive's annual Base Salary, Incentive Compensation, and the value of the annual fringe benefits (based upon their cost to the Company) required to be provided to the Executive under Sections 4.2 and 4.4 hereof, for the year immediately preceding the year in which his employment terminates, plus (y) the value of the portion of his benefits under any savings, pension, profit sharing or deferred compensation plans that are forfeited under those plans by reason of the termination of his employment hereunder. The Company shall have no further liability hereunder (other than for (1) reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 4.1, and (2) payment of compensation for unused vacation days that have accumulated during the calendar year in which such termination occurs). (b) For purposes of this Agreement, the term "Change in Control" shall mean: (i) Approval by the shareholders of the Company of (x) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation or other transaction do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, in substantially the -5- same proportions as their ownership immediately prior to such reorganization, merger, consolidation or other transaction, or (y) a liquidation or dissolution of the Company or (z) the sale of all or substantially all of the assets of the Company (unless such reorganization, merger, consolidation or other corporate transaction, liquidation, dissolution or sale is subsequently abandoned); (ii) the acquisition (other than from the Company) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act, of more than 30% of either the then outstanding shares of the Company's Common Stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors (hereinafter referred to as the ownership of a "Controlling Interest") excluding, for this purpose, any acquisitions by (1) the Company or its Subsidiaries, (2) any person, entity or "group" that as of the Commencement Date of this Agreement owns beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act) of a Controlling Interest or (3) any employee benefit plan of the Company or its Subsidiaries. (iii) The resignation of Manuel D. Medina as both Chairman and CEO of the Company, his death, or his absence from the day to day business affairs of the Company for more than 90 consecutive days due to disability or incapacity. 5.7 Resignation. Upon any notice or termination of employment pursuant to this Article 5, the Executive shall automatically and without further action be deemed to have resigned as an officer, and if he or she was then serving as a director of the Company, as a director, and if required by the Board, the Executive hereby agrees to immediately execute a resignation letter to the Board. 5.8 Survival. The provisions of this Article 5 shall survive the termination of this Agreement, as applicable. 6. Restrictive Covenants. 6.1 Non-competition. At all times while the Executive is employed by the Company and for a one year period after the termination of the Executive's employment with the Company for any reason (other than by the Company without Cause (as defined in Section 5.1 hereof) or by the Executive for Good Reason (as defined in Section 5.5(d) hereof)), the Executive shall not, directly or indirectly, engage in or have any interest in any sole proprietorship, partnership, corporation or business or any other person or entity (whether as an employee, officer, director, partner, agent, security holder, creditor, consultant or otherwise) that directly or indirectly (or through any affiliated entity) engages in competition with the Company (based on the business in which the Company was engaged or was actively planning on being engaged as of the date of termination of the Executive's employment and in the geographic areas in which the Company operated or was actively planning on operating as of date of termination of the Executive's employment); provided that such provision shall not apply to the Executive's ownership of: Common Stock of the Company or the acquisition by the Executive, solely as an investment, of securities of any issuer that is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and that are listed or admitted for trading on any United States national securities exchange or that are quoted on the National Association of Securities Dealers Automated Quotations System, or any similar system or automated dissemination of quotations of securities prices in common use, so long as the Executive does not control, acquire a controlling interest in or become a member of a group which exercises direct or indirect control or, more than five percent of any class of capital stock of such corporation. -6- 6.2 Nondisclosure. The Executive shall not at any time divulge, communicate, use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any Confidential Information (as hereinafter defined) pertaining to the business of the Company. Any Confidential Information or data now or hereafter acquired by the Executive with respect to the business of the Company (which shall include, but not be limited to, information concerning the Company's financial condition, prospects, technology, customers, suppliers, sources of leads and methods of doing business) shall be deemed a valuable, special and unique asset of the Company that is received by the Executive in confidence and as a fiduciary, and Executive shall remain a fiduciary to the Company with respect to all of such information. For purposes of this Agreement, "Confidential Information" means information disclosed to the Executive or known by the Executive as a consequence of or through his employment by the Company (including information conceived, originated, discovered or developed by the Executive) prior to or after the date hereof, and not generally known, about the Company or its business. Notwithstanding the foregoing, nothing herein shall be deemed to restrict the Executive from disclosing Confidential Information to the extent required by law. 6.3 Nonsolicitation of Employees and Clients. At all times while the Executive is employed by the Company and for a two (2) year period after the termination of the Executive's employment with the Company for any reason, the Executive shall not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity (a) employ or attempt to employ or enter into any contractual arrangement with any employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six months, and/or (b) call on or solicit any of the actual or targeted prospective clients of the Company on behalf of any person or entity in connection with any business competitive with the business of the Company, nor shall the Executive make known the names and addresses of such clients or any information relating in any manner to the Company's trade or business relationships with such customers, other than in connection with the performance of Executive's duties under this Agreement. 6.4 Ownership of Developments. All copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Executive during the course of performing work for the Company or its clients (collectively, the "Work Product") shall belong exclusively to the Company and shall, to the extent possible, be considered a work made by the Executive for hire for the Company within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made by the Executive for hire for the Company, the Executive agrees to assign, and automatically assign at the time of creation of the Work Product, without any requirement of further consideration, any right, title, or interest the Executive may have in such Work Product. Upon the request of the Company, the Executive shall take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment. 6.5 Books and Records. All books, records, and accounts relating in any manner to the customers or clients of the Company, whether prepared by the Executive or otherwise coming into the Executive's possession, shall be the exclusive property of the Company and shall be returned immediately to the Company on termination of the Executive's employment hereunder or on the Company's request at any time. 6.6 Definition of Company. Solely for purposes of this Article 6, the term "Company" also shall include any existing or future subsidiaries of the Company that are operating during the time periods described herein and any other entities that directly or indirectly, through one or -7- more intermediaries, control, are controlled by or are under common control with the Company during the periods described herein. 6.7 Acknowledgment by Executive. The Executive acknowledges and confirms that (a) the restrictive covenants contained in this Article 6 are reasonably necessary to protect the legitimate business interests of the Company, and (b) the restrictions contained in this Article 6 (including without limitation the length of the term of the provisions of this Article 6) are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind. The Executive further acknowledges and confirms that his full, uninhibited and faithful observance of each of the covenants contained in this Article 6 will not cause him any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained herein will not impair his ability to obtain employment commensurate with his abilities and on terms fully acceptable to him or otherwise to obtain income required for the comfortable support of him and his family and the satisfaction of the needs of his creditors. The Executive acknowledges and confirms that his special knowledge of the business of the Company is such as would cause the Company serious injury or loss if he were to use such ability and knowledge to the benefit of a competitor or were to compete with the Company in violation of the terms of this Article 6. The Executive further acknowledges that the restrictions contained in this Article 6 are intended to be, and shall be, for the benefit of and shall be enforceable by, the Company's successors and assigns. 6.8 Reformation by Court. In the event that a court of competent jurisdiction shall determine that any provision of this Article 6 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Article 6 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law. 6.9 Extension of Time. If the Executive shall be in violation of any provision of this Article 6, then each time limitation set forth in this Article 6 shall be extended for a period of time equal to the period of time during which such violation or violations occur. If the Company seeks injunctive relief from such violation in any court, then the covenants set forth in this Article 6 shall be extended for a period of time equal to the pendency of such proceeding including all appeals by the Executive. 6.10 Survival. The provisions of this Article 6 shall survive the termination of this Agreement, as applicable. 7. Injunction. It is recognized and hereby acknowledged by the parties hereto that a breach by the Executive of any of the covenants contained in Article 6 of this Agreement will cause irreparable harm and damage to the Company, the monetary amount of which may be virtually impossible to ascertain. As a result, the Executive recognizes and hereby acknowledges that the Company shall be entitled to an injunction from any court of competent jurisdiction enjoining and restraining any violation of any or all of the covenants contained in Article 6 of this Agreement by the Executive or any of his affiliates, associates, partners or agents, either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other remedies the Company may possess. 8. Assignment. Neither party shall have the right to assign or delegate his rights or obligations hereunder, or any portion thereof, to any other person. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. -8- 10. Section 162(m) Limits. Notwithstanding any other provision of this Agreement to the contrary, if and to the extent that any remuneration payable by the Company to the Executive for any year would exceed the maximum amount of remuneration that the Company may deduct for that year under Section 162(m) ("Section 162(m)") of the Internal Revenue Code of 1986, as amended (the "Code"), payment of the portion of the remuneration for that year that would not be so deductible under Section 162(m) shall, in the sole discretion of the Board, be deferred and become payable at such time or times as the Board determines that it first would be deductible by the Company under Section 162(m), with interest at the "short-term applicable rate" as such term is defined in Section 1274(d) of the Code. The limitation set forth under this Section 10 shall not apply with respect to any amounts payable to the Executive pursuant to Article 5 hereof. 11. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and, upon its effectiveness, shall supersede all prior agreements, understandings and arrangements, both oral and written, between the Executive and the Company (or any of its affiliates) with respect to such subject matter. This Agreement may not be modified in any way unless by a written instrument signed by both the Company and the Executive. 12. Notices: All notices required or permitted to be given hereunder shall be in writing and shall be personally delivered by courier, sent by registered or certified mail, return receipt requested or sent by confirmed facsimile transmission addressed as set forth herein. Notices personally delivered, sent by facsimile or sent by overnight courier shall be deemed given on the date of delivery and notices mailed in accordance with the foregoing shall be deemed given upon the earlier of receipt by the addressee, as evidenced by the return receipt thereof, or three (3) days after deposit in the U.S. mail. Notice shall be sent (i) if to the Company, addressed to Terremark Worldwide, Inc., 2601 S. Bayshore Drive, 9th Floor, Miami, Florida 33133, Attn: Brian K. Goodkind, Executive Vice-President and Chief Operating Officer, and (ii) if to the Executive, to his address as reflected on the payroll records of the Company, or to such other address as either party hereto may from time to time give notice of to the other. 13. Benefits; Binding Effect. This Agreement shall be for the benefit of and binding upon the parties hereto and their respective heirs, personal representatives, legal representatives, successors and, where applicable, assigns, including, without limitation, any successor to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise. 14. Severability. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law, and, in the event that any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall be declared invalid, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted. If such invalidity is caused by length of time or size of area, or both, the otherwise invalid provision will be considered to be reduced to a period or area which would cure such invalidity. 15. Waivers. The waiver by either party hereto of a breach or violation of any term or provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation. 16. Damages. Nothing contained herein shall be construed to prevent the Company or the Executive from seeking and recovering from the other damages sustained by either or both of them as a result of its or his breach of any term or provision of this Agreement. In the event that either party hereto -9- brings suit for the collection of any damages resulting from, or the injunction of any action constituting, a breach of any of the terms or provisions of this Agreement, then the party found to be at fault shall pay all reasonable court costs and attorneys' fees of the other. 17. Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 18. No Third Party Beneficiary. Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person other than the Company, the parties hereto and their respective heirs, personal representatives, legal representatives, successors and assigns, any rights or remedies under or by reason of this Agreement. 19. Indemnification. The indemnification obligations of the Company to Executive shall be in accordance with the Company's standard indemnity agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. COMPANY: Terremark Worldwide, Inc -------------------------------- By: /s/ Brian K. Goodkind ----------------------------- Name: Brian K. Goodkind Title: Executive Vice President EXECUTIVE: /s/ Jose Segrera -------------------------------- Name: Jose Segrera -10- EX-10.14 8 g77123kexv10w14.txt EMPLOYEEMENT AGREEMENT / JOSE GONZALEZ EXHIBIT 10.14 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is made and entered into on this 25th day of September, 2000, effective as of the date set forth in paragraph 2.1 below, and is by and between Terremark Worldwide, Inc., a Delaware corporation (the "Company"), and Jose E Gonzalez (hereinafter called the "Executive"). RECITALS A. The Executive possesses knowledge and skills which the Company believes will be of substantial benefit to its operations and success, and the Company desires to employ the Executive on the terms and conditions set forth below. B. The Executive is willing to make his services available to the Company on the terms and conditions set forth below. AGREEMENT NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties agree as follows: 1. Employment. 1.1 Employment and Term. The Company hereby agrees to employ the Executive and the Executive hereby agrees to serve the Company on the terms and conditions set forth herein. 1.2 Duties of Executive. During the Term of Employment under this Agreement, the Executive shall serve as the General Counsel of the Company, shall diligently perform all services as may be assigned to him by the Board (provided that, such services shall not materially differ from the services currently provided by the Executive), and shall exercise such power and authority as may from time to time be delegated to him by the Board. The Executive shall devote his full time and attention to the business and affairs of the Company, render such services to the best of his ability, and use his best efforts to promote the interests of the Company. It shall not be a violation of this Agreement for the Executive to (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, or (iii) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities to the Company in accordance with this Agreement. 2. Term. 2.1 Initial Term. The initial Term of Employment under this Agreement, and the employment of the Executive hereunder, shall commence on the date set forth above (the "Commencement Date") and shall expire on the date that is twelve months after the Commencement Date, unless sooner terminated in accordance with Section 5 hereof (the "Initial Term"). 2.2 Renewal Terms. At the end of the Initial Term, the Term of Employment automatically shall renew for successive one year terms (subject to earlier termination as provided in Section 5 hereof), unless the Company or the Executive delivers written notice to the other at least one month prior to the Expiration Date of its or his election not to renew the Term of Employment. 2.3 Term of Employment and Expiration Date. The period during which the Executive shall be employed by the Company pursuant to the terms of this Agreement is sometimes referred to in this Agreement as the "Term of Employment", and the date on which the Term of Employment shall expire (including the date on which any renewal term shall expire), is sometimes referred to in this Agreement as the "Expiration Date". 3. Compensation. 3.1 Base Salary. The Executive shall receive a base salary at the annual rate of $175,000 (the "Base Salary") during the Term of Employment, with such Base Salary payable in installments consistent with the Company's normal payroll schedule, subject to applicable withholding and other taxes. The Base Salary shall be reviewed, at least annually, for merit increases and may, by action and in the sole discretion of the Board, be increased at any time or from time to time. 3.2 Bonuses. During the Term of Employment, the Executive shall be eligible to receive bonuses in such amounts and at such times as the Board shall determine in its sole discretion. 4. Expense Reimbursement and Other Benefits. 4.1 Reimbursement of Expenses. Upon the submission of proper substantiation by the Executive, and subject to such rules and guidelines as the Company may from time to time adopt, the Company shall reimburse the Executive for all reasonable expenses actually paid or incurred by the Executive during the Term of Employment in the course of and pursuant to the business of the Company. The Executive shall account to the Company in writing for all expenses for which reimbursement is sought and shall supply to the Company copies of all relevant invoices, receipts or other evidence reasonably requested by the Company. 4.2 Compensation/Benefit Programs. During the term of Employment, the Executive shall be entitled to participate in all medical, dental, hospitalization, accidental death and dismemberment, disability, travel and life insurance plans, and any and all other plans as are presently and hereinafter offered by the Company to its executives, including savings, pension, profit-sharing and deferred compensation plans, subject to the general eligibility and participation provisions set forth in such plans. 4.3 Working Facilities. During the Term of Employment, the Company shall furnish the Executive with an office, secretarial help and such other facilities and services suitable to his/her position and adequate for the performance of his/her duties hereunder. 4.4 Stock Options. During the Term of Employment, the Executive shall be eligible to be granted options (the "Stock Options") to purchase common stock (the "Common Stock") of the Company under (and therefore subject to all terms and conditions of) the Company's 2000 Stock Option Plan, as amended, and any successor plan thereto (the "Stock Option Plan") and all rules of regulation of the Securities and Exchange Commission applicable to stock option plans then in effect. The number of Stock Options and terms and conditions of the Stock Options shall be determined by the Committee appointed pursuant to the Stock Option Plan, or by the Board of Directors of the Company, in its sole discretion and pursuant to the Stock Option Plan. Notwithstanding the forgoing, the Company agrees to request its Board of Directors to issue to the Executive 100,000 options for TWW common stock with a -2- market strike price, vesting 1/3, 1/3, 1/3 after one year, two years and three years, respectively. If the unlikely event the Board refuses to do so, the Executive may, at his option, immediately terminate this Agreement by written notice to the Company. 4.5 Other Benefits. The Executive shall be entitled to three weeks of vacation each calendar year during the Term of Employment, (subject to the general eligibility provisions set forth in Company's personnel policy), to be taken at such times as the Executive and the Company shall mutually determine and provided that no vacation time shall interfere with the duties required to be rendered by the Executive hereunder. Any vacation time not taken by Executive during any calendar year may not be carried forward into any succeeding calendar year. The Executive shall receive such additional benefits, if any, as the Board of the Company shall from time to time determine. 5. Termination. 5.1 Termination for Cause. The Company shall at all times have the right, upon written notice to the Executive, to terminate the Term of Employment, for Cause. For purposes of this Agreement, the term "Cause" shall mean (i) an action or omission of the Executive which constitutes a willful and material breach of, or failure or refusal (other than by reason of his disability) to perform his duties under, this Agreement which is not cured within fifteen (15) days after receipt by the Executive of written notice of same, (ii) fraud, embezzlement, misappropriation of funds or breach of trust in connection with his services hereunder, (iii) conviction of a felony or any other crime which involves dishonesty or a breach of trust, or (iv) gross negligence in connection with the performance of the Executive's duties hereunder, which is not cured within fifteen (15) days after written receipt by the Executive of written notice of same. Any termination for Cause shall be made in writing to the Executive, which notice shall set forth in detail all acts or omissions upon which the Company is relying for such termination. The Executive shall have the right to address the Board regarding the acts set forth in the notice of termination. Upon any termination pursuant to this Section 5.1, the Company shall only be obligated to pay to the Executive his Base Salary to the date of termination. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 4.1). 5.2 Disability. The Company shall at all times have the right, upon written notice to the Executive, to terminate the Term of Employment, if the Executive shall become entitled to benefits under the Company's group disability policy or any individual disability policy then in effect, or, if the Executive shall as the result of mental or physical incapacity, illness or disability, become unable to perform his obligations hereunder for a period of 90 days in any 12-month period. The Company shall have sole discretion based upon competent medical advice to determine whether the Executive continues to be disabled. Upon any termination pursuant to this Section 5.2, the Company shall (i) pay to the Executive any unpaid Base Salary through the effective date of termination specified in such notice, (ii) pay to the Executive a severance payment equal to one month of the Executive's Base Salary at the time of the termination of the Executive's employment with the Company. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however to the provisions of Section 4.1). 5.3 Death. Upon the death of the Executive during the Term of Employment, the Company shall pay to the estate of the deceased Executive any unpaid Base Salary through the Executive's date of death. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of the Executive's death, subject, however to the provisions of Section 4.1). -3- 5.4 Termination Without Cause. At any time the Company shall have the right to terminate the Term of Employment by written notice to the Executive. Upon any termination pursuant to this Section 5.4 (that is not a termination under any of Sections 5.1, 5.2, 5.3, 5.5 or 5.6), the Company shall (i) pay to the Executive any unpaid Base Salary through the effective date of termination specified in such notice, (ii) continue to pay the Executive's Base Salary for a period (the " Continuation Period") through the date on which the Term of Employment would have ended pursuant to Section 2 hereof in the absence of an earlier termination pursuant to this Section 5 but in no event for more than six (6) months from notice of termination hereunder, provided, however, Executive shall have been employed by Company for a period of at least ninety (90) days to be eligible for such payment, (iii) continue to provide the Executive with the benefits he/she was receiving under Sections 4.2 and 4.4 hereof (the "Benefits") through the end of the Continuation Period in the manner and at such times as the Incentive Compensation or Benefits otherwise would have been payable or provided to the Executive, provided, however, Executive shall have been employed by Company for a period of at least ninety (90) days to be eligible for such Benefits or payment of the cash value of such Benefits, as set forth below. In the event that the Company is unable to provide the Executive with any Benefits required hereunder by reason of the termination of the Executive's employment pursuant to this Section 5.4, then the Company shall pay the Executive cash equal to the value of the Benefit that otherwise would have accrued for the Executive's benefit under the plan, for the period during which such Benefits could not be provided under the plans. The Company's good faith determination of the amount that would have been contributed or the value of any Benefits that would have accrued under any plan shall be binding and conclusive on the Executive. For this purpose, the Company may use as the value of any Benefit the cost to the Company of providing that Benefit to the Executive. Further, the vesting of the Executive's Stock Options, if any, shall be subject to the terms of the Stock Option Plan. The Company shall have no further liability hereunder (other than for (x) reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 4.1, and (y) payment of compensation for unused vacation days that have accumulated during the calendar year in which such termination occurs). For all purposes under this Agreement, the failure by Company to offer to renew the Agreement following the expiration of the Initial Term or any Renewal Term on the same terms and conditions hereunder shall be treated as if the Company terminated this Agreement pursuant to this Section 5.4. 5.5 Termination by Executive. (a) The Executive shall at all times have the right, upon sixty (60) days written notice to the Company, to terminate the Term of Employment. (b) Upon termination of the Term of Employment pursuant to this Section 5.5 (that is not a termination under Section 5.6) by the Executive without Good Reason, the Company shall pay to the Executive any unpaid Base Salary through the effective date of termination specified in such notice. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 4.1). At the Company's sole option, upon receipt of notice from the Executive pursuant to this Section, the Company may immediately terminate the Term of Employment, in which case, in addition to the covenants set forth above, the Company shall pay the Executive 60 days of Base Salary. For all purposes under this Agreement, the failure by Executive to offer to renew the Agreement following the expiration of the Initial Term or any Renewal Term on the same terms and conditions hereunder shall be treated as if the Executive terminated this Agreement pursuant to this Section 5.5, except that the Executive shall not be entitled to any Base Salary in excess of that which is due through the last day of Executive's employment hereunder. -4- (c) Upon termination of the Term of Employment pursuant to this Section 5.5 (that is not a termination under Section 5.6) by the Executive for Good Reason, the Company shall pay to the Executive the same amounts that would have been payable by the Company to the Executive under Section 5.4 of this Agreement if the Term of Employment had been terminated by the Company without Cause. The Company shall have no further liability hereunder. (d) For purposes of this Agreement, "Good Reason" shall mean (i) the assignment to the Executive of any duties or responsibilities inconsistent in any respect with the Executive's position or a similar position in the Company or one of its subsidiaries, as contemplated by Section 1.2 of this Agreement, or any other action by the Company which results in a substantial and compelling diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Article 3 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location outside of the area for which Executive was originally hired to work except for travel reasonably required in the performance of the Executive's responsibilities. For purposes of this Section 5.5(d), any good faith determination of "Good Reason" made by the Board shall be conclusive. 5.6 Change in Control of the Company. (a) In the event that (i) a Change in Control (as defined in paragraph (b) of this Section 5.6) in the Company shall occur during the Term of Employment, and (ii) prior to the later of the Expiration Date or one year after the date of the Change in Control, either (x) the Term of Employment is terminated by the Company without Cause, pursuant to Section 5.4 hereof or (y) the Executive terminates the Term of Employment for Good Reason the Company shall (1) pay to the Executive any unpaid Base Salary through the effective date of termination, (2) pay to the Executive as a single lump sum payment, within 30 days of the termination of his employment hereunder, a lump sum payment equal to the sum of (x) two times the sum of Executive's annual Base Salary, Incentive Compensation, and the value of the annual fringe benefits (based upon their cost to the Company) required to be provided to the Executive under Sections 4.2 and 4.4 hereof, for the year immediately preceding the year in which his employment terminates, plus (y) the value of the portion of his benefits under any savings, pension, profit sharing or deferred compensation plans that are forfeited under those plans by reason of the termination of his employment hereunder. The Company shall have no further liability hereunder (other than for (1) reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 4.1, and (2) payment of compensation for unused vacation days that have accumulated during the calendar year in which such termination occurs). (b) For purposes of this Agreement, the term "Change in Control" shall mean: (i) Approval by the shareholders of the Company of (x) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation or other transaction do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, in substantially the -5- same proportions as their ownership immediately prior to such reorganization, merger, consolidation or other transaction, or (y) a liquidation or dissolution of the Company or (z) the sale of all or substantially all of the assets of the Company (unless such reorganization, merger, consolidation or other corporate transaction, liquidation, dissolution or sale is subsequently abandoned); (ii) the acquisition (other than from the Company) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act, of more than 30% of either the then outstanding shares of the Company's Common Stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors (hereinafter referred to as the ownership of a "Controlling Interest") excluding, for this purpose, any acquisitions by (1) the Company or its Subsidiaries, (2) any person, entity or "group" that as of the Commencement Date of this Agreement owns beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act) of a Controlling Interest or (3) any employee benefit plan of the Company or its Subsidiaries. (iii) The resignation of Manuel D. Medina as both Chairman and CEO of the Company, his death, or his absence from the day to day business affairs of the Company for more than 90 consecutive days due to disability or incapacity. 5.7 Resignation. Upon any notice or termination of employment pursuant to this Article 5, the Executive shall automatically and without further action be deemed to have resigned as an officer, and if he or she was then serving as a director of the Company, as a director, and if required by the Board, the Executive hereby agrees to immediately execute a resignation letter to the Board. 5.8 Survival. The provisions of this Article 5 shall survive the termination of this Agreement, as applicable. 6. Restrictive Covenants. 6.1 Non-competition. At all times while the Executive is employed by the Company and for a one year period after the termination of the Executive's employment with the Company for any reason (other than by the Company without Cause (as defined in Section 5.1 hereof) or by the Executive for Good Reason (as defined in Section 5.5(d) hereof)), the Executive shall not, directly or indirectly, engage in or have any interest in any sole proprietorship, partnership, corporation or business or any other person or entity (whether as an employee, officer, director, partner, agent, security holder, creditor, consultant or otherwise) that directly or indirectly (or through any affiliated entity) engages in competition with the Company (based on the business in which the Company was engaged or was actively planning on being engaged as of the date of termination of the Executive's employment and in the geographic areas in which the Company operated or was actively planning on operating as of date of termination of the Executive's employment); provided that such provision shall not apply to the Executive's ownership of: Common Stock of the Company or the acquisition by the Executive, solely as an investment, of securities of any issuer that is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and that are listed or admitted for trading on any United States national securities exchange or that are quoted on the National Association of Securities Dealers Automated Quotations System, or any similar system or automated dissemination of quotations of securities prices in common use, so long as the Executive does not control, acquire a controlling interest in or become a member of a group which exercises direct or indirect control or, more than five percent of any class of capital stock of such corporation. -6- 6.2 Nondisclosure. The Executive shall not at any time divulge, communicate, use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any Confidential Information (as hereinafter defined) pertaining to the business of the Company. Any Confidential Information or data now or hereafter acquired by the Executive with respect to the business of the Company (which shall include, but not be limited to, information concerning the Company's financial condition, prospects, technology, customers, suppliers, sources of leads and methods of doing business) shall be deemed a valuable, special and unique asset of the Company that is received by the Executive in confidence and as a fiduciary, and Executive shall remain a fiduciary to the Company with respect to all of such information. For purposes of this Agreement, "Confidential Information" means information disclosed to the Executive or known by the Executive as a consequence of or through his employment by the Company (including information conceived, originated, discovered or developed by the Executive) prior to or after the date hereof, and not generally known, about the Company or its business. Notwithstanding the foregoing, nothing herein shall be deemed to restrict the Executive from disclosing Confidential Information to the extent required by law. 6.3 Nonsolicitation of Employees and Clients. At all times while the Executive is employed by the Company and for a two (2) year period after the termination of the Executive's employment with the Company for any reason, the Executive shall not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity (a) employ or attempt to employ or enter into any contractual arrangement with any employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six months, and/or (b) call on or solicit any of the actual or targeted prospective clients of the Company on behalf of any person or entity in connection with any business competitive with the business of the Company, nor shall the Executive make known the names and addresses of such clients or any information relating in any manner to the Company's trade or business relationships with such customers, other than in connection with the performance of Executive's duties under this Agreement. 6.4 Ownership of Developments. All copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Executive during the course of performing work for the Company or its clients (collectively, the "Work Product") shall belong exclusively to the Company and shall, to the extent possible, be considered a work made by the Executive for hire for the Company within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made by the Executive for hire for the Company, the Executive agrees to assign, and automatically assign at the time of creation of the Work Product, without any requirement of further consideration, any right, title, or interest the Executive may have in such Work Product. Upon the request of the Company, the Executive shall take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment. 6.5 Books and Records. All books, records, and accounts relating in any manner to the customers or clients of the Company, whether prepared by the Executive or otherwise coming into the Executive's possession, shall be the exclusive property of the Company and shall be returned immediately to the Company on termination of the Executive's employment hereunder or on the Company's request at any time. 6.6 Definition of Company. Solely for purposes of this Article 6, the term "Company" also shall include any existing or future subsidiaries of the Company that are operating during the time periods described herein and any other entities that directly or indirectly, through one or -7- more intermediaries, control, are controlled by or are under common control with the Company during the periods described herein. 6.7 Acknowledgment by Executive. The Executive acknowledges and confirms that (a) the restrictive covenants contained in this Article 6 are reasonably necessary to protect the legitimate business interests of the Company, and (b) the restrictions contained in this Article 6 (including without limitation the length of the term of the provisions of this Article 6) are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind. The Executive further acknowledges and confirms that his full, uninhibited and faithful observance of each of the covenants contained in this Article 6 will not cause him any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained herein will not impair his ability to obtain employment commensurate with his abilities and on terms fully acceptable to him or otherwise to obtain income required for the comfortable support of him and his family and the satisfaction of the needs of his creditors. The Executive acknowledges and confirms that his special knowledge of the business of the Company is such as would cause the Company serious injury or loss if he were to use such ability and knowledge to the benefit of a competitor or were to compete with the Company in violation of the terms of this Article 6. The Executive further acknowledges that the restrictions contained in this Article 6 are intended to be, and shall be, for the benefit of and shall be enforceable by, the Company's successors and assigns. 6.8 Reformation by Court. In the event that a court of competent jurisdiction shall determine that any provision of this Article 6 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Article 6 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law. 6.9 Extension of Time. If the Executive shall be in violation of any provision of this Article 6, then each time limitation set forth in this Article 6 shall be extended for a period of time equal to the period of time during which such violation or violations occur. If the Company seeks injunctive relief from such violation in any court, then the covenants set forth in this Article 6 shall be extended for a period of time equal to the pendency of such proceeding including all appeals by the Executive. 6.10 Survival. The provisions of this Article 6 shall survive the termination of this Agreement, as applicable. 7. Injunction. It is recognized and hereby acknowledged by the parties hereto that a breach by the Executive of any of the covenants contained in Article 6 of this Agreement will cause irreparable harm and damage to the Company, the monetary amount of which may be virtually impossible to ascertain. As a result, the Executive recognizes and hereby acknowledges that the Company shall be entitled to an injunction from any court of competent jurisdiction enjoining and restraining any violation of any or all of the covenants contained in Article 6 of this Agreement by the Executive or any of his affiliates, associates, partners or agents, either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other remedies the Company may possess. 8. Assignment. Neither party shall have the right to assign or delegate his rights or obligations hereunder, or any portion thereof, to any other person. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. -8- 10. Section 162(m) Limits. Notwithstanding any other provision of this Agreement to the contrary, if and to the extent that any remuneration payable by the Company to the Executive for any year would exceed the maximum amount of remuneration that the Company may deduct for that year under Section 162(m) ("Section 162(m)") of the Internal Revenue Code of 1986, as amended (the "Code"), payment of the portion of the remuneration for that year that would not be so deductible under Section 162(m) shall, in the sole discretion of the Board, be deferred and become payable at such time or times as the Board determines that it first would be deductible by the Company under Section 162(m), with interest at the "short-term applicable rate" as such term is defined in Section 1274(d) of the Code. The limitation set forth under this Section 10 shall not apply with respect to any amounts payable to the Executive pursuant to Article 5 hereof. 11. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and, upon its effectiveness, shall supersede all prior agreements, understandings and arrangements, both oral and written, between the Executive and the Company (or any of its affiliates) with respect to such subject matter. This Agreement may not be modified in any way unless by a written instrument signed by both the Company and the Executive. 12. Notices: All notices required or permitted to be given hereunder shall be in writing and shall be personally delivered by courier, sent by registered or certified mail, return receipt requested or sent by confirmed facsimile transmission addressed as set forth herein. Notices personally delivered, sent by facsimile or sent by overnight courier shall be deemed given on the date of delivery and notices mailed in accordance with the foregoing shall be deemed given upon the earlier of receipt by the addressee, as evidenced by the return receipt thereof, or three (3) days after deposit in the U.S. mail. Notice shall be sent (i) if to the Company, addressed to Terremark Worldwide, Inc., 2601 S. Bayshore Drive, 9th Floor, Miami, Florida 33133, Attn: Brian K. Goodkind, Executive Vice-President and Chief Operating Officer, and (ii) if to the Executive, to his address as reflected on the payroll records of the Company, or to such other address as either party hereto may from time to time give notice of to the other. 13. Benefits; Binding Effect. This Agreement shall be for the benefit of and binding upon the parties hereto and their respective heirs, personal representatives, legal representatives, successors and, where applicable, assigns, including, without limitation, any successor to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise. 14. Severability. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law, and, in the event that any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall be declared invalid, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted. If such invalidity is caused by length of time or size of area, or both, the otherwise invalid provision will be considered to be reduced to a period or area which would cure such invalidity. 15. Waivers. The waiver by either party hereto of a breach or violation of any term or provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation. 16. Damages. Nothing contained herein shall be construed to prevent the Company or the Executive from seeking and recovering from the other damages sustained by either or both of them as a result of its or his breach of any term or provision of this Agreement. In the event that either party hereto -9- brings suit for the collection of any damages resulting from, or the injunction of any action constituting, a breach of any of the terms or provisions of this Agreement, then the party found to be at fault shall pay all reasonable court costs and attorneys' fees of the other. 17. Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 18. No Third Party Beneficiary. Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person other than the Company, the parties hereto and their respective heirs, personal representatives, legal representatives, successors and assigns, any rights or remedies under or by reason of this Agreement. 19. Indemnification. The indemnification obligations of the Company to Executive shall be in accordance with the Company's standard indemnity agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. COMPANY: Terremark Worldwide, Inc -------------------------------- By: /s/ Brian K. Goodkind ----------------------------- Name: Brian K. Goodkind Title: Executive Vice President EXECUTIVE: /s/ Jose E. Gonzalez -------------------------------- Name: Jose E. Gonzalez -10- EX-21 9 g77123kexv21.txt SUBSIDIARIES OF THE COMPANY EXHIBIT 21 SUBSIDIARIES Boca Telecommunications Investors, Inc., a Florida corporation Coloconnection, a Florida corporation NAP of the Americas, Inc., a Florida corporation Park West Telecommunications Investors, Inc., a Florida corporation (1) TECOTA Services Corp., a Delaware corporation (2)(3) Terremark Trademark Holdings, Inc., a Nevada corporation TerreNAP Data Centers, Inc., a Florida corporation (4) TerreNAP Services, Inc., a Florida corporation (5) (1) Park West Telecommunications Investors, Inc. is a significant shareholder or owns a significant interest in: Technology Center of the Americas, Inc., a Florida corporation (7) Technology Center of the Americas, Ltd., a Florida limited partnership (2) TECOTA Services Corp. is the sole shareholder of: T-Rex Miami, LLC, a Delaware limited liability company (3) TECOTA Services Corp. is a minority shareholder of: Technology Center of the Americas, LLC, a Delaware limited liability corporation (4) TerreNAP Data Centers, Inc., is the sole shareholder of: Spectrum Telecommunications Corp., a Delaware corporation (6) Terremark Asia Company, Ltd., a Bermuda corporation (8) Terremark Latin America, Inc., a Florida corporation (10)(11) (5) Terremark NAP Services, Inc. is the sole shareholder of: Terremark Centre GP, Inc., a Florida corporation Terremark Centre Partner, Inc., a Florida corporation Terremark Development, Inc., a Florida corporation (9) Terremark Financial Services, Inc., a Florida corporation Terremark Fortune House #1, Inc., a Florida corporation Terremark Fortune House #2, Inc., a Florida corporation Terremark Galloway, Inc., a Florida corporation Terremark Management Services, Inc., a Florida corporation Terremark Northeast, Inc., a New York corporation Terremark Realty, Inc., a Florida corporation Terremark Technology Contractors, Inc., a Florida corporation (6) Spectrum Telecommunications Corp. is the sole shareholder of: Terremark Americas Group, a Delaware corporation (7) Technology Center of the Americas, Inc. owns a minority interest in: Technology Center of the Americas, Ltd., a Florida limited partnership (8) Terremark Asia Company, Ltd., a Bermuda corporation, is the sole shareholder of: Asia Connect, Ltd., a Bermuda corporation TerreNAP Data Centers (China), Ltd., a Bermuda corporation (9) Terremark Development, Inc. is the sole shareholder of: Terremark Miami Avenue, Inc., a Florida corporation (10) Terremark Latin America, Inc. is a majority shareholder of: Terremark Latin America de Argentina, SA, an Argentine corporation Terremark Latin America (Brasil) Ltda, a Brazil corporation Terremark Latin America de Mexico, SA de CV, a Mexican corporation (11) Terremark Latin America, Inc. is a minority shareholder of: Terremark do Brasil Ltda, a Brazil corporation (12) (12) Terremark Latin America (Brasil) Ltda, a Brazil corporation, is a majority shareholder of: Terremark do Brasil Ltda, a Brazil corporation * Terremark Worldwide, Inc. owns a minority shareholder interest in: Terremark Latin America de Argentina, SA, an Argentine corporation Terremark Latin America (Brasil) Ltda, a Brazil corporation Terremark Latin America de Mexico, SA de CV, a Mexican corporation 2 -----END PRIVACY-ENHANCED MESSAGE-----


Common Stock, par value $0.001 per share		American Stock Exchange
(Title of Class)		(Name of Exchange on Which Registered)


			Page No.

PART I				2
	ITEM 1.	BUSINESS		2
	ITEM 2.	PROPERTIES		8
	ITEM 3.	LEGAL PROCEEDINGS		8
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		8
PART II				8
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS		8
	ITEM 6.	SELECTED FINANCIAL DATA		10
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		11
	ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		27
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		28
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		28
PART III				28
	ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT		28
	ITEM 11.	EXECUTIVE COMPENSATION		32
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		33
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		34
PART IV				35
	ITEM 14.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K		35
SIGNATURES				38



	Prices
Fiscal Year 2001
Quarter Ended	High		Low

June 30, 2000	$	4.9375	$	4.2500
September 30, 2000		2.9500		2.5500
December 31, 2000		0.9000		0.6500
March 31, 2001		2.5000		1.8000



	Prices
Fiscal Year 2002
Quarter Ended	High		Low

June 30, 2001	$	2.3000	$	1.4000
September 30, 2001		1.6500		0.4500
December 31, 2001		0.9000		0.4700
March 31, 2002		0.7400		0.2200



	Twelve Months Ended March 31,

	2002			2001			2000			1999		1998


	(Dollars in Thousands except per Share Data)
Results of operations:
Total revenue	$	15,872		$	40,147		$	15,390		$	44,456	$	37,632
Total cost of sales		18,628			23,705			9,422			31,148		22,667
Other expenses		54,616			37,815			12,001			12,684		13,869
(Loss) income from continuing operations		(57,372	)		(21,373	)		(6,033	)		624		1,096
Loss — discontinued operations		—			(82,627	)		—			—		—
Net (loss) income	$	(57,372	)	$	(104,000	)	$	(6,033	)	$	624	$	1096
(Loss) income from continuing operations per common share	$	(0.29	)	$	(0.11	)	$	(0.09	)	$	0.01	$	0.02
Loss — discontinued operations per common share		—		$	(0.44	)		—			—		—
Net (loss) income per common share	$	(0.29	)	$	(0.55	)	$	(0.09	)	$	0.01	$	0.02
Financial condition:
Real estate inventory		—			—		$	11,797		$	12,888	$	33,311
Total assets	$	81,024		$	78,069		$	77,998		$	17,598	$	42,931
Long term obligations(1)	$	35,919		$	16,462		$	28,632		$	8,731	$	32,081
Stockholders’ (deficit) equity(2)	$	(49,276	)	$	11,163		$	476		$	6,510	$	1,709


[X]	Annual report pursuant to Section 13 or 15(d) of the Securities


[ ]	Transition report pursuant to Section 13 or 15(d) of the Securities


Delaware (State or Other Jurisdiction of Incorporation or Organization)		52-1981922 (I.R.S. Employer Identification No.)


ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.


ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.



	Three Months Ended

	March 31, 2002			December 31, 2001			September 30, 2001			June 30, 2001


	(Dollars in Thousands except per Share Data)
Results of operations:
Total revenue	$	4,576		$	1,745		$	4,397		$	5,154
Total cost of sales		5,545			4,322			5,082			3,679
Other expenses		22,483			10,028			12,651			9,454
Net loss		(23,452	)		(12,605	)		(13,336	)		(7,979	)
Net loss per common share	$	(0.12	)	$	(0.06	)	$	(0.07	)	$	(0.04	)



	Three Months Ended

	March 31, 2001			December 31, 2000			September 30, 2000			June 30, 2000


	(Dollars in Thousands except per Share Data)
Results of operations (1):
Total revenue	$	15,857		$	14,469		$	7,996		$	1,825
Total cost of sales		8,843			8,344			5,850			668
Other expenses		12,931			13,578			6,947			4,359
Loss from continuing operations		(5,917	)		(7,453	)		(4,801	)		(3,202	)
Loss — discontinued operations		(65,833	)		(7,564	)		(6,935	)		(2,295	)
Net loss		(71,750	)		(15,017	)		(11,736	)		(5,497	)
Loss from continuing operations per common share	$	(0.04	)	$	(0.07	)	$	(0.06	)	$	(0.04	)
Loss — discontinued operations per common share	$	(0.34	)	$	—		$	—		$	—
Net loss per common share	$	(0.38	)	$	(0.07	)	$	(0.06	)	$	(0.04	)


ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


	Capital lease		Operating		Notes		Convertible
	obligations		leases		payable(1)		debt		Total

2003		2,354,263		4,511,232		50,752,209		—		57,617,704
2004		1,436,317		4,625,268		2,998,000		—		9,059,585
2005		1,072,257		4,729,065		48,000		4,250,000		10,099,322
2006		—		4,420,167		48,000		26,405,000		30,873,167
2007		—		4,662,561		34,091		—		4,696,652
Thereafter		—		87,354,638		—		—		87,354,638

		4,862,837		110,302,931		53,880,300		30,655,000		199,701,068


ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE REGISTRANT.


ITEM 11.	EXECUTIVE COMPENSATION.


ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.


Name	Age		Principal Position

Manuel D. Medina		49	Chairman of the Board, President and Chief Executive Officer
Joseph R. Wright, Jr.		63	Vice Chairman of the Board
Guillermo Amore		64	Director
Timothy Elwes		66	Director
Jose Maria Figueres-Olsen		47	Director
Marvin S. Rosen		60	Director
Miguel J. Rosenfeld		52	Director
Joel A. Schleicher		49	Director
Kenneth I. Starr		53	Director
Brian K. Goodkind		44	Executive Vice President and Chief Operating Officer
José A. Segrera		31	Senior Vice President and Chief Financial Officer
José E. González		41	Senior Vice President, General Counsel and Secretary


											Options
						Other Annual			Stock		SARs
Name and Principal Position	Year		Salary($)			Compensation			Awards($)		(#)

Manuel D. Medina		2002	$	350,000								100,000
President & Chairman of the Board		2001	$	350,000
		2000	$	350,000

Joseph R. Wright, Jr.		2002	$	100,000	(1)
Vice Chairman		2001	$	250,000
		2000	$	285,000			35,000	(2)		87,500		200,000

Brian K. Goodkind		2002	$	250,000								150,000
Executive Vice President &		2001	$	250,000								150,000
Chief Operating Officer		2000	$	250,000

José A. Segrera		2002	$	170,000								200,000
Senior Vice President &		2001	$	150,000								150,000
Chief Financial Officer		2000		—

José E. González		2002	$	175,000								200,000
Senior Vice President,		2001	$	175,000								150,000
General Counsel & Secretary		2000		—


ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.


					Percentage of
					Outstanding
		Amount of Beneficial			Common Shares
Name and Address of Beneficial Owner		Ownership(1)			Owned

Directors and Executive Officers
Manuel D. Medina			33,302,190	(2)		16.2	%
Joseph R. Wright, Jr.			4,257,017	(3)		2.0	%
Guillermo Amore			3,669,928	(4)		1.8	%
Marvin S. Rosen			1,286,151	(5)		*
Miguel J. Rosenfeld			383,463	(6)		*
Kenneth J. Starr			272,000	(7)		*
Brian K. Goodkind			262,843	(8)		*
Jose Maria Figueres-Olsen			234,000	(9)		*
Joel A. Schleicher			160,668	(10)		*
Timothy Elwes			134,000	(11)		*
José E. González			54,501	(12)		*
José A. Segrera			50,001	(12)		*
All directors and executive officers as a group (12 persons)			44,066,762			20.8	%
5% Stockholders
Vistagreen Holdings (Bahamas Limited)			29,909,128	(13)		14.6	%
	Charlotte House Charlotte Street, PO Box N-65 Nassau Bahamas
Paradise Stream Delaware LLC			25,000,000	(13)		12.2	%
	c/o Corporate Service Company 2711 Centerville Road Suite 400 Wilmington, Delaware 19808-1645


ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


ITEM 14.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.


Exhibit
Number		Exhibit Description

	2.1	Agreement for Sale of Assets by and between ITV Communications, Inc. and Netmatics, Inc., dated January 11, 1996, and Promissory Note and Security Agreement dated January 16, 1996(1)
	2.2	Agreement of Merger between AVIC Group International, Inc., a Colorado corporation, with and into AVIC Group International, Inc., a Delaware corporation dated July 10, 1996(2)
	2.3	Agreement and Plan of Merger by and between Terremark Holdings, Inc. and AmTec, Inc., dated as of November 24, 1999, as amended by that certain Amendment to Agreement and Plan of Merger, dated as of February 11, 2000(3)
	2.4	Letter agreement dated January 12, 2001 among MP Telecom, LLC, Terremark Worldwide, Inc., Clifford J. Preminger, Thomas M. Mulroy and Manuel Medina(4)
	3.1	Certificate of Merger of Terremark Holdings, Inc. with and into AmTec, Inc.(5)
	3.2	Restated Certificate of Incorporation of the Company(5)
	3.3	Restated Bylaws of the Company (5)
	3.4	Certificate of Designations of Preferences of Series G Convertible Preferred Stock of the Company(5)
	3.5	Certificate of Designations of Preferences of Series H Convertible Preferred Stock of the Company(6)
	4.2	Specimen Stock Certificate(1)
	4.3	Form of 13% Subordinated Convertible Debenture, due December 31, 2005(7)
	4.4	Form of Warrant for the Purchase of Shares of Common Stock(8)
	4.5	Form of 13.125% Subordinated Convertible Debenture, due August 30, 2004*
	10.1	1995 Stock Option Plan(9)
	10.2	1996 Stock Option Plan(9)
	10.3	Real Property Lease between Lexreal Associates and the Company dated May 8, 1995(9)
	10.4	Form of Indemnification Agreement for directors and officers of the Company(2)
	10.5	Employment Agreement with Joseph R. Wright(10)
	10.6	Employment Agreement with Manuel Medina(11)
	10.7	Amendment to Employment Agreement with Manuel Medina(12)
	10.8	Employment Agreement with Brian Goodkind(13)
	10.9	Amended and Restated Credit Agreement between the Company and Ocean Bank, dated September 5, 2001(14)
	10.10	$5 million Promissory Note from Manuel D. Medina to the Company dated September 5, 2001*
	10.11	Share Purchase Agreement between the Company and NAP de Las Americas — Madrid, S. A. dated July 13, 2002*
	10.12	Form of Promissory by Company to Officers or Directors*
	10.13	Employment Agreement with José A. Segrera*
	10.14	Employment Agreement with José E. González*
	21	Subsidiaries of the Company*


Signature	Title	Date

/s/ MANUEL D. MEDINA Manuel D. Medina	Chairman of the Board, President and Chief Executive Officer (principal executive officer)	July 15, 2002
/s/ GUILLERMO AMORE Guillermo Amore	Director	July 15, 2002
/s/ TIMOTHY ELWES Timothy Elwes	Director	July 15, 2002
/s/ JOSÉ MARIA FIGUERES-OLSEN José Maria Figueres-Olsen	Director	July 15, 2002
/s/ MARVIN S. ROSEN Marvin S. Rosen	Director	July 15, 2002
/s/ MIGUEL J. ROSENFELD Miguel J. Rosenfeld	Director	July 15, 2002
/s/ JOEL A. SCHLEICHER Joel A. Schleicher	Director	July 15, 2002
/s/ KENNETH I. STARR Kenneth I. Starr	Director	July 15, 2002
/s/ JOSEPH R. WRIGHT, JR. Joseph R. Wright, Jr.	Director	July 15, 2002
/s/ JOSÉ A. SEGRERA José A. Segrerá	Chief Financial Officer	July 15, 2002



		March 31,

		2002			2001

ASSETS
Current assets:
Cash and cash equivalents		$	283,078		$	5,574,687
Restricted cash			757,573			32,039
Accounts receivable, net of allowance for doubtful accounts of $234,767 and $0, respectively			1,621,978			2,871,119
Contracts receivable			1,362,836			4,637,916
Real estate held for sale			—			12,860,657

	Total current assets		4,025,465			25,976,418
Investments in TECOTA, at cost			489,855			489,855
Property and equipment, net			61,088,987			25,065,989
Other assets			2,199,454			2,823,579
Identifiable intangible assets and goodwill, net of accumulated amortization of $4,773,029 and $1,270,462, respectively			13,220,170			23,712,737

	TOTAL ASSETS	$	81,023,931		$	78,068,578


LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Current portion notes payable (includes $4,250,000 and $-0- due to related parties)		$	50,752,209		$	13,317,662
Construction payables — property and equipment			26,250,729			16,960,452
Trade payables and other liabilities			10,240,698			16,016,521
Current portion of capital lease obligations			2,079,294			840,106
Interest payable			2,347,742			323,153
Net liabilities of discontinued operations			1,394,010			2,700,847

	Total current liabilities		93,064,682			50,158,741
Convertible debt (includes $4,450,000 and $3,875,000 due to related parties)			30,655,000			15,855,382
Notes payable, less current portion (includes $2,950,000 and $-0- due to related parties)			3,128,091			363,181
Capital lease, less current portion			2,136,076			243,738
Deferred revenue			815,826			284,693

	TOTAL LIABILITIES		129,799,675			66,905,735

Series H redeemable convertible preferred stock: $.001 par value, 294 and -0-shares authorized, issued and outstanding, respectively			500,000			—

Series G convertible preferred stock: $.001 par value, 20 and -0-shares authorized, issued and outstanding, respectively			1			1
Common stock: $.001 par value, 300,000,000 shares authorized; 200,882,250 and 200,507,179 shares issued, of which 1,400,000 shares are held in treasury, respectively			200,882			200,507
Paid in capital			125,652,119			125,339,544
Retained deficit			(173,096,835	)		(115,724,620	)
Common stock subscriptions			950,000			—
Common stock warrants			2,879,413			2,059,398
Common stock options			1,566,801			1,716,138
Less cost of shares of common stock in treasury			(2,428,125	)		(2,428,125	)
Note receivable — related party (Note 10)			(5,000,000	)		—
Commitments and contingencies (Note 15)

	TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY		(49,275,744	)		11,162,843

	TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	81,023,931		$	78,068,578



			For the Twelve Months Ended March 31,

			2002			2001			2000

Revenues
	Data center		$	3,215,897		$	252,906		$	—
	Real estate sales			—			2,752,748			11,008,332
	Development, commission and construction fees			3,218,330			12,484,272			2,563,647
	Management fees			1,183,570			2,212,326			1,069,176
	Construction contracts			8,254,687			22,445,156			749,262

		Operating revenues		15,872,484			40,147,408			15,390,417

Expenses
	Data center operations			11,230,513			1,223,112			—
	Start up costs — data centers			3,383,127			6,507,517			—
	Cost of real estate sold			—			2,134,572			8,867,641
	Construction contract expenses			7,397,524			20,347,165			554,610
	General and administrative			15,561,042			19,929,438			7,917,793
	Sales and marketing			3,621,176			2,768,890			2,933,125
	Depreciation and amortization			7,257,151			3,257,292			81,264
	Impairment of long-lived assets			18,973,670			4,155,178			443,627

		Operating expenses		67,424,203			60,323,164			20,798,060

	Loss from operations			(51,551,719	)		(20,175,756	)		(5,407,643	)

Other income (expense)
	Interest income			97,237			505,743			222,062
	Interest expense			(9,750,473	)		(1,097,683	)		(804,785	)
	Other (expense) income			(326,247	)		(570,749	)		374,803
	Dividend on preferred stock			(26,741	)		(34,806	)		(417,669	)
	Gain on sale of real estate held for sale			4,185,728			—			—

		Total other expense		(5,820,496	)		(1,197,495	)		(625,589	)

	Loss from continuing operations before income taxes			(57,372,215	)		(21,373,251	)		(6,033,232	)
Income taxes
	Current tax expense			—			—			—
	Deferred tax			—			—			—

		Total income tax expense		—			—			—

Loss from continuing operations				(57,372,215	)		(21,373,251	)		(6,033,232	)

	Loss from discontinued operations, net of income taxes of $-0-			—			(21,499,587	)		—
	Loss on disposition of discontinued operations, net of income taxes of $-0-			—			(61,126,824	)		—

Net loss			$	(57,372,215	)	$	(103,999,662	)	$	(6,033,232	)

Basic and diluted (loss) earnings per common share:
	Continuing operations		$	(.29	)	$	(.11	)	$	(.09	)
	Discontinued operations			—			(.44	)		—

	Net loss		$	(.29	)	$	(.55	)	$	(.09	)

	Weighted average common shares outstanding			199,243,146			188,550,498			70,685,845



		Stockholders’ Equity


					Common Stock
					Par Value $.001
									Additional				Common			Common
		Preferred			Issued				Paid-In		Stock		Stock			Stock			Treasury			Note Receivable-			Retained
		Stock			Shares		Amount		Capital		Subscriptions		Warrants			Options			Stock			Related Party			Deficit

Balance at March 31, 1999		$	4,176,693			70,685,845	$	70,686	$	7,954,010	$	—	$	—		$	—		$	—		$	—		$	(5,691,726	)
Net loss																										(6,033,232	)

Balance at March 31, 2000			4,176,693			70,685,845		70,686		7,954,010		—		—			—			—			—			(11,724,958	)
Effect of AmTec merger:
	Conversion of preferred stock		(4,176,693	)		7,853,985		7,854		4,168,839		—		—			—			—			—			—
	Assumption of AmTec equity		1			38,289,500		38,289		46,923,782		—		1,687,038			—			—			—			—
Sale of common stock			—			68,722,349		68,722		28,054,203		—		—			—			—			—			—
Common stock issued in acquisitions			—			14,412,500		14,413		37,531,045		—		—			—			—			—			—
Exercise of warrants			—			54,000		54		190,161		—		(21,640	)		—			—			—			—
Exercise of stock options			—			489,000		489		517,504		—		—			—			—			—			—
Warrants issued			—			—		—		—		—		394,000			—			—			—			—
Stock options issued			—			—		—		—		—		—			1,716,138			—			—			—
Treasury stock acquisitions			—			—		—		—		—		—			—			(2,428,125	)		—			—
Net loss			—			—		—		—		—		—			—			—			—			(103,999,662	)

Balance at March 31, 2001			1			200,507,179		200,507		125,339,544		—		2,059,398			1,716,138			(2,428,125	)		—			(115,724,620	)
Exercise of stock options			—			115,000		115		40,135		—		—			—			—			—			—
Forfeiture of stock options			—			—		—		—		—		—			(169,337	)		—			—			—
Warrants issued			—			—		—		—		—		849,015			—			—			—			—
Exercise of warrants			—			100,000		100		29,900		—		—			(29,000	)		—			—			—
Stock options issued			—			—		—		—		—		—			20,000			—			—			—
Conversion of debt			—			160,071		160		242,540		—		—			—			—			—			—
Common stock subscriptions			—			—		—		—		950,000		—			—			—			—			—
Funding of note receivable-related party			—			—		—		—		—		—			—			—			(5,000,000	)		—
Net loss			—			—		—		—		—		—			—			—			—			(57,372,215	)

Balance at March 31, 2002		$	1			200,882,250	$	200,882	$	125,652,119	$	950,000	$	2,879,413		$	1,566,801		$	(2,428,125	)	$	(5,000,000	)	$	(173,096,835	)



					For the Twelve Months Ended
					March 31,

					2002			2001			2000

Cash flows from operating activities:
	Net loss				$	(57,372,215	)	$	(103,999,662	)	$	(6,033,232	)
	Adjustments to reconcile net loss to net cash used in operating activities
		Discontinued operations				—			82,626,411			—
		Depreciation and amortization of capital leases				3,754,584			408,274			81,264
		Amortization of intangible assets and goodwill				3,502,567			2,849,018			—
		Amortization of loan costs to interest expense				1,097,922			132,481			137,749
		Bad debt				234,767			—			—
		Gain on sales of real estate held for sale				(4,185,728	)		—			—
		Loss on sale of property and equipment				373,369			—			—
		Other, net				(44,167	)		164,167			—
		Impairment of long-lived assets				18,973,670			4,155,178			443,627
		(Increase) decrease in:
			Real estate inventories			—			(1,063,351	)		929,786
			Restricted cash			(725,534	)		504,737			(212,335	)
			Accounts receivable			1,014,374			(3,982,744	)		164,172
			Contracts receivable			3,275,080			(2,312,896	)		—
			Notes receivable			—			1,809,254			(2,418,363	)
			Other assets			(285,764	)		(315,198	)		(263,702	)
		Increase (decrease) in:
			Trade payable and other liabilities			(7,305,823	)		9,463,524			79,562
			Interest payable			2,024,589			250,239			(351,312	)
			Deferred revenue			531,133			284,693			22,721
			Net liabilities of discontinued operations			(1,306,837	)		2,700,847			—

				Net cash used in continuing operations		(36,444,013	)		(6,325,028	)		(7,420,063	)
				Net cash used in discontinued operations		—			(22,236,555	)		—

				Net cash used in operating activities		(36,444,013	)		(28,561,583	)		(7,420,063	)

Cash flows from investing activities:
	Purchase and development of property and equipment					(45,785,047	)		(24,412,720	)		(745,409	)
	Cash paid in disposals					—			(900,000	)		—
	Investment in unconsolidated entities, net					—			(4,202,004	)		—
	Proceeds from sale of real estate held for sale					17,046,385			55,781,259			—
	Proceeds from sale of property and equipment					30,000			—			—
	Cash acquired in acquisitions					—			2,368,273			10,250

				Net cash (used in) provided by investing activities		(28,708,662	)		28,634,808			(735,159	)

Cash flows from financing activities:
	Construction payables — property and equipment					9,290,277			16,960,452			—
	New borrowings					66,750,175			17,947,892			17,861,701
	Note receivable — related party					(5,000,000	)		—			—
	Payments on loans					(26,550,718	)		(73,563,352	)		(9,122,535	)
	Convertible debt					15,042,318			11,955,000			—
	Capital lease obligations					(1,162,236	)		—			—
	Exercise of stock options					40,250			517,993			—
	Sale of common stock					—			28,122,925			—
	Exercise of warrants					1,000			168,575			—
	Cash received for common stock subscriptions					950,000			—			—
	Sale of preferred stock					500,000			—			—

				Net cash provided by financing activities		59,861,066			2,109,485			8,739,166

				Net (decrease) increase in cash		(5,291,609	)		2,182,710			583,944
Cash and cash equivalents at beginning of year						5,574,687			3,391,977			2,808,033

Cash and cash equivalents at end of year					$	283,078		$	5,574,687		$	3,391,977


Leasehold improvements		5 - 20 years
Computer software		3 years
Furniture, fixtures and equipment		5 years


Revenue	$	40,147
Net loss	$	(106,030,000	)
Basic and diluted net loss per share	$	(0.47	)


			AmTec		T-Rex		Post Shell		Spectrum		IXS.NET			Asia Connect

Assets:
	Cash and cash equivalents		$	1,508,803	$	248,210	$	307,260	$	247,130	$	26,945		$	29,925
	Restricted cash			—		30,000		—		—		—			—
	Accounts receivable			—		238,322		2,325,020		531,712		184,902			—
	Investments and option agreements			12,228,209		172,970		—		—		—			—
	Reclassification of option			—		—		—		—		(2,400,000	)		(6,500,000	)
	Notes receivable			344,438		—		—		—		—			—
	Furniture and equipment			48,355		46,038		55,556		5,352,923		161,694			55,866
	Other assets			279,143		61,275		17,785		900,939		95,710			293,030
	Identifiable intangible assets			—		15,785,558		1,283,000		—		—			—
	Goodwill			35,519,223		—		7,126,748		18,252,975		4,543,194			6,770,179

		Total assets acquired	$	49,928,171	$	16,582,373	$	11,115,369	$	25,285,679	$	2,612,445		$	649,000

Liabilities
	Notes payable		$	—	$	—	$	4,924	$	10,531,229	$	29,896		$	150,000
	Trade payable and other liabilities			479,060		1,082,373		2,680,445		1,693,463		320,904			—

		Total liabilities assumed		479,060		1,082,373		2,685,369		12,224,692		350,800			150,000
	Minority interest			—		—		—		475,306		—			—
Equity assumed				48,649,111		—		—		—		—			—
Issuance of common stock				—		15,500,000		8,430,000		12,039,000		1,576,457			—
Estimated merger costs and other				800,000		—		—		546,681		685,188			499,000

			$	49,928,171	$	16,582,373	$	11,115,369	$	25,285,679	$	2,612,445		$	649,000


Year	Redemption Price

2002		104	%
2003		103	%
2004		102	%
2005		100	%


					Weighted
					Average
					Exercise
		Number			Price

Outstanding at March 31, 2000			—			—
Assumed in merger			5,077,000			1.24
Granted			6,468,326			1.48
Expired/Terminated			(157,500	)		3.19
Exercised			(489,000	)		1.06

Outstanding at March 31, 2001			10,898,826		$	2.31

Granted			4,072,125			.91
Expired/Terminated			(2,106,500	)		2.75
Exercised			(115,000	)		.35

Outstanding at March 31, 2002			12,749,451		$	1.92

Options exercisable at:
	March 31, 2002		7,382,793		$	1.74

	March 31, 2001		4,588,000		$	1.26

Weighted average fair value of options granted during year ended:
	March 31, 2002	$	.81

	March 31, 2001	$	2.63


	Year ended		Year ended
	March 31, 2002		March 31, 2001

Risk-free rate		3.91% - 6.41%		4.64% - 6.41%
Volatility		80% - 139%		80% - 139%
Expected life		5 years		5 years
Expected dividends		0%		0%


				Average
Range of				Remaining		Average		Number
Exercise				Contractual		Exercise		Exercisable
Prices		Outstanding at		Life (Years)		Price		Options at

March 31, 2002
	$0.29-0.50		2,176,000		3.2	$	0.35		2,150,000
	$0.51-1.00		2,769,900		9.3		0.70		1,118,500
	$1.01-1.50		1,359,500		7.1		1.41		852,833
	$1.51-2.00		324,874		8.9		1.73		100,976
	$2.01-3.00		1,515,225		5.9		2.84		1,130,833
	$3.01-5.00		4,603,952		8.3		3.26		2,029,651

			12,749,451						7,382,793

March 31, 2001
	$0.35-0.50		2,390,000		4.1	$	0.35		2,390,000
	$0.51-1.00		223,500		7.7		0.87		217,500
	$1.01-1.50		1,235,500		7.5		1.37		704,500
	$1.51-2.00		808,374		9.7		1.82		17,500
	$2.01-3.00		1,167,000		5.2		2.90		1,146,000
	$3.01-5.00		5,074,452		9.2		3.94		112,500

			10,898,826						4,588,000